European Council, Maastricht

HL Deb 25 November 1991 vol 532 cc1148-266

3.6 p.m.

The Lord Privy Seal (Lord Waddington) rose to move, That this House takes note of the forthcoming negotiations at the European Council at Maastricht.

The noble Lord said: My Lords, two weeks from now the European Council will meet in Maastricht, a meeting which is set to decide issues crucial to the future of the European Community and for Britain's role in it.

Before looking to the future, it is worth reminding ourselves how far we have come. For a host of reasons—historical, geographical, political—we in Britain were slow to see the value of the Community or at least our membership of it and, even when we did, admittance was denied to us. I know that a number of noble Lords have strong views on British policy in those early years of the Community's existence. There is perhaps not a great deal of point in raking over that ground again now. But the fact of the matter is that when we did join the Community, after intensive negotiations in which my noble friend Lord Rippon played a distinguished part, it was an organisation which certainly had not been framed by its original members in order to suit us. This inevitably meant that in the early years of our membership repeated attempts were made to modernise the structure and the workings of the Community in a way that would accommodate the United Kingdom and the other two new members.

At first we were faced with having to pay a disproportionate contribution to the budget but eventually an equitable budget arrangement was secured. We wanted reform of the common agriculture policy and that has become a central item on the Community's agenda. We wanted to improve the efficiency, the effectiveness and the financial accountability of the Community and now we see proposals to that effect in the IGC winning wide support. We are beginning to fashion a Community more in accordance with our own ways of working; and the call for pragmatism may be a prosaic rallying call but it is one which the Community is now heeding in the knowledge that not only Britain but the whole Community stands to gain.

The Community has indeed come a long way since we joined in 1972. One milestone undoubtedly was the Single European Act of 1986 which broadened and deepened co-operation on a number of fronts. Most importantly, under the guiding hand of our then British Commissioner, my noble friend Lord Cockfield, it set a deadline for the completion of the single market and introduced a substantial extension of qualified majority voting in order to ensure that this could be achieved. It gave substantial new legislative power to the European Parliament, then beginning to adapt to its new status as a directly elected forum. In European Political Co-operation (EPC) it laid the foundations for closer co-ordination of foreign policies and the habit of working together in this area which we hope to build upon at Maastricht.

A number of our European partners believe that the changes brought about by the Single European Act set us irrevocably on a pre-determined path leading to political, economic and monetary integration within a federal Europe. That is not the case. Political union is an evolving process not a goal, and the Community is a developing organism, the ultimate form of which none of us can confidently predict. We cannot set the final shape of Europe now. The most we can do is ensure that each step we take, each institutional change, is useful and workable in itself. We must consider the amendments proposed at Maastricht in this light: an end in themselves, not simply a means to a more distant goal.

It is with this overriding consideration in mind that we have set out our objectives for the political union negotiations. First, as I have already said, we must increase the efficiency and the effectiveness of the Community as it is now. That means above all strengthening the rule of law within the Community and tightening up its financial practices.

Britain's record in implementing and enforcing Community law is among the best. Others who are not as punctilious should be discouraged from signing up to directives in Brussels which they have no intention of enforcing at home. We have proposed formal declarations in the IGC which will commit member states to making greater efforts to implement legislation and to ensuring that the mechanisms exist for the enforcement of that legislation once it is enacted. We have also won wide support for a treaty article giving a new power to the European Court of Justice to fine a member state for non-compliance with EC legislation.

We have also led the way in proposing a package of measures designed to ensure the Community's financial probity and improve accountability. I know this is a subject particularly dear to the heart of the noble Lord, Lord Bruce of Donington. He will be glad to know that it is now proposed that the European Parliament should play a more detailed role in the budget discharge process; that it should examine the Community's accounts and should have the right to call the Commission to account for its expenditure and to report on financial control. There is a draft treaty provision to encourage member states to protect the financial interests of the Community against fraud. The Commission will be required to provide an assurance of sufficient resources to accompany any new legislative proposal put forward. We hope the conference will adopt a declaration on the structure of the Court of Auditors, committing member states to a review of the court's structure in order to increase its effectiveness.

All of these proposals have won wide support and, if confirmed at Maastricht, will represent not only a great success for the United Kingdom but a genuine long-term benefit for the efficiency and effectiveness of the Community. At the same time, we wish to reform the institutional structure of the Community as it relates to the Commission. Although the Council of Ministers remains the decision-making centre of the Community, the Commission has substantial influence and impact on the Community's citizens. That influence, if I may say so, was wielded with considerable skill and constructiveness by the noble Lord, Lord Jenkins of Hillhead, during his period as President of the Commission. It is right that the Commission's activities should be subjected to closer democratic scrutiny; a scrutiny that national parliaments alone are unable to apply. Proposals in the current draft treaty will help to fill that omission.

There is a clear role here for the European Parliament of which four noble Lords are Members. One of those Members, my noble friend Lord Plumb was president of that body. I am glad that my noble friend Lord Bethel] will speak today. The Parliament already has the right to force the resignation of the Commission as a whole following a vote of censure. To that it is proposed to add a formal role for the European Parliament in the appointment of the Commission, thus increasing its democratic accountability while preserving member states' right to nominate their own Commissioners and preserving the Commission's essential independence.

There are other proposals which will also allow the European Parliament to monitor more closely the activities of the Commission. For example, the European Parliament will be able to establish temporary committees of inquiry; it will be able to receive petitions from those with complaints about how the Community's activities have affected them; and the European Parliament will be able to appoint an ombudsman to investigate cases of maladministration in the activities of the Community institutions or bodies. These reforms in the Community's institutional structure are welcome: they will increase the Community's effectiveness and accountability while leaving the basic institutional balance intact.

This last is an important point, and relates to what I have said earlier about the need for a pragmatic and prudent approach to the Community's development. We have made clear that we believe the best way forward for the Community is to build on the existing range and forms of co-operation. That includes both co-operation as a Community under the Treaty of Rome and inter-governmental co-operation outside it, with the jurisdiction of the European Court of Justice and the Commission's sole right of initiative excluded.

We should like to see this latter form of co-operation in foreign and security policy and interior justice issues. We recognise as well as anyone the need for us all to develop the habit of working together in these areas. But we do not believe that they are areas where Community competence should apply; nor would it be right to decide substantive issues of foreign policy by majority vote.

Consensus is the only workable basis for a successful and influential common foreign policy. Qualified majority voting, European Court of Justice jurisdiction and a Commission sole right of initiative—the trappings of Community competence—will in no way strengthen or promote a common policy where no common will exists. There is no escaping that fact. I must stress a point I made earlier. We should not at Maastricht be looking for a possible model for co-operation far in the future, but for practical arrangements which improve co-operation now.

The same goes for interior justice issues. No one doubts that this is an area where co-operation with our European partners is particularly necessary. International crime, the drugs trade, terrorism and illegal immigration are problems we all share and the answer to these problems lies in strengthened co-operation and the development of a common will to tackle them, not in the extension of Community competence.

There are other areas, too, where we are far from convinced that there is a case for extending more broadly the Community's competence. There is clearly a case for co-operation and policy co-ordination where issues transcend national boundaries. But we do not see that the world has changed so much since 1986 that the Treaty of Rome now needs further substantial amendment to add to the range of Community common policies.

In practice the Community has never been prevented from taking action when it has been necessary. Necessity must remain the test for the future. The Community should respect the principle of subsidiarity, there being no need for Community action where the objective can be achieved by member states acting alone.

Where extensions of competence are proposed, as they are in a broad range of areas in the draft treaty text, the Government will negotiate forcefully to ensure that they should not permit the introduction of unnecessary or inappropriate measures of harmonisation. Nor should they impose excessive financial costs, either on the British taxpayer or on the British economy. We shall continue to examine and negotiate on the proposals before the IGC with those practical considerations very much in mind.

Finally, I should like to make clear the Government's position on extending the legislative powers of the European Parliament. Nobody denies that the European Parliament has an important role to play in the Community and in its future development. That role has developed gradually over the years, notably with the introduction of the co-operation procedure under the Single European Act. It is not apparent to us that a further step change in the Parliament's legislative powers is called for at this stage. For that reason, and in order to preserve an institutional balance which works well, we have argued strongly against introducing a "co-decision" procedure giving the Parliament an equal right in decision-making with the Council of Ministers. The proposals now included in the Dutch presidency's draft treaty text are for a more modest procedure, amounting to an ultimate right for the Parliament to reject Council decisions in certain areas at a third reading. We have indicated our willingness to consider introducing this procedure into the Community's decision making, provided that the scope of its application is strictly limited. Scope is obviously still a matter for negotiation, and we shall want to ensure that anything that is agreed at Maastricht will conform to our overall objective that any changes should be workable, should build on existing practice, and should not push the Community too far, too fast.

We must not neglect the role that our own Parliament, and other national parliaments, can play in the Community's affairs. As your Lordships know, we have tabled a declaration in the IGC calling for the closer involvement of national parliaments, due regard for national parliamentary scrutiny, and in particular closer relations—better information, more meetings—with Members of the European Parliament. I know that that is something for which this House in particular has often expressed its support. We hope that the adoption of a conference declaration will provide the stimulus for greater contacts of that kind throughout the Community.

Those are all important issues, and it should come as no surprise that the Government's views are not shared by all our partners. We all have our own interests, our own histories and our own particular concerns. It is the presidency's task at Maastricht to weigh those differing opinions, to reconcile them, and to assess how large a step forward is possible now. We should certainly not expect Maastricht to settle the final shape of Europe for all time. But it can, and we hope it will, reach a satisfactory conclusion to the current negotiations.

The world cannot wait for the Community to agonise forever over its internal procedures. Next year the Community will be facing new challenges: the reform of the common agricultural policy, a review of the structural funds, the completion of the single market and necessary preparations for the enlargement of the Community. The British Government are not seeking agreement at any price, but we want to see Maastricht succeed. We believe that Britain's place is at the heart of Europe and that the Community's best interests lie in reaching an agreement which will satisfy all of its members. That means give and take on all sides and good will. We are confident that it will be forthcoming.

Moved, That this House takes note of the forthcoming negotiations at the European Council at Maastricht.—(Lord Waddington.)

3.25 p.m.

Lord Cledwyn of Penrhos

My Lords, we are grateful to the noble Lord the Leader of the House for setting the scene for the debate and for his comprehensive speech in which he explained some aspects of the Government's policy.

A two-day debate on the importance and implications of the Maastricht Summit was held in another place last week. We all followed that discussion with great interest. Today we have the opportunity to express our views on what is without doubt a historic milestone in the history of the Community.

There are differences of view on a number of issues between the parties, and within the parties, in this country, as was made very plain in last week's debate in the House of Commons. However, there is overwhelming agreement on one central point; namely, that as a member of the European Community it is our duty in this country to work for solutions which are in the best interests of our people and of the Community as a whole. We must be clear about how we want to see the Community develop and we must work to ensure that Britain is in a position to influence the objectives which we support.

There is little doubt that the Community will expand still further. Sweden and Austria are seeking membership and the other EFTA countries will follow, as may two or three Eastern European countries in due course. It is an exciting prospect but it will be an attractive one only if we can ensure that the new association will be democratic and that there will be accountability as between the various levels of administration within the Community—a point upon which the noble Lord expanded.

Economic, monetary and political union for Europe is an ambitious concept and a complex and intricate one. The noble Lord said that we cannot set the final shape of Europe now, and I agree with him. It is for that reason that we should tackle each stage of the development with realism and common sense. We know that there have been arguments on a range of issues and we do not know, even at this late stage, whether they will be resolved before the Maastricht Summit takes place.

The noble Lord also said that Maastricht will not settle the fate of Europe now. Here again I agree with him. I suggested in the debate on the Address that we should seek to negotiate a package upon which we could all agree at Maastricht while other matters on which agreement is clearly impossible should be reserved for further consideration. That must be preferable to a pointless and acrimonious haggle there. The impression has been created that Maastricht is a make or break summit. That is a great mistake for it has been plain from the start that there are issues on which total agreement may well be impossible, at least at this stage.

As the noble Lord has said, every country in the Community has its own history, ethos, culture and national memory and its policies inevitably reflect that. That has its dangers, as we know all too well. Yugoslavia demonstrates that in an extreme way at this moment. We can thank heaven that the Community came into existence primarily to ensure that the wars which had devastated Europe would never happen again.

It is very much to the credit of this House that over the past two years or so it has gone to very great lengths to study and debate the problems implicit in Maastricht.

In October 1990 and in July this year our Select Committee on the European Communities, which is presided over by my noble friend Lady Serota, published excellent reports which we debated here at some length. The committee made important recommendations which are very relevant to our debate today. For example, it stressed that the communities must take steps to meet the requirements of democratic principles and that Community institutions must be, and must be seen to be, democratically accountable. It is for that reason that the Commission as at present constituted poses a problem. I must put the question to the noble Earl, Lord Caithness, who is to reply to the debate: why should not the Commission be more accountable to the European Parliament? That is one of the key issues to be resolved at this time.

The noble Lord, Lord Waddington, described some reforms which we listened to with interest. We support those proposals, but we should go further. The European Parliament has some limited powers and there is a strong case for extending them as, otherwise, it could develop into an expensive talking shop and nothing else. Its powers should complement but not replace those of national parliaments and it should share some powers to institute legislation with the Commission. A further step in accountability would be to give the Parliament rights of confirmation after hearings for each member of the Commission with, possibly, a right of recall. Such a process would strengthen Community democracy without impairing the power of national parliaments. That is well worth considering.

As to the Council itself, we must remember that it decides a good deal of legislation affecting the British people. I agree with the report to this House that: they have a duty to be far more forthcoming about the intentions and the progress of legislation". It has been suggested that national parliaments should receive all Commission proposals for legislation by the Council; that they should also be given adequate time to scrutinise the proposals and appropriate opportunity for discussion; and that Council procedures should provide adequate opportunity for national scrutiny in advance of final decisions. That seems to me to be very reasonable and sensible. I hope that the Prime Minister and his colleagues will support those suggestions and, if necessary, propose them at Maastricht. When he replies to the debate, perhaps the noble Earl will also comment on that point.

Paragraph 115—the last paragraph of our Select Committee's report dated 23rd July of this year—should be borne in mind by us and by the Government at this time. It states: The questions which we have discussed in detail relate to the be lance of power—between the Council and the Parliament and between the Community and its Member States. We believe that any shift in the existing balance of power between the institutions and in the balance of power between the Community and the Member States should take place not in pursuit of a vision or a destiny or under pressure to board some imaginary train, but following an informed debate as to the probable consequences". That seems to me to be a sensible comment relevant to this debate.

Another practical point that tends to be overlooked is that Ministers who are members of the Council are so preoccupied with work in their own departments at home that they do not have the necessary time to apply themselves to Council work which then inevitably falls more and more to civil servants. I have immense respect for our civil servants, but the danger and tendency is for the powers of commissioners and civil servants to grow imperceptibly, unless measures are taken to make them accountable at every stage. It is out duty to ensure that the structure is democratic and not bureaucratic.

I do not believe or accept that the European Community is intended to be a unitary state or that the objective is to build a superstate. That is something that I am unable to contemplate. The use of the word "federal" has confused matters. When we use it, we in this country think of the United States. When our partners use it, they think of a looser form of association. We must try to find a definition on which all can agree. Since its inception, the Community has developed slowly and, although mistakes have been made, its achievements are considerable. The fact that Sweden and other EFTA nations wish to join is proof of that, but Sweden, like this country, wishes to preserve its own national parliament. We must have openness and democracy in decision-making.

The Prime Minister believes in charters. He must go to Maastricht with a charter for democracy and clear proposals for the reform of the Parliament, the Commission and the Council. So far, those have not been clarified and the Government must realise that positive proposals would be better than negative reactions.

We know that Mr. John Major has a difficult task on his hands in achieving a reasonable settlement at Maastricht. For the reasons that I have given, it would not be easy for any British Prime Minister of whatever party, but the task has been made infinitely more difficult for him by the attacks upon him by prominent members of his own party, notably Mrs. Margaret Thatcher, who has described his policy as "arrogant" and "wrong". She was referring mainly to his reaction to the call for a referendum. I have some sympathy for Mr. Major. During her tenure, Mrs. Thatcher was never a great champion of referenda; she always tended to regard her own pronouncements as the equivalent of a referendum. If she was in power now, would she have held a referendum? I think not.

Nevertheless, the Government have not been able to handle this preparatory period skilfully. They have lurched from hesitation to uncertainty and there is a lack of clarity on several issues, some of which I have mentioned. My noble friend Lord Williams of Elvel will deal with economic and monetary union when he speaks later, but I must say that I am still uncertain about the Government's policy on the currency issue which is of central importance. Will the noble Earl tell us exactly where Britain stands on EMU? Is it the case that Mr. Major will leave this country "wholly free to reject" a commitment to a single currency?

I understand that the Bundesbank is being helpful at this moment, as is the Italian Bank, in sustaining the pound. But we must look to the future, and the possibility that the bankers will control interest rates when neither the Government nor Parliament will have any say in the matter. Many people have asked me to put that point to the noble Earl in the debate. The Times put the matter in a nutshell on 23rd November when it said: The whole enterprise is fraught with risk. An unelected oligarchy of bankers would sooner or later clash with elected politicians … The political conflict might well be aggravated by the fact that the central bankers might no longer be 'ours'. A constitutional impasse over monetary policy could even precipitate the collapse of the Community as a whole". I want to see a constructive settlement at Maastricht, but I also think that Parliament should be given a clearer explanation of Government policy at this time.

There are further questions that I should like to put to the noble Earl on matters that we on this side regard as important. Will he explain why, in the Government's view, the other 11 member states have no problems in accepting the principles of the Social Charter? Furthermore, if the Government are so obstinately opposed to much of the legislation based on the charter, why did they subscribe the Government's name to Articles 117 to 119 of the Single European Act?

Finally, on the issue of qualified majority voting to which the noble Lord referred, we noted that the Government were in favour of that with regard to measures to facilitate the completion of the single market (Article 100A of the Act). Will the noble Earl tell us what distinction of principle is perceived between that area of policy and those relating to the social dimension and the environment where the Government opposed qualified majority voting? As the House knows, those matters deeply worry my noble friends.

I regret that time does not permit me to deal with other matters of substance, although we discussed many of them in the debate on the Address three weeks ago. For example, I made plain then that we believe that NATO is the best guarantor of peace and security in Europe and that the Western European Union should be built up, not as an alternative to NATO, but as its European pillar. Our aim is to build a democratic Community subject to the rule of law and the freedom of the individual. We must secure those basic rights and principles in every step we take, in every regulation and in every law that we allow to pass.

I supported the Community from the start, not for reasons of commerce or trade, important though they are, but, as I said earlier, because Europe in our time was devastated by the two most terrible wars that the world has known. In those wars 50 million people were killed, 6 million Jews died in the Holocaust and there is not a family represented in the Chamber this afternoon that did not lose a loved one in those dreadful hostilities. That is why the European Community came into being; that is what Maastricht is about; and that is why Maastricht must not fail.

3.40 p.m.

Lord Thomson of Monifieth

My Lords, I am glad that the noble Lord, Lord Cledwyn, concluded on such a note, reminding us of the great vision that lies behind the need to create an effective European Community. It is a mistake to believe that there is an inherent contradiction between having that wider vision of the longer term goals of the European Community and seeking practical ways to achieve those goals. I recollect being told by a distinguished Foreign Office official that in Brussels I should learn lessons of pragmatism that I had never learnt in the Fabian Society in this country. It is worth remembering that point.

As the noble Lord, Lord Cledwyn, said, this debate follows the two-day debate in another place. We are grateful to the noble Lord, Lord Waddington, for giving us some detail of the negotiating position that the Government will seek to adopt at Maastricht. The fact is that there is much common ground around on many of the issues aimed at promoting what the noble Lord, Lord Waddington, called a more efficient and effective Community. There is much in what the noble Lord said, and much has been said in detail elsewhere, which may be debatable but about which there is no reason to be dogmatic. However, in the view of these Benches, there is one fundamental aspect of the Government's approach to the Maastricht Summit that is deeply flawed. It undermines the rest of the Government's approach. Let me put it in terms of the Prime Minister's careful and conscientious analysis in another place of his position. He said, and I agree with him: There are in truth only three ways of dealing with the Community. We can leave it and no doubt we would survive but we would be diminished in influence and prosperity. We can stay in grudgingly, in which case others will lead it; or we can play a leading role in it and that is the right policy". However, in my judgment he went on to make it very difficult for Britain to play that leading role by saying on one of the most sensitive aims of Community policy at the Maastricht Summit—the goal of full economic and monetary union with a single currency and single central bank— We [the Government] are therefore insisting [on] the right, quite separately from any European Council decision, to decide for ourselves [in 1996] whether or not to [join in] … Nothing in the treaty that I sign now will bind us now to the decision that we must take then … because at this stage we cannot know what the circumstances then will be". [Official Report, Commons, 20/11/91; col. 272.]

Nor can any of the other 11 member governments know; yet none of them insists on the opt-out/opt-in clause which the Government are so strangely proud of having, in a preliminary way, negotiated in the preparations for Maastricht. Why cannot the Government see that standing in isolation will at the very least deeply undermine the Prime Minister's professed aim of "playing a leading role" in the Community? Why cannot the Government see that it will lead inexorably to the other possibility that the Prime Minister himself spelt out; namely, staying grudgingly in the Community, in which case others will lead it and shape it to suit their interests and not ours.

The reason for the Government's behaviour has little to do with a practical, pragmatic approach to European unity and everything to do with preventing Conservative disunity in the approach to Maastricht. They are not succeeding even in that aim to judge by the reaction of Mrs. Thatcher and those around her, as described by the noble Lord, Lord Cledwyn. Surely Mr. Major, more than most, should have recognised that the lady is not for appeasing.

Unless that approach can be corrected, sadly it will perpetuate Britain's role in the Community as the reluctant member and the odd man out. So far, with the honourable exception of Mr. Edward Heath's administration, the attitude to the Community of successive British governments, Conservative or Labour, has been that of the proud Scottish mother watching her son on the parade ground and saying, "My goodness, everybody is out of step except our Jock". The Government are adopting such a short-sighted attitude in an area of policy—banking and financial services—where Britain has every claim to be pre-eminent.

Our manufacturing industry, battered and bruised by government policy, may have to take second place to that of the Germans; but the Government have always insisted—I think they are right—that the City of London and Britain generally could benefit greatly from being the financial capital of a wider Europe whatever the efforts of Frankfurt and other places to seek to replace the City of London. Britain should have had the strongest claim to be the seat of the proposed European Monetary Institute, the embryo central bank. But what chance is there of that if in advance we decline to commit ourselves to the possibility of being part of such a bank? Are we to have six years of uncertainty over whether we shall be part of a single currency? Why should investors from the rest of the world want to face over those years all the uncertainties of the foreign exchange position in the City of London when, if they go to Frankfurt or elsewhere, they can be part of a large single currency area? What nonsense it is, when we all know that at the end of the day it is much more than probable that, as so often with European Community policies, the Government will go into the single currency—with which the Prime Minister conceded that he agrees in principle. Even if we do not do so, we shall end up with an insular, national currency shadowing a powerful ecu.

That fundamental flaw at the heart of the Government's approach to Maastricht will diminish our influence in all the other difficult issues which the noble Lord, Lord Waddington, described; namely, the arrangements for political union, striking the right sort of balance between the institutions of the Community and getting right the arrangements for closer cohesion of foreign policy. Those are all very difficult issues and I agree with much of what the noble Lord said about finding solutions.

Without a clear commitment to a single currency as the outcome of bringing about convergence of national economies, the shaping of those developments will be dominated by Germany and France. Britain, instead of taking its proper place at the top of the premier division, will have relegated itself to the second division.

The noble Lord, Lord Cledwyn, raised the matter of a referendum. In a very real sense that is secondary to the matters which the noble Lord, Lord Waddington, described, such as the major issue of the currency about which I have spoken. The issue of a referendum is now causing a good deal of public debate and raises the question of how the political system in our country can best take its final decisions over Maastricht once the results of the negotiations have emerged. How major constitutional change should be decided in a country without a constitution is not n easy issue to confront. It is not sufficient for the Government or the official Opposition to say that there is no need for a referendum because we are a parliamentary democracy. If we were a more perfect parliamentary democracy there might indeed be no need for a referendum. But we are far from that. Since the last European referendum in 1975, changes in society and increasing polarisation between the two major parties in domestic politics have greatly reduced the fairness of our electoral system and, as a result, the representative quality of the parliament that emerges from it.

My noble friends on these Benches will know what I mean, when I say that some of us are inclined to feel prisoners of the past with regard to a referendum. I voted against a European referendum in 1972. I have strong reservations about resorting to the referendum device too frequently on major issues. However, having taken a vigorous part in the referendum campaign of 1975, I found that debate across normal party lines a great deal more impressive and I believe more helpful to the British people than that which had taken place in Parliament.

The current debate in another place—I fully exempt debates in your Lordships' House from these remarks—can hardly be said to have risen to the level of the fateful issues at stake. It has been distorted by the divisions within the Conservative Party to which the noble Lord, Lord Cledwyn, referred, and by the usual two party slanging match seeking to score party points on every single issue. The debate is also disfigured by using character assassination of the Leader of the Opposition as a substitute for serious argument.

That is the background against which Mr. Paddy Ashdown, the leader of the Liberal Democrats, the party to which I now belong, has made his case for a post legislative referendum. His motivation is very different from that of Mrs. Thatcher and her supporters. For them the referendum is the last refuge of losers in an internal party battle. We all know that if Mrs. Thatcher had managed to remain Prime Minister and had been able to handbag her party into acquiescence with her views about the European Community, she would have remained as opposed in principle to a referendum as she had been previously.

However, underneath the froth of the current arguments and the various public opinions polls, I believe that the common sense of the British people tells them that we are in the Community, that it would be folly to seek to come out, and that therefore the sensible thing is to make the best and the most of our membership. In order to see through the many and complex issues described today by the noble Lord, Lard Waddington, the people need a clear lead from their political leaders. If Mr. Major, even at this late stage, were to abandon his escape clauses on EMU and possibly on political union, which were designed to appease Mrs. Thatcher, and were then to lead a cross-party eleven on to the referendum cricket field, I prophesy that he would knock for six the motley team that he would find on the other side. The result would be at least as decisive as that of 1975 and the voice of the Cassandra of Finchley might be effectively silenced on the issue. Alas, Mrs. Thatcher's latest outburst has made such a change of policy even less likely than it was before. We can therefore only fall back on the old fashioned parliamentary method of a change of government. Fortunately, we should not have to wait long for that. On these Benches, with a long, consistent commitment to a truly united Europe, we shall seek to ensure that an alternative government does a great deal better than their sadly divided predecessor.

Perhaps, in conclusion, I may remind your Lordships' House that on 11th December, the day following the end of the Maastricht conference, there is a five-hour debate allocated to these Benches. My noble friend Lord Jenkins of Hillhead will initiate a debate and move a resolution on the results of the Maastricht Summit. That debate will give your Lordships' House the earliest opportunity—perhaps the first opportunity within the Houses of Parliament—to express its views on the results that Her Majesty's Government bring back.

3.55 p.m.

The Duke of Manchester

My Lords, the last time a member of my family spoke in this House was in 1903. My grandfather's speech was on a Question to the House relating to the borders of Northern and Southern Ireland. Today I wish to make a short speech on the constitution and sovereignty of our country.

Our fellow countrymen have fought in two world wars with great loss of life to defend this country, our constitution and our monarchy. At the same time, we have gone to the aid of other countries at great personal sacrifice to our nation. That has enabled those countries to enjoy their freedom with the knowledge that Great Britain has always been there to assist them in the hour of need.

I believe that unless we go to Maastricht with all parties united to maintain our sovereignty and constitution, we shall be giving away what past and present generations have sacrificed themselves for. I fully appreciate that we must not be outside the European pact as we have so much to offer, being the oldest sitting Parliament in Europe. However, the ultimate agreement must be with all nations united in an agreement which does not sacrifice our collective democracies.

I draw your Lordships' attention to the speech of the noble Lord, Lord Carrington, on 6th September 1990, prior to the Gulf War. He stated: I should like to touch on one other matter which, although perhaps not immediately relevant, is something on which the European Community might usefully reflect. This crisis has shown up how far removed the 12 countries are from achieving a closer political association".—[Official Report, 6/9/90; col. 1813.] Note should be taken of that statement from such an eminent Member of your Lordships' House. I thank noble Lords for giving me the opportunity of making my maiden speech.

3.58 p.m.

Lord Cockfield

My Lords, it is my very great pleasure on behalf not only of myself but the whole House to congratulate the noble Duke, the Duke of Manchester, on his maiden speech. It was most interesting and sincere. It is relevant to the problems that face us at present. It was also one of the shortest maiden speeches that I have ever heard. But that increases its value; it does not diminish it. He also sits in the most distinguished company in the Cross-Benches where independent advice can be offered even-handedly to the antagonists on both sides of the House. We look forward to hearing him on many occasions in the future.

I do not propose going into the detail of the negotiations at Maastricht which are to come in less than a fortnight's time. My own views are so well known to your Lordships that it is unnecessary to repeat them today. Both the Prime Minister in another place and my noble friend the Leader of the House, in what I thought was a most valuable tour d'horizon this afternoon, have set out the issues so very clearly. They have enabled us to understand precisely what the Government's negotiating stance is and the reasons for it. If my noble friend will forgive me, I detected a slight degree of greater flexibility on his part than was evident in another place, because he said that we want to see Maastricht succeed and that there must be give and take on both sides. That latter sentiment is something that I may need to come back to at a later stage in my address.

This afternoon I want to concentrate on the risks involved in failure at Maastricht, and particularly the risks involved so far as this country is concerned. My right honourable friend the Prime Minister said during the debate in the other place, there is no better sanction than the market".—[Official Report, Commons, 20/11/91; col. 273.] The market has now delivered its verdict and I am afraid that verdict is not a very encouraging one. I know that all kinds of explanations will be found for the fall in sterling and the rise in the deutschmark. There will be references to the weakness of the American economy, which is perfectly true; there will be references to speculative movements; there will be references to dissension in the Conservative Party; there will be references to the dangers of a Labour Government and there may be all kinds of other explanations. But at the end of the day what matters is that it was the deutschmark which strengthened and the pound sterling which fell. The real explanation lies in the fear of the market that the Maastricht summit will not succeed. That is why I want to come back to that issue in some detail.

I am going to take separately the two treaties; the one on economic and monetary union and the other on political union. But they are in fact linked, and that is another point that I shall have to come back to. I agree with the noble Lord, Lord Thomson, to the extent that I should like to see us go into a single currency right from the very beginning. But contrary to the view that he has put, I believe that in this country's circumstances the course taken by the Prime Minister is the best and wisest one available to us at the moment. There are plenty of precedents for it.

The noble Lord, Lord Jenkins of Hillhead, has the enormous honour and prestige of being the originator of the existing EMS. We did not become full participating members until 11 years after its foundation. I hope that in this case no period of time of that kind will elapse nor, as I understand it, is there an intention that it should elapse. The actual form of the special provision for the United Kingdom is well established in the Community and that point needs to be known and understood. On the face of it there was every reason to suppose that the treaty on monetary union would in fact be adopted without any very great further difficulty.

I now come to the treaty on political union. Perhaps I may say from a purely personal point of view that I have no very great enthusiasm for it. When I was in the Commission I resolutely refused to discuss it. My attitude was that we would see economic union in my lifetime and that I would work for it. My view was that we would not see political union in my lifetime, and I would leave that to other people who came after me. I have either underestimated the speed with which events have moved or I have underestimated my own ability to survive. But whatever may be the explanation, this issue is now very much on the agenda.

In his speech the Prime Minister set out a whole range of matters which he said were unacceptable to the United Kingdom. I need not remind your Lordships of them. First, there was the question of the unitary nature of the Community—that is to say, whether the additional areas of activity come within Community competence or whether they are dealt with outside. The second was the question of majority voting. The third was the question of the powers of the European Parliament. The Prime Minister said that these were all matters on which he and the Government held the strongest possible views and that they were not prepared to accept a treaty which contained provisions of that kind.

The simple truth is that the great majority of our fellow members take a different view from what we do. It is particularly interesting that when from time to time of her countries support us they tend to be what, without any intent to be derogatory, might be described as the peripheral countries—that is to say, the countries which geographically are on the periphery of the Community. I refer to Denmark, Ireland, Portugal and Greece. They do not support us invariably; but where we do get support it tends to come from those countries. They all share one common characteristic; namely, that, like ourselves, they joined the Community late. The Community was already established and fully operational before any of the countries that I have mentioned joined the Community.

So the real problem at Maastricht is going to be over the treaty on political union. There are matters in that treaty with which I do not agree. I am not going to go into the detail of them. I am simply making the point that that is where the crunch will come. At this point we have to go back to the fact that right at the very beginning a decision was taken by the European Council in Rome in December 1990 when it was stated clearly that the two treaties went together and that they were not divisible. You could not have one and not the, other. Consistently throughout, Chancellor Kohl of the Federal Republic of Germany has said that he will not accept the treaty on monetary union unless there is also agreement on the treaty on political union. That view has recently been reinforced in debate in the Bundestag.

There were press reports to the effect that when the Prime Minister saw the Federal Chancellor at the delayed meeting on 10th November, he was going to endeavour to get the Federal Chancellor's agreement to separate the two, but there has been no public confirmation that he succeeded. There is no reason to suppose that he did. It was further reported in the press that when he sees the Federal Chancellor again on Wednesday of this week the Prime Minister will again press him on that particular point.

It is not for me to explain in detail why the German Government take that view. Fundamentally, they take it because they say that they are being asked to give up one of the most precious parts of their sovereignty; namely, the right to control absolutely the deutschmark, which has been the great success story of the German Federal Republic. They say that they can only sell that proposition to their own people if they tell them that all sorts of other people have given up an area of their sovereignty where the German Federal Republic wishes to see advance on those fronts. So far as we know at present, there is an absolute determination on the part of the German Government to stick to the unitary nature of the two treaties.

What would be the consequences of the failure of the summit? On Friday and, to some extent, today, the financial markets were discounting the failure of the summit. Some people may be inclined to leap to the conclusion that if Maastricht failed, there would be no single European currency. That conclusion would be totally and completely wrong. It is not commonly appreciated in this country that there is already a deutschmark group in the Community. There is Germany itself. France has said that it will never again devalue, and yesterday the French were talking of revaluing, if they had to do anything at all. After the last realignment, the Dutch said that never again would they devalue the guilder compared with the deutschmark. Belgium and Luxembourg have formally linked themselves to the D-mark. Therefore, there is a five country D-mark group already in existence. Austria, Finland and Sweden are already linked, either directly or indirectly, to the D-mark. If the single currency fails, there will be a single currency in the form of the D-mark. We should have no say in that and no influence of any sort. That is the choice which faces us. We must face up to that.

We have a similar problem as regards political union. There is a certain strange hiatus between the first and second part of the Prime Minister's speech. In the first part he said: What we could not do is to prevent some or all of the other eleven member states making a separate treaty on their own outside the treaty of Rome. Those who argue that they would not do so are mistaken".—[Official Report, Commons, 20/11/91; col. 273.] He was there referring to economic and monetary union but the same argument applies also to political union. It is not possible to distinguish between the two. Therefore, even on the political side, we face the risk that if we do not reach agreement—I entirely accept the Prime Minister's view that you do not accept an agreement on any terms but I do not believe it will ever come to that—on political union, we may find that at least a group of the other member states decides to go ahead on its own.

My view, for what it is worth, is that had there never been any enlargement of the Community in 1973 and subsequent years, the six original states of the Community would, by now, have formed a union. Whether one calls it a federal or European union does not matter. I am sure that they would have formed a union. We must be extremely careful that in taking a negative attitude we do not push them back into that situation.

One does not expect, and it would be wrong to expect, the Prime Minister and the Government to modify publicly their negotiating stance before battle is joined at Maastricht. However, I very much hope that when it comes to the detailed negotiations, the Government will adopt the stance which my noble friend the Leader of the House indicated; namely, that there is a need for flexibility on both sides. There is a need for give and take.

4.15 p.m.

Lord Callaghan of Cardiff

My Lords, I hope that it will not be thought that I am losing my grip when I say that I agree with much of what the noble Lord the Leader of the House and the noble Lord, Lord Cockfield, said. I believe that there is a great deal in common on these issues.

The noble Lord, Lord Cockfield, illustrated the extremely difficult tactical hand which the Prime Minister must play at Maastricht. I do not believe that that has been made any easier by the histrionics of last week but at least the speeches which have taken place in this debate today have shown that it is possible to discuss calmly and rationally those historic issues which will affect our children and our country's welfare as a whole.

I almost chuckled when I heard Mrs. Thatcher invoking the symbol of the pound as a symbol of stability and sovereignty. It is ironic that, three or four days after her speech, we are relying on the Bundesbank to prop up sterling in order to ensure that it remains inside the European rate mechanism. I simply cannot accept that the pound is a symbol of either stability—its value has declined consistently since the war—or of sovereignty. Indeed, there is no such thing as pure sovereignty, as we all know. To use the pound as a symbol of our independence and the independence of our monetary policies, especially on a day like today, will do everything to convince the Europeans that we are a backward-looking nation wallowing in nostalgia for the past instead of looking forward to what must lie ahead.

I differ from my former noble friend and certainly my personal friend the noble Lord, Lord Thomson of Monifieth, as regards the opt-out clause. He asked why other countries are not insisting on that clause in the way in which we are. If he reflects for a moment he will realise that the situation is different between ourselves and those other countries. Here I make a point with which those on the Government Benches opposite may or may not agree. The difference between us is that the United Kingdom economy is much less capable of standing up to an entry into European monetary union than are most, if not all, the economies of our allies. Indeed it is uncertain whether we shall be able to maintain our position.

I very much hope that we shall be able to do that. However, when I look back over the history of recent years, I see that we have squandered the oil revenues and have decimated British industry. I say to the noble Lord, Lord Thomson, that at the depth of a depression we have a balance of payments deficit which has never before been known in our history. Our imports are at their lowest and there is spare capacity in industry which should be taken up in exports—to a minor degree it has been taken up. That deficit has continued not merely for a month or two but over a period of years. I ask myself what will be the position if and when the recession is over not only technically but in reality, when men are being taken on in the factories and workshops and when our industry starts moving upwards again. What will be the shape of our balance of payments deficit then?

Therefore, I say to the noble Lord, Lord Thomson of Monifieth, that there is a case for the opt-out clause. I regret that it should be so. But it is important and imperative, when we come to 1996 or 1997, that this country should have the option. To those whom I may call the "Eurosceptics", I say that it will not be a cause for celebration. It will be a symbol of our internal defeat as a nation; a symbol that we shall continually slide more slowly into a state where we cannot sustain the standards of living of our people relative to other countries and where our influence as a country will decline. The opt-out clause is important. What is important also is that we have four or five years in which to put ourselves into a position from which we can face 1997 with the same equanimity as the Bundesbank.

With regard to referenda I say this. I have a history of referenda. During my administration there were two; one went the way the government wanted and the other did not. I cannot say that I am a lover of referenda. One was taken under the influence of the Commons, which was quite right, and the other in order to help the government, which was also right, as I am sure noble Lords opposite will agree. I believe that the results were right. However, where I strongly disagree with Mr. Tebbit is that it would be absurd to hold a referendum after Maastricht, as he proposed. There may or may not be a case—I should want to hear it argued further—for holding a referendum in 1996 or 1997. But we should not hold one immediately after Maastricht when we do not know what the future will hold.

The noble Lord, Lord Waddington, referred to the future development of the Community. Will a Community which was devised for six, could accommodate nine, and is rather straining itself with 12, be able to contain, without a change in its structure or practices, a membership of 20 or 25? Who can tell at this stage what will be the shape of the Community in 1996 when this fateful decision for Britain will need to be taken? No one knows.

We are in a position of considerable speculation in regard to the future. No one really knows what the shape of the Community will be when we finally take up the challenge of economic and monetary union. No one knows whether this country will be in a position—as I fervently trust—to accept the challenge. I say to all those thinking of a referendum, please use some common sense. Let us see what the change will be over the years that lie ahead. We can then take a decision in the light of the knowledge that we possess at that time.

I hope that at the end of the negotiations the Prime Minister is in a position to sign or initial in good faith the single economic and monetary union treaty, with the safeguard of the opt-out clause. As I say, it will be no bed of roses. We shall need to watch the position and the Prime Minister will need to negotiate on a number of issues. There is the whole question of the convergence of our economies to be considered, to which I referred. There is the special position of the regions of Scotland and Wales to take into account. Constitutional possibilities should not be overlooked in relation to either of those two countries and their relationship with the European Commission. Each may have different thoughts regarding the unity of the United Kingdom in certain circumstances. I do not rule that out. I do not wish to see it come but we are all facing a great many uncertainties in the present situation. Therefore I say to the Prime Minister: sign the treaty in good faith. Work through stage 2 in order to achieve its ends and then through stage 3. However, at the end of the day if we opt out, although it will be a matter of deep regret, at least we will have endeavoured and succeeded in doing what we can.

In regard to political union, I agree with the approach of the noble Lord, Lord Cockfield. I do not view the prospect with any enthusiasm at all. However, I disagree with his conclusions for this reason. Germany has taken the concept of political union at too much of a gallop. It has come far too soon. It has not been worked out properly nor thought through properly. The clauses in the treaty—I am sure many noble Lords have read them—are flabby, imprecise and can be interpreted in many ways. Some may argue that that is a case for signing—that we will be able to interpret them in many ways. I am not sure that that is a good way to proceed.

Our Prime Minister should not be frightened by the noble Lord, Lord Cockfield, into coming back without an agreement on political union. The arguments that he will hear are the arguments that we have all heard ever since 1949 when the Council of Europe was set up. As a young Member of Parliament I was sent by Mr. Attlee to deputise for Mr. Herbert Morrison—as if such a thing were possible! We divided ourselves at that time into federalists and functionalists. The British, of course, were in the functional camp. The Belgians, the Dutch and the other smaller nations were in the federal camp. As far as I can see, over the past 40 years the arguments have not changed and the line-up remains the same.

I notice one important difference; that is, that the definition of "federal" has begun to change. I see the noble Viscount, Lord Eccles, is in his place. He will remember those great debates as I do. There were one or two in which M. Spaak, the prominent federalist, took me to task and rebuked me for not seeing matters in the way that he did. The noble Viscount, Lord Eccles, escaped that, although I believe he was really on my side at the time. However, I do not believe we have progressed much further except in the definitions. I do not believe that the Prime Minister should sign a document which contains the word "federal.' because it has a different connotation in this country than elsewhere. It may be that they are right and we are wrong. The plain truth is that it means something different to us. We should therefore not sign at this moment.

A dilemma exists. We are torn between the voiced dislike of many ordinary citizens about what has been seen to be and in reality is the growing centralisation of power, and the revolt against that centralised power, and, conversely, the growing realisation that pure sovereignty is no longer possible; that we are not able to solve our problems by ourselves. Somehow that dilemma must he resolved.

I regret to say that I do not take all the statements made by leaders of other countries immediately prior to the negotiations—and perhaps, indeed, not even those of Mr. John Major—at face value. Whatever the French may say in regard to devaluation, I am not sure that, should the time come, they would not devalue again. I have heard them say it before, as has the noble Lord, Lord Cockfield. General de Gaulle said it in the most stringent terms, yet when the moment came they did.

Although Chancellor Kohl made the suggestion—no doubt in good faith and with the hope of helping the Conservative Party win the election, which would be a poor bet—that the decision be postponed for six months, I do not believe that that is realistic. Nor should we accept such an offer, even if the Prime Minister thought it would bring him victory in the general election. It is too fundamental a problem. Those issues must be worked out much more thoroughly than they have been at the present time.

It may be that the others will go ahead without us. I am not talking about economic and monetary union. I want us to be there, and if the Prime Minister uses the right tactics he will see that he comes to an agreement on that first before they tackle political union. After all, that was on the agenda long before political union. If we get to the point where they go ahead it will be a great disappointment, but it will not necessarily be a catastrophe.

In regard to defence, to try to erect a defence pillar without the assistance of the United Kingdom would be ridiculous. It could not he done. Indeed, as long as NATO continues to exist in its present form it would be otiose. As regards the foreign policy aspects, I agree with the quotation given in his maiden speech by the noble Duke, the Duke of Manchester, from the speech of the noble Lord, Lord Carrington; that what was shown by the Gulf situation was our incapacity, when we get into a particular situation, for such a combined foreign policy to be worked out. Therefore, I say that I will be disappointed but that we should not sign up at this stage on a political union that includes defence and foreign policy.

Finally, I agree with those who have said that the powers of the Commission need to be restricted. I agree with the Foreign Secretary about the bureaucratic tendency to peer into every nook and cranny of our national life. It must be made more accountable. I thought that the editor of Dimanche Matin put it very well in the Observer yesterday when he said: It is time now to redefine the democratic content of the European Community, to decide on a system of checks and balances in order to counter the technocratic traditions and autocratic temptations of the European Commission. Many of us will say, "Hear, hear".

Finally, I hope I have made it clear that I want very much to see this closer union of Europe, but that does not mean that the British, in their usual pragmatic way, should not point out the practical difficulties of what is being proposed on certain issues. We should never forget the hold and imaginative concept of the 1940s, which led to the establishment of the European Community; the reconciliation of ancient enemies; a means of harnessing the immense latent power of Germany, which is now much strengthened so that it is 80 million strong; the establishment of confidence among her smaller neighbours; and the construction of a powerful economic entity. All those benefits have flowed from the setting up of the Community, and Britain has an essential and fundamental role in that. Its success is the best safeguard of the welfare and safety of those who come after us.

4.33 p.m.

Viscount Tonypandy

My Lords, I wish to apologise to the House at once that it may not be possible for me to stay until the end of this debate. I also wish to congratulate the noble Duke, the Duke of Manchester, on his maiden speech. When I was Speaker I loved brief speeches, but when I agreed with every word that was said it made me feel all the better. I want to say to the noble Duke that I hope we shall hear him again.

It is an especial privilege for me to follow my noble friend Lord Callaghan of Cardiff. For nearly 40 years we were neighbours with our constituencies in the capital city of Wales. It was a commonplace for us to be on the same platform, sometimes singing slightly different tunes—as indeed may be possible today—but always understanding the sincerity with which the other spoke. The Leader of the Opposition was also my colleague for I think over three decades as a Member of Parliament from the Principality. Therefore, I follow old friends upon an issue that is as old as Parliament itself.

I put my name down to speak today because of the office that brought me to this place. For 700 years it has been the privilege and the duty of the Speaker to guard the unwritten constitution and to guard the rights and privileges of the Commons at Westminster. I am reminded that when King Charles I filled Westminster Hall with his troops to intimidate the Commons and he himself marched into the Chamber—the last monarch to set foot inside the Commons Chamber—he took the Speaker's chair.

When Charles I looked around for the five Members he wished to arrest and asked the House where they had gone—they had all gone to good schools, so they said—they looked down and would not say anything, and when his Majesty ordered the Speaker to tell him, Mr. Speaker Lenthall said: I have eyes to see and tongue to tell only as this House doth command me. We have to be careful lest future Speakers should reach the position where they will say that they have eyes to see and tongue to tell only as the European Commission will tell them.

As everyone knows, I am not an enthusiast. Perhaps I may say that the debate in the other place caused high passions. It will be a sorry day for Britain when emotion as well as intellect does not play its part in the debates in the House of Commons. I shall be the first one to say a kind word about Mrs. Thatcher, who a year ago was ambushed by the people who now would like to silence her. I believe that everyone has a right to be outspoken on an issue that will concern generations yet unborn belonging to these islands.

We can take action that is irreparable and which has effects long term. We have done it from time to time, and sometimes I have regretted my own votes on matters over the years, because as the years unfold we change our opinion; we see evidence of what we have done. On the two issues of economic union and political union, I believe that it was a mistake to go into the ERM at the figure we did, but it was done. It is too late to alter that. It is now an economic fact of life.

I think that all of us have been prepared to co-operate—we want to co-operate—with Europe, because the high ideal of breaking down barriers between old enemies appeals to everyone with any common sense at all, but especially to our age group who lived through two world wars. However, I share the views of my noble friend Lord Callaghan of Cardiff when he expresses his deep anxiety—forgive me if I am putting in the word "deep"—about political union.

I see in today's edition of The Times the heading: Germany admires its own image in mirror of new Europe. I read it several times with great care. Every one of us in this Chamber knows that within a decade a united Germany will be running Europe and will be the overpowering influence there. We would not be doing our own country justice if we pretended that we were not aware of the growing economic and political strength of Germany in Europe.

What of our friends in Europe? It almost amounts to moral blackmail to be told, "All our colleagues in Europe want to go the other way". Many of those countries in Europe are hanging on because they want German money. They are very much linked to the Bundesbank. Every country is looking after its own interests. I believe in every fibre of my being that, before there is any prospect of political union being agreed, it would be right to hold a referendum.

My noble friend Lord Callaghan of Cardiff reminded us that his Administration wished to give Wales an assembly, a non-legislative assembly, something fiercely opposed by Mr. Kinnock. He was against it—

Lord Callaghan of Cardiff

He is now.

Viscount Tonypandy

My Lords, I do not wish to discuss him because I want to remain friends with him. It was considered so important that the Administration said, "This is a constitutional issue affecting the lives of our people in Wales and in Scotland". How can this House decide without knowing the will of the people? When all parties are agreed the people have no opportunity to express their view. If they want on this specific issue to express an opinion there is no alternative to a referendum. If it was right for a Welsh Assembly, surely it will be right if political union threatens 700 years' history in the House of Commons. I believe that Mrs. Thatcher was right to call for a referendum if there is a signature on political union or indeed if other steps are taken at Maastricht which make it impossible for us later to move ground. We have no right to say to tomorrow's world that we shall decide for you on that question.

I have listened with deep interest to every word that has been spoken in the debate and I have agreed with so much of what has been said from both sides of the House. But I know this I heard the expressions of sad anxiety about 1997 and what would poor old Britain do if we were right down in the dumps again. In those circumstances I would rather be the 51st state of the USA than one-twentieth of Europe. I should like it to be clearly known that they share our heritage and our language. We are nearer to them than is Honolulu. There is some logic in that argument but I hope that it does not come to that. I was seeking to apply myself to the argument that Britain can no longer think in terms of independent sovereignty. I hope that our spirit has not gone and that our will has not become so weak that we could look at the world and say, "We cannot stand on our own if it is necessary": I believe that we could.

4.45 p.m.

Lord Joseph

My Lords, it is always a privilege to speak in your Lordships' House but I am particularly glad today to speak after the noble Lord, Lord Callaghan, and the noble Viscount, Lord Tonypandy. I share the vision of the noble Lord, Lord Callaghan, and I am proud to share the historical sense and the understanding of the noble Viscount, Lord Tonypandy, of the importance to the British people of what we are debating today.

My vision, which I share with the noble Lord, Lord Callaghan, is compatible with a Europe that is not a federal one. Indeed, I am not the only one in your Lordships' House who has a distaste for the concept of and indeed the word "federalism". I support the Bruges approach—l'Europe des patries: the sovereign nations of the Community consulting and cooperating, as they now do, evolving joint policies when suitable. We in Europe, I believe, are nowhere near ready—if we ever will be—to go further and form a single central government.

We need to be alert to the appetite both of the Commission and of the European Court to extend their jurisdiction. Mrs. Thatcher was right last week to warn us of a conveyor-belt to federalism. Indeed, I agree strongly with what the noble Lord, Lord Callaghan, said about the flabby nature—I was going to say o the debate, but the lack of debate on the word "subsidiarity". This is a crucial subject: the division of powers between nation states and any central instrument of government that they might agree to set up. The approach to defining subsidiarity has illustrated either the frivolity or the stealthy ambitions of the federalists.

From the speeches in another place of the Prime Minister and Ministers and from the speech of the noble Lard, Lord Waddington, this afternoon, I judge that the Government are aware of these dangers and are unwilling to sign away at Maastricht any powers crucial ID this country's vital interests. I for my part therefore am content with the Government's stance on political union at Maastricht.

On economic and monetary union, however, I very much regret the Government's apparent readiness to sign a treaty in reliance on an opt-in clause enabling us or our successors to decide whether to join in a single currency later. I am not a banker, nor a financier, nor an economist. My worries are those of a layman. My main worry is that a single currency with a single central bank would involve a single central government—and our Government reject a single central government.

Your Lordships should be in no doubt that a single currency and a single central bank lead ineluctably to a single central government. My noble friend Lord Cockfield illustrated this thesis by telling us, warning us, and reminding us that the Germans have said that they will not sign an economic and monetary treaty unless they sign a political treaty. They understand very well that a single central government follows from a single currency and a single central bank. Mr. Heath, speaking last week in another place, must have been trying to be brief when he spoke of single trading areas in the United States and in Japan having single currencies. Yes, indeed, they do, but he failed to say—no doubt to save time—that they also have single governments.

A single central bank controlling a single currency would impose such a straitjacket on social and economic conditions in member countries that there would be immense pressure for a single central accountable government or there would be mounting and dangerous nationalist resentments. On this I agree strongly with what Mr. Benn said so eloquently in another place last week. If, therefore, we refuse to sign a political union treaty because we reject a single central government, let us not sign an economic and monetary union treaty that inevitably would involve just such a single central government.

To sign an EMU treaty relying on opt-in reservations would undermine our rejection of a single government. Moreover, as Mr. Ridley pointed out in another place, the EMU treaty we would be signing would bring in the whole apparatus of the Treaty of Rome and of the European Court. In my view we should veto the EMU treaty.

The question that your Lordships will immediately ask is: would we damage ourselves? As my noble friend Lord Cockfield reminded us, our Prime Minister told us that the 11 would probably immediately set up a single currency in a separate treaty outside the Treaty of Rome. I am not seeking to make them parallel in their current authority. But, in the same debate, Mr. Lawson judged that they would not. I repeat that I am no expert on the matter.

An article in The Spectator last week by Tim Congden reminds us of what happened when President Pompidou proclaimed that a single EEC currency would be in force under the Werner Plan a few years later in 1980. What did happen? Nothing happened. Why? Presumably because of the difficulties. However, there is no evidence that those difficulties have been tackled now, let alone overcome. For example, to whom would the single putative central bank lend? Moreover, what would happen to the foreign exchange reserves of Britain and of other member sovereign countries? Will the 11 want to go ahead without any contribution from us—one of the main contributors of money within the Common Market—towards the heavy subsidies that several member states will be demanding?

I am wistful that stable money, with all the blessings in jobs and earnings that it would bring, which might be hoped for from a single currency controlled by a fiercely monetarist single central bank is not available. It would not, any way, be the Bundesbank in charge but a board containing Greeks, Portuguese and Italians. They are noble peoples in their own way, but not ideal people to put in charge of a single central bank. There is no mockery in what I say because they are indeed noble people. But there are too many grave dangers in EMU—the implication of a single central government, the straitjacket and the nationalist dangers. The truth is that we have to squeeze out inflation and sharpen our economic competitiveness by our own efforts. We can do it.

My noble friend Lord Cockfield and the noble Lord, Lord Callaghan, both told us that the Germans will not sign EMU if they do not get EPU. There was a difference between what the two noble Lords said. My noble friend recommended that we should sign EPU but the noble Lord, Lord Callaghan, despite the fact that it would destroy the prospect of Germany signing EMU, recommended that we should not sign EPU. I apologise for these neologisms but even if no EMU means no EPU that would be no tragedy. I agree with the noble Lord, Lord Callaghan, that it is far too soon to contemplate a single central government.

Therefore, I still urge our Government not to sign EMU even with its opt-in reservation for Britain. It would only undermine their own robust stance on EPU.

4.55 p.m.

Lord McCarthy

My Lords, I am very conscious of the fact that the House may feel that we are now moving in to the second division in this debate, speaking as I do after six privy councillors and a noble Duke. I do not wish to follow the broad sweep of the argument between the clashing of the Titans which we have heard so far in the debate, but rather to make just a few random reflections as to how I see the situation at present.

I must first apologise in the same way as the noble Lord. Lord Thomson of Monifieth, for the fact that I may not be able to stay in the Chamber to hear the end of the debate. However, I shall be most interested to read the Minister's replies. I should also like to join those who congratulated the noble Duke, the Duke of Manchester, on his maiden speech. I do so not just for the brevity and clarity of it, but also because it reminded us of the long roots of this debate.

I must also congratulate the noble Lord the Leader of the House on the simplicity of the Motion. The Motion may not say very much but we know what it tells us. Indeed, it is much more simple and straightforward than the very complicated Motions put forward both by the Government and the Opposition in another place. I should also like to thank the noble Lord for the fact that he said, if I understood him correctly, that he had no wish to rake over the ground of the past in the debate. That is the way in which the debate in this House so far has been a significant improvement on the one which took place in another place over a period of two days. In that debate I felt that people were not debating where they were but that they were debating how long they had been there. There was a small number of people who were proud of the fact that they had been pro-Europe before Spaak. There were other people on both sides of the House—and certainly on my side of the House—who said that they were against Europe in 1963, even more against it in 1976 and that they were against it now.

Lord Stoddart of Swindon

That is right.

Lord McCarthy

My Lords, my noble friend agrees that that is right. I believe that most of us are not in that position. I believe that most of us have changed. It would be rather ridiculous for us in certain respects not to have changed over this very long period.

I began as one who believed that there was an alternative to British membership of what was then called the Common Market. Even now, I think that it is possible that those of us who believe that certain things must and should happen now may wake up in two, three or four years' time believing that things are slightly different. I am very worried about people who use single direction metaphors in this subject; for example, we have been told, "Don't mount the conveyor belt", "Mind you catch the tide", "Don't miss the bus", "It's the wrong train" or "It's the right boat". In other words, there is only one way: you either get on or you do not and that is the end of the story. But, of course, it is never like that. In that sense I remain a Euro-sceptic. But then I was a Commonwealth sceptic and I am a market sceptic—perhaps I am just a sceptic.

If I were looking for a phrase or an analogy to epitomise the way I believe that most of my fellow countrymen feel about the European Community, it is not as a boat, a ship, a saviour, or something which is always good or always bad. It is rather like the internal combustion engine—it is the basis of modern life and it is totally inescapable. Moreover, when we think of what it does sometimes we wish to God that we were back in the days of the horse and buggy. However, we are not back in those days. The belief that I and some of my friends held that we could have an alternative economic policy based upon what we used to call, in those days, "a command economy" with exchange, import, and capital controls—and that wonderful thing we never managed to achieve, a strategic devaluation—is no longer there. It is no longer a viable policy.

It is interesting to note that those on my side of the House, who, as I understand them—I may be wrong and I may not be here when they tell me that I am wrong—still oppose what is in front of us in terms of the EC are not now arguing for us to get out of the EC. There is, in effect, no significant section of political life in this country which is arguing for that. It is obvious why that should be. It is because there is no real alternative to what we are being asked to accept. There is an alternative at the margin. There are things that can be negotiated.

In my opinion, the most important issue dividing the two sides of the House today is what is to be the definition of "convergence". The Opposition are right in waiting to widen the meaning of the term "convergence". If that means that we shall not have convergence, I can live with it. If it means that it is difficult to imagine a situation in five or 10 years' time in which we have Poland at one end of the Community and Norway and Sweden at the other end, and no one can see how those different economies could possibly significantly converge, I can live with that. But that is not an argument for not discussing the issue and seeking to reach agreement on what is the meaning of "convergence".

If one looks at the EC as one looks at the internal combustion engine, one finds that there are a considerable number of things one can do today, but one cannot do without the car. Even if one does not have a car, one uses the internal combustion engine. We cannot hope to regulate multinational companies without the framework of the Community. We cannot hope to tackle problems of pollution and the environment without the framework of the Community. We cannot hope to tackle the refugee crisis and the creation of cross-frontier social and employment standards without the European Community. That brings me, as some will not be surprised, to what the Conservatives are now saying about the social charter.

The noble Lord the Leader of the House mentioned charters. Ministers hardly rise to their feet without mentioning one kind of charter or another, but never the social charter. Therefore, it is worth saying briefly why I believe that to be the position. The first point to make is that the Government's opposition to an improvement of international labour standards is nothing new. Unlike many things which are now blamed upon the right honourable Member for Finchley, that is not her fault. Since the 1970s, and the days of the first social action programme and the Vredeling fifth directive, the Conservative Government have opposed all attempts to improve international labour standards. There is nothing new about that.

As I understand it, two bogus arguments have been advanced. One of those arguments was mentioned by the noble Lord the Leader of the House. It is the principle of subsidiarity. We are told that there is no case for doing those things because they can be better done at national level. There is a great deal of truth in that, if I hat is what is being done. If the Government were to say, "We do not want parental leave to be regulated by Brussels; we will do it ourselves and we will do it now", they would have an argument for subsidiarity. If the Government were to say, "We do not believe that the social action programme should deal with working hours; that is a matter for our Government and we will introduce it now", they would have a case. But their use of subsidiarity is an argument for doing nothing. So it is not a legitimate argument which they can use within the context of the treaty. Therefore, they move to their second equally bogus argument, which is that buried in the treaty and in many statements coming from Brussels there is a commitment to high employment. Since high and stable levels of employment are thought to be incompatible with an improvement in international labour standards, they are therefore able to sabotage every attempt by everyone else to improve them.

Lord Harmar-Nicholls

My Lords, perhaps I may intervene to make one point. The noble Lord said that people say that there is no alternative. He said that was because we do not announce in advance that we will do what other people recommend should be done. Is not doing nothing an alternative to doing something? So there is a practical alternative.

Lord McCarthy

My Lords, I am not certain what the noble Lord is doing nothing about. If he is talking about the social charter, yes, of course there is an alternative to introducing legislation on minimum hours and minimum wages; but that cannot be justified by talking about subsidiarity. The essence of subsidiarity is that we are saying, "We can do it better at our level than you can at your level." To justify that, we have to propose to do something. The argument is that the proposal may be against employment. The short answer to that argument is that that is not what 11 out of the 12 countries think. That is what the Secretary of State for Employment says as a result of feeding his prejudices into the Treasury computer. He receives that answer. We have told him again and again of the whole range of other research of a different kind which comes to a different conclusion.

We must take the view that the Government believe in moving towards European standards where they are the standards that the Government require. The Government are not good Europeans because they are not prepared to accept that there are other countries which place other priorities in other directions. It is for that reason that we cannot support the Government today.

5.7 p.m.

Lord Gladwyn

My Lords, my brief remarks will be devoted chiefly to the bogey-word "federalism". As I understand it, we are already firmly committed to an "ever closer union" of European states within the European Community. If that phrase means anything, it means that, every so often, we are bound to take measures which will gradually transform the Community into a political and economic union of some sort; that is to say, investing it increasingly with some supra-national powers. That would seem not to differ much in practice from pursuing a "federal goal". But, of course, it all depends on what one supposes an eventual federation would turn out to be.

As I see it, the word might be retained as being of some use in persuading our European partners that we really are sincere in our desire for ever closer union, but it is perhaps dangerous by giving the impression that we agree with those who look towards the formation in Europe of the equivalent of the constitution of the United States of America. That last is, however, something which I believe this country would never accept; nor would it be acceptable, I suspect, to most of our European partners, if it ever came to the point.

Why? The North American states which came together in a union after their successful war against Great Britain, already had, in addition to the fellow feeling resulting from that war, many things in common, notably language, law, cultural traditions and even, to a large extent, religion. It was therefore possible for them eventually to form what was, in effect, something more than a federal union with a President, elected by popular suffrage, able, with the "advice and consent" of a Congress, to conduct among other things, foreign affairs and defence, the component states being substantially left with powers over internal matters only. But who can imagine a similar system being applied to the ancient nation states of Europe, with their different languages, histories, cultures and religions, who have been obliged to come together, not because of a common war against an external foe, but as the result of a series of appalling wars among themselves?

Is it, in fact, conceivable that in the foreseeable future we might have a president of Europe, elected—regardless of nationality—for a period of four years, installed in Brussels with his own staff, his own ministries, and in command of a strong, possibly conscripted, force, all wearing a federal uniform and presumably run on a common language? It is barely conceivable.

But if so, what is the point of having some kind of Congress, also in Brussels, consisting of a Council of Ministers transformed into a Senate and the present Parliament transformed into a House of Representatives, which clearly could not function in the absence of a central authority of some kind? Unless, of course, it were agreed that the unelected president of the Commission should become the effective president of Europe. But I do not think that such a solution would be likely to appeal to our various democracies.

Now it may be argued—and it is argued—that a presidential regime of the kind envisaged would work if the nation states comprising the present European Community voluntarily agreed to become the equivalent of American states, or perhaps if those states broke up into regions which were separately represented in the new federation. Of course it could be—and logically that might be the best solution—acceptable to those who sincerely believe that the nation state itself is the source of all international evil and that it must totally forgo its independence if peace is ever to prevail.

What may happen in the future no one can say; what is certain is that if, in present circumstances, the impression grows that we are inevitably moving towards such an abolition of the nation state, there is likely to be an explosion of nationalist sentiment—and not only in this country—that may at least put back further progress towards European unity for several years.

It seems to follow, if what I suggest is agreed, that what the Government could well do when they say, as they do, that they seek to avoid "the development of a federal Europe" is to make clear that what they will not accept is the creation of something like the United States of America. But, as I see it, none of the points which we still apparently object to in the two draft treaties for discussion at Maastricht—and here, differing from the noble Lord, Lord Joseph, I include an eventual monetary union and a social charter—comes into this category at all. We may object to some of them, perhaps along with others, on the grounds, for instance, that they are unworkable or contrary to the general interest, or that the time for them is not ripe, but not that if they were approved they would eventually reduce this great and ancient nation to the rank of an American state.

The European Community is an unique organisation, never before attempted, I believe. It was born as a result of a realisation by the nations of Western Europe, almost all of which had been defeated or occupied during the last hideous war, that they must in some way become interdependent if another catastrophe was to be avoided. We felt originally that we could not join them. Had we not won the war? Suez, and our increasing impoverishment, made it impossible for us to stand aside. But the Community's machinery, which we accepted 20 years ago, though it has its defects, has been shown, broadly speaking, to be acceptable and correct. The Council of Ministers and its numerous sub-committees, the Commission, the Parliament and the Court will all, in time, be reformed, but it is on them alone that the future Community must surely be constructed.

In particular, the Commission has been unduly criticised in this country. The disastrous CAP is not its fault, but rather that of the Council of Ministers; it, too, must and will be reformed. It is quite right that the Commission should be preparing plans for example, for a common industrial, transport and, yes, a social policy. One would have thought that the principle of subsidiarity alone would prevent it from trying to prescribe the exact meat content of a British sausage, or indeed the precise location of a British road. But it must obviously have an important part to play in initiating plans to provide against, for instance, the poisoning of the atmosphere or the sea. To describe it as a "Belgian Empire" is a silly joke.

So, in conclusion the Ministers must be prepared over the next year or two to take more decisions by qualified majority vote, even in some matters affecting foreign affairs, and eventually—more especially if the Americans withdraw from Europe—defence as well. The Parliament must be given some real part to play in the formation of policy and with some control over the Commission. For its part, the Court should, by one means or another, be assured that its decisions are duly observed by all concerned. It will take time for all this to be done, but we should press strongly for it to come about as quickly as possible.

With all this in mind, we can surely wish the Government well in the all-important negotiations on which they are about to embark. Undoubtedly, all but a small minority will applaud them if they return with two treaties signed by all concerned. But a similar majority will be filled, I fear, with gloom and apprehension if, for any reason, they fail—especially if they are found to be in a minority of one. The opportunity for far-reaching decisions, taken in common, is approaching, and they must rise to a great occasion.

5.20

Lord Aldington

My Lords, it is always a pleasure to speak after the noble Lord, Lord Gladwyn, whose experience of these issues extends over so many years. The subject of this debate was covered by two reports of the Select Committee. One report was produced by a sub-committee I chaired and another, more legal report, was produced by the sub-committee chaired by the noble and learned Lord, Lord Oliver. Both reports were welcomed. I stand by the principles and opinions of both reports.

Our report, published in 1990, warned against the use of the word "federalism". It came out against a federalist approach and for a step-by-step approach. At the outset of my remarks I wish to say that I support unreservedly the stance taken by the Prime Minister and the Foreign Secretary. That stance was admirably expressed to us by my noble friend Lord Waddington this afternoon. I express my warmest admiration for the way in which the Prime Minister and the Foreign Secretary have handled the negotiations so far, and for the way in which they have kept us in this House and those in another place fully informed.

As I support their stance, I shall not make any proposals on any detailed matters they may be negotiating. However, I shall make some general observations. Through my attendance at meetings of European affairs committees of the 12 parliaments and through my visits to a number of our partner countries in the course of Select Committee business, I have been able to form a worm's eye view, as it were, of the problems facing the negotiators.

That experience has shown me all too clearly the divergent and often emotional demands and arguments of some—not all—of the parliamentary representatives of other member states. That worm's eye view has given me a chance of understanding the problems that have faced our negotiators better than I understood them in the past. There is the confusion between the fine and historic visions of the future they want for Europe and the practical requirements as regards the choice of what further advances towards political union should be put into the treaty this year. There is the matter of the acceptance of catchwords such as "federal" and "democratic deficit" without working out what the words and concepts mean.

I have still to meet any champion of the federal aim today who is ready to say now that his country should give up its international sovereignty and its seat in the United Nations. I have not met all that many enthusiasts for passing joint control of legislative powers to the European Parliament who understand where democratic control of Community legislation lies today; namely, in national parliaments with the European Parliament playing an important but not dominant part in co-operation and other processes.

The fact is that some national parliaments have had little information about Council proceedings and still less say, until quite recently. It is no wonder that Britain has found it difficult to explain our preference for the European Parliament controlling the Commission and not the Council. It is all so logical to us because we believe that the Council is the key decision maker in the Community, and has to be in the foreseeable future. My noble friend referred to the proposals—the Prime Minister has described these proposals—to give the European Parliament much greater powers in other respects. That is a good measure and I support it.

It seems to me obvious that the best way to build up unity of thought and action in the Community is by voluntary consensus on policy within the Council. That seems so obvious that I have mistakenly underestimated the force of those who seek to impose unity in policy, as well as in action, by majority vote. I do not understand how it can be supposed that Britain, or for example France, Germany or Italy, can be expected to face a situation in which their foreign ministers, having said that course A in foreign policy is right and course B is wrong, and can then be forced to tell their parliaments, "We have been outvoted and are now required on a vital foreign policy issue to do exactly what we think is wrong". What better way of provoking later Balkanisation of the Community!

We have been right to feel our way in the advance towards closer political union. The whole Community has been right up to date in eschewing definitions of the form of union it seeks. The noble Lord, Lord Jenkins of Hillhead, in giving evidence to the Select Committee on 28th June 1990 said: I think we will always be travelling towards rather than arriving at political union … I do not myself envisage it as likely and probably not desirable that we should move towards a complete common polity in the sense the United States is".

I agreed with that view, as did the Select Committee. I believe that most noble Lords also agree with it. It would seem to me an enormous mistake in a fast changing world—as the noble Lord, Lord Callaghan, said, there is so much we do not know—for the Community to depart from its known, steady, step by step advance which has proved so right in the 35 years since its establishment. However, it would be as serious a mistake to take no forward steps now when quite obviously there is need for more parliamentary control of the Commission's activity, including the implementation of the Council's decisions. There should be more parliamentary control by the European Parliament; a better understanding of the Council's work—more open explanation—more co-operation between individual members of the European Parliament and members of national parliaments; better implementation of laws and decisions of the European Court of Justice and the modernisation of other institutions' powers among other things.

I wish to make a few remarks about economic and monetary union where there is also a need for further progress. That objective has been agreed by all member states since 1972. It has been encouraging to watch the success of British Ministers in working with others to steer the monetary union negotiations into sensible practical channels. The immediate need is for agreement on Stage 2 and the preparatory arrangements for the next stage, whenever that may be and whatever it may consist of. That there is broadly such agreement, as I understand it, is a tribute to the Chancellor of the Exchequer among others.

In our EMU and PU report—as it is known—last year we were anxious to ensure that British Ministers took a full and effective part in the discussions about Stage 2 and the preparations for the next stage, whenever that should be. They appear to have achieved that. The noble Lord, Lord Thomson of Monifieth, said we could not influence such preparations. I do not view the matter that way. I do not view the draft treaty that way. I believe that we can and will influence preparations at the right time.

Like my noble friend Lord Cockfield I am fully persuaded—whatever my views are on the single currency, which I shall discuss later—that it is right for Britain and indeed for everyone to have the right to delay the decision on whether, as well as when, to embark on a single currency until nearer the time when such a great change is practical. It is much easier to understand the advantages of a single currency at the right time than it is to appreciate the problems of creating the currency and its mechanisms and the full potential of the problems that could be caused to any nation whose economy was not ready for monetary union. Both those problems can be underrated.

On the other hand, I believe that the advantages of a single currency to all members of a single market cannot be overrated. I certainly do not believe that Britain could be a successful member of the single market and not be in the single currency union from the outset. That is my view and it is the view of a number of people who are more knowledgeable than I am. However, at present it is not the view of the other place, nor of my noble friend Lord Joseph and many other noble Lords, or of Mr. Benn and others. Some of the reasons for those people taking a different view are political and some are economic.

In those circumstances I agree that it would have been quite wrong for the Prime Minister to have accepted any commitment for Britain beyond Stage 2. As I have said before, I do not agree with those who say that that prejudices our ability to influence later events. There is plenty of time to debate the economic and political advantages and problems of a single currency before it would be wise to take a decision in the Community. Those questions can quite properly be resolved several years on.

At Maastricht there are other more immediate problems to be resolved. I remain optimistic that they will be resolved. Like other noble Lords I very much hope that they will be resolved. It is very important that they should be but it is equally important that we should not give our backing to going along the wrong road.

I say that I am optimistic because our Prime Minister and Foreign Secretary are being listened to once again. Once again we are accepted as full Europeans. That is due most of all to the Prime Minister's personal commitment, the position which he has won with his fellow heads of government and the support which he commands in our country.

5.33 p.m.

Baroness Ewart-Biggs

My Lords, the opinion polls tell us that the public are becoming increasingly disillusioned with the European Community and suspicious about the negotiations which are to take place at Maastricht. That is a great pity, but it is not entirely surprising given the note of hysteria which has entered part of the public debate which is taking place at this very crucial period leading up to the negotiations.

That does not appear to have happened in other countries on the Continent. Their governments and people are facing the same decisions but the discussion is on an entirely different level. One wonders why that is so. I believe that it is because each country made the same calculations. They agreed to the Single European Act and they cannot and do not want to turn back. They accept the pooling of sovereignty within the Community in return for wider world influence.

The decisions to be made are momentous. There is a great need for informed discussion so that people know exactly what is at stake. However, I believe that the Government should have had that informed discussion prior to the signing of the Single European Act, which set in motion all the changes which are to be discussed at Maastricht. However, because of the internal problems within the Conservative Party the Government found that difficult. That has resulted in suspicion among the British people of further integration within the European Community.

Much of the debate is a re-run of the discussions of the 1960s and early 1970s. It seems sometimes to be forgotten that we have been a member of the Community for two decades. People talk as if it is still a matter of joining for the first time. Now, as my noble friend Lord Cledwyn mentioned, there is a request for a referendum. I am happy that the Government appear to be responding negatively to that demand. That is right. The present situation has clearly emanated from the Single European Act, the debate on which was guillotined in the other place. It is ironic that the very person who signed the Single European Act is now calling for a referendum.

Lord Stoddart of Swindon

My Lords, will my noble friend give way? Perhaps I may remind her that the call for a referendum came from other people long before Mrs. Thatcher took it up.

Baroness Ewart-Biggs

My Lords, my noble friend is probably right; but when Mrs. Thatcher asked for a referendum it made a great impact.

I should like to make three points. First, what would happen if we availed ourselves of the draft EMU treaty's opt-out clause and signed the treaty, retaining the right to decide whether we want a single currency? My noble friend Lord Callaghan gave some reasons why we may be obliged to do that. However, it should be recognised that the sacrifices that we would make would be very great. Such action would place Britain fairly and squarely in the second division. If we eventually decided not to join a monetary union which went ahead without us, there would be an adverse effect on inward investment into Britain and a likely loss of influence on the development of the EMU. Further—and crucially—how could we expect to make the City of London the financial centre of the Community when we were outside a single currency? Therefore, as my noble friend Lord Callaghan pointed out, there would be considerable problems if we did not sign that treaty.

Perhaps the Minister will specify what the Government will do if our European Community partners form a monetary union and Britain remains outside that structure even though convergence is achieved. The noble Lord, Lord Cockfield, gave his interpretation. I hope that the outcome will not be as bad as that suggested by my noble friend Lord Tonypandy—that we would become the 51st state.

Many people are not convinced by the economic arguments for EMU. We have heard many of them today. However, surely there is still a great deal to be negotiated. The question is whether Britain will have any serious influence on events after Maastricht if, as William Keegan wrote in the Observer yesterday, we remain beyond the boundary as the permanent twelfth man of Europe. As was also pointed out in the Observer yesterday, at the bottom line lies that 50 dollar question: where else is there for us to go? There has been no suggestion of that in the debate today.

I should like to reiterate the Labour Party's view on the matter. The party is in favour in principle of progress towards economic and monetary union and an eventual single currency. However, it believes that economic monetary union must involve members working towards real economic convergence, not just on inflation but on policies to produce sustained growth. My noble friend Lord McCarthy made that very clear.

My second point concerns closer co-ordination of European foreign policy. I shall take the topical and tragic events in Yugoslavia to illustrate the need for that. What happened in Dubrovnik shows why we hope aid pray that Maastricht works.

There are two reasons for that. First, if European member states had co-ordinated their foreign policies regarding the situation in Yugoslavia, they might not have sent such conflicting messages to Yugoslavia and so avoided the incorrect assumptions made by the different factions in that conflict. Secondly, what has happened points to the need to widen Europe. But how can we widen it without first deepening it via a closer economic and monetary union and the co-ordination of foreign policy? We cannot possibly envisage absorbing the countries that have already been mentioned—Sweden, Norway and Austria—and the eventual involvement of Eastern European countries, together with Russia and various of its republics, without first developing a consistently co-ordinated foreign policy among member states. A vital element in that foreign policy should be to put into practice an idea of the previous French Minister of Justice, M. Badinter; namely, to establish a permanent European Community arbitration commission so that in future we could put conciliation procedures in place before a conflict got under way. Maastricht gives Europe the opportunity to deepen before it has to face the challenge of widening eastwards. I sometimes wonder whether that becomes clear in British debate which so often seems to be dominated by the most parochial conception of our national interests.

My final point, which has already been made today, relates to democracy. Members of another place are bound to equate democracy with British parliamentary sovereignty, but the general public may wonder whether democracy might also mean accountable European institutions and, above all, an elected European Parliament with real powers to control and review the decisions of the Council and the Commission. I was happy to hear the noble Lord, Lord Waddington, state in detail the reforms envisaged. He realises that we would like to go a little further and that we favour the European Parliament being given the power to initiate legislation and to enjoy some form of co-decision with the Council of Ministers. Co-decision would in effect give a degree of legislative power to the European Parliament at the expense of the Commission. That would have a balancing effect on the different powers of those institutions.

In conclusion, I am not a born-again European which I understand the Conservatives are calling my colleagues in the House of Commons. Ten years ago I made my maiden speech in your Lordships' House on Britain's position in Europe. I still believe what I said then; namely, that Britain's position in Europe is of great interest and importance to the people of Britain and to the people of Europe as a whole.

5.43 p.m.

Lord Rippon of Hexham

My Lords, I warmly welcome the impressive speech with which my noble friend the Leader of the House opened our debate. I am also glad to note the wide degree of agreement on all sides of the House about the best way in which we should proceed.

I recollect being asked to state a final negotiating position in advance of negotiations, so I have every sympathy with the Prime Minister and the Foreign Secretary at present. They cannot be expected to state precisely what they will or will not agree to at Maastricht. As my noble friend the Leader of the House said—I am glad that the point was taken up by my noble friend Lord Cockfield—there must be give and take in negotiations. One must go into them with a measure of room for manoeuvre.

The Prime Minister has stated his approach clearly in so far as that is possible at present. I am sure that he will defend both British and European interests in the hope that they coincide, as they should do. The list of practical proposals which we put forward, and which my noble friend the Leader of the House indicated, is prudent and, if adopted, will lead to the strengthening of the Community. The Prime Minister is right when he says that we must be at the very heart of Europe, bringing our own ideas for its future development to the conference table for open discussion, and always seeking to ensure that the Community moves forward harmoniously.

As she indicated in the other place, no doubt Mrs. Thatcher would have turned up swinging her handbag. She said that she hopes the Prime Minister will wield a cricket bat. He has certainly said that we must go on to the pitch to play hard, but, because he has a rather better relationship with our Community members, I see him bowling a few gentle but nonetheless effective googlies at opponents who have their heads too much in the air. His approach will be different in style, although not always essentially in substance.

In her speech last week, Mrs. Thatcher invoked the spirit of Winston Churchill, but not so long ago the Prime Minister reminded an audience in Bonn that it was Winston Churchill who saw our task as being: to recreate the European family, or as much of it as we can, and provide it with a structure under which it can dwell in peace, in safety and in freedom". That must remain our primary objective.

In response to the noble Baroness, Lady Ewart-Biggs, we must also seek to widen as well as deepen the Community, because, under the Treaty of Rome, those European countries that can fulfil the requirements of the treaty have a right to become members. We must also seek to make the Community more outward-looking than it is at present and we must give a high priority to implementing the Single European Act. We must do all that before we can set about trying to determine the ultimate end of the Community and the final structure.

As the noble Baroness suggested, it is ironic that perhaps the greatest achievement of Mrs. Thatcher's Administration, for which it will be honoured in the future, is that it passed the Single European Act of 1986. That took the United Kingdom along the road to a supra-national European union by accepting majority voting in place of unanimity in a significant number of cases. It is still open to us to decide how and when we shall extend that number, but the principle was quite clearly accepted in the 1986 Act. There was no question of a referendum then. There was no question even of the free vote which the Conservative Party allowed when we debated the European Communities Bill.

Before we talk of referendums, we might consider the importance in constitutional matters of this kind of allowing more genuine free votes in the House of Commons. There was no question then of letting the people choose: Mrs. Thatcher made the choice herself. It is strange to see demands for referendums come from the very people who spend most of their time arguing about the vital importance of maintaining parliamentary sovereignty.

The noble Lord, Lord Thomson of Monifieth, showed some sympathy for the idea of a referendum. Part of the pressure for a referendum and one of the reasons why the polls initially showed some support for a referendum is the growing feeling that parliamentary sovereignty has been undermined by an increasingly powerful and centralised Executive. With dissent of any kind, to put it mildly, discouraged and with a payroll vote that would make George III and Lord North green with envy, Mrs. Thatcher hardly allowed the Cabinet to decide, much less Parliament or the British people. It is almost bizarre to hear an attack on arrogant and wrong government coming from her lips.

She says, "Let the people choose." But choose what? She said that the people must choose whether or not they want to be forced into or kept in a union. Maybe we shall soon hear her espousing the cause of Scottish nationalism. A better example might be a referendum to allow the English to choose whether they want to retain the union with those expensive, troublesome and all too socialist Scots. So what is the referendum to be about? What is the question? That is the question.

The question was clear in 1975: "Do you want to be in the Community or out?" Perhaps one could put the same question again, if a treaty of that nature emerges from Maastricht. What shall we have as a question? If it were: "Do you want a federal states of Europe?", the answer would almost certainly be "No". If the question were: "Do you approve the goal of European union?" (as Mrs. Thatcher herself affirmed in the Stuttgart declaration), the answer would almost certainly be "Yes". If it were: "Do you agree with the objective, as set out in the Treaty of Rome, of an ever closer union of the peoples of Europe?", the answer, I believe, as in 1975, would be an absolutely overwhelming "Yes".

The referendum question may be: "Are you in favour of a single European currency today?" The answer would probably be "No", in which case the Government would say, "Thank you for your advice but the question does not arise. Future parliaments may ask your advice again". If the question were: "Do you agree that a single European currency at some time in the future has much to commend it?" the answer would probably be "Yes".

I have just spent three days on the Continent carrying around three envelopes, one with French francs, one with Belgian francs and one with German marks. Every time that I changed a traveller's cheque I lost money. It might be worth recalling that it was Thomas Cook who, in the 19th century, invented the traveller's cheque because the British found it difficult to travel around Italy with 16 different currencies to negotiate. We might also remember that Belgium and Luxembourg have not lost control of their budgets or their national identity by having a common currency; nor have Switzerland or Liechtenstein. As my noble friend Lord Cockfield said, there is nothing to stop any of them having a further extension of the common currency. Let the Dutch throw the guilder into a Benelux common currency if they so wish.

A more relevant question at the present time might be: "Do you think we might join the narrow band of the exchange rate mechanism (a) on our own initiative, or (b) only when the rest of the Community does so?" One might add perhaps: "If not, why not?"—or, "Answer in not less than 50,000 words". If the Foreign Secretary and the Prime Minister can agree on the basis of a new treaty at Maastricht, it will have to go through the process of ratification, through either the Ponsonby rules or a change in our domestic law to give effect to the terms of the treaty. If they want to do that, well and good, but we cannot judge until they come back with a treaty on which we can express an opinion.

I do not believe that failure to agree on everything will necessarily hold back developments in Europe. We at least can fairly claim that so far we have done more to create an open financial market than has any other country of the Community. We now need every member of the Community to allow complete freedom of capital movement to comply with existing obligations under the Single European Act and to achieve a greater convergence of national economies before we can contemplate a single European currency.

It is unfortunate that a number of factors have sown the seeds of disunity in this country and elsewhere in recent months. I believe that we must regret the unnecessarily aggressive statements and actions of Mr. Jacques Delors, the President of the Commission. I heartily agree with those speakers who said that we must bring the Commission under greater democratic control, both by the European Parliament and the national parliaments. It does not help that the Italian commissioner—at the moment I forget his name—has such a totally misguided view of our town and country planning procedures. Plainly he does not understand how they operate.

There has also been the quite extraordinary bureaucratic nonsense of the kind which says that a Bath bun can only be baked in Bath or that one can eat a Yorkshire pudding only if it comes from Yorkshire. Those examples are fiction but in fact it is almost impossible when reading the newspapers to decide what is fact and what is fiction. Certainly there is a great deal of public resentment of that kind of bureaucratic interference.

Finally, I regret the unwisdom, to put it mildly, of the Dutch presidency in insisting on the words "federal union" being stated as an objective of the treaty. That may be just what I call Euro-rhetoric but it is manifestly provocative and designed to create dissension. As a result, much of our debate on Europe—certainly in the other place and some of the newspapers—has become increasingly unreal and to a large extent irrelevant. We must all know that irresponsible national attitudes offer only a miserable prospect of mounting mutual injury and bad feeling. As the noble Lord, Lord Callaghan, said, European union means different things to different people. What is certain is that it is not about some utopian united states of Europe on the United States basis in the immediate future or even in the distance.

Of course, to many Europeans federation means decentralisation rather than the reverse. I have always adopted as a general principle—we often talk about the founding fathers—the views expressed by Jean Monnet, who said: The European Community is a process not a project. Or, as he put it on another occasion: We are uniting not states but people. Also, if I might say so, I like the expression used by my noble friend the Leader of the House: it is a "developing organism".

I have always believed that we must move forward step by step with realism, recognising that every practical step that we take toward the ever closer union of the peoples of Europe is part of an irreversible process. It is one in which, to do her credit, Mrs. Thatcher and her Administration played a most notable part.

Lord Harmar-Nicholls

My Lords, perhaps I may ask my noble friend a question. He said "move forward". Could he tell me to what, in his vision, he is moving forward? What is the ultimate place at which he expects to arrive in moving forward?

Lord Rippon of Hexham

I hope to arrive in heaven and I hope that some things will happen after that. My vision of moving forward is a movement toward an every closer union of the peoples of Europe. I do not see that it is necessary to define it much further than that. It is a process to which we must all freely agree at every stage.

The goal of European monetary union is clearly of immense importance. As many speakers have pointed out, our response to it may well determine whether our industry thrives or whether we lose London's pre-eminence in financial markets to Frankfurt or Paris. As with NATO and the Western European Union—still, I believe, the basis of our European defence—or any other treaty, we have to surrender a degree of sovereignty. We are not considering some academic concept of sovereignty. We have freely pooled sovereignty in the past whenever we thought that it was in our common interest. I have no doubt that we shall do so again—I hope after Maastricht, but if not I am sure that there will be many more summit conferences in the years ahead. Sometimes we expect too much from them and are needlessly disappointed. I shall be content if some substantial progress is made on this occasion.

Above all, I agree with those speakers who emphasised that we must not lose our vision of a truly united Europe. We must be practical and pragmatic. But though we have our feet on the ground we can still look at the stars. I only add that we must watch our step and not try to go too fast; otherwise Europe, like me, may fall flat on its face and break an arm in four places.

I am confident that the Prime Minister and the Foreign Secretary will successfully keep their balance and that at Maastricht they will serve both this country and Europe well.

6 p.m.

Lord Harris of High Cross

My Lords, it is a pleasure to follow the noble Lord, Lord Rippon, who spoke in such rollicking form. I have no hesitation in agreeing emphatically that the Community should give more priority to completing the market, and that it should be more outward-looking, as the noble and learned Lord said. I confess to mixed feelings in finding so much with which to agree in the previous speeches. For 40 years I have enjoyed engaging in economic disputation as a substitute for physical exercise. When I find so much to agree with, I think that I must re-examine my own view. It was heartening to hear the noble Lords, Lord Cockfield and Lord Callaghan, candidly expressing in much the same words a lack of enthusiasm for political union.

Having heard the very clear speech of the Leader of the House, I am still left with a mystery about Maastricht which deepens as the fateful day draws near. The question that I keep asking is this: what positive, substantial benefits are Her Majesty's Government seeking for Britain in return for the endless and dangerous concessions that our European partners will never cease to demand from us? Until last Wednesday I did not believe that the Prime Minister had been very forthcoming. Indeed, his reticence prompted a magisterial Euro-sceptic leader in The Times last Wednesday which stated that the "stark difference" between them was that Margaret Thatcher "knew where she wanted to lead her country and did not care who else knew it"; and that John Major "appears less sure and is certainly less frank". However, since last Wednesday almost all has been revealed. In a 45 minute oration, the Prime Minister drew up the battle lines: he would never agree to a federal vocation; he opposed conceding more power to the European Parliament beyond monitoring the Commission; he rejected Community interference with our health and education policy; he was against extending the competence of the Brussels Commission; he rejected the more or less indiscriminate extension of qualified majority voting, especially on the mountain of mischief lurking beneath the innocent-sounding "social dimension"; he opposed the subordination of British foreign policy and national defence to the vagaries of the European Council; and, finally, for the foreseeable future he did not want Britain committed to monetary union.

What positively does he want? The only tangible benefit that he claimed in his speech came from Britain's membership of "the world's largest single market". I entirely agree with that. But surely this is our dear old forgotten friend the European Economic Community, now more or less banished from polite conversation and, as I understand, a forbidden reference in Hansard. Beneath all the cross-talk about IGCs, successive Luxembourg and Dutch drafts, endless negotiations and photo opportunities, the British Government want nothing more from Maastricht. What they crave above all is an agreement. I fear that this craving will cost us, and indeed Europe, dear.

Style and semantics apart, Mr. Major's judgment on the main issues is now revealed as not so very different from that of Mrs. Thatcher. All that remains in doubt is whether he can summon up her candour and courage to see the matter through. The plain fact seems to me that we have a stage-managed political circus coming up at Maastricht. It is a distraction from our greater priority of completing the single market which was brilliantly conceived five or six years ago, by the noble Lord, Lord Cockfield. More seriously, it is a tragic diversion from the Bruges vision of preparing to open that market to the liberated countries of Eastern Europe. The noble Baroness, Lady Ewart-Biggs, said that we must deepen the Community before we widen it. My anxiety is that in the name of deepening it we shall make it more difficult for other less developed economies to join.

The Euro-summitry shows that Britain's overriding aim is damage limitation. The Euro-swells talk of a new dawn, a noble European vision. I do not mind that in the long run. However, the unalluring reality here and now smacks more of murky wheeling and dealing to conjure up a bogus consensus that conceals a fundamental and quite honourable conflict of principles. The familiar Foreign Office strategy is to see how little it must concede to federal folly, how little damage it will risk to long-term British interests and how little appeasement it must offer to the ceaseless importunities of the Euro-zealots. All that, my Lords, is in the cause of keeping at the centre of Europe and on board that ghost train being driven recklessly by people such as Jacques Delors in a direction that few Ministers and not many previous speakers wish to travel.

My conundrum for the Euro-élitists who now head all three parties, is this. How can we give a positive lead to nations hellbent on travelling in the wrong direction? I give two examples. First, the present draft treaty enables our partners to impose on us a social programme that among other mischief restores trade union power, enforces minimum wage and holiday requirements, lays down maximum full-time and part-time hours, days and week-ends, only stopping short—for the time being—at prescribing a uniform European bedtime. Yet free trade, which we uphold, depends on differences in costs and circumstances. Free competition and mobility includes choice between alternative jurisdictions. The single market requires the removal of existing obstacles, not the erection of new ones. Labour supporters such as the noble Lord, Lord McCarthy, may like the social charter as a sly way back to the golden age of 1979. But am I guilty of what Sir Geoffrey Howe mocks as a "negative, apprehensive, fearful" approach if I claim that such policies—whatever one thinks of them—should be forever a matter for domestic debate and decision? That is surely the best type of subsidiarity.

Like so much else, all that has less to do with Euro-idealism than with the brazen national interest of the stronger economies such as Germany to burden the weaker members with high labour costs, and the effort of the weaker countries such as Spain and Portugal to burden the stronger with the cost of compensating subsidies.

So it is with monetary union. The Government are right to oppose membership because it is bad not only for us but for Europe. There are technical, economic reasons why a totally fixed exchange rate is inappropriate for a Europe of economies at differing stages of development, with differing structures, differing rates of growth and differing degrees of flexibility that will never reach the blessed state of convergence. Nor is there any guarantee that the EMU under multi-lingual management will be as stable as the old deutschmark. The only certainty is that one currency would mean in the end one finance minister, as Nigel Lawson said, and the noble Lord, Lord Joseph, repeated today. There would be no retreat to national moneys when things go wrong, as assuredly they would.

The impatience of some partners to join up is based on conflicting or inconsistent aims. For example, in Germany it is to avoid inflation; in France and Italy, it is to avoid deflation; and with Spain and others there is the never-ending prospect of subsidies. Since it is a doomed and costly experiment, why should we sign at Maastricht on condition that we are left out? But we are still left in to pay towards the perpetual subsidies for the worst affected regions. Such doubts held by leading independent, liberal economists throughout Europe are held with the same vigour that I am perhaps displaying. Noble Lords will find them attached to a ringing declaration in the latest paper of the Bruges Group which I strongly commend to your Lordships.

Last Wednesday the Prime Minister concluded his speech on the Community by saying simply; The goals were democracy, prosperity and stability in Europe The means were the creation of a single market in goods and services".—[Official Report, Commons, 20/11/91; col. 280.] I agree 100 per cent. with that formulation. I am going to make a suggestion to the Prime Minister that the next time he makes a speech and wants to ring the changes, he should quote Adam Smith who said 215 years ago: Were all nations to follow the liberal system of free exportation and free importation, the different states into which a great continent was divided would so far resemble the different provinces of a great empire". Here is our immediate priority: to combine the economic integration of free trade with the political decentralisation of self-government. Then we can extend Adam Smith's spontaneous, invisible, natural and evolving empire to an ever-widening single market.

According to the Guardian poll of 14th November a clear majority of all persuasions, including the Liberal Democrats, want nothing more than completion of the market and the benefits of international free trade. It remains only for our party leaders to learn that while the spread of trade brings people together, forcing the pace on political union would only deepen the divisions among us.

6.12 p.m.

Lord Boardman

My Lords, it is always a pleasure to follow the noble Lord, Lord Harris of High Cross. However, he started his speech by suggesting that the speech of the Prime Minister had not been very clear on his objectives. In contrast to the noble Lord I found the speech to be extremely clear both as regards the objectives and, so far as his negotiating posture would allow, on the means whereby he hoped to achieve them. That also enables me to say, having also heard the speech of the Leader of the Opposition in the other place, how refreshing it was to hear the speech of the noble Lord, Lord Cledwyn of Penrhos, today. The noble Lord was intelligible and clear as to what he thought. Although I do not agree with a great deal of it, his speech made a quite refreshing change. I hope that he will not get into trouble with his own party for what I have said.

I propose to confine my remarks to the single currency proposal. That is welcomed by a number of industrialists, including the CBI, and a number of those in the City. In particular, the City believes that the prompt acceptance of a single currency will increase the chances of the European central bank being sited in London. It should be. I remind noble Lords that the physical possession of the central bank does not have any influence on the manning of it. If the bank should be here, no doubt the governor and many senior officials will be drawn from other nation states as is the case with the European Bank for Reconstruction and Development which is situated in London but manned by others.

Another group of enthusiasts for a single currency tend to be the tourists. Understandably, they find the inconvenience and expense of changing currencies to be something which they hope to avoid. They give some extreme and rather silly examples. It is suggested that if you take a pound and change it into the currencies of the 12 countries you finish back in the UK with 30p. That is ridiculous. Apart from the suggestion made by my noble friend Lord Rippon of Hexham of traveller's cheques, the other way which I commend is the far more effective Eurocheques which enable one to tap into the currency of the country wherever one may be.

For those who are enthusiastic for joining the single currency now, particularly some in the City of London and tourists, I ask noble Lords to consider what the consequences would be on much more important issues. A single currency must inevitably mean a single European central bank wherever it is situated. In order to discharge its responsibilities which must include the stability of the currency, the avoidance and control of inflation, that bank must have the power to fix interest rates for the member states which are part of the EMU. That would deprive the Opposition of their weekly questions as to why interest rates have been increased or decreased, or whatever the case may be. That would be a consequence. It would be a question of the European central bank fixing the rates.

In order to discharge those responsibilities, the European central bank must fix the main fiscal policies of the member states.

Lord Cledwyn of Penrhos

My Lords, I am grateful to the noble Lord for giving way. Before he leaves the question of the bank, will he tell the House to whom that bank will be accountable?

Lord Boardman

My Lords, perhaps I may move on to that. If the noble Lord will wait a moment, I will deal with that because I attach much importance to that point. Another factor that would arise with a central bank is that it would have hold and control of the gold and foreign reserves of all the central banks of the nation states who are members, just as the Bank of England does today in holding the reserves to support sterling. My noble friend Lord Joseph made reference to that in his speech. I believe that these essential parts of the central bank—that is to say, fixing interest rates, fiscal policy and the holding of reserves, are components which are essential to a European central bank with the responsibility for controlling inflation and achieving stability.

We well know about the relationship between those factors in our own economy; namely, the control of inflation, interest rates and fiscal matters which are issues which we debate in this House from time to time. There is the further point to achieve the essential convergence and to keep it. That is needed in order that the nation states can be members of a single currency. That will mean very large transfers of aid from the richer to the poorer countries. It will be a multiple of the aid which is provided under the present EC structural funds at the present time.

Prosperous economies such as that of the United Kingdom and the businesses in it, will have to provide the resources to build up the economies of poorer nations, such as Greece and others. The result will be a massive and permanent transfer of authority and resources—and to whom? The noble Lord, Lord Cledwyn of Penrhos, raised the question of who is to be responsible for the appointment of the governor and officials of that central bank. Who will be responsible for hiring and firing them? As I understand it, the draft treaty states that they must not be political appointments and that I understand. If that is so, how are the appointments to be made? I was told by a member of the European Parliament that they will be appointed by agreement between the 12 nation states with the approval of the European Parliament. I await with interest to see how that is to be achieved. We read about the 364 economists in this country, at one time writing on how the European economic policy should he conducted. Imagine multiplying that factor throughout the various nation states.

There are those who quote the Bundesbank as being the ideal example of political independence from the state. I remind those who make that argument of what happened when the basis of the exchange rate between the East German ostmark and the deutschmark had to be resolved. It was not resolved by the politically independent Bundesbank; the decision was not that of Karl Otto Pöhl, the governor of the Bundesbank. The decision was made by Chancellor Kohl and the German Government. It was they who said what the rate should be, with rather serious consequences on the economy of Germany in the short term. So much for the political independence of the Bundesbank.

A single currency within Europe may well evolve. I am not saying that it is unattainable over time but I am saying that that time is not now. We should not forget the larger world outside Europe. We must not believe that Europe contains all our trading relations, political allies and economic enemies. The larger world outside will have its own currencies. We shall still have to contrast and compare ourselves with the dollar and the yen. With a single currency, instead of Wall Street and Tokyo looking to London to make an assessment of pounds sterling, they will have to cast their eyes to that rather more mixed bag which will evolve under the contemplated arrangements.

I believe that the Prime Minister and the Government are taking those points fully into account. I support their refusal to accept a single currency at this stage. I believe that they are right to reserve the right to opt in later if we wish. I shall not develop that argument because it has been discussed earlier and will no doubt be discussed again later.

As regards a referendum, I believe strongly that the issues which we are debating here should be decided by the long established parliamentary democracy of which we are part. In my view a referendum would be inappropriate and would be an erosion of the sovereignty of Parliament which I wish to preserve.

Lord Weidenfield

My Lords, I shall confine myself to the notion of a common foreign policy and majority voting. If I share the Government's reluctance on the question of head counting on vital issues of foreign policy, it is not in spite of but because of a lifelong attachment to the idea of a united Europe, a Europe which sooner or later may embrace all lands between Brest and Brest Litovsk, and one day may stretch even further east.

While ever closer union and continuous consultation in the fields of economic, financial, educational and social policy should be the order of the day, there are still wide gaps, too many differentiated interests in the sphere of the foreign policies of Europe's nations, varying priorities and, hence, still scope for independent initiatives within the wider context of European or western values and standards.

Had M. Delors had his say at the outset of the Gulf crisis, a majority would probably have voted for concessions to Saddam Hussein. He may have been allowed to keep the islands, to retain his army and air force and by now he would have been further along the road to atomic autarchy. Had German unity been put to the vote, M. Delors would have pleaded, as plead he did, to find an independent birth in the Community for the desolate German Democratic Republic. Conversely, it was the bold, almost reflex, reaction of the British Government in confronting Saddam Hussein from the beginning which swayed the other European nations to follow suit with varying speed and vigour. It was the patient and wise statesmanship of Chancellor Kohl and President Gorbachev which found a peaceful formula of opening and, as it were, "greening" the frontiers between the west and east of Europe.

As regards the Yugoslav tragedy, the groping and fumbling for a well-nigh unanimous solution has thwarted important initiatives and has lost us invaluable time as well as human lives. Had Germany and Italy—members of the Community—and Austria (certainly the next in line for membership) been encouraged to follow their first impulse to recognise the sovereignty of Slovenia and Croatia last summer, I submit that the implicit consequences would have deterred the Serbian soldiery and might have saved Vukovar from being razed to the ground and Dubrovnic from being turned into a Venetian ruin.

With the Community expanding in stages to 14, 17, 20 or more than 25 ultimately eligible members, and as many languages, we may have to think realistically and imaginatively about how a future Europe could be run. We may find unity through diversity and not see consensus turn into sluggish compromise, conforming to a kind of Gresham's Law where the basest currency of mean appeasement or masterly inactivity drives out principles, moral values and cherished ideals.

The process of European unity in the field of harmonising foreign policy must not be artificially hastened. As I said, there is much more to be done to intensify co-operation in many other fields. There is much need for a deeper understanding of how we perceive our neighbours and how they perceive themselves.

If Maastricht, as some have pointed out, is the moment of truth, it is also the moment for plain speaking. Whence derives the feverish drive to settle European institutions so hastily? The Dutch president speaks for one of the smaller nations which, not unnaturally, prefers a system in which it has equal weight with the towering big four or five, as we shall soon include the growing Spanish power. However, the driving force is France—the France of Mitterrand. France seems to be in search of a dominant role in the councils of Europe. It seeks that role through Brussels where the prevailing ethos, the style of leadership of the bureaucracy, is largely influenced by France and reflects the vision of her president. Here is the brilliant, complex, volatile leader whose words, deeds, initiatives and coups de théâtre straddle four centuries of French history; who in his diurnal round echoes the purple eminences of the 17th century and the haughty despot; of the 18th century; the grand visions of the first Napoleon and the buildings of the third Napoleon who, at some moment, joins in spirit the marchers to the Bastille, and at others steps into the shoes of his great gaunt predecessor who more than anyone else moulded the 20th century for France.

All those policies and gestures are neatly knotted together by two twin threads: distrust of America and fear of Germany. To marginalise American influence in the fields of foreign policy and defence and to tie Germany to a central institution in which France has a disproportionate weight are accordingly the two primary aims of France's political endeavour. Is that in the national interests of ourselves or Europe?

It should be Britain's primary aim to have the closest relations with Germany and Italy and to widen the Franco-German axis which admittedly, when functioning fairly, is the greatest achievement of European history in the half century behind us. However, we should widen it into a close-knit three or four power relationship of growing intimacy and intensive partnership.

The Germans are backing the French designs with overt enthusiasm but there must also be misgivings. Germany has an abiding desire to keep America well inside Europe. However, there is also that uncanny doubt which Germany has about her identity. There is the German fear of herself and the wish to allay mistrust and banish the ghosts of the past. To that end the Germans have been ready to overlook some French sorties and sallies. Did not Mitterrand, as the only western statesman, fly to east Berlin and counsel Herr Modrow to reassert the position of the DDR? Did he not fly to Kiev to persuade President

Gorbachev to go slow on German unification or plead in Prague with President Havel to set up a new French inspired cordon sanitaire at Germany's eastern border?

The Germans have proved that they can be relied upon. They have a functioning democracy and a sense of responsibility. Their challenge and opportunity in eastern and south eastern Europe are enormous and they are destined to play a leading part in years to come in the rehabilitation process in that part of the Continent. In my view, Britain should be an active partner and should develop ever closer ties with Europe's central power, not at the expense of others but with a single-minded vigour and conviction.

There are dangerous portents of political radicalism and inter-communal strife all around us, near and far. That is undeniable. However, we can work with the new Germany to build a better Europe. It is worth the risk but it also requires a new trusting state of mind. If anything can rouse some of the dormant demons in German society, it is a blinkered and prejudiced approach. Only if our Monday Club men go on hissing "Hun", our media Cassandras whisper "Fourth Reich", and defeatist manufacturers go on crying "Wolfsberg" is there a remote chance of prophecies fulfilling themselves.

In conclusion, the great variety of traditions and well-tried institutions in Europe need not be an impediment to the unity that we who call ourselves convinced Europeans desire so much. On the contrary, they can be the building blocks not for an unhistorical Europe of cantons; not even for a Federal United States of Europe, but for a United Europe of States which, in the fullness of time, will grow together indissolubly.

6.30 p.m.

Baroness Platt of Writtle

My Lords, I must first apologise that I shall not be able to stay to the end of the debate, as I have duties elsewhere. However, I have found the contributions from those far more expert than I most interesting and informative. The debate has shown the House at its best.

We are already part of Europe. We signed the Treaty of Rome. Today's arguments are about the pace of change towards a united Europe whatever that may mean, who is to be invited to join, and in which fields we should progress most rapidly.

I count myself as British first but also a European. I stayed with a kind and educative French family when I was in my early teens and would describe myself as a Francophile, although their Europeanism today comes into question when they "return to our moutons" in a most unco-operative way. My brother-in-law is Italian and I belong to a county council that has close connections with the Landkreis of Ludwigsburg in Germany. When one visits Holland or Denmark one feels a deep sense of old and long-standing alliances and friendships.

However, I agree with my right honourable friend the Foreign Secretary that Europe is interfering more and more in every nook and cranny of national life. We do not need nannying about planning from Brussels. When I travel in Europe I am pleased to meet variety; to enjoy the idiosyncrasies and variety of national habits. French saucisson, German wurst and Italian salami are all delicious. But I am still pleased to come back to British "bangers and beans". And we certainly do not need a European sausage.

My impression is that too many initiatives come from civil servants cocooned from ordinary people in bureaucratic palaces of administration in Brussels. Democratic control from elected members and governments, who are much closer to people's feelings and beliefs, must continue to prevent theory from taking over. I was glad to hear the proposals of my noble friend the Leader of the House on that subject today. Subsidiarity must be based on practical possibilities acceptable to people of each country unless international harmonisation is absolutely essential.

As chairman of the Equal Opportunities Commission for five years I was grateful for the influence of the Treaty of Rome in this country in securing progress in equal opportunities between men and women. However, as a member of a European advisory committee on the subject, some of the papers we received were far too abstract and theoretical and we did not adopt them.

For too long Europe has been torn apart by succeeding "war war". Now we must pursue the alternative policy of "jaw jaw". At times that can be frustrating and, to the impatient, slow. However, I believe that it is the only way. Rome was not built in a day. In circumstances such as these, impatience leads to hasty and ill-prepared decisions which will create a backlash—literally, more haste less speed. Nevertheless, in a spirit of give and take we must all remember our common heritage—Christianity, love of music, drama and the arts, reliance on science and mathematics, our common humanity and a proper respect for individual freedom. We have much to share for our common good. Patience and perseverance in the search for acceptable common policies must be the name of the game—a step-by-step policy as described earlier by my noble friend the Leader of the House—if we are to succeed in coming closer together.

As a great supporter of the right honourable Margaret Thatcher as Prime Minister, I do not agree with her demand for a referendum. These subjects are far too complex for simple straight votes by ordinary laymen and women, among whom I count myself. We would find it extremely difficult properly to take into account all the factors involved. As a European I fully support the Prime Minister in his rejection of that idea and also in his policy of patient negotiation, but at the same time his strong stance for sovereignty for Britain where necessary. He has a difficult task needing all his undoubted carefully balanced judgment. I wish him well at Maastricht.

6.36 p.m.

Lord Ardwick

My Lords, my noble friend Lady Ewart-Biggs spoke of the opinion polls and their negative attitude towards the European Community and its present intentions. That is a serious matter. There is a wide difference between the views of the three major political parties and those of the general public.

In 1975 the Prime Minister announced that in the referendum the nation had voted overwhelmingly to remain in the European Community. "And now", he said, "an end has come to 14 years of controversy". We all agreed with Prime Minister Wilson and most of us were relieved, for the controversy was not always edifying. It was fed on one side by Utopian hopes and promises, and on the other by bizarre threats and dire prophecies. It was feared that there were risks to the status of the Queen. There was a fear that we should be turning our backs on 1,000 years of history and we might even be renouncing our language—the language of Chaucer. No longer could we ask our friends what would happen, Whan that Aprille with his shoures sote The droghte of Marche hath perced to the rote".

All that would be over if we remained in Europe. And all the barmy proposals made to the Commission by pressure groups in Brussels, or the daft ideas of some junior busybodies working for the Commission would be reported and broadcast as if they were the solid intentions of the Commission. A moment ago it was said that one could not distinguish fact from fiction. We all remember the claim that Bristol Cream Sherry could no longer be sold under that label because it contained no milk fats.

Political fears were also raised. The Community was a rich man's club led by Roman Catholics, all too ready to exploit the innocent and guileless British. Even stronger was the view of some of the far Left, that the Community was a cold war instrument supported by the Americans, designed to keep Europe split into two so that Western capitalism could be free from Communist contamination.

It is true that much of that nonsense disappeared after the referendum. But some of it stayed around. Since the nation reached what was presumably the final decision, 16 years have passed and a new generation are now hearing some of the old warnings against largely imaginary dangers. That is partly responsible for the opinion polls today. Only this weekend a former Cabinet Minister referred to our fellow Europeans, our colleagues in the Community, as "foreigners", and the former Prime Minister thought it useful to remind us that, unlike other countries, Britain is surrounded by water.

It has been said recently more than once that we are to be enticed into an abominable federation and to lose our national distinction for all time in a United States of Europe. So, my Lords, some people—including a lot of Conservatives—are proposing a referendum because they believe that we should reject the Treaty of Maastricht, though what would happen to us and the Community, with which we do over 50 per cent. of our foreign trade, they do not say, but they believe that the result of a referendum would be negative.

How has this grown up? It is partly the result of membership of the Community being used as a political card in the internal politics of the United Kingdom. This has fostered throughout the nation much suspicion of the Community. This Government have done a lot of good things in Europe, and of course signed the Single Act, that most important European gesture. Nevertheless they have chosen to appear to the electors to be the more sceptical member of the Community, the most aggressive, the most nationalistic. And my own party, until quite recently, has played into Conservative hands by its cold hostility or even total opposition. We have always had in the Labour Party a European wing, to which I have always belonged. But the Labour voices heard most frequently and most vehemently in the European debates in another place have been highly critical of the Community.

The Liberals can be proud of their consistent support, but it has had little effect on their fortunes or on the public attitude to the European question. Now for virtuous but ill-advised reasons, which I did not understand even when the noble Lord, Lord Thomson, was explaining them today, they are proposing a referendum. It is of course true that what is now proposed, a single currency and closer political union, is as great a leap for its members as was the original act of joining the Community. It is a solemn moment in history and the proposals need to be authoritatively explained and deeply discussed. Surely the Government must show more enthusiasm for the general idea and sound a clarion call to the nation, for there is no doubt about the objectives but only about the means of their achievement.

It was a calm, reasoned and rather good speech that the Prime Minister made last week. I thought it was a perfect House of Lords speech rather than a House of Commons speech. But it was designed to cool the party, not to enthuse the nation. He did not explain why he wants to be able to back Maastricht and what its consequences might be. He did not calculate the costs nor estimate the benefits. His party is too frail at this moment for such a vigorous exercise, seeking to deal with an obstinate recession and to hold at bay the discarded mistress of its current economic and social troubles.

This criticism of the coldness of the Prime Minister—or should I say the coolness of the Prime Minister—has been made by my own party, but its own enthusiasm is too recent and too unexpected to move the nation. Indeed, it has not yet had a noticeable effect upon our own prominent sceptics. Alas, too, this debate has been more of a precursor to the general election than to the Maastricht agreement. I am talking not about the debate in this House but about the general debate in the country. It is sad indeed that the problem has to be discussed at this moment in the electoral cycle.

The great historic events in Europe also complicate the issue. Prosperous countries from the European Free Trade Area are ringing at the front door for admission to the Community, and the new democracies in the East are knocking at the back door and pining for the day when they become associate members. The political side of Maastricht is further complicated by the changes in the role of NATO and the need for the Community to have not a defence policy—for that is NATO's job—but a security policy.

We must take care not to underestimate the difficulties of advancing towards a single currency and political unity. We have heard some important speeches on that subject from expert people in this Chamber tonight. The criteria proposed for adequate economic convergence are simple, but they will require a stricter discipline than some countries might be able or politically willing to enforce. But closer union must come if the powerful German nation and the rest of us are to live easily and happily together.

I am most thankful that my party, in the words of one of its senior spokesmen, has come to recognise that the choice for Britain, and France too, is shared sovereignty or no sovereignty, shared influence in Europe or no influence, shared power or no power at all. The danger some people fear of a United States of Europe on the American model with a European all-powerful Washington is a most improbable danger, but the danger of a disintegrated Europe is one to be feared and avoided.

6.47 p.m.

Lord Campbell of Alloway

My Lords, I agree with the noble Lord, Lord Ardwick. It is unfortunate that it appears that the party to which he adheres and the party to which I adhere tend to give the impression of using this subject as a political card. There are some other matters that the noble Lord mentioned with which I cannot agree. The main burden of my speech is to support the approach of my right honourable friend the Prime Minister as reported in the Official Report of the other place and as explained by my noble friend the Leader of the House today. I stand by the views expressed by many speakers, including my noble friend Lord Aldington.

If my noble friend Lord Boardman is satisfied that the Government have taken into full account the problems of monetary union, as other noble Lords have also stated, that is good enough for me. And if the noble Lord, Lord Callaghan, supported by other noble Lords, is satisfied that the Government have taken into full account the problems of political union, that again is good enough for me.

It is also the burden of this speech to remind Ministers at Maastricht, and the money markets of the world, that under the aegis of my right honourable friend the Prime Minister decisions of government are a true reflection of the composite wisdom of the Cabinet. We in your Lordships' House should consider all differences in a calm, objective fashion, establish a little more confidence and seek to stabilise the currency so that the negotiations get off to a good start unencumbered by what my noble friend Lord Carrington once described as "foghorn diplomacy".

Our destiny lies assuredly with the Economic Community, as it continues to expand by accession or association—in whatever form it may assume, a form as yet not known—so long as in this process of give and take, referred to by my noble friend the Leader of the House, a form of constitutional government under the Queen in Parliament and a substantial measure of residual sovereignty is retained by the state. There are proposals on the table for extending the powers of the Commission and the European Parliament and for extraneous extensions of qualified majority voting beyond what is already established. If implemented these proposals could reduce the powers and status of the Mother of Parliaments to that of a local authority council chamber. If once our frontiers were on the Rhine, they now march with those of all other member states in the Community, a Community which we have no wish to divide and no claim to rule, a Community in which the states retain their sovereign status and individuals retain their national identities, a Community committed to establishing closer union between the peoples of Europe.

The concept of this closer union among the peoples of Europe is not new. Sir Winston Churchill said at The Hague in 1948 that we need not waste time about who originated the concept of a united Europe. We may yield, he said, our pretensions to King Henry of Navarre and to his minister, Sully, who between 1600 and 1607 laboured to set up a permanent committee of the leading Christian states of Europe. It was called the Grand Design. As Sir Winston truly said, we are all, after this long passage of time, servants of that Grand Design. But the process leading gradually to a union with a federal goal, however worded in the draft treaty, would establish a new federal European order. As the noble Lord, Lord Callaghan, rightly said, we are not ready for it, and it is not sufficiently worked out.

We may take note that, as soon as the ink was dry on the signatures of the Six, a debate arose between those who wished to have a federal structure and those who did not. The debate continues today, not having been resolved in favour of federalism either by the Treaty of Rome or by the Single European Act. We may also take note that the noble and learned Lord, Lord Oliver of Aylmerton, advised that the wording of the draft treaty in this regard is calculated to excite the highest suspicion and that the danger of employing expressions of ultimate objective opens the door to some future positive commitment.

Next, one comes to my right honourable friend the Prime Minister. Surely we must take note that he, as a matter of principle, has adopted a fundamental approach which by and large appears so far to have commanded the broad approval of most speakers in this debate. I advert only to three facets of the Motion to which he spoke in another place; first, a constructive approach to economic, monetary and political union which avoids the development of a federal Europe; secondly, preservation of the right of Parliament to decide in the future whether to adopt a single currency; thirdly, the avoidance of intrusive Community measures in social and other areas which are a matter for national decision.

My right honourable friend the Prime Minister has a safe pair of hands. My right honourable friend the Foreign Secretary is a skilled and tested professional diplomat. These men of calibre can surely be trusted as to whether they make a deal or do not make a deal; and if they make a deal which involves any substantial surrender of sovereignty, to respect the ballot box and the will of Parliament. I agree with my noble friend Lord Rippon that there is much to be said for ratification of any treaty on a truly free vote in another place. That is far better than a referendum which, as my noble friend Lord Boardman truly said, is erosive of Parliament and, as my noble friend Lady Platt has just said, is far too complicated for most of us to be able to understand. I include myself with her among that body of people. I have to rely on the expertise of noble Lords of the calibre of my noble friend Lord Boardman. I am not sufficiently expert in these matters to be able to know exactly what I should do.

Surely on 9th and 10th December at Maastricht we shall achieve a new spirit of consensus, something to which my noble friend Lord Waddington referred, on the implementation and enforcement of Community measures and on the commitment to defeat Community fraud. Reference is made to our proposals for the Court of Auditors, a matter near and dear to the heart of the noble Lord, Lord Bruce. There will be enhanced co-operation against terrorism and all types of international crime. On defence, in an entirely new dimension, WEU will perhaps be accepted as the bridge between NATO and the European Council. No doubt other proposals for alleviating the fluctuating exchange rates which at the moment only appear to be of benefit to currency speculators are on the table for discussion. As I said, I am not competent to deal with such matters but it is a great source of comfort to think that they will be discussed in an objective and constructive manner. Last of all, something has to be done about the accountability of the Commission.

There is much to be achieved in the mutual interests of all member states. For my part, I join with other noble Lords who have expressed good wishes and encouragement to both my right honourable friends on their mission to Maastricht.

7 p.m.

Lord Ezra

My Lords, I am glad to be taking part in this important debate which was introduced by the measured and thoughtful speeches of the noble Lord the Leader of the House, the noble Lord, Lord Cledwyn, and my noble friend Lord Thomson. I believe that they set the tone of what has been a very wide-ranging debate. I am also very glad to be succeeding the noble Lord, Lord Campbell of Alloway, to whose contributions to our debates I always listen with great care. I agree with him that it is time we decided that our destiny lies within the European Community and in working towards ever closer union among the peoples of Europe, while at the same time retaining our historic national identity.

There is no doubt about the historic importance of the negotiations which are about to take place in Maastricht. As the noble Lord the Leader of the House said in his opening speech, there are a number of people who feel that in dealing with the Community in the past we may have been too slow to react. There are some who feel that had we joined the European Coal and Steel Community, or the European Economic Community, the shape of the Community might have been different. However, what is important is to learn from whatever errors or omissions there have been in the past. I am glad to note the very careful preparations which have been made for the forthcoming negotiations, for the time which has been allowed for full debate in both Houses of Parliament and for the stimulus of a large degree of public debate.

As a strong supporter of our European destiny, I am heartened every time the Prime Minister says, as he repeated in his speech in another place, that it is in Britain's interests to be at the heart of the European Community. There are massive changes going on throughout Europe. More and more countries are looking to the European Community as an area of political stability and long-run economic growth. There are already five countries which have applied for membership and five more have signified their intention of doing so. What they eventually do will be largely determined by what goes on at Maastricht. If those negotiations are successful and there is general agreement, then these countries will be emboldened to go ahead and we can use the European Community as a basis for establishing democracy and prosperity over a wider and wider area of the whole European continent. A leader in the Financial Times this morning says: Unity will open the way to an enlarged Community". There are of course many aspects to the two treaties which will be negotiated and which are interlinked. As some noble Lords have done, I should like to concentrate on economic and monetary union. The most important aspect of economic and monetary union s the element of convergence which many noble Lords have already mentioned. In his speech in another place when speaking about convergence, the Chancellor of the Exchequer said that that was not a new objective and that in fact it had been considered and pressed forward in the early 1970s as one of the major objectives of the European Community. What is remarkable is the degree of convergence which has developed among those countries that were the original signatories of the European monetary system, which was of course introduced during the presidency of the Commission by my noble friend Lord Jenkins of Hillhead.

That convergence has meant that there have been very few changes in recent years to the parities within the monetary system. There is little doubt that by pursuing that same route greater convergence could be achieved in the future. I believe that Britain has played a very large part in bringing the concept of convergence to the head of the argument in favour of ultimately moving towards a single currency. There were those who sometimes felt that if we got the single currency first, we would then move towards convergence. However, the view has now been established that we need to work towards convergence and then move into the single currency.

The elements of convergence as laid down in the protocol to the treaty are of great importance because they encapsulate all the objectives of economic policy which ill parties in this country have in mind; for example, low inflation, low budgetary deficits, exchange rate stability, long-term interest rates at reasonable levels and sustained growth. If one carefully examines the various stages by which the single currency is to be reached, it is proposed that, as a result of sustained efforts to achieve greater convergence, the decision will be taken at about 1997 as to which of the member countries has achieved that level of convergence which would enable it to join the single currency concept.

I should now like to raise the issue taken up by Britain concerning the so-called "opt-in" position. I have a question for the noble Earl, Lord Caithness. Assuming that we achieve our economic objectives which have been clearly set out—that is, low inflation, and so on—and that we reach a level of convergence by 1997 which would enable us to go into the single currency, would we then prima facie do so or not? If, on the other hand, we did not reach that level of convergence then obviously we could not go in. I am not quite sure what the opt-in position is. The process by which the single currency is to be achieved is that it should be applied to those countries which reach the agreed level of convergence on inflation and the other related matters.

The point has been raised as to what would happen if we did not join the single currency: that is, assuming that we were in a position to do so. The fact is that we would then have a currency caught between three very strong currency groupings—namely, the yen, the dollar and the ecu. Within the past few days we have already seen what happened to sterling when it was caught between the weakening dollar on the one hand and the strengthening Deutschmark on the other. We have already suffered from that pincer movement and there is not yet a European single currency. Once the single currency is established and the ecu represents a large number of the countries in the European Community, our position with a currency standing outside but trading worldwide, which it still is, would become very exposed.

There is another important point which has been mentioned by noble Lords, including the noble Lord, Lord Boardman. I refer to the question of transaction charges. We tend to think of those charges as what we as tourists pay when we want to convert our money into Lira and so on. But, in total, transaction charges throughout the Community over the past year amounted to 20 billion ecus; that is, £15 billion. That is what the transaction charges amounted to. If ever there were a non-tariff barrier impeding development of the single market, it seems to me the £15 billion paid yearly to exchange money within the single market is such a barrier, and, therefore, it should be eliminated.

Lord Boardman

My Lords, will the noble Lord confirm that those figures relate to Europe, and do not extend to some of the other countries with which European countries trade?

Lord Ezra

So far as I am aware they relate to Europe, my Lords.

Lord Bonham-Carter

My Lords, back to the banks, I suppose.

Lord Ezra

My Lords, indeed, back to the banks. That is very pleasant for the former friends of the noble Lord, Lord Boardman, or, indeed, for his present friends.

This is a serious problem. Great benefit is to be gained from the single currency proposal. I hope that the Minister will be able to explain why we have made the reservation that we have, as there are already conditions attaching to those who will be eligible to join the single currency when the time comes.

I should like to conclude by repeating that I am pleased that the position taken by the Government at present is much more positive than it was previously. There are still some constraints and limitations, as the Prime Minister made clear in his speech in another place, and which were repeated and strongly supported by the noble Lord, Lord Harris of High Cross. There are those constraints and limitations, some of which I am dismayed about. Nonetheless, bearing in mind that the objective is for us to stay at the heart of Europe, and bearing in mind the great skill of our negotiators, I wish them well and every success.

7.12 p.m.

Lord Bethell

My Lords, I should like to make a few remarks about the future role of the European Parliament and the powers which I believe it should enjoy after the Maastricht agreement, which we hope will take place. I should declare that it has been my interest and preoccupation to be a Member of that Parliament for nearly 17 years.

The history of the European Parliament's place in this country has been a sad one, because when we first became elected in 1979 that coincided with the election of a Prime Minister who believed that there was no place in the European institutions for a directly elected European Parliament. It was perhaps no coincidence that Members of another place took their cue from her and in many cases formed the opinion that we were a weak Parliament on the one hand, but on the other hand a threat to their existence as the fount of democratic virtue, and the repository of sovereignty which began some 600 years ago.

It emerged that some of those reservations were correct: that we were not an effective Parliament; and we were not an effective democratic guardian. With our wanderings across Europe, our constant waitings at airports and our moving of documents and machinery from capital to capital, it would be difficult if that were not to be the case.

The background built up on the basis of our being in conflict with national parliaments and, in particular, with another place. That was reflected, for instance, in a public opinion poll in the Sunday Times yesterday which claimed that a minority was in favour of extending the powers of the European Parliament; but the question posed, and the one almost always posed on that point, was: Are you in favour of transferring powers to the European Parliament from the Westminster Parliament? The answer received depends upon the question asked.

I should like to argue that there should be greater powers for the European Parliament, but not at the expense of the British Parliament, or other national parliaments. I believe that greater powers for Strasbourg would increase the influence of national parliaments.

We must face the fact that the most powerful force within the European institutions is still the Commission. Its members are the professionals in European business. Not only do they run the day-to-day administration of Europe; not only are they the guardians of the Treaty of Rome; not only are they the initiators of all legislation—they have all the skills—the Commission has senior Cabinet Ministers from many countries put in to guide and lead it. It has a vast amount of political weight and it has all the strings in its hands. What happens when a new law is proposed? The draft is of course prepared by the Commission. It is sent to Strasbourg. It is sent to us in the European Parliament to examine, to reject or to amend. We amend it or we reject it; but the Commission then has the right to say yes to our amendments and to our advice or to say no to them. We cannot then insist on our amendments being persevered with in the face of the Commission's refusal.

In what other democratic country, I wonder, is a civil service permitted to overrule the wishes of the democratically elected legislature? More than that, simultaneously with the Commission discussing an amendment that may have been voted by the European Parliament, it is also discussing the same amendment with another group of people—the national civil servants: the men and women from Whitehall; from the Quai d'Orsay; and from the Farnesina; and from other Foreign Offices and departments in the 12 countries. We often say that we believe that we are doing good work and making common-sense amendments, but how do we know that that same matter is not being discussed in secret by officials, with not one person among them being elected? At the end of the day what we recommend and decide may be voted down. It is not merely voted down, it is slapped down by the Commission. There will be nothing that we can do about it.

During that time national parliaments have little to contribute. I say that with great respect to the work done by the House of Lords European Communities Committee, which scrutinises legislation. With the best will in the world, it is difficult for your Lordships to influence the Council of Ministers when we have contact with only one Minister out of 12, and when the contact with the Commission—the people doing the day-to-day work—is virtually zero. There is no formal line between your Lordships' House and the Commission; nor is there a link between Members of another place and the Commission.

In practice of course Members of another place are often busier than we are. They do not have time to study the detail of the proposals as carefully as do the members of the committee chaired by the noble Baroness, Lady Serota. They are presented with a take-it-or-leave-it decision, or semi-decision, about which they often complain but reluctantly accept.

Members of the European Parliament would do well to be allowed to work more closely, if necessary on a formal basis, with Members of your Lordships' House and Members of another place. They will do so in order to provide proper democratic scrutiny of proposed legislation emanating from the Commission in Brussels and to make sure that the democratic deficit—so-called—ceases to exist. I believe that this idea should be put by my noble friend the Prime Minister close to the top of his agenda. It should be advocated by our senior Ministers at the Maastricht conference. The idea of greater powers for Strasbourg should be put together with greater powers for Westminster, as something to be proclaimed rather than as a concession to the foreigners, which the idea of greater powers has been in the past.

Lord Harmar-Nicholls

My Lords, may I intervene to ask a question? What is there at the moment to stop the House of Commons and the House of Lords meeting regularly to discuss all the items, without them having to be bothered with further discussions at Maastricht? That is the situation that exists, if we want it.

Lord Bethell

My Lords, my noble friend is quite right. As a former Member of the European Parliament, he has great expertise in this matter. However, the fact is that, particularly in another place, there does not seem to be the time to tackle these questions when any decision reached by such a group could not be implemented by contact with the Commission or with the Council of Ministers. The link, the nexus, is just not there. That is where we Members of the European Parliament could help members of national parliaments. In other words, I am in favour of a Strasbourg-Westminster axis and against a Whitehall-Brussels or Whitehall-Berlaimont axis. That is how I believe the matter should be regarded.

I very much hope that my noble friend the Prime Minister will take note of some of these ideas. As for the legislative side, I believe it is less important. At this stage I do not foresee much greater powers being given to the European Parliament vis-à-vis the Council of Ministers. I wish to do away with that bogyman. I believe that there should be strong powers for the Council of Ministers but not that the powers of the European Parliament should be circumscribed at every point by a non-elected body of commissioners and a large number of "Brussels bureaucrats". We should be allowed to do our job for which we were democratically elected, just as the Ministers do the job for which they were elected. I hope that this is what the Prime Minister will urge. I believe he would still have time between now and the meeting to suggest that if we are really to do our job properly and if we really are to control the men and women in the Berlaimont, who—as his right honourable friend put it—poke their noses into the nooks and crannies of our British way of life, we shall do it much more effectively if we are able to establish our base in the same city as the Commission is sited at present. It will be much easier and mere sensible if that can be done and I hope that the Prime Minister will take the point on board.

I wish to echo what other noble Lords have said in truly wishing my right honourable friend well in the Herculean task that he faces over the next few days. He will be going to Maastricht with the overwhelming support of your Lordships and Members of another place. For heaven's sake, we wish him well.

7.24 p.m.

Lord Skidelsky

My Lords, I offer no apology for starting with history, as did the noble Lord, Lord Weidenfeld. We are all both trapped by our history and wish to overcome it at the same time. After attending the Paris peace conference in 1919, Keynes wrote: England still stands outside Europe … Europe is apart and England is not of her flesh and body. But Europe is solid with herself". Our agonised heart-searching in the run up to Maastricht shows how much of that judgment is still true. Every move forward to greater political unity is a crisis in our politics. That is certainly not the case for other members of the Community. For Europe has conceived a project which history has taught us to fear. It is not the single market or even the single currency—I shall come to the single currency later—but the attempt to unite Western and Central Europe into a single state.

There have been many attempts in the past to do this by force and we have resisted them. At present, there is an attempt to do it by agreement and we resist that. It is not just that we do not wish to be part of it, but that we do not really want it to happen at all. The noble Lord, Lord Cockfield, believes that had we not joined the Common Market the six would already have formed a political union. I think that we went in partly to prevent that from happening.

Many would argue that this fear of European political unity is an out of date historical reflex, that Europe has a federal destiny and we are inescapably part of it. I do not despise reflexes—they often come in quite handy—but I am not sure that people who say this are right on either count. Federalism is only one of the institutional forms which European unity can take, and not necessarily the most attractive or relevant one. France and Germany are also trying to overcome their history and may learn by experience that the world today is very different from the world of the 1940s and the 1950s when the European project was conceived. Nor am I convinced that the best way for us to maximise our talents, our energies and our interests is to box ourselves into a new European state.

The Prime Minister talks about us being at the heart of Europe. The fact is that we have been at the centre of the world but rarely at the heart of Europe. Our location precludes us from that. It is still so today and I doubt that it will ever be different. Although we are much reduced, our instinct is still to seek our fortune overseas, not on the continent. All that will change; it is already changing. But we cannot achieve in five minutes that sense of a common fate which it took two world wars—not of our making—to bring about in Europe.

We have been slow to grasp the persistence of the European drive to political unity. The former Prime Minister sometimes gives the impression that, like one of the architects of Ceausescu's palace in Bucharest, she woke up every morning to find the horror of another unexpected excrescence added to that grisly structure. But there has really been no excuse for surprise. The post-war constitutions of most of the original six contain provisions for the transfer of sovereign powers to supranational bodies. So the federalist thrust was there from the start. It was deflected for a time by de Gaulle and his successors, but the competition between the four main Community institutions—theCouncil, the Commission, the Court and the European Parliament—now gives it an internal dynamic which may well prove irresistible.

How should we play the hand which history has dealt us? I am as much in favour as the next person of trying to get the best of all worlds and I am not immune to European idealism. It would be extraordinary folly to cut ourselves off from the benefits of the single market and political co-operation in order to hoard a shrinking sovereignty. At the same time we must recognise that we are not nearly as ready to accept a European destiny as many, perhaps most, of the present members of the Community. This suggests to me a fourfold strategy for Maastricht and beyond. Incidentally, I have to agree with the noble Lord the Leader of the House that no strategy is needed, that we must take issues as they come. This leaves the initiative in European affairs to those who do have a strategy. As I have suggested, there are many of them.

First, we should do everything in our power to slow down the pace of the advance towards federalism. That means essentially trying to limit the competence of the Community as far as possible to the economic and monetary matters defined in the Treaty of Rome and the subsequent Single European Act.

Secondly, I agree completely with the noble Lord, Lord Joseph, that within that area of competence we should fight unremittingly to get the principle of subsidiarity properly defined and taken seriously. Everyone now pays lip service to it, but the Commission often issues its directives as though it had never heard of it.

As Samuel Brittan has argued eloquently and frequently in the Financial Times, the enemy here is not federalism but centralisation—the urge of Brussels to interfere, under cover of health and safety, harmonisation, level playing fields and other such issues, in matters which are not its concern. We should oppose the extension of qualified majority voting to the matters contained in the social charter and we should always, with other directives issued under the qualified majority procedure, ask, "Is this required by the principle of subsidiarity?"

Incidentally, I find it difficult to understand remarks made by the noble Lord, Lord McCarthy, earlier in the debate. He seemed to be arguing that subsidiarity is all very well if the Government do what he wants, but if that is not the case then Brussels should do it. I would point out to the noble Lord that the issue is not one of what one does, but of where the responsibility for doing it lies. I agreed very much with the noble Lord, Lord Harris of High Cross, when he said that healthy competition between different social systems is what is good, not a grey uniformity.

Thirdly, we should do all we can to make a reality of European co-operation in defence and foreign policy. I feel that what we have lacked in the past is not a federal vocation but a European vocation, as de Gaulle, no federalist himself, never tired of pointing out. It is our uncritical Atlanticism which more than anything else has detached us from France in the past. Had we taken ideas of defence and foreign policy co-operation with the French more seriously in the 1980s we would never have been so isolated as we are today on the issue of majority voting in foreign policy. That is a classic example of how to play a strong hand badly.

Fourthly, we should press hard for early widening of the Community to include Poland, Hungary and Czechoslovakia. That is not to stop so-called deepening but because those countries urgently need the political and economic support for freedom and democracy which membership of the Community alone can give them. However, in putting that case for widening we will also expose the hollowness of some of the arguments for centralisation.

I wish to say a few words about the single currency. This, like the single market, has to do with economic welfare. Our judgment should turn not on the abstract ground of sovereignty but on whether the arrangements proposed are more or less likely to promote the well-being of our people. By joining the Common Market we renounced the right to put up our own tariffs. By joining a monetary union we renounce the right to devalue, to inflate the currency or to run budget deficits at will. The serious arguments against the surrender of any of these instruments of national economic management take a Keynesian form. It is said that the capitalist economy is inherently unstable and suffers from lack of confidence, and that national governments must retain the power to protect their people from slumps. I appreciate the force of that argument although it comes, rather oddly, from Mrs. Thatcher. I should have preferred a rather looser fiscal rule.

However, a perfectly good Keynesian argument can be put on the other side. Instability is largely due to uncertainty. A major cause of uncertainty since the 1970s has been the erratic way national governments have managed their economies. So rules designed to guarantee low inflation, exchange rate stability and prudent fiscal policy will tend in themselves to make economies more stable and allow for a higher level of activity by their effect in reducing the long-term interest rate.

That is a prize which has eluded us for over 20 years. Time will tell whether the rules and institutions outlined in the draft treaty on economic and monetary union will work out as intended, but the risk is surely worth taking if the convergence conditions are met. Here I find some of the arguments that have been put forward in this debate a little confusing. The noble Lord, Lord Joseph, argued that economic and monetary union would lead ineluctably to central government; that a central bank would lead ineluctably to a central government. I do not see the logical connection there. Article 107 of the draft treaty states clearly: When exercising the powers and carrying out the tasks and duties conferred upon them by this Treaty … neither the ECB, nor a national central hank, nor any member of their decision-making bodies shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body". Does the noble Lord, Lord Joseph, believe this will not happen, or what? Where is the connection between the idea of a central bank and the inevitability of a central government? To me the independence of the central bank from political control is the most attractive thing about it. In monetary management I prefer a democratic deficit to a democratic surplus.

The noble Lord, Lord Callaghan, says we need an opt-out clause because our economy may be too weak when the time comes. But that surely is a matter of the convergence conditions. If they are properly specified, no opt-out clause is necessary. The noble Lord, Lord Ezra, also asked that question. I shall be interested to hear the reply to it. If the noble Lord, Lord Harris of High Cross, believes that the economies of Europe will never converge enough to make a single currency possible, why is he so worried about us committing ourselves to it? Those are all questions that require answers. Therefore, I take a relaxed view about progress towards a single currency. We have five years to test the hypothesis that this is the best way forward and I see nothing wrong in committing ourselves to the experiment.

The noble Lord, Lord Callaghan, has rightly pointed out that any British Government will have a difficult time ahead. We have a small margin for mistakes. However, if our diplomacy is skilful and resolute we have a good chance of obtaining the agreements we want. I have no doubt that in time our European, though not necessarily our federalist, vocation will grow. For those reasons I am in favour of the Government's negotiating stance for Maastricht.

7.37 p.m.

The Earl of Bessborough

My Lords, I should have liked to make a separate speech about subsidiarity as it is a subject that interests me greatly. I should also have liked to make a separate speech on convergence, but I shall not do so. The noble Lord who has just spoken made some extremely interesting comments on those two subjects. I merely wish to ask: what is Europe? That is a question which a well known Italian friend of mine, Giovanni Agnelli, asks in a recent article entitled Uniting Europe through Enterprise. He points out that 2,500 years ago Herodotus offered an answer to the question. He said that Europe is one of the three parts into which the world is divided. Understandably, his view of geography was somewhat limited.

History does not provide much help either. There never has been a state or political entity which could formally be called Europe. Even the European Community does not provide an answer to the Herodotus question. Too many important elements are missing. One cannot ignore the EFTA countries and the emerging democracies of Eastern Europe. Incidentally, I am glad that the European Community and EFTA are reported to be reaching agreement on creating a European economic area as a step towards full membership of the Community for the seven EFTA countries.

In that connection I was particularly happy to preside recently at a luncheon in honour of the Austrian Vice-Chancellor, Erhard Busek, having also recently had talks with the Austrian ambassador in Washington on the subject of the EC and EFTA, of which Austria is a member. I hope that such a European economic area comes into being. Austria and the other EFTA countries seem keen that it should.

Faced with a world order which is moving towards global dimensions, divided into large continental regions, Europe has to be united. I believe that that is an absolute necessity for our political and historical survival. As my right honourable friend the Prime Minister and my noble friend the Leader of the House have said, that does not mean rushing blindly to sign any agreement. Nor does it mean renouncing the different cultures and traditions which make up Europe's rich and varied heritage. As my right honourable friend the Prime Minister said at Blackpool, our aim should be for closer union between states, not a so-called federal merging of states. I wish that we could forget that "F" word: the "U" word (union) makes much more sense. We now have a chance to build on that, to recreate more of a European family, to construct a safe and prosperous home for European generations yet to come. To quote again what my right honourable friend the Prime Minister said, it is a chance we must not miss.

As Europeans, we are, I believe, on the threshold of historic decisions. I regret having to say this, but to adopt as negative a line as my right honourable friends Mr. Tebbit and Mr. Ridley would be a disaster. I do not believe that even my right honourable friend the former Prime Minister would altogether go along with them, even if she did take on Sir Alan Walters as an adviser. However, I am glad to learn that the professor now seems to be accepting the inevitable.

I am also glad that my right honourable friend Mrs. Thatcher did not vote against the Government last week. Her predecessor, my right honourable friend Mr. Heath, is the staunchest European I know. I agree with his whole stance in regard to Europe. What would we be without the Romans and Normans and many other continental invaders and refugees?

From what I have said so far, your Lordships will recognise that I too am a Europhile. That is not merely because I am half French, with an American wife whose country unites so many of those of European stock, nor because my son-in-law, who is a distinguished art expert, is Greek and my niece is married to a notable Italian banker, to say nothing of having Irish, Welsh and Canadian connections and friends in every member state of the Community. I say what I have said because I believe that 2,500 years ago Herodotus was more or less right. I hope that he may prove to be so in the future and that Europe will be the second, third, or perhaps the first great power in the world.

Finally, I recognise that there are considerable problems to be resolved in regard to political union and defence. However, having reflected in some detail on monetary union I can think of no reason why we should not unite with other member states in the stabilisation of currencies and aim ultimately for a single currency. That need not involve dropping the term "pound sterling" even if we also recognise the ecu—as we already do for certain transactions.

I agree with what my noble friends Lord Aldington and Lord Rippon said on that subject. Both made excellent speeches. As I have said before in your Lordships' House, I believe that a single European currency will help to keep down inflation and reduce interest rates whatever the slide of sterling vis-à-vis the deutschmark may be today—and I gather that this afternoon sterling has rallied. I feel sure that the Bank of England will be able to deploy its 44 billion dollars of foreign reserves to stave off any fresh assault on the pound and avoid the need for the Government to raise interest rates to defend sterling.

Surely my right honourable friend Mrs. Thatcher, whom we all respect as having been a great Prime Minister, having agreed to join the exchange rate mechanism and signed the Single European Act, must have known that those were steps on the way to accepting monetary union.

I hope therefore that we shall be able to come to agreement with our 11 friends at Maastricht and not, at least at this stage, have to organise a referendum. Britain is after all itself a parliamentary democracy. As the first British vice-president of the European Parliament, and having played an active part in the 1975 referendum, I hope that the European Parliament, which is democratically elected, may have some of its powers increased. I was glad to hear what my noble friend the Leader of the House said on the subject. He went a long way towards what I consider to be the right type of solution for the European Parliament. I agreed very much with what my noble friend Lord Bethell said. I had the honour to propose him as an MEP in 1973. I have never forgotten it, and he has been a very good Member of that Parliament.

I say to the Government: good luck at Maastricht!

7.48 p.m.

Lord Stoddart of Swindon

My Lords, my noble friend Lady Ewart-Biggs, asked why the British people are rather more sceptical and not as enthusiastic about European union as people in other member states. Did she not say that? Perhaps she will enlighten us.

Baroness Ewart-Biggs

My Lords, I did not ask why. I said that it was a fact and then gave the reasons.

Lord Stoddart of Swindon

My Lords, I thought that she was asking a rhetorical question but she sees it as a fact. I see it as a fact that the British people are not so much in favour of so-called integration and economic union as our continental partners and that is because, first, our institutions are different. Secondly, the ways in which people relate to those institutions and in which people in this country relate to their politicians are different. Thirdly, and perhaps most importantly, the British people were deceived and misled when we first entered the Common Market in 1972. We were not told that we were entering a form of economic union. We were told that we were entering a Common Market. During the referendum campaign, we were specifically told that economic and monetary union had been negotiated out of the treaty and that it no longer existed as a policy or as a possibility. As they were deceived at that time, the British people are therefore not as enthusiastic about further integration and unity as my noble friend would like them to be.

Maastricht is now revealing the truth; namely, that this country has been led unwittingly into a position which threatens its future as a self-governing nation. Thus, in 19 short years, we have come a long way towards abandoning the institutions built up over hundreds of years to give the British people freedom, democracy and self-government. Apparently, our Government now contemplate signing a treaty that will sooner or later give away British control over economic and monetary policy and perhaps start down the road of ceding power over foreign and defence policy. That will effectively be the end of a self-governing Britain. Judging from our experience so far, our people will instead be governed by a domineering, centralising, soulless, federal super-state within which ordinary people will have little say and over which they will have no influence.

People like myself and my noble friend Lord Bruce of Donington, who from the beginning have recognised the real intentions of the Euro-federalist fanatics to create a Western-European super-state, have been insulted, belittled, told that we were misleading the people when we warned of the federalism in store for Britain and have been called Little Englanders and the rest. However, we were right all along and those who did not dare to reveal their true ambitions before are now emboldened to do so.

Sir Geoffrey Howe was at it again last week. He described so-called Euro-sceptics as yesterday's men. As always, like all Euro-fanatics, he stood the truth on its head. Yesterday's men are the empire-builders and centralists whose world has collapsed in chaos, recrimination and bloodshed. It is those who see the way forward to peace and stability through determined but willing co-operation between sovereign, self-governing states who are today's men and tomorrow's men, not those who wish to rebuild in Western Europe the centralist monster that has so ignominiously collapsed in Eastern Europe.

During his resignation speech, Sir Geoffrey Howe said that sovereignty is not like virginity which you either have or do not have. He believes that sovereignty can be shared. That is another misleading concept. For "sovereignty", substitute "self-government". Now you see that it is like virginity: you either have it or you do not have it. If you allow your decisions to be made by a group of other people or nations voting by a majority, you have not pooled self-government; you have lost it. That is the truth of the matter.

We are told, and I should like to believe it, that the Government have no intention of accepting the present proposals for political union. However, they appear quite ready to sign an agreement on economic and monetary union which would remove from the British Government and Parliament, and therefore the people, a huge tranche of self-government. They say that they will sign the treaty, but will not be bound by it for the present. However, inevitably, once in place, as we have seen time and time again, the inexorable process of economic and monetary union will move on until it envelops all the parties to the treaty within its stifling mantle. Thus, monetary policy will be exercised by a central European bank which will have snaffled all Britain's external reserves. The British Chancellor will be told how large his budget deficit may be or whether he shall have a deficit at all. Every aspect of economic and financial policy will be under the scrutiny and control of Brussels and all countries will have to conform to its diktat.

It is said that the object before we attain union must be convergence but, frankly, for "convergence" we could read a form of economic fascism in which all countries have to conform, whether they can or not and regardless of their different backgrounds, to the policy of the strongest state, or else.

I understand why such a system might appeal to corporatists like Mr. Heath, but I cannot understand why the Labour Party would wish to be put under such savage restraints, bearing in mind the policies that it wishes to implement. The party's change of mind appears to stem from the Single European Act which was ruthlessly imposed on Parliament and the people by Mrs. Thatcher. Labour opposed that Act because it believed that it eroded Britain's ability to govern itself. It now says, "We have gone so far; we might as well go the whole hog and hand the whole lot over to Brussels". That is not good thinking. It is like a doctor who, having given a patient some medicine which half kills him, decides to carry on prescribing the same medicine until the patient is dead. That is quite wrong. Furthermore, the Labour Party should beware lest it is accused of wishing to gain office merely to give away to others the power bestowed on it by the people, should it win the election.

The issue transcends party politics. It has always been country before party and it will remain that way. I have never been prepared to be whipped on this subject in the past and I shall certainly not allow myself to be whipped in the future.

That brings me to my final point; namely, the question of a referendum. Mrs. Thatcher has attracted a great deal of criticism, much of it, quite frankly, deserved. However, I find it amazing that the Conservative Party, particularly some of its senior members, should seek to stifle what she says and to tell her that she should not have free speech. I should have thought that that was wrong. It is her right and duty to speak on the subject as she believes. That is the duty of all of us.

The case for a referendum in the present circumstances is quite unanswerable. I do not know at what stage it would take place. I agree with many people who have asked at what stage we should have a referendum. We should have a referendum at the stage where it is quite clear that our economic, monetary and perhaps other policies will be controlled by people other than the British Government and the British Parliament. If all the parties are agreed on a single policy, there is only one way in which the British people can have a voice in resolving what in fact would be a unified parliamentary policy; namely, by referendum.

I see no reason why people should be afraid of such a referendum. I sincerely hope that all those in senior positions in all the parties will consider and reconsider the matter and that they will agree that, unless the people are given the opportunity to declare themselves, they will again be dragged reluctantly into the new arrangements by what they will consider to be a conspiracy. That would be damning for Parliament, bad for Government and bad for democracy.

Let me say a final word to noble Lords and to the British people. It is not far-fetched to say that we are in danger of losing self-government. I warn that once a people loses self-government, it is a hell of a job to get it back. Therefore, before we lose it, let us make sure that the people give their consent. Better still, let us not agree to lose it at all but keep it for ourselves, for it has protected us over many hundreds of years.

8.1 p.m.

Lord Elibank

My Lords, to my mild surprise I find myself in the minority of speakers advocating a pro-European policy, almost to the point of recklessness. As such I shall inevitably incur the wrath of the noble Lord, Lord Stoddart of Swindon.

I have been mildly surprised at the very cautious—I might almost say unenthusiastic—approach of a number of noble Lords to this great new development which is opening up in front of us. I believe that the great majority of your Lordships feel that the EC is inherently a dangerous institution, that it ought to be approached with great care and that we should keep as far away from it as we decently can at all points. I believe that that is a misconception. I believe that our future lies in Europe. I hope that the Government will approach in a positive frame of mind the various negotiations, treaties and institutions which are to be discussed, seeking to join them where possible and not to approach them with the objective, which I secretly suspect they have in some respects, of delaying for as long as they decently can.

Some aspects of the Government's policy lack clarity. I listened carefully to the speech of my noble friend the Leader of the House. I now understand better the Government's negotiating position at Maastricht, though I admit that I would not wish to be cross-examined on it. I feel that there may be some confusion between a negotiating position and an objective. I heard the Leader of the House use the word "objective". What he meant, I believe, was that we must adopt a pragmatic approach. Indeed, "pragmatic" was a word which he used from time to time.

The problem with the pragmatic approach, much beloved of the British people, is that it is no clarion call. If we wish to have the British people behind us on this and subsequent negotiations, some kind of resounding call will have to be made to them at some time. That cannot be done by talking vaguely of convergence toward a common objective or a united Europe.

Lord Harmar-Nicholls

My Lords, perhaps I may ask my noble friend a question. He called for clarity and suggested that it was not in my noble friend's speech. Mr. Jacques Delors has been very clear. Does my noble friend think that that is the kind of thing that we ought to accept or that we ought to be pragmatic about?

Lord Elibank

My Lords, I certainly do not accept everything that Mr. Delors has said; nor do I accept the timetable that he has proposed. He has other motivation for the route that he follows. However, he is clearly on the federalist course. However objectionable that word may be, I believe that if we are looking for a convergence in Europe—or something like it—that is what will come in time. The idea of a policy of convergence sets no timetable. It may look 10 years or 100 years ahead. It is very vague. Personally, I should prefer to see an objective of convergence at approximately the same speed as the other members of the Community. That is where we are inclined to drag our feet. In our negotiations with the EC we always seem to see merit in delay, hanging on and waiting to see what might happen. That way we shall be late again.

One aspect that causes the Government a considerable amount of trouble is sniping from the sidelines. I have great sympathy with them. Members of the party, often senior members, ridicule or contradict the Government's efforts forward. I exhort the Government to take a firm and determined line on this issue and disregard such sniping; otherwise, when they go to the negotiating table at Maastricht the impression will be created that they are looking over their shoulders at their enemies or antagonists at home. That will weaken their approach to their negotiating partners in Europe; it will also weaken their chance of convincing the British people that what they are doing is right and best for the nation.

Referendums and whether or not they are desirable have also been mentioned. The noble Lord, Lord Callaghan, said that he had instigated two referendums, one of which ended up as he wished while the other did not. I do not understand how the Government can handle a situation in which they have a positive policy which they recommend to the electorate and start to carry through but then have a referendum which might well go against the policy that they advocate. Can they then backtrack or do they hedge? What do they do? That would seem an intolerable situation but one which could possibly arise in the present circumstance. The Government might well have a majority for their policies in both Houses when they return from Maastricht; however, a referendum could show a majority of the British electorate against those policies. The Government would then be in an intolerable position. I think that they do very well to reject referendums at any stage.

My last point touches on the issue of sovereignty. It is a very important matter and the motivation behind much of the caution exemplified by many of the speeches tonight. Fear of the loss of sovereignty is the motivation for proceeding with the utmost caution, in many cases as slowly as possible.

Sovereignty, as a number of noble Lords have said, is not an absolute concept. If one considers the last time that we could properly say that we were a sovereign nation I suggest that it was the second half of the last century at the height of the Victorian age. We were probably then the number one power in the world and what we wanted to do with our economy, foreign policy and defence we could do without consultation with others. Since that time our power and sovereignty have diminished. With the occasional upward blip, it has been a steady downward path from the middle of the 19th century until today.

There are various reasons for that. Some are arguable. However, most of us would say that a prominent element in that loss of sovereignty has been our willingness to over-pay ourselves for the poor levels of productivity that we have achieved in relation to our competitors. At present, our economy is very much at the mercy of the Japanese, the Americans and the Germans. That is the realistic situation today. It will not change. If we isolate ourselves in Europe and refuse to join, or join belatedly, a number of the institutions we have discussed today, that loss of sovereignty and power can only accelerate. Our only hope is to get into a larger power complex such as Europe and to wield our influence from within.

Our economic record over the past 100 years has been so poor that I cannot concede that a union within Europe will cause it any further deterioration. Of course there is an element of risk when we throw the dice. But it seems to me that we have a far better chance of winning than of losing. Fundamentally, unlike the noble Lord, Lord Skidelsky, I believe that the force of history compels us to join Europe. It is inevitable. The only choice that we have is how long we delay in joining any particular institution.

It has been said a number of times that in those circumstances it is better to get in early and to set the rules of the club rather than to hang back and have them set for us in a manner that we might find unattractive.

8.12 p.m.

Lord Varley

My Lords, at this point in the debate after so many fine speeches I wonder what fresh new material I can give. I am tempted to say, "Ditto to the speeches that have gone before". If I were to forgo my right to speak, I would say, "Ditto to the speech of the noble Lord, Lord Rippon of Hexham", because I agreed with so much that he said. However, I do not intend to forgo my chance to put in my two pennyworth.

I was very pleased when my noble friend Lord Cledwyn put the case for the official Opposition so forcefully and cogently when he spoke today. I was delighted that he reinforced the position taken by the Leader of Her Majesty's Opposition in another place, and colleagues such as the Shadow Foreign Secretary and the Shadow Chancellor of the Exchequer who have taken courageous lines. I hope that when he goes to Maastricht the Prime Minister will realise that he is very fortunate in having prominent members of the Opposition in this House and in another place who want to see a successful outcome to the negotiations.

In the 1960s I believed that Britain could thrive and prosper outside the Community. I even thought that, but only just, at the time of the referendum in 1975. However, I considered that we could thrive and prosper, perhaps preserve and build on our trade with the Commonwealth, and forge even closer links with the United States. I am sorry to say that that route to increasing prosperity and to building a first class economy proved illusory and mistaken. We are now no more than a medium-sized European power slipping down the world's manufacturing industrial league. Our industrial base has shrunk and our international competitiveness is constantly under threat.

Our great abundance of national resources is being squandered, or not used to good effect. My enthusiasm now for the Community stems largely from our appalling decline in industrial influence in the world. For example, since 1979 our manufacturing capacity has increased by only a tiny amount—2 per cent. Consumer spending has increased by about 30 per cent., hence the huge balance of payments deficit, and the fact that we have not used the tremendous resources from the North Sea.

It grieves me to see Ministers sometimes almost going down on their bended knee to plead with the Japanese to invest in this country. I do not wish to give the wrong impression; such inward investment is extremely welcome. However, the fact that we are able to do better in vehicle building today in Britain has more to do with Nissan, Honda and Toyota than what remains of our indigenous car industry. We once were proud to claim support for ICL as a wholly owned British computer company. Now that great hope is wholly owned by a Japanese company.

Over the past 25 years, we have sought to control our rising unit labour costs either by a statutory or a voluntary incomes policy with all the anguish that that has brought. More latterly we have sought to do so by reducing trade union influence, by restrictive legislation or high unemployment. Our attempt to remain internationally competitive was at the expense of devaluing our currency. The only time in the past decade when sterling currency appreciated was when the world oil prices rose either due to the OPEC cartel, when that body had power, or in a Middle East conflagration. Its appreciation was because of our self sufficiency in energy. That is diminishing all the time.

I do not know anyone who wishes to go back to the days of formal incomes policies or trade union power broking and the scope now for anti-trade union legislation hardly exists without violating basic human rights. It will not be long before our indigenous oil and gas start to diminish. Whatever cushion we attain from those fuels at present will decline. Our future is therefore inextricably linked to the European Community. Every examination of the facts points inescapably to our need to play a leading role in its development.

I rejoiced when we joined the exchange rate mechanism because it imposes a discipline on us that we have not had the courage to apply to ourselves over any reasonable length of time. I leave aside whether we joined at the right rate. I assumed that the then Prime Minister, Mrs. Thatcher, who agreed to it, and her Chancellor, the present Prime Minister, knew what they were doing. Perhaps after the recent outbursts from Mrs. Thatcher it was foolish of me to make that assumption. But I assumed if they said it was right that it was right at the time.

The present difficulties that sterling is experiencing in the exchange rate mechanism is as much to do with the Government's prevarication about the line to take at Maastricht and the disarray in the Conservative Party than any threat of a rise in German interest rates. Therefore the Government, headed by Mrs. Thatcher, having committed us to a Single European Act and the exchange rate mechanism now have a duty to play a leading part in forging even closer links with our Community partners.

It is naive to believe that we can stop the further development of the Community. If the Prime Minister and his senior colleagues find that they cannot sign the treaties at Maastricht, it will lead to their humiliation and it will be disastrous for the country.

I can understand why the Motion before this unelected House is to "take note" but on such an important issue I was amazed by the Government's pathetic Motion in another place last week. I believe that Mr. Tebbit described it as "Alice in Wonderland". You could have taken any three pages from that book, put them on the Order Paper and got everybody through the Lobbies on that basis.

It would have been far better if our Government had followed the example and courage of the Labour Opposition and set down a Motion on the Order Paper which gave a clear lead. Then at least those in a minority who genuinely and conscientiously did not agree could have registered their opposition. For example, those who take the line of my noble friend Lord Stoddart of Swindon could have gone through the Lobbies or abstained as many of my former colleagues did in the House of Commons.

However, my biggest complaint about the Government and some of the Ministers on this issue—I do not necessarily say that that applies to the noble Lord, Lord Waddington, the Leader of the House when he spoke this afternoon—is that they are not making out a logical case for European integration or participating constructively. They seem only to react to what our partners propose and then appear to give the impression that they want to slow down what I believe to be an inevitable process. Of course many aspects of Community power is infuriatingly bizarre and trivial. But as the Government approach the negotiations, we are not talking about whether Cornish pasties can be made in Worcester, but the whole pattern of our trade and industrial power perhaps for the next 30 years. Over 50 per cent. of our exports and 52 per cent. of our imports are with countries in the EC. By the end of this decade the Community of 12 may be 20. To make sure that we gain our full share in an expanding and prosperous Community, we need currency stability and eventually a common currency link.

If our leaders make a hash of the negotiations at Maastricht, we can probably rule out the City of London as Europe's leading financial centre, and the £4,000 million or so that it earns a year will eventually go to Frankfurt or Paris. Therefore, I urge the Prime Minister and his colleagues not to allow themselves to be painted into a corner by Mrs. Thatcher and Mr. Tebbit who try to give the impression that they are saving us from awful foreigners. I believe that it was Samuel Johnson who said, Patriotism is the last refuge of a scoundrel". Neither Mrs. Thatcher nor Mr. Tebbit are scoundrels, but they are in the twilight of their House of Commons' careers. I would not be surprised to see them here before too long and as impotent as some of us are. That may be. I believe that the Prime Minister wants to reach an agreement at Maastricht. He should not be looking nervously over his shoulder at a minority in the House of Commons even as eminent as that minority is. If he has the courage to follow his own instincts, he will be doing a great service to the British people. I hope that he reaches agreement, and I wish him well.

8.23 p.m.

Baroness Elles

My Lords, the number and standard of the speeches that have been heard in your Lordships' House this afternoon are surely full evidence of the great importance of the subject which we are debating tonight. The noble Lord, Lord Varley, will understand that I do not entirely agree with all the comments he made about the economy of this country, though I agree with some of what he said.

We are discussing in this draft treaty a document which is presumably to be only an interim document. With countries knocking at the door to enter the Community over the next five to 10 years presumably it will be necessary to renegotiate a further document dealing with institutions, the economic situation and financial arrangements which will enable EFTA and eventually the other new democracies in Eastern Europe to join in a wider Community.

We have to look at the draft treaty as an interim document which gives an orientation for future development within the EC. Further, we cannot see the EC as isolated. Therefore, we cannot afford to let it fail. EFTA and the new democracies, and the extraordinary and dramatic instability both in the economy and the political situation in what I believe is now the USS, formerly the USSR, are surely reasons why we must come to satisfactory conclusions at Maastricht. We need to answer the requests of these countries and their aspirations to join the EC.

In this instance it is also important to maintain the balance between the institutions which may eventually be modified to deal with enlargement. Therefore, I particularly welcome the speech of my noble friend Lord Waddington this afternoon setting out the main parameters of the political and economic dimensions which arise within the discussion on the draft treaty. Most noble Lords have referred to the speech made on Wednesday in another place by my right honourable friend the Prime Minister. He outlined the main issues in which the United Kingdom was also winning arguments. As far as I can see he has won the argument about NATO; he is winning the argument about WEU; he is also winning the argument about where a foreign common policy will be placed in the overall architecture of Europe.

Therefore, we are seeing not only skilful negotiations but a demonstration of the powers of this Government to work towards agreement with other member states. Those of us who do not live only in this Chamber, but who sometimes have time to go outside and visit other countries in the European Community, will know perfectly well as we read our local press that each member state has its own problems with regard to Maastricht. The document before this Government and the other 11 member states is a draft document prepared by the Netherlands Government and originally based on the Luxembourg draft treaty which was distributed in June of this year.

What we are seeing are all 12 member states trying to come to a common agreement. Therefore, I totally reject the insinuation that my right honourable friend the Prime Minister is acting in a defensive capacity. He is putting forward some extremely good ideas which seem to be gradually gaining acceptance from other member states. Of course, he is defending the position of the United Kingdom as one would expect any prime minister of any political party to do in this kind of negotiation. In this instance I believe that the Prime Minister and my right honourable friend the Foreign Secretary have already clocked up some considerable gains for the United Kingdom.

The noble Lord, Lord Varley, and also the noble Lord, Lord Callaghan of Cardiff, agreed that the Government were acting in good faith in trying to get a satisfactory solution. It was with great regret therefore that I read in the Rainbow, which is the Hansard of the European Parliament, that the leader of the British Labour Group, Mr. Ford, said in the main debate in which M. Delors addressed that body: Do not give in! Do not let a lame-duck government, which itself has the support of only a minority of the British people, that is afraid of its own right-wing minority"— I underline the following words— that refuses to negotiate in good faith". I hope that whoever replies to the debate from the Benches opposite will reassert that there is no question but that the Government of the day and my right honourable friends the Prime Minister and the Foreign Secretary are acting in good faith for the good of the United Kingdom. That disgraceful statement made within the European Parliament was heard by a very large number of members from all over the EC. It was neither helpful nor acceptable.

Lord Cledwyn of Penrhos

My Lords, I am grateful to the noble Baroness for giving way. I was not aware of the remarks made by the leader of the Labour Party in the European Parliament. However, I must remind the noble Baroness that the most savage and offensive attacks upon the right honourable Member the Prime Minister were made by Members of his own party.

Baroness Elles

My Lords, I accept that comment from the noble Lord, Lord Cledwyn, but I regret that in an international body such as the European Parliament there can be that sort of attack undermining the good faith of the Government and, in particular, my right honourable friend the Prime Minister.

I should like to say a few words about detail. First, as regards the single currency, I do not pretend to be an economist. However, I welcome the opt-in clause. Let us remind ourselves that that is not only for the benefit of the United Kingdom. I know at least one government, apart from the United Kingdom's, who are delighted that that is included. They will benefit from that opt-in clause. We always take the view that the opt-in clause is only for the British Government to save our situation, but that is an accepted position by all member states, and at least one other member state agrees.

The point about convergence was strongly enforced by the British Government in that certain criteria should be agreed as to what determines whether or not convergence had been reached and whether there should be entry into a single currency. There again, at least o le if not two governments will not be able to fulfil those criteria in five, six or possibly seven years when the date is reached—if we ever reach that stage—at which we enter into a single currency. We must view those matters with rather more objectivity and not continue to hammer at our own Government who are, after all, working with 11 other governments to reach satisfactory conclusion.

In parenthesis, I should say that this is a new situation created by our present Prime Minister. However, he is working with 11 governments to reach a satisfactory conclusion. Perhaps that has not always been the case up to the present time. The United Kingdom set that principle on convergence before we join a single currency. It is now widely recognised as essential. Of course, we may never reach that stage. Nobody knows because it is a matter for the future. We may never reach a common currency. However, we already have a common currency which is widely used—indeed, I remember the comments and strictures made about a hard ecu and the ribald laughter at that proposal. However, I believe that we are now reaching a hard ecu. It is being used in trading negotiations throughout the Community and, indeed, by countries outside the Community trading within it. Those countries insist on trading in ecus. I am happy to see my noble friend Lord Boardman, an expert in that sphere, nodding his head in agreement.

I welcome also the statement concerning NATO and the question of the Western European Union. I support my noble friend Lord Bethell in his excellent speech about the powers of the European Parliament. I should like to insist—as did my noble friend—on the necessity of the European Parliament's role to scrutinise the work of the Commission. Commissioners are appointed and are not elected. Nobody within the Commission structure is elected. We see more and more secondary legislation coming from the Commission because it is delegated by the council. That secondary legislation is published and is hardly every scrutinised, debated or amended because it is controlled by the Commission through the system of committees whose officials are from member states. That is a new role to which the European Parliament must be directed.

Another aspect is the control of fraud. I was sorry to hear on good authority that the socialist group in the European Parliament has proposed that the budget control committee should be abolished and be made a sub-committee of the budget committee. Perhaps another noble Lord may be able to confirm that, but I heard it on good authority from the European Parliament. It seems to me that if the role of the European Parliament is to scrutinise and to take action on the amount of fraud taking place throughout the Community—and we are all well aware of that—surely one needs a stronger budget control committee acting on its own. The committee should be given certain rights of investigation. It should be provided with documentation and have the power to call people before it. That would be better than abolishing such a useful committee.

Lord Bruce of Donington

My Lords, I thank the noble Baroness for giving way. In regard to the proposed abolition of the budget control committee, will the noble Baroness investigate to see whether one reason for that proposed abolition—and I have no knowledge of it—is because of the great difficulty always experienced not only by the budget committee but also by the budget control committee in obtaining definite information from the Commission? The noble Baroness will appreciate that the budget control committee can act only if it is supplied with the information it needs, particularly from the Commission.

Baroness Elles

My Lords, I totally agree with the noble Lord, Lord Bruce of Donington, who is an expert in that sphere. I hope that in the draft treaty special powers will be given to the budget control committee to allow it to do what the noble Lord, Lord Bruce, was talking about. Indeed, that was reinforced by the excellent report which came from the European Communities Select Committee of this House which proposed that that committee should have stronger powers as regards calling for documents and evidence from the Commission and, indeed, the Court of Auditors. I am grateful to the noble Lord for his intervention.

The ratification of the president of the Commission is essential if the parliament is ever to be able to use its power under Article 114 to censure the Commission. I know that there are two ex-commissioners in your Lordships' House. They can feel safe that never again will they be at risk of censure. However, they know that from time to time a sword of Damocles was held over their heads. Their minions would ask the MEPs whether there would be a censure motion. Perhaps that does not apply to the two noble Lords present, but I have heard that phrase several times during my time in the parliament.

If the appointment of the president of the Commission must be ratified by the parliament then, once the Commission had been censured, member states would not be able to reappoint the same people again. They would have to come before the parliament before they took up office. Therefore, that would strengthen that power which the parliament has never used for the reasons which I have described.

The noble Lord, Lord Joseph, was right that subsidiarity is a crucial element in the draft. There are implications for the powers of member states—not only national governments but also local authorities right down to district council level. The draft which I saw is unacceptable and I should prefer a statement along the lines of the US constitution's Tenth Amendment which clearly reserves powers to the states in the text. That would be extremely beneficial.

I now refer to the subject of a referendum. I am a firm supporter of the former Prime Minister who did so much for this country and so much to support the sovereignty of Parliament in all her statements throughout the world. Wherever she travelled she always spoke of the sovereignty of Parliament and, above all, the sovereignty of the United Kingdom Parliament in relation to her arguments in the meetings of the Council of Ministers. I am very sad that she is now suggesting a referendum. That would totally undermine the powers and the sovereignty of Parliament. Three parties agree on a major issue. Because she happens to disagree with those three parties she believes that she is entitled to call for a referendum of the people of this country. There have been several major issues on which agreement has been reached by the three major parties; for example, NATO, the Anglo-Irish agreement and a host of major issues of the greatest importance to this country. I believe that that shows the good sense of the people of this country in voting for politicians of the major political parties who, whatever their disagreements may be on some issues, when considering the overriding interests of the United Kingdom, nearly always join together to protect its greater interests. Therefore, I totally reject the idea that we should have a referendum on those two issues. I am sorry that that suggestion should have come from my right honourable friend for whom I have the greatest respect.

In conclusion, we should realise that we must get the draft treaty right.

Lord Harmar-Nicholls

My Lords, perhaps my noble friend will allow me to intervene. She may recollect that the suggestion of a referendum did not come from the right honourable lady, Mrs. Thatcher. It was mooted by people who had feelings upon it. She said that she would not rule it out in certain circumstances. There is no question of her being the author of the suggestion, whether right or wrong, and I do not believe she was all that wrong.

Baroness Elles

My Lords, I am pleased to hear from my noble friend Lord Harmar-Nicholls that the former Prime Minister did not make that suggestion. I am perhaps mistaken in my understanding. Having read Hansard, there is no doubt that the Official Report of 20th November showed my right honourable friend indicating considerable enthusiasm for the idea of a referendum. Because she suggests so many things I could not believe that she allowed someone else to suggest the idea and then took it up herself. I must therefore apologise to my noble friend for making that cardinal error.

In conclusion, we must recognise that the world is changing. In the past two years we have seen dramatic events in Europe. We do not know what dramatic events we shall see beyond Eastern Europe. We are seeing a new emerging southern Africa. It behoves us in this Parliament to ensure that Britain is in the centre where major decisions will be made affecting not only our future but also the future of the whole of Europe and, indeed, the rest of the world.

We know that the European Community is the largest trading bloc. It will be even bigger with EFTA countries coming in and its position will be stronger. I hope that the draft treaty produces all the answers we need to ensure our stability and prosperity. Consequently, I totally support the actions of my right honourable friends the Prime Minister and the Foreign Secretary and wish them well in their task, which will be for the benefit of our people.

8.41 p.m.

Lord Monson

My Lords, it is always a pleasure to follow the noble Baroness, Lady Elles, in our debates on the Community, as seems to happen quite often, particularly as on this occasion I warmly agree with one of her later suggestions, to which I shall return.

Ten days ago the deputy editor of the Daily Telegraph, Mr. Charles Moore, in an article on the implications of Maastricht, wrote as follows: Bored and perplexed, we [the British people] tend to assume that the European question can be treated pragmatically. We dislike what we call the wilder excesses of the federalists, but we comfort ourselves that the important people in the Community are more moderate. This is false comfort. You have only to talk for half an hour (and I have talked for much, much longer) to senior EC officials and politicians, to realise that they almost all want to supersede the nation state with European government. 'We are building the United States of Europe', one Commissioner told me on Tuesday, and he said it not as a rhetorical challenge, but as a statement of fact".

Those who have studied the matter and are honest with themselves must concede that as far as continentals are concerned that is one of the main objectives of the Maastricht Summit. In other words, de Gaulle's noble concept of L'Europe des patries, is effectively chucked aside. That may be what countries which are 19th Century creations want, or countries which were formerly dictatorships or which not so long ago were under the sway of dictatorships, but it is not for us. Our history is different and therefore our psychology is different. That is why those noble Lords like the noble Lord, Lord Elibank, who claim that if we had joined the Community earlier or played a greater or more central role in its deliberations we could have swayed the other 11 members to our way of thinking, are mistaken.

It is not merely a question of tradition and sentiment. There are dangers involved, and not for this country alone. We must consider some of the implications of a common foreign policy subject to qualified majority voting, which the noble Lord the Leader of the House rightly condemned in a vigorous and excellent speech. Suppose, heaven forbid, some years in the future Argentina and Brazil were to go to war with one another. One would expect Portugal to back the Brazilians and Spain and possibly Italy to back the Argentinians. But why on earth should any of the rest of us become involved?

Moving to another part of the world, do we really want to become involved in an all too possible future armed conflict between Greece and Turkey? That almost certainly would be the case if there were to be a common foreign and defence policy.

Again, we know that many people on the Continent, and not just Madame Edith Cresson, are consumed with resentment for Japan, the United States and, by extension, the English-speaking former dominions. But that is not our attitude and never will be. We have absolutely nothing against the Japanese, provided they are prepared to admit to the atrocities committed by their troops between 1936 and 1945; nothing, apart from occasional minor irritations against the Americans, to whom we are bound by blood And language; and we certainly have nothing against the Canadians, Australians and New Zealanders. On the contrary, we back them up to the hilt, much to the annoyance of the continentals more often than not.

As I have mentioned before, French acquaintances of were genuinely affronted that we backed the New Zealanders rather than them over the "Rainbow Warrior" incident, holding that our attitude brands us as not being sufficiently communautaire. I would much rather be right than communautaire. Very belatedly indeed the French at long last apologised to New Zealand for the "Rainbow Warrior" incident, only to spoil it all a few days later by awarding decorations to the two secret service agents who blew up the "Rainbow Warrior" and killed the Portuguese photographer on board. If a common foreign policy had been in place no doubt the French Government would expect the British Government to try to persuade Her Majesty to include the two French agents in the next New Year's Honours List for services rendered to the Community. I do not believe that that would go down particularly well.

The most worrying aspect of all, as the right honourable Member for Devonport, Dr. David Owen, hinted at in another place last Wednesday, is that if a uniform foreign policy had been in place last August at the time of the hard-line coup in the Soviet Union, when Britain was supporting Mr. Gorbachev and Mr. Yeltsin but France and Germany seemed to be on the verge of accepting the coup as a fait accompli, Britain might have been outvoted. So with President Bush virtually isolated, a hard-line government might well have been in power in the Soviet Union today, with Mr. Gorbachev and Mr. Yeltsin behind bars or in Siberia.

I turn to the question of a single currency. As almost every expert tells us, except the noble Lord, Lord Rippon—I am certainly not an expert—but including Mr. Nigel Lawson, monetary union will accelerate the trend towards economic union and is also likely to lead inexorably, over a period of time, towards fiscal union, for reasons I shall not go into now.

What are the implications of that? There is one grave constitutional implication which, so far as I know, has not been mentioned in either House of Parliament. As the noble Lord, Lord Joseph, emphasised, nobody seriously supposes that any EC central bank which comes into existence will he genuinely independent, any more than the Bundesbank was independent when the West German Government twisted its arm last year and forced it to accept a preposterously out-of-line exchange rate for the östmark. In other words, the different national governments controlling the central bank will have an input into monetary policy just as they will have an input into economic and Community-wide fiscal policy.

Suppose by coincidence, as is quite possible, France, Germany, Italy, the Benelux Countries, Spain and Portugal were all due to hold general elections in the autumn and winter of 1993 and the spring of 1994. Suppose, also by coincidence, the United Kingdom, the Republic of Ireland, Greece and Denmark had general elections scheduled for the autumn of 1994 or the spring of 1995. Suppose again that a drastic economic crisis blew up in the summer of 1994 and that forthwith the French, German and Italian governments proposed extreme fiscal and monetary corrective measures to remedy the situation; in other words, a short, sharp shock. They would have nothing to worry about because their general elections would be three-and-three-quarters, four-and-a-half or five years away. In vain would the British, Irish, Danish and Greek governments argue that that would he disastrous for their re-election chances six or nine months ahead. They would be outvoted. Rigid austerity measures would be imposed and the incumbent governments in the United Kingdom, the Republic of Ireland and so on would be thrown out on their ears.

I am therefore convinced that the end effect of a single currency and all the implications attached to it will be synchronisation of general elections all over the European Economic Community; not necessarily on the same day but at any rate in the same week. In practice this would entail fixed-term parliaments. I think that the Liberal Democrats would welcome such a move; I am not sure that other parties would do so.

There is another aspect to elections taking place on virtually the same day. On the evening of election day when the British public are gathered around their television sets to watch the results coming in first from Cheltenham and then Torbay—or the other way round—then from Bradford, Edinburgh and so on, Mr. Dimbleby will fill in the gaps that there always are between the results coming in by showing the results coming in from Aix-en-Provence, Dortmund, Piacenza, Cordoba, Odense, Coimbra, Zeebrugge, Chania, and so on, and inevitably the British people would begin to realise, if they had not done so already, as would the people in other member states, that the real power in the Community lies not with the national parliaments but in Brussels and Strasbourg.

They would begin to take the view, if they had not done so already, that there was no further point in pressing their Members of Parliament for improvements in their standards of living, or to rectify the wrongs they feel they are suffering. As power now lies at the centre, that is the place to lobby; and there is not much point in turning out for general elections in future since they have become tantamount to local government elections, where you get only a 30 per cent. or 40 per cent. turn out at most. I really wonder whether that is what people in either House of Parliament want.

Turning quickly to the powers of the European Parliament, I think it was the noble Lord, Lord Bethel!, who said that it was democratically elected. Certainly it is democratically elected but it is not democratically composed. The people of Luxembourg will have 12½ times as many representatives per capita as will the people of a united Germany: but it is democratically elected.

Perhaps there is something to be said for allowing the parliament a veto over new legislation, not least because so much legislation nowadays tends to be interfering, illiberal and often unnecessary the world over, and therefore the more often that it is vetoed the better. There must be one proviso. Reform of the common agricultural policy and action against corruption must be put beyond the reach of any veto by the European Parliament.

Finally, the noble Lord, Lord Callaghan, rightly cited the resentment that most people in this country feel at interference by Brussels in matters which are no legitimate concern of Brussels, and no legitimate concern of people in any other country. This applies Community wide. The French do not want interference from us any more than we want interference from them.

The noble Lord, Lord Beloff, in earlier speeches has on two occasions suggested to us why this should be: too many talented men with too much power and quite a little time on their hands tend to get up to mischief. The noble Lord may well do so again tonight for all I know. I would also suggest that the European court is beginning to act too much like the American Supreme Court, in that it is making quasi-political decisions instead of purely judicial ones. These decisions are always in the direction of interpreting ambiguous statutes, and there are far too many ambiguous ones, in favour of Brussels rather than in favour of individual nation states.

Time does not permit me to list all the ridiculous, petty, harmonising directives with which we are lumbered, but I invite your Lordships to read Christopher Monckton on page 7 of the Evening Standard of 20th November. We are apparently even now to have a standardised Euro-condom. It seems that the Commissioners found the Italian ones too small. I am not making this up: your Lordships can read it in most of last week's papers.

It is not enough for the Prime Minister, Mr. Major, to say to the other 11, as he must, "Thus far and no further" as regards petty harmonisation. The frontiers of Brussels interference must be rolled back. At the least we must be as free to control our internal affairs as are Arkansas, New South Wales and Prince Edward Island, which at the moment, in many respects, we are not. In other words, in return, for example, for agreeing to the admirable new directive controlling time-share advertising and marketing—admirable because time-share abuses extend across national frontiers—the Prime Minister should reclaim the right of the British, and of course of others, to decide on the location of their own bridges, motorways, bypasses and so on, which have nothing to do with people in any other country.

In order to roll back effectively the frontiers of Euro interference, despite what other noble Lords said, I am afraid that we must throw into the dustbin such vague, amorphous, weasel words as "subsidiarity", which mean all things to all men. Subsidiarity, incidentally, also implies that all power legitimately rests at the centre, which may graciously decide to dole out a little of it to the constituent nation states as and when it so feels inclined. But it does not reside at the centre: power resides with the people and the nation states, and it is up to them to hang on to it and not tamely cede it to Brussels.

Instead—and here I greatly welcome what the noble Baroness, Lady Elles, proposed—we need a new treaty that will strictly confine the competence of Brussels and Strasbourg to those matters which genuinely transcend national frontiers, leaving everything else without exception to national parliaments.

8.57 p.m.

Lord Harmar-Nicholls

My Lords, this debate to take note "of the forthcoming negotiations at the European Council at Maastricht" has been fantastic. It has covered a wide field. We have already had 28 speakers and there are eight more to follow. That is a pretty wide coverage. It has also been a long debate. I shall therefore take only a short time and short circuit the points that I wish to make.

The object of a debate taking note, as we who understand what parliamentary words mean know, is to share minds with the Government as to the line they should take when debating at Maastricht—sharing minds with us, as they shared minds with Members of another place last week. We know that the Prime Minister and the Foreign Secretary, who will do the negotiating, will not be able to read every word of what has been said by 36 speakers in your Lordships' House today. But we expect the Leader of the House, who is a member of the Cabinet, to take back a clear message as to what the House has said.

If I may presume to give guidance to my noble friend on the Front Bench, I would suggest that he discards quite a lot of what has been said which, although absolutely excellent, is longer term, and concentrates on that part of the debate that relates to the negotiations to be entered into on 9th and 10th December. We can reduce that to saying that the single currency and the political and social charters are the two issues that cause difference of view. On those issues the Prime Minister has the support of almost everyone who believes that we must be careful not to throw away our parliamentary powers and our general sovereignty. Along with many of my noble friends I listened to his speech in another place last week. Its message was clear and certainly satisfied pretty well all the arguments I have heard today on the two issues. I could repeat in my own words many of the points that have been made but I satisfy myself by saying that an amalgam of the speeches of the noble Lord, Lord Callaghan, and of my noble friends Lord Joseph and Lord Boardman would summarise the message from the majority of the participants in the debate on the two questions to which I have referred.

I should like to put one point to my noble friend Lord Boardman. In his invaluable contribution he made clear the dangers that would flow inexorably from the single currency. However, I did not quite understand how he feels about the rather cunning suggestion made by ardent Europeans that while we can have the power to decide when we opt in, we ought now to agree to a resolution that we would now be prepared to anticipate that ultimately, under certain circumstances we would opt in. If one gives up the point of principle, the consequences referred to by my noble friend will flow. It would be helpful if my noble friend could indicate to me how he feels on that point.

Lord Boardman

My Lords, it is clear that we look at what is on offer. We have a period of five, six or seven years to see how it evolves. If we believe then that it is in the interests of the United Kingdom to join the European monetary union, then we have the option and right to join. At the same time we shall have right—being in the heart of Europe, to use the words of the Prime Minister—to take part in forming that union, a union which we hope we will have the right to join and which we will or will not join as we decide at that time.

Lord Harmar-Nicholls

My Lords, I heartily endorse that interpretation. That means that we do not want the Prime Minister to come back and say, "We have not agreed to the single currency but we have agreed that we will not rule it out under certain circumstances". That is giving way on the principle.

I have voted solidly on one line since the Treaty of Rome first came before us in draft. From the very beginning I have felt that what was proposed would grow to dangerous levels. That has happened. How did they get away with it? We had a very alert House of Commons and a very alert House of Lords at that time. It occurred through the type of developments that I have just described. One commits oneself in advance to some extent and then one has to pursue it to some extent or risk the charge of perfidious Albion; someone going back on his word. As my noble friend Lord Cockfield is looking a little sceptical, I shall give him an example of what I mean.

Lord Cockfield

My Lords, I am sorry to interrupt the noble Lord. We were not signatories to the Treaty of Rome. We had nothing to do with the drafting of it. We had an observer at the conference at Messina. We said that we would not participate in the Community because we were certain that it would fail.

Lord Harmar-Nicholls

My Lords, I know that. I can remember when we sent Reggie Maudling along. He came back and said that it was a dead duck. Although they said that it was a dead duck after they had sent Reggie Maudling packing, it did not stop them later virtually accepting the draft of the Treaty of Rome, from which all the trouble has flowed.

I want to say why I am wary of the kind of tactics that can arise. In those days I had resigned as a junior Minister in order to emphasise that I felt strongly on the point. There was no personal animosity. Derek Walker-Smith, Robbie Turton and I tried to point out the dangers that we felt would flow. That is why I hope the Prime Minister will listen to the points I am making. We could not then get them to talk on this vital principle of what would develop if certain things happened. They would turn us off by saying how wonderful was the directive on carrots or how the directive on brussels sprouts would be to our advantage.

The noble Lord, Lord Cockfield, is not perhaps the politician that some of us have had to be for the past 40 years in order to recognise how these things work. I am saying that on this issue I hope that the advice of my noble friend Lord Boardman on the single currency will be taken and that it will not be weakened by having a long-term half acceptance of a general principle. If an amalgam of the speeches made by the noble Lord, Lord Callaghan, and my noble friends Lord Joseph and Lord Boardman contains the message that the Leader of the House takes to the Prime Minister—that is what the object of the debate should be —that would leave me very happy.

As I accept the views expressed so well by my noble friends and by the noble Lord, Lord Callaghan, there is no need for me to repeat the individual arguments. However, I have a suggestion not only for the Prime Minister but for the Labour Opposition in terms of what could flow from these developments. We have had a good deal of talk about a referendum. Under certain circumstances I believe that a referendum should not be ruled out. Indeed, before Ireland comes in it will have a referendum. Switzerland has a referendum virtually every month so as to make certain that it carries the nation with it when instruments are signed. Therefore, on this issue I cannot see where we claim that it is of fundamental importance. I do not remember any other time in the history of what I call the parliamentary system based upon parties when a matter of such fundamental importance had the official support of the Government, the Opposition and any third party which may be in existence.

I believe that our parliamentary system is the thing which preserves our freedoms. Indeed, it is what I believe brought us to be one of the most satisfying nations in the world. That is why so many people want to come here. I want to preserve that. We have always had the advantage of ensuring that we come to the right conclusions by the confrontation of the Government, the Opposition and others. If that confrontation is not going to take place, and if the fundamental danger—that is, if there is such a danger—is that the people of this country will suffer because our present parliamentary system does not allow them to have their point of view taken into account, I do not think that that is satisfactory. I do not even say that if we have a referendum which brings forth a decision the government of the day have got to accept it; they can amend it and do all sorts of things. However, they ought to be aware of the situation. I do not think that Gallup polls are a satisfactory method of arriving at such a conclusion.

However, we should not forget that, in the absence of a referendum, Gallup polls seem to show conclusively that the people of this country do not want a single currency and do not want us to move speedily down the avenue of political and social charters such as M. Delors has explained to us. That is why I questioned my noble friend on that aspect of the matter. M. Delors does seem to get his own way. However, that does not mean that we can be accused of being a country without compassion. We can bring in the individual parts of the political and social policy which we think are good. We do not have to wait for that to be pushed upon us by the European Government or Parliament. Indeed, we have accepted many of those parts.

I am glad to see that my noble friend the Leader of the House is back in his place. I know that he is very well versed on what I have to say in conclusion. Indeed, he has been at it for the same length of time that I have. He was one of my young helpers when I fought my first election in 1945. Therefore, I know that he has been bang in the middle of electioneering and that he knows all about my next point. It could well be that the referendum will be unnecessary. All parties at present seem to be in agreement. The voice of the people as shown by the Gallup polls may not be taken into account—although I think it will. The speech of my right honourable friend the Prime Minister, if adhered to, satisfies me. If what he said last Wednesday is brought to fruition in the sort of arrangements he agrees at Maastricht, then that is all right by me. However, if, for some reason which we are never allowed to understand, he deviates from that course, that is when the referendum will come in. We must bear in mind the fact that we shall have a general election in a very short time after the negotiations take place at Maastricht on 9th and 10th December. At that time, the people will want to say something about these matters.

I do not know how many of my noble friends have been actively involved in politics for long enough to remember some of the precedents. Many of my noble friends who were active will remember how, at a time when the issue never became anything like as vicious as is likely to be the case this time, Lord Hinchingbrocke challenged the official Conservative candidate. The seat was played about with and lost.

I suggest that if what comes back from the negotiations differs very much from what the Prime Minister said he wants to achieve, then let us not be surprised—and this message applies to the Labour Opposition as well as to my noble friends in the Conservative Party—the effect could be the drafting-in of anti-European candidates who will want to reflect what the Gallup polls are saying and what people as a whole are thinking. Lord Sutch has built up an organisation and has fought a number of elections; a number of independents seem to appear and fight almost every by-election; and so I do not believe that people who feel strongly about this matter of such fundamental importance will let the matter go without using the power that exists to get themselves elected to Parliament to put forward their views. I hope that that does not happen because it would be disruptive.

Many of my right honourable and honourable friends at the other end of the Palace to whom I have spoken have given me the impression—I hope that I am wrong—that they are more interested in doing things which will win them their seats than in doing what they deep down believe is in this country's long-term best interests. Unfortunately, the danger that will flow from making the wrong move at Maastricht on 9th and 10th December will not show itself overnight. If it did, we could deal with it.

In Russia, it took them 74 years to discover the mistake that they made. I do not know how many years it will take us to realise the danger that some of us believe will flow from these decisions.

Baroness Elles

My Lords, does my noble friend agree that the circumstances in the Soviet Union and the result of 74 years of communism are different from 20 years of a successful European Community since we have been a member?

Lord Harmar-Nicholls

My Lords, my noble friend is usually alert. Indeed, I am the president of her fan club. She can usually see the point quickly. What I am saying is that when these ideological issues—because that is what they are—start to take a grip, that will not happen overnight. It will take some time before we realise that we have lost our sovereignty. It may take a long time before we realise that it is some chancellor in Brussels who is deciding the rate of tax and some other Minister somewhere else who is deciding how that tax should be spent. It may take 20 or 30 years. I am only using that as an analogy: in Russia it took 74 years.

It has been a good debate. We do not expect those who will negotiate in Maastricht to have read it, because with 36 speakers that will take too long. We know that my noble friend the Minister will be reporting to his colleagues as to the general feeling of the House before they go to negotiate. I merely suggest to my noble friend that he disregard the points made about the long term, which have been good, because they are not immediate. The two factors which are immediate, and which will decide whether we are to have unanimity in the country or not, are the single currency and the political and social charters. If my noble friend can take back an amalgam of the speeches of my noble friends Lord Joseph and Lord Boardman and of the noble Lord, Lord Callaghan, he will have satisfied me that the right message has been passed to the right quarters.

9.18 p.m.

Lord Bruce of Donington

My Lords, your Lordships will recall that as recently as 1986 I had the honour of speaking for my party from the Front Bench in total opposition to the Single European Act. One of the principal reasons for that was a conviction which, at that time, I had every reason to believe was shared by my party, the members of which were with me in the Division Lobby. I detected and suspected an unrelenting drive towards federalism and the diminution of the powers of the British people, through their parliamentary democracy, to determine the nature and extent of their own policies and to deal with their own affairs, while at the same time co-operating to the maximum degree of unanimity with our European colleagues.

I have not changed the views that I expressed then, which were reflected again in the speech which your Lordships allowed me to make in the debate on the Select Committee's report on economic and monetary union only a few days back. It is not my intention to repeat the reasons that I then gave. Indeed, I shall endeavour, so far as it lies within my power, to make some constructive suggestions to the Government as to how, under present circumstances, they might see fit to proceed. That may be accompanied perhaps by one or two cautions about the kind of things they ought to avoid.

Before doing so, however, I wish to deal with one aspect of our affairs which I find highly disturbing. It has been widely represented that Britain—my country and your Lordships'—is somehow the odd man out in Europe. that it is one versus 11. If one looks at the Community flag, one finds 12 stars of equal size. The misconception ought to be subject to a small correction because the odds are not quite as large as it would indicate. It will come as no surprise to your Lordships that the population of the United Kingdom is greater than the combined population of at least seven of the member states: Belgium, Denmark, Greece, Ireland, Luxembourg, the Netherlands and Portugal. Taken together, they have a population 3 million less than that of the United Kingdom. So the odds arc a little shorter than 11 to one which gives the impress on of cold isolation against overwhelming numbers on the continent of Europe.

The original treaty and the amended treaty that followed it give sanction to this. The state of Luxembourg has a population of 378,000, and that is the same size as the city of Bristol. Luxembourg has one member on the Council of Ministers and six Members in the European Parliament. If we transpose that into terms of British politics, it would mean that Bristol had 81 Members of the British Parliament. I venture to suggest that that is a slight over-representation.

Let us take matters rationally: the odds are not all that overwhelming in terms of 11 to one. Moreover, the seven themselves to which I have referred are not always n agreement with one another. It has been known for Italy, Germany and France to have differences. Please let us not put ourselves in the position of self-isolation. I remember that there was a case in the early part of the war when the American Ambassador gave a report back to the President of the United States as to the likelihood of Britain being able to endure a conflict against nazi Germany. The report was pessimistic, he said he did not think we would be able to make it. Events have proved him wrong. Therefore, let us take a slightly more objective view in terms of numbers and weight, and the extent of the present disagreements.

What is the intergovernmental conference about? Why was it held at all? The Council of Ministers can from time to time meet over a proposal of the Commission, as I shall show. But there is nothing to prevent it meeting from time to time to discuss progress within the European Community. It would obtain a surprising picture if it did that, because the Community so far—although I hope things go well in the future—has not been very impressive. Its rate of growth has been less than that of Japan or of the United States, and its rate of unemployment is higher. There are a whole series of factors to he considered. The EC has almost reached the stage where it compares itself with a single country, Japan, and is busily fortifying itself against possible Japanese commercial invasion. The EC has not been such a profound success. One only has to read—as I have—the annual reports produced by the Commission. They are lengthy but they all reveal the same disappointing picture.

The economy of Europe, as Europe, is not doing all that well. I wish it would do better. Moreover, as regards rectifying regional differences, one only has to read the previous Commission report to obtain a review of the whole progress of regional development over the past 10 years. The report admits that regional differences far from having disappeared—no one ever pretended that was the case—have not substantially changed in spite of a massive injection of funds. I could understand the desire to convene a conference to discuss those kinds of matters openly and in public and to discuss whether the Common Market had achieved the free interchange of goods, services and people and how it could be made to operate more efficiently and thereby improve the European economy. However, this intergovernmental conference was convened specifically by the Commission. Exactly the same situation pertains with regard to this conference as pertained in regard to the conferences that preceded the Single European Act. The purpose of the Commission is a structural one to make further progress towards the openly avowed objective of achieving the ultimate super state and a federal union in Europe. The noble Lord, Lord Monson, referred to that aim in his quotation from the Daily Telegraph. It is common knowledge that the Commission has already announced that if it does not get its way at the Maastricht conference, it will convene a further intergovernmental conference a few years later. The Commission will continue to convene conferences until it achieves what it wants.

I cannot believe that we in the United Kingdom—I trust that I speak broadly for all parties—want the continuation of these proceedings to be under the relentless pressure of non-elected civil servants, or collegiates, in Brussels with the pure purpose of enlarging the area of bureaucratic operation. I do not think that is wise or necessary. Are the Government themselves, in negotiating at Maastricht, content to accept a position where they can act only on a proposal from the Commission? One can quite understand that in the earlier stages of the Community, when the politicians got together, it was highly convenient to have a highly trained body of civil servants or academics for the purpose of charting out future progress. It was highly convenient that progress should be made by means of that delegated instrument. But was it the intention of the Council of Ministers that member states could only act on a proposal from the Commission? If that is still the case, I hope I may respectfully suggest to Her Majesty's Government that before they sign any treaty at Maastricht they should make quite sure that the Council itself takes more powers and that the powers of the Commission in relation to the Council are correspondingly reduced.

There is a further instance. Your Lordships may not be aware that not only is the situation as I have described it in relation to original proposals, but even when the 12 member states agree that they want a regulation amended that can be vetoed by the Commission. Indeed, Mr. Lilley, in giving public evidence before the Select Committee of your Lordships' House on 22nd October, said in reply to a question from me: It is something not often understood in this country. It gives the Commission the right of veto. In one particular case Britain started off in a minority of one, and managed to persuade all 12 Member States to agree with our position, but the Commission then did not agree, so it could not proceed. They sometimes evoke that right of veto".

The question I have to ask the Government is whether in the course of the Maastricht negotiations they intend that position to continue. If they do not intend it to continue, what amendment to the draft treaties do they propose to institute in order to ensure that that does not happen?

There are a number of things which the Commission could do. Perhaps one may suggest that if it does not like what it contains, in the free time—free from preparing plans for the next intergovernmental conference following Maastricht —the Council itself brings pressure to bear upon the Commission to make very drastic changes to the common agricultural policy, which, so far as I can gather, both sides of the House (or at least two-and-a-half sides of the House) agree is a bad policy.

Without it being a proposal from the Commission, can the Commission suggest that the Council becomes more accountable for public funds? Recent audit inquiries have revealed that in 1990 Italy received £4.22 billion in aid from the Commission for which it cannot account to the Commission. To this day the Commission does not know where that money has gone. Similar observations apply in relation to £151 million of aid to Turkey and a further £3 million to Morocco. That cannot be properly authenticated and the Commission do not know where the money has gone. Will the Council bring pressure to bear or will it take powers under the treaty to instruct the Commission, which after all is supposed to be the Council's executive arm, to make full and effective investigations into the matter?

Again, as the Government know very well, the Court of Auditors is a source of continued irritation to the Commission. At present the Court of Auditors frequently has great difficulty in obtaining the information it requires, not only from member states but sometimes from the Commission itself. I know that because I have spoken to representatives of the Court of Auditors.

The financial regulations of the Community, as drafted by the Commission and agreed by the Council, state that the Commission have the right to reply to the Court of Auditors' report prior to the issue of that report to the general public. The Commission's comments, usually about one-third of the size of the report itself, are issued together with the auditor's report. That means that we shall receive the auditors' report for 1990 about mid-December—an unnecessary delay of some three months. I should like to know whether the Government are prepared in negotiating at Maastricht to incorporate within the treaty an undertaking to amend the financial regulations to ensure that the auditors' report is published immediately and independently of any Commission comments on it. I should be grateful if the Government would comment on that matter.

In the short time remaining, I should like to deal with changes in the powers of the European Parliament. As I understand it, it is proposed to give the European Parliament powers of co-determination with the Council. I may be wrong and should be glad to be corrected. However, if a situation arises in which the European Parliament has a right to veto any directive or any other measure passed by the European Council, that will undermine the authority of Westminster. In the case of British interests, instead of coming to the Westminster Parliament, powerful lobbies which oppose certain Community proposals will start flocking to Strasbourg in order to lobby there. Power in that regard will automatically depart from the Westminster Parliament. I hope that the noble Earl will consider that matter.

I also seek an assurance about the role of bankers. I look almost in terms of affection upon the noble Lord, Lord Boardman, who occupied a high position in the bank with which I entrusted my meagre funds. I read in the draft treaty a proposal for a bank which would be completely independent of all political influence and which would determine the strategic banking and monetary policy throughout the Community without any kind of political control. That is an enlargement of the Liberal Party's proposal to make the Bank of England independent of the Government here. The Liberal Party will always agree with anything that comes out with a European label, so we need not trouble with that any more. I want to know whether the Government agree—

Lord Bonham-Carter

My Lords, has the noble Lord read the constitution of the Bundesbank on which the independent bank is to be modelled? That constitution states that the Bundesbank must support the economic policy of the German Government.

Lord Bruce of Donington

My Lords, I have read the text to which the noble Lord refers, but I have a more up-to-date version than that of the noble Lord, Lord Ezra, who speaks from the Front Bench on behalf of his party and who advocates complete independence.

Some of my best friends are bankers; but, after the recent history of the banking community throughout the world, not by any means excluding the City of London, with recent banking scandals and manifestly unsound monetary and lending policies, I venture to suggest that any body of politicians which ventures to put strategic economic control in the hands of bankers wants their head examined. Perhaps the Government will comment on that.

Finally, it is suggested that, if we do not take part in these arrangements, we shall be relegated to the second division, whatever that may mean. I well appreciate the significance of league tables. On perusing those relating to the excellent game of football, I observe that Wales is not in either the first or the second division. That does not damn Wales in my eyes. In fact, some of my best friends are Welshmen. I sincerely hope that we shall not apply the metaphor too directly, particularly in view of the results at Cardiff Arms Park in the other type of football. I hope that there will be a Welsh national recovery.

However, any suggestion that this country is in the second division of anything is a complete insult. My country is a great country. It has been a great country for many years. It has stood for freedom throughout the world at a time when some of the European countries were not always so assiduous in pursuit of that freedom. It has a considerable Commonwealth with which it has very good relations. I do not believe that it has all the virtues, but I am very proud to be a member of it. I am quite sure that whatever is implied by the term second division—I assume that that is a position of inferiority to someone or other—my country never has been and in my view never will he in that kind of position.

9.40 p.m.

Baroness Park of Monmouth

My Lords, it is always my fate to follow a splendid speaker. I am reassured by the stated policies of Her Majesty's Government as set out by my right honourable friends the Prime Minister and the Secretary of State and by the noble Lord the Leader of the House in his opening remarks. However, like most of us I want to eat my cake and have it. I want to be in Europe on our own very tightly drawn terms as a free country, freely co-operating with others, and not under existing central control, without accountability. I realise that our national instinct is only too likely to be pragmatic, to compromise and see the other man's point of view. This time we must be not traders but good poker players. We must not sign away our independence for tactical advantage. The Prime Minister cannot show his hand too soon, but we must call the bluff of the Germans and their supporters, remembering always that they need us.

If I believe that the Prime Minister will preserve our political independence, why do I say more? One reason is that important as our national interest must be, there are also broader considerations. My specific concerns are, first, the future relationship between the European Community countries and the newly-liberated Warsaw Pact countries in what was the Soviet Union. On that issue we must think strategically. Those countries have all emerged after a great struggle from a closed, non-accountable, unwieldy, centralised bureaucracy. They are struggling towards the light, democracy and individual accountability. The Western democracies have been their model. It cannot make sense for us to choose this moment to relinquish our democratic, accountable sovereignty in favour of placing ourselves under the autocratic, central control of the Commission or even of yielding it more power in any sphere.

Speaking before the Select Committee of this House on political union, a witness spoke of the need to address the democratic deficit and for greater transparency. He said that the most important arm of the legislation—the Council—operates entirely behind closed doors. Another witness said that the power that has gone from national parliaments in member states to Europe has not gone to the European Parliament; it has gone to the Commission and the Council of Ministers. Democratic controls that were fought for over decades and longer have, if you will, been abandoned.

We keep deploring the lack of infrastructure in the countries of the East. We keep deploring their total inexperience in terms of accountability. Is the Commission a good model? We must retain our own open and independent democratic process but somehow still contrive to play an effective part in Europe and correct that democratic deficit. We must ensure that the powers of the Commission pass further to the parliament and that the newly-democratic countries do not find there, in the splendid phrase used in the Select Committee's proceedings, "wolves in democratic clothing".

Let us stand by advocating the proposal of the noble Lord, Lord Bethel], for closer links with the European Parliament. Otherwise the Russians and the other states could well be driven back on to their own old model of centralised bureaucracy, secrecy and private pressure groups. We also have to remember that those countries do not have partnership in development with Europe as their only option. Japan, once the Kuriles question is settled, is waiting to move in.

My other concern is the need for us to retain enough strength and independence in both political and defence terms to contain what I see as the dangerous resurgence of fascism in Germany, Austria and to some degree in France. The signs are the same as those that we saw and ignored at our peril in the 1930s. I recognise that the West Germany of 1989 may have wished genuinely to be a peaceful power whose strength lay in its economic might. However, the Germans who joined them in 1990 came from a state that was built at least partly by the remnants of the SS and of the nazi power. Reunification has not proved the fairy tale success that many of the younger generation of the former GDR expected. Those who are disillusioned and unemployed—and many are—are vulnerable, as they were in Hitler's day, to demagoguery and to a revival of the Hitler cult. They now have a vote in Germany and an ever louder voice, and Germany wishes to exert its great power through the instrument of the Community. I am deeply relieved therefore that Her Majesty's Government are apparently determined that we shall retain our own independent foreign and defence policies and that we have already ensured that NATO will remain in Europe. We may need one day to help the good Germans against their own internal devils.

In the end, I believe that we shall be able to solve the problems of Eastern Europe and of the larger world only if the European Community works in concert with the United States. For that to be successful we must retain our full independence of action to operate freely in the Community, in NATO, in the UN and in the Commonwealth as the special needs of each situation may require. We must be an active part of the Community if we are to influence the future. But we belong to many groups besides Europe—for example, the UN and the Commonwealth. We have far more to offer the Community than we sometimes recognise. Moreover, we may not be alone among the Twelve in the line that we take.

I hope that we think of Maastricht as the first of many serious examinations of the options—not as a make or break encounter. It is all too important to hurry over in this constantly changing international situation, especially in the Soviet Union. As Alexander Yakovlev said a week ago in the United States, If democracy does not survive in the Soviet Union, it will be useless to discuss issues of strategic stability".

9.48 p.m.

Lord Desai

My Lords, at this late hour much has been said and it is difficult to know what to add. I voted yes to the 1975 referendum. In past years I have lived with the uncomfortable position of not being in agreement with the Labour Party Front Bench. At last I find myself in the odd situation of being on the right side.

The debate has continued for many years. As a schoolboy I was brought up on a Indian nationalist version of the history of the British Empire. I was told—I am sure that it was wrong—that the East India Company reneged on all the treaties that it signed. Obviously that must have been untrue. However, government having signed the treaty in 1973 in which the goal of economic and monetary union was clearly stated, and having passed the Single European Act in which it was made clear that there was an eventual hope of political union, I am astonished that people still express surprise at the situation they face today.

The debate is not about whether we should join Europe; the time has long since passed for such debate although I wish later to discuss whether that is inevitable. The debate that has continued for the past 20 years or more is about the modernisation of British society.

Over the post-war period we have seen a number of attempts to modernise British society. We have had the white heat of the technological revolution of the noble Lard, Lord Wilson; we have had Selsdon Man; and we have had the tremendous effort of Mrs. Thatcher and her Government, though I am not in sympathy with it. All these have been attempts to launch this country into a modern, dynamic economy and society. If we are still discussing Europe it is because some of us—and more than many of us imagine—find that the best hope of meeting the challenge of modernising British society after 100 years of the "British disease", as it is called, lies in being part of Europe and part of a modern, dynamic community.

That is because many of us have doubts that, if left to ourselves, we could be modern. That is a doubt shared by people who do not like the European Community. There is hesitation whether we should opt in or out in 1995 or 1997 to which my noble friend Lord Callaghan referred. Why is there this hesitation that, come 1995 or 1997, we may or may not be able to join? It is because we are not sure that we will be ready to join and that the economy will be strong enough even after six, seven or 10 years of adjustment. We have lost confidence that the economy can survive on its own as a dynamic economy able to make its way.

The reason we have lost that confidence is the experience of the past 40 years or more of economic management by different parties with the best of intentions. There was some success and some failure, but at the end of the day we cannot say that we have the political wisdom to say, with hands on our hearts, that left to ourselves we shall make a success of things. The noble Viscount, Lord Tonypandy, said that he would much prefer being the 51st state of the United States rather than being part of Europe if all the arrangements fell through.

We should discuss all the options that are available. We are a sovereign state and we can choose to withdraw from the EC if we wish. We can refuse to sign at Maastricht and say that we do not want any part of it. Let us face that situation and look at it in its true reality. Suppose we withdraw from the EC. What choice do we have? We have many choices. We can join the United States. In the early 1970s the North Atlantic free trade area was much mooted and some people thought that they might be able to join. However, that experiment failed because it was not really credible that such an arrangement would be a viable one. There was no political will or economic case for it.

I do not believe at this juncture of our economic history that we could last outside both the EC and what is going to be the North American free trade area comprising Canada, the United States of America and Mexico. I do not believe that anyone seriously thinks, much though we love it, that sovereignty is so valuable to us that we are right now willing to withdraw from the European Community and not join anything else and survive on our own. That is because the economic case for doing so is lacking.

Another reason is that we no longer live in a world in which capitalism in one country is possible or feasible. The growth of multinational corporations, the international division of labour and the global financial markets all tell us that sooner or later we shall have to join a club. That club need not be a centralist one. A federation can be non-centralist. The United States of America was non-centralist for a long time and some people may believe that it is still non-centralist. Indeed, the US managed to have a federation with a single currency and without a central bank for much of its history. As the noble Lord, Lord Joseph, said, the US did not have a central bank until about 80 years ago. It had a single currency. Indeed, even after having a central bank it would be false to say that the US had a centralist federation. That happened about 25 years later for totally different reasons. Therefore, one does not necessarily have to take it for granted that a centralist European Community is inevitable.

Indeed, I say to my noble friend Lord Bruce that if we do not want a centralist Community—and I do not want that—let us argue more strongly not just that the Council should be more powerful than the Commission but that the European Parliament should be more powerful than the Council. Indeed, if we do not like the European Parliament because we believe that it threatens the sovereignty of Westminster, let us follow the logic of federations around the world and say that democratic deficit is not merely shown by the fact that the European Parliament does not have enough power but that the European Parliament represents only territorial principle and not the principle that members of a federation should have representation as a federation, the principle on which the US Senate is based.

We do not have that. Indeed, we should argue that the European Parliament needs a second chamber which would more properly reflect the federate nature of the European Community. Surprisingly, that argument has not been made but it should be. It is no good believing that by hesitating now, refusing to sign, by making conditions and by delaying, as the noble Lord, Lord Skidelsky, said, we shall gain a more democratic Community or a less centralist Community. If we want that, we must get in there and play an active role. We should not play a recalcitrant and sullen role. Let us propose that our traditions of democratic control, which we know about, should be reflected in the European constitution.

My main purpose is not to speak so much about the political problems of the federation but about the economics of monetary union and the single currency. I believe that a single currency would be very good and the sooner it comes the better. I shall explain why I think that. I believe that when we used to have national economies with proper control over monetary and fiscal policies—roughly the period between 1946 and 1971—that was a golden period. We had full employment and moderate inflation. We had good economic growth. It was better in some years than in others but it was fairly good. From 1971 onwards we entered a different era in which individual countries lost their autonomy. There were global financial markets and rapid movement of capital. It is difficult for small single nations to be able to pursue a policy of full employment and good economic growth without becoming subject to rapidly speculative movements of capital and currency.

The example of the United States shows that an economy of a sufficient size, such that the proportion of foreign trade is not large, can pursue full employment policies within its territory without having to look over its shoulder constantly for speculative attacks on its currency. The US has been able to pursue an extremely aggressive monetary policy. It has cut interest rates and tried to get a revival not because it does not care about inflation—its inflation record is very good. However, it can pursue such a course with impunity because it is a sufficiently large area of a single currency and custom-free union.

We cannot pursue such policies and we have not been able to do so. Rather, when we have done so in 1970–73 or 1986–88, we have had to pay dearly for those policies. I do not mind confessing that I care more about full employment than anything else. I welcome a single currency. I believe that a single currency would allow us, over the Community territory as a whole, to pursue policies of full employment and economic growth which currently we are restricted from pursuing.

I differ in one respect from the usual doctrine in regard to the European community, which is that, like my noble friend Lord Bruce, I am not all that thrilled about the autonomy of a central bank. It is a paradox, bearing in mind all we know regarding the Bank of England. The Bank of England was autonomous after 1946. It covered itself in great glory regarding monetary policy.

The idea that autonomous central banks are successful is a recent invention. It arises only from the experience of the Bundesbank. People forget to tell us that the Bundesbank is supported by a sensible wage-bargaining system which sustains it; it is not merely monetary orthodoxy. Monetary orthodoxy often leads to severe deflations whose costs fall on the poorer people. It is all right for central bankers to say that they are autonomous and do not want the currency to slide, and so on. But I shall always believe that proper democratic control is required as much of bureaucracies such as the European Commission as it is of central banks. If we do not have proper democratic control over central banks, then they are likely to do untold damage to the economies, as indeed the Bank of England did to the British economy in the 1920s.

I conclude by saying that I do not believe choice is inevitable or unavoidable. But even if we had signed no treaties in the past, if there were no commitments and I was asked what was the best choice facing this economy, I should still say that we should enter economic and monetary union as soon as possible. Let us work towards a proper federal Europe; not a central Europe but a federal democratic Europe in which we can play an active part.

10.3 p.m.

Lord Beloff

My Lords, if there is one thing about which academics must be careful it is not trespassing on other people's territory. Therefore I shall make only one comment on the latest remarks of the noble Lord, Lord Desai, who must have left those Members of the House with no access to the media with the impression that the United States has conquered the problem of unemployment. The United States has a single currency; it has important areas of unemployment and has not by any means through that single currency been able to overcome the considerable differences that exist between its states. Therefore, whether or not it is a good thing, it is not a panacea for those who put employment at the top of their economic objectives.

Having made that point I shall hastily retreat to matters about which I have some knowledge. The debate is a constant irritation for those whose academic discipline is either history or politics. They find both those disciplines misused. The point I should like to begin with is the argument alluded to several times in the course of the debate regarding a referendum. I believe that a referendum is not simply something that we should reject on principle, or that is contrary to the sovereignty of Parliament or some other great phrase. I believe that it is simply incompatible—I hope to show why—with the way in which we operate our system of government.

Let us suppose that the Prime Minister returns from Maastricht with two agreements and that those are put to the vote of the country in a plebiscite or referendum. Let us suppose, as the noble Lord, Lord Harmar-Nicholls, would have us believe—he may be right—that the country votes against these measures. What then is the Prime Minister to do? He and his Cabinet will have convinced themselves that this is the way in which they can run the country's affairs, and presumably that there is no other option. Therefore, they must, in accordance with the normal logic of our constitution, resign. They would have lost in the same way as if they had lost a vote in the House of Commons. These arguments apply equally to the idea of free votes in the House of Commons, which, on major issues, are also incompatible with the way in which we run our affairs.

So the Prime Minister resigns. Can Her Majesty then summon Mr. Kinnock to form an Administration? Hardly, because Mr. Kinnock would have come back with something even less acceptable to those who voted against Mr. Major's agreements. Can Her Majesty apply to Mr. Paddy Ashdown? The argument there is even stronger. So what happens? The only alternative open is to apply to someone who has opposed the measures that the Government wish to put through, and so we would get an Administration headed by my right honourable friend Mrs. Thatcher, along with Mr. Tebbit, Mr. Ridley, the noble Lord, Lord Harmar-Nicholls, and whoever else may be available. But that Administration would clearly not have a majority in the House of Commons, and therefore there would have to be an election.

We come back to the fact that the logic of the British system is that only an election to the House of Commons can determine policy. Whether the parties agree or disagree, are united or are split, for 200 years or perhaps more it has been an assumption that a government can only continue in office if it has the support of the House of Commons, and if this is challenged then it must appeal to the country to return a House of Commons that will sustain it.

For that reason all the arguments about let the people decide and so on are totally irrelevant. They might fit if we had, for instance, the separation of powers. Suppose we had an irremovable president. Then one could say, "All right, he will have lost one Administration but he is still there and he can carry on the executive branch of government". But we have not got that. we have responsible government. We have the Westminster model, and one cannot combine the Westminster model with a referendum. I say this irrespective of whether one would or would not be in favour of the proposals put to the country.

A referendum might be, and is, appropriate, as are free votes in the House of Commons, for matters that do not affect the general conduct of policy. But how can a cabinet that had decided that it cannot conduct foreign affairs, defence and the economy, except by the agreements that it has reached with other countries, venture to say, "Never mind. Of course we can still go on"? It cannot happen. Therefore what people are challenging is the essence of our system.

Coming more closely to the substance, what worries me occasionally—and it is perhaps understandable—is attempts made to bring in arguments which sound at first blush powerful. If he will forgive me, the noble Lord, Lord Rippon, should have been cautious before quoting Winston Churchill as favouring what is now proposed in the form of European integration, including this country.

As it happens, for an historical meeting on Churchill held in the United States under the aegis of my noble friend Lord Blake, I spent a good deal of time at the beginning of this year rereading Churchill's speeches on Europe at the time and the evidence of his opinions as recorded by his collaborators and his friends. Although Churchill was of course enthusiastic for some kind of union in western continental Europe, because after the Second World War as after the first he hoped that France and Germany could reconcile their age-old quarrel, he always said that this union, however it was phrased—at different times it took different forms—in western Europe should be supported by the British Empire, as it then was, and Commonwealth and by the United States. He never believed that Britain could or should be part of it. Therefore to bring in Churchill is to wave a banner which we are all tempted to follow but at which we should sometimes look with caution.

There has been a good deal of skating around federalism. We hear the excuse occasionally that we can accept it because it means something different to continentals. That is nonsense. There is only one meaning of federalism. It is a system of government in which powers are guaranteed by a written constitution both to central authority and to the units of which the federation is made up. That is true of the United States, Canada, Switzerland and Australia and also, though in a slightly different way with a greater degree of centralism, of the Federal Republic of Germany.

Lord Williams of Elvel

My Lords, does the noble Lord agree that Bavaria never signed the constitution of the Federal Republic of West Germany?

Lord Beloff

My Lords, I am not sure what Bavaria needed to do to sign it. It is governed by the Basic Law and does in fact operate under it. It is represented in the Bundesrat and the Bundestag. Having spent some time in Bavaria, I found no one who thought that it was not part of federal Germany. But perhaps the noble Lord has other Bavarian friends who think differently.

We know exactly what federalism means. As I have said in the House before, there are moments when one thinks that a proper federal system might be less dangerous than what is available to the European Community at the moment, which seems to be a capacity for extending powers at the centre in a way which in a thoroughgoing federal system it might be easier to check. In particular one has the court always interpreting questions of competence in favour of the centre as a matter of policy, a point to which the noble Lord, Lord Monson, referred.

I do not know and no one knows how deep it actually goes in Europe but we are facing at any rate at the level of our dialogue people who are convinced above all that they are swimming with the tide of history. It used to be the future of the proletariat, but now it is the future of European integration. People who believe that they have history on their side are often very difficult to talk to about practical issues.

I believe that only yesterday Chancellor Kohl in a television interview compared the march of European integration to the flowing of the River Rhine down to the sea. Considering the fact that the River Rhine is the major source of pollution in Europe, I thought that that was a singularly unfortunate metaphor. But, on the other hand, I have the greatest confidence in my right honourable friend the Prime Minister and my right honourable friend the Secretary of State. I am sure that when they get to Maastricht they will steer clear of the Lorelei.

10.15 p.m.

Lord Bonham-Carter

My Lords, in the course of this debate we have heard a great many different attitudes expressed. There have been those, mainly from the Government Front Bench, who have said that we cannot foresee the final shape of Europe. Of course, that is true. But it is good to have some idea of where we are going. Then there are those who are scared to death of federalism, of which the noble Lord, Lord Beloff, appears to be one. I shall return to that issue later. The noble Lord said that there is only one meaning to the word "federalism". He is quite correct in that view. However, it is also true to say that it can take several different forms. There are also others who appear to be wholly opposed to any kind of association with Europe, except of the loosest and purely trading variety, but who do not offer much alternative.

It is equally difficult to interpret what happened in another place last week or to interpret the result of that debate. I say that because the Government defeated the Labour amendment by 101 votes. But it is very difficult to work out what that signifies as, implausible though it may seem, the Labour amendment was rather more pro-European than the Government's Motion. Moreover, what can we make of a vote in which Mrs. Thatcher, Mr. Heath, Mr. Ridley and Sir Geoffrey Howe walked through the same Lobby, if not arm in arm or side by side, at least one behind the other?

The debate in which we have engaged today is one which has been going on for a very long time in this country. It has gained in intensity during recent weeks simply because we are faced once more with making a decision and simply because, once more, when faced with such a decision there are siren voices advising us to refuse to jump, so to speak, to postpone the decision or to procrastinate. It happened before and we know about the consequences of following such advice.

As the Prime Minister said last Wednesday, we joined the Community late, the rules of which were drawn up by the original members and not by us. He went on to point out, quite correctly, that the structure of the Community's budget and the much reviled common agricultural policy are the result of that situation. Those who revile the CAP might learn the lesson that it is better to be in and make policy rather than be out and have the policy made in your absence.

It seems to me, as other noble Lords have said, that the decisions which we are being asked to make at Maastricht go very nearly to the heart of the purposes which inspired the Community and which need to be repeated again and again. Whatever the noble Lords, Lord Stoddart of Swindon and Lord Harris of High Cross, may say, the aims of the Community were always, and from the beginning, political; it was merely the means that were economic. That fact must never be forgotten. Moreover, the aims remain political. Those who refuse to recognise that point have tried and failed in the past to break the Community by setting up a free trade area. They have tried to transform the Community into a free trade area and to prevent its political development by opposing such decisions as those which will confront us at Maastricht in the near future.

The political purpose of the Community was straightforward and it was successful. It was to prevent, as the noble Lord, Lord Cledwyn of Penrhos, said, the outbreak of yet another civil war in Europe; it was to secure a reconciliation between France and Germany; it was so to scramble Germany in a European omelette that it could never be reconstituted into the original eggs, if I may a use a complicated and not very appropriate metaphor. That was the purpose, and it succeeded.

The noble Lord, Lord Bruce of Donington, says what a failure the Community has been. That is rather astonishing because the Continent has had a long period of peace, and for that we must be grateful to the Community. We have a queue of people trying to join the Community. They are not only the EFTA countries but those in central Europe. It is odd that such a failure should prove to be such a political and economic magnet.

The original purpose was also to balance within the Community the economic and political power of Germany by having substantial countries such as the United Kingdom, Italy and France within that Community. With the reunification of Germany, that is more than ever necessary.

The same arguments apply now to the need to strengthen and consolidate the Community institutions within the new Europe that is emerging before our eyes today. The political structures which underly that Europe need consolidation and strengthening. We need to look at them again in the new situation that faces us. That task is made only more urgent by the prospect of enlargement; by the application of the EFTA countries and the hopes of the central European countries—Poland, Hungary and Czechoslovakia—to which I shall return.

If the noble Lord, Lord Harris of High Cross, thinks that those central European countries want only a free trade area, he has misunderstood their intentions. They want to be part of a politically integrated Europe and nothing less.

Among the objections to such plans which are regularly raised is sovereignty, which has been discussed by several noble Lords. Membership of the Community involves, and always has involved, a loss and a pooling of sovereignty. Anyone who supposed anything else grossly misunderstood the very nature of the European Community. That loss of sovereignty under modern conditions, as my noble friend Lord Thomson of Monifieth and the noble Lord, Lord Desai, have pointed out, is more nominal than actual because we do not have it now. As my noble friend said, if the other 11 opt for a single currency in a single market the pound will be tied to the ecu, and opting out will prove to be a weak option. If that is the sovereignty that we are losing, I do not believe that it is a matter of very great substance.

The same applies to foreign and defence policy. Where was our sovereignty within NATO? An attack on one was an attack on all, and that was that. There was no question of opting out under those circumstances. The idea that Britain can pursue its own independent, free foreign policy surely disappeared at the time of Suez. Nor did the Falklands prove anything to the contrary. Without American intelligence, missiles, bases and fuel it is exceedingly doubtful whether we could have succeeded in the Falklands.

Lord Beloff

My Lords, I am most grateful to the noble Lord for giving way. Is it not equally true that any European defence organisation which was not part of NATO would have to depend upon the technological advantages which the United States alone possesses?

Lord Bonham-Carter

My Lords, it all depends on the kind of conflict in which it was involved. I should have thought that it was perfectly clear from recent events, for example, that the United States is not particularly interested in participating in anything to do with Yugoslavia. I do not see why it should be. On a wider scale, it may be necessary but I do not believe that it is self-evident that what the noble Lord said is true.

In the Gulf, for example, in which we also participated, our contribution was 2 per cent. of the total. It was outnumbered by the French and paid for by the Germans. So much for the independent military action of this country.

It therefore seems to me that the co-ordination of foreign and defence policy which is becoming accepted will almost inevitably go further. How and when is more difficult to foresee, but the history of the European Community's response both to the Gulf and to Yugoslavia shows the need for devising a more effective and efficient way of co-ordinating foreign and defence policy than has so far been devised, and for resolving the differences which inevitably exist within a group of nations such as our own.

Nor is it in my view anti-American to foresee that the American military presence in Europe is likely to diminish in the next decade as it has already diminished. It is merely necessary to draw obvious conclusions from what is happening in the United States; for example, the results of the Pennsylvania senatorial election and the pressures under which President Bush finds himself to concentrate more on America and American policy and less on overseas.

The development of a European defence pillar, a European defence policy, by the end of the century seems to me necessary and inevitable and a sensible precaution for us to take. The question is: should we participate in that development or should we keep out of it and leave it once more to others to develop in our absence?

Let me now turn briefly to federalism. It has become a kind of bogy word and is interpreted by many people, in the Prime Minister's words, as a centralised federal structure. In this I wholly agree with the noble Lord, Lord Desai. There is no reason why it should be a centralised federal structure. It is a question of how we distribute the power. That we can do as and how we wish. I wholly agree also with the noble Lord, Lord Beloff, when he said that it is much better to have a formal federal structure in which we decide how the powers will be distributed between the centre and the lower authorities rather than to do it on the hoof, as it appears to be done at present.

However, what is absolutely clear is that from the very beginning it was the intention of the Community to develop on these lines. Indeed, when in February 1959 I spoke to an amendment in another place proposing, after the breakdown of the free trade area negotiations, that we should join the European Community, Mr. Maudling, the then Paymaster-General who had been in charge of the negotiations answered this proposal fully. I quote from Hansard: for us to sign the Treaty of Rome would be to accept as the ultimate goal political federation in Europe, including ourselves". Anyone who thinks that there was any doubt, even at that time, as to what we would be committing ourselves to is deluding himself.

Lord Harmar-Nicholls

My Lords, at the same time as that was being said by Reggie Maudling, the other leaders were saying that we had the power of the veto and we would use it to prevent that happening. Those two things run together.

Lord Bonham-Carter

My Lords, we were not in the European Community at that time so we could not possibly have had powers of veto. They were simply saying that if we signed the Treaty of Rome that would mean committing ourselves to a federal goal. That is the only point I am making. That was said in 1959 by Reginald Maudling and repeated by several other people at that time. I do not think anyone would deny that. It was said to be an unthinkable prospect at that time for that very reason. However, much that was said to be unthinkable has now become thinkable. Since then we have signed the Treaty of Rome, presumably with our eyes open. We have signed the Single European Act, which allowed majority voting, presumably with our eyes open. I find it difficult to understand what people think we have done, which we did not do, knowing what we were doing.

Lord Stoddart of Swindon

My Lords, I do not wish to delay the noble Lord but is it not a fact that when we were signing the Treaty of Rome and when we passed the European Communities Act Mr. Heath and others denied the fact that we were on the road to a federal Europe? Is that not a fact and was that not concealed not only from Members of both Houses of Parliament but also from the British people? That is the complaint here.

Lord Bonham-Carter

My Lords, that question was put to Mr. Heath in another place last week. If the noble Lord reads the relevant copy of Hansard, he can read Mr Heath's reply. It is not for me to reply for Mr Heath. All I can say is that the Liberal Party, which was in favour of joining the Community, never at any moment denied that there was a loss of sovereignty involved and that there would be a supra-national authority to which we would have to conform.

However, for the reasons I have already given, I think it is foolish to make federalism a bogy word because one should take seriously into account how the powers are distributed. If one takes that matter seriously, I see no reason why the issue of over centralisation should arise. It seems to me odd that a Government obsessed with subsidiarity—that is really another way of talking about the distribution of powers—should refuse devolution for Scotland. It is rather odd to think that in the likelihood of a Scottish assembly being established—I should think it probable that that will occur within the next decade—this country will become that dread thing, a centralised federation.

Further, once there is majority voting, one is on the way towards some kind of federal structure. One is in a federal condition and the precise distribution of powers is a matter of the utmost importance. I shall not detain noble Lords for much longer. What we have witnessed in the whole of this debate and in the whole of this controversy which has occurred over the past few months is a lack of leadership on the part of the Government in relation to public opinion at home and within the Community.

The policy the Government have followed appears to be determined more by internal Conservative Party politics than by the interests of the country. The Government have not been manifestly successful in that policy, and as a consequence they have had to ask for the tolerance and understanding of our European colleagues. For that tolerance and understanding we shall in due course have to pay a price. The price will include London being ejected from its position as the financial centre of the Community. The choice of London as the site for the central bank will be put in jeopardy. The dominance of the Franco-German alliance has been strengthened. Those are the prices we have had to pay to keep the Government's policy on line. They are heavy prices to pay. But the most important factor in my view is that we have not been asking the questions within the Community which urgently need answering at this moment.

As the noble Baroness, Lady Elles, said, the European Community has been a huge success. It has been a magnet attracting other countries wishing to join, such as the EFTA countries and Central European countries. As the noble Earl, Lord Bessborough, said, it is likely to increase in size from 12 to 20 or more members in the course of the next decade or 15 years. In addition, it has the problem of absorbing the united Germany of 80 million people within its structure. We should be asking ourselves whether the institutions which were devised for six members are appropriate for 20 and whether the consensual arrangements whereby the six and the 12 reached agreements can be transferred just like that to 20 members.

In my view that is exceedingly unlikely. It will require rare political and institutional imagination to adapt those institutions to include the EFTA countries and the countries of Central Europe within their ambit. We should be asking how and proposing ways and means whereby those institutions should be adapted, how the distribution of powers should be arranged, what organisation of foreign and defence policy should be devised, and how we should arrange voting. The idea that one could have unanimity in a Community of 25 powers is unrealistic; that would lead to the situation that existed in the Polish Diet in the past. Those are the urgent questions to which the attention of the country, the Community and the Commission should be directed.

If we want to be at the heart of Europe - and I and my colleagues on these Benches believe profoundly that that is the right place for this country, that it is her destiny to be there, that we should be a constructive influence there and, as the noble Lord, Lord Desai, said, we should try to make it work - it is to those questions that we should be addressing ourselves rather than to the old, sterile arguments which we have gone over so many times in the past.

10.37 p.m.

Lord Williams of Elvel

My Lords, it is late in the evening and I shall try not to detain your Lordships too long. This has been a very important debate, which has echoed the debate in another place, although not in all expressions of opinion. Strongly held views have been expressed in your Lordships' House, and it is only right that that should be so.

I shall try to follow the noble Duke, the Duke of Manchester, in his distinguished maiden speech and seek to discover the common ground between us. The noble Duke is absolutely right. We have been invited by the noble Lord the Lord Privy Seal in his Motion to take note of the negotiations. In doing so we should try to discover the common ground that exists in this House. As a number of noble Lords have said, there is a great deal of common ground, although there is no point in ignoring the fact that there are sharp differences of opinion.

As my noble friend Lord Cledwyn said, my job is to talk more about economic and monetary union than about political union. However, I accept the point of the noble Lord, Lord Cockfield, that Chancellor Kohl has made it perfectly clear that political and monetary union go together. Whether the noble Lord, Lord Cockfield, is right or my noble friend Lord Callaghan is right in casting some doubt on whether that is so or whether it is a negotiating position remains to be seen. However, I accept that there is a political dimension to economic and monetary union even if EPU and EMU do not go together in exactly the way that Chancellor Kohl has indicated. I shall concentrate on EMU while not neglecting the fact that EMU itself is a political matter.

The noble Lord the Lord Privy Seal, in what, if it is not impertinent to say so, was a very constructive and interesting opening speech, took us further than the debate in another place last week. He explained some of the background to the negotiations at Maastricht. As we heard from other speakers, we have had the European Communities Act, the Single European Act and entry into the European exchange rate mechanism. I have some sympathy with my noble friends Lord Bruce and Lord Stoddart—it is probably the only point on which I have some sympathy with them—who said that the Single European Act was pushed through your Lordships' House on a Friday. As I recall, it was whipped and guillotined through another place. I am not sure whether the debate that was held in this House on a Friday, when my noble friend Lord Bruce was in charge, was exactly the kind of debate that we should have had on the Act. Nevertheless, it went through.

As my noble friend Lord Cledwyn said, we now find ourselves confronted with the present situation. There are several questions. The first is, as the noble Lord, Lord Bonham-Carter, said, the age-old debate: is this to be a Common Market—in other words, a free trade area—or is this to be a community? That debate has run through the past 20 years or so. Some of us have taken the view from time to time that it should be a common market; in other words, a free trade area. Others have taken the view that it should be a community and, to be perfectly honest, we have changed our minds from time to time. It is only reasonable that, confronted with those problems, we should change our minds.

The second question is: if it is to be a community, what happens to what is called the democratic deficit? The noble Lord, Lord Bethell, referred to that factor. The third question is: what happens to the social dimension which many people on the Continent of Europe, and probably all of our partners in the Community, feel is part of the Community rather than something that can be separated from it.

My noble friend Lady Ewart-Biggs and the noble Earl, Lord Bessborough, raised a fourth point; namely, the widening of the Community. How do we construct an organisation which can not only answer the three questions that I have put, but allow for entry of Eastern European countries or other countries as and when they wish to enter? All those questions—there is no point in denying it or in bucking the issue—are fundamental questions for the constitution of our country. That is why it is right that your Lordships should discuss the matter this evening.

The noble Lord, Lord Gladwyn, and my noble friend Lord Callaghan put their fingers on the point when they said that Maastricht is not the end of the story. No one will come out of Maastrict saying, "That is the final form of the Community. That is where we are for ever and a day and there is nothing that can possibly change". Furthermore, the noble Lord, Lord Gladwyn, said that there is no intention—I cannot conceive of any intention—of trying to turn Europe into something like the United States. In that sense, federalism—here I reply to the point of the noble Lord, Lord Beloff—is almost what you mean it to be. There have been many disputes about what federalism really means.

Speaking for myself and for my party, I do not want to go strongly down the "federal" road. I do not think that it is right. I do not wish to have to correct the noble Lord, Lord Cockfield, but de Gaulle did not refer to, "L'Europe des patries"; he referred to, "L'Europe des états". It is important to get that right. It is a Europe of states which come together in a community in which certain matters are decided by qualified majority voting. We certainly envisage qualified majority voting on environmental issues, but we do not envisage qualified majority voting on, for instance, defence policy issues. We believe in NATO. There is an intermediate area in which there are certain issues on which qualified majority voting is in our view right and there are certain issues where it is not right.

I turn to economic and monetary union. I was very interested to hear what the noble Lord, Lord Aldington, had to say. I think it was the first time that he has agreed with the Government in almost everything that he said. It was a delight to hear that he agreed with the Government. I am almost speechless, for the noble Lord's speeches, which I admire, always seemed to be constructed against the Government. Maybe I am mistaken and maybe on occasions the noble Lord has spoken against the Government. However, I was interested to hear him say - and he is right - that the Single European Act by itself commits us to economic union. That is in the Preamble, although I accept that there is no timetable for it. But Parliament passed that measure and economic union is in the Preamble of the Single European Act.

The Government tried to respond to the difficulty that economic union almost inevitably implies some closer arrangement between currencies—to be logical, in the end economic union requires some locked exchange rates—by what is known as the hard ecu proposal, which was put forward by the Treasury and about which we have heard very little. I ask the noble Earl—it is the only question I put to him - what on earth has happened to the hard ecu proposal? Has it vanished down the pipe or down the stream? Has it been given up? What has happened to it? We heard speeches from the Dispatch Box opposite to the effect that the hard ecu was the right way to proceed. Somehow we no longer hear such speeches. What has happened to that proposal?

I should like to concentrate now on the conditions under which we believe that economic and monetary union can work. It is a point that was raised by my noble friend Lord Callaghan and indeed the noble Lord, Lord Joseph, said that the problem is that if we go into economic and monetary union we must have real convergence. I accept that the noble Lord, Lord Joseph, would rather not go into the whole thing, but the point which was emphasised by my noble friends Lord Varley and Lord Callaghan is that the United Kingdom economy at the moment is not strong enough to move into convergence along the lines defined in Article 109f of the draft treaty.

If we are to go into economic and monetary union, we must have real convergence rather than the convergence that is set out in the article that I mentioned. It is not enough to have a high degree of price stability. It is not enough to have a sustainable government financial position. It is not enough that member states should have respected the normal fluctuation of margins provided for by the ERM. And it is not enough that there should be durability of convergence achieved by the member states with participation of the ERM.

What has to happen if we are to participate successfully in EMU is real convergence of the real economy; otherwise, we shall have a level of unemployment in this country and a massacre of the rest of manufacturing industry which we cannot sustain. That is the point that we believe very strongly.

Secondly, what other condition do we require for entry into EMU? It is political accountability of the institutions that will run that organisation. The noble Lord, Lord Boardman, made the point very clearly. He asked: who will appoint the governor of this European central bank? Who will be responsible for setting the exchange rate of the single European currency? Our view is that that should be the role of ECOFIN. We believe that proper democratic accountability could be achieved through the Economic and Financial Council.

I believe my noble friend Lord Bruce of Donington was right on our third condition. We cannot accept EMU unless there is a proper regional policy of distributing the rewards of whatever happens through EMU through the communities so that we do not end up by paying more than we should to the Community.

I have made this point on many occasions previously. I do not wish to bore your Lordships by repeating it. My noble friend Lord Callaghan was right; I thought he had been reading the speech I made during the debate on the gracious Address. We are running a deficit at the depth of a depression, whereas on all previous occasions we have come out of a recession with a balance of payments surplus. That is the case in money terms at present. However, if we go into a single European currency, it is no good thinking that that deficit will simply be eliminated. It will be eliminated statistically, but it remains in real terms. It is important to ensure that in 1997 our economy is in balance with other economies in the European Community so that we can say, "In real terms we are holding our own". Under any other conditions EMU will be a loss maker for us.

We then come to the penalties for not joining EMU. In other words, it is the same question: what is in it for us? My noble friend Lady Ewart-Biggs spoke of the disadvantage to the City of London, as did the noble Lord, Lord Boardman. There would be severe disadvantages to the financial services industry—as I prefer to call it—if we were not members of this new unit. I do not believe that the noble Lord, Lord Cockfield, is right in saying that the markets have bombed out sterling in the expectation that there will be no deal at Maastricht.

I believe that there is a problem with the dollar and with possible interest rates in Germany. Those are more responsible than discounting a possible failure at Maastricht. Nevertheless, the noble Lord, Lord Cockfield, made a serious point when he said that if we are outside this currency union—in other words, if we do not lock our exchange rate in one way or another, through a single currency, or another way—with the deutschmark, there will be a deutschmark zone. If there is a deutschmark zone in 1997, it will be so powerful that sterling will inevitably shadow the deutschmark in that zone, like it or leave it. I am afraid that that is the truth of the matter as the markets will see it.

I accept what the noble Lord, Lord Boardman, said about transactions charges. He is quite right. We would certainly save money. If we went into EMU seriously we would ensure that we benefited from being the financial centre of Europe.

The timetable is this. There would have to be real decisions in 1997. That is where Stage Three really starts to bite. Either we are in or we are out by 1997, unless the Community decides to postpone the whole issue for another two years; that is in the draft treaty. My noble friend Lord Callaghan likes the idea of an opt-out arrangement. I prefer to see the convergence provisions in Article 109f of the draft treaty very much strengthened along the lines that I have recommended. The whole Community then has to decide whether in real terms the economy of one or any country is up to joining this new single currency that is proposed.

I do not like the idea of a referendum. I believe that the noble Lord, Lord Beloff, knocked that on the head pretty successfully. I do not see how one can frame a question or what happens if a referendum is lost. I do not see how it can be binding. I simply do not see how it can work. Nevertheless, we have to accept that there are decisions that will be made at Maastricht. As the noble Lord, Lord Cockfield, said, there will be give and take. I have no objection to the noble Lord the Lord Privy Seal not revealing the Government's negotiating position. That is absolutely right. We believe that, subject to the points that I have mentioned and subject always to the thought that there is a social dimension to Europe that the Government do not yet accept, that, with the Prime Minister, we should be at the heart of Europe.

I have tried to sum up from our side where we see common ground in this House. I accept that there are noble Lords who have different views on the extremes, but I believe there is common ground in this House. It is in that spirit that I say to the Government that we believe that we should be right in there, forming the Community as it is developed. In that I wish the Prime Minister success at Maastricht.

10.57 p.m.

The Earl of Caithness

My Lords, this has been, as one would expect of such an important occasion, a most stimulating and encouraging debate. I am grateful to all noble Lords who have taken part. It is indeed a debate that my right honourable friends the Prime Minister, the Secretary of State for Foreign and Commonwealth Affairs and the Chancellor of the Exchequer will read with great interest. We have heard a range of views expressed generally supportive of the Government's constructive approach to these negotiations and their firm commitment to Community membership. There are those who would like to see the Community do more or to see a re-drawing of the balance of power between the institutions; more power to the Parliament and less power to the Commission.

As my noble friend the Lord Privy Seal stressed at the start of this debate, we must first and foremost always consider the practical implications of any such changes. There is no point erecting gleaming new machinery for enhanced European co-operation if we are not in a position to make it work.

The noble Lord, Lord Cledwyn, said that the negotiations would be difficult for any Prime Minister and the noble Lord, Lord Callaghan, said much the same. The noble Lords are right. But it is not nearly as difficult as a re-negotiation back into Europe that a Conservative Prime Minister would have had to undertake if a Labour Government had won the last election and taken us out of Europe. While the Labour Party's new-found enthusiasm for Europe is welcomed by many but by no means all of its supporters, as was clear this afternoon, it is sad that those facets which it opposed in the Community are the same ones which have benefited Britain and that its new-found enthusiasm is on the same issues as could do Britain the most damage.

Lord Williams of Elvel

My Lords, I tried very hard in my winding up speech not to make a party political broadcast. I tried to unite the discussion that we had in the House. I hope that the noble Earl will follow me in that.

The Earl of Caithness

My Lords, the noble Lord is right. He made a very constructive speech. I shall make a constructive speech. Various points were made quite legitimately. I am sorry that the noble Lord took offence at what was purely a factual statement by me.

I would like to start with economic and monetary union. It is a wide-ranging subject and it needs a little explanation. It comprises three stages. We are already in stage one which only consists of as many member states a possible seeking to join the ERM and efforts to complete the single market next year. The draft treaty says that stage two starts on 1st January 1994. The key points are that monetary policy remains a national responsibility. Contrary to previous plans, the European Central Bank is not set up. The Economic Monetary Institute - the EMI - is established with an advisory, consultative role continuing the work of the committee of the European Central Bank governors which now meets regularly in Basle.

The existing process of multi-lateral surveillance of member states' economic policies is set on a formal treaty basis.

The finance council has a discretion to register member states' budget deficits and, if it chooses, to declare them excessive. It can issue recommendations but not ceilings or penalties. All member states will make efforts to achieve convergence of economic performance in four areas: inflation, no excessive deficit, long-term interest rates and two years in the ERM narrow band.

In answer to the noble Lord, Lord Williams of Elvel, there is agreement that there should be a hardening of the ecu in stage two, as I have just described it. I noted with interest what my noble friend Lady Elles said about that. She felt that we were already moving in that direction.

There is no fixed timetable for stage three. The only rule is that the Commission and the EMI must report on progress on convergence before 31st December 1996. The key points here are that the European Central Bank is established to take over monetary policy. National central banks will be part of the European system of central banks. All would be independent of member states and Community institutions but would be accountable to the European Parliament and the finance council. We do not share common ground with the noble Lord, Lord Williams of Elvel, on that point. It would not be practical for the European Central Bank to take instructions from 12 finance Ministers.

The exchange rate policy would be determined by the finance council provided it was compatible with the primary objective of price stability. Member states would not be able to move to stage three until they had passed the convergence tests set out above. At least a certain number - six, seven or eight and we should prefer eight - would have to be ready and willing to move to stage three before it could start. As the noble Lord, Lord Ezra, reminded the House, the United Kingdom has successfully taken the lead in arguing for the importance of prior convergence. Countries which failed the test would be granted temporary derogations, allowing them to join later when they were ready. Under the current proposals any member states, not just the United Kingdom as my noble friend Lady Elles reminded us, would be able to opt for exemption status. If they do not wish to move to stage three, they do not have to do so.

The noble Lord, Lord Desai, and the Labour Party would welcome a single currency now. In contrast, we have made it clear that we shall not sign a treaty which would commit us to move to a single currency without a separate decision by the British Government and Parliament.

The noble Lord, Lord Thomson of Monifieth, said that that shows that we are grudging members of the Community. I put it to him that he is wrong for the reasons given by the noble Lord, Lord Callaghan, and my noble friends Lord Cockfield and Lord Aldington. I must disagree with the view put forward by the noble Lord, which the Liberal Party enunciates, that the only good European is the person who does not query any measures put forward. I do not believe that to be in Europe's interests.

To answer the point made by the noble Lords, Lord Ezra and Lord Skidelsky, my right honourable friend the Prime Minister made it clear that it would be wrong to pre-empt a decision as to whether it would be right for the United Kingdom to move to a single currency. That is not a decision for now. It is a decision to be taken by Parliament at the appropriate time in the future. I believe that is also the answer to my noble friend Lord Joseph, to whom I listened with particular care.

I can tell the noble Baroness, Lady Ewart-Biggs, that it is envisaged that the existing arrangements for the ERM will continue for any country which is not part of the single currency although the monetary policy of the European Central Bank would not apply to any exempt member state.

We wish to reach satisfactory conclusions to both IGCs at Maastricht. We are working for that result, but I cannot speak for others.

I now turn to the other IGC; namely, that on political union. We have heard a great deal this afternoon and this evening about that "F" word -federalism—the federal goal and whether any treaty at Maastricht will set us on a road towards it. Federalism is a red herring. As the noble Lord, Lord Callaghan, said, to some it means centralisation and a superstate: to others it means de-centralisation and a structure of subsidiarity. None of us can predict how the Community will develop and whether in 10 years from now it will look more or less like a federal system.

As my noble friend the Lord Privy Seal pointed out in opening the debate, the Community has come a long way since we joined it in 1972. But it has done so on the basis of the mutual consent of all its members to broaden and deepen the range of their co-operation. That is the way in which it will continue to develop in the future. Defining any end state can only be unhelpful, especially where a word like "federalism", open to such a wide variety of interpretations, is the specific goal in question. Therefore my noble friend Lord Bessborough will be pleased that the Government have already made perfectly clear that we cannot accept any treaty containing that language, and we are pleased to have the support of my noble friend Lord Aldington on that.

In our view the Community should evolve gradually by the consensus of its members. The important thing is to make sure that each step forward is a practical and workable one which will bring benefit to all the Community's members. That is why we have all along advocated a treaty structure which retains the current flexibility and diversity in the forms of co-operation between member states. Much of that co-operation takes place on the basis of provisions and common policies set down in the Treaty of Rome. But there is much useful work that goes on outside that structure in inter-governmental fora. It is no less European for that. It is no less intense, no less co-ordinated and no less useful than work under the treaty.

I am glad to say that the present text of the Netherlands treaty recognises that view and maintains areas for inter-governmental co-operation. That approach will allow us to expand the level of our co-operation on a number of sensitive subjects as far as necessary and as quickly as possible. After all, that is what we all want.

A number of noble Lords, including my noble friend Lord Campbell of Alloway, raised the important issue of increasing the democratic accountability of the unelected Commission. We have a clear view of the powers of the Commission, and more importantly, of the limits of those powers. It is the Council of Ministers which is the decision-making power in the Community and not the Commission. The Commission's legislative powers are limited to those delegated to it by the Council of Ministers, and then under carefully drawn conditions. Even so, as my noble friend Lord Rippon of Hexham said, it is still possible for the Commission to stray into the details of everyday life in a way which has antagonised the British people and led to calls for increasing the accountability of the Commission. A number of draft provisions in the treaty to be examined in Maastricht are designed to address that problem.

If a treaty is signed, it will contain provisions allowing a European Parliament role of approval on the appointment of the Commission, a more detailed European parliamentary role in the budget discharge procedure, and the right to call the Commission to account, as well as broader rights to set up temporary committees of inquiry to receive petitions and to appoint an ombudsman. That would be a positive gain for Britain and for the rest of the Community.

We spent some time a little over a month ago debating in detail the question of expanding the European Parliament's powers in the legislative field. We did so on the basis of an admirable report produced by the European Communities Committee on the law-making powers and procedures of a political union. I remind the House of one of the report's conclusions, which said that the concept of co-decision between the European Parliament and the Council was inherently unworkable. We very much agree, and it seems that our partners do as well. What is now on the table in the latest Dutch treaty text is nothing like earlier ambitious proposals for joint decision-making between the Council and the European Parliament, both having equal weight in the legislative process. Instead, there is the prospect of introducing in certain areas an ultimate power for the European Parliament to block a decision taken by Ministers in the Council. The label "co-decision" is no longer accurate and no longer applies.

The Government's position on the developing role of the European Parliament in the Community has been set clearly before the House in the past. The noble Lord, Lord Cledwyn, and the Government are close to being on common ground in that regard. We recognise and encourage the useful work that the parliament can perform in enhancing the accountability of the Commission, in attending to the detail of the Community's accounts to achieve greater efficiency, and in providing a focus for investigating the grievances of European citizens. In addition, in answer to a question of the noble Lord, Lord Bruce of Donington, we are ready to consider introducing the new proposed negative assent procedure into the Community's decision-making process, provided its scope of application is strictly limited.

However, the noble Lord, Lord Cledwyn, and we differ in that we believe that there is no case for any more significant increase in the parliament's legislative power so soon after the step change represented by the Single European Act. To the noble Lord, Lord Bruce of Donington, and to my noble friend Lord Bethell, I would add that it is through involving our national parliaments more closely in the Community's work, an area where I know that this House wishes to take the lead, that we will truly be able to strengthen the democratic accountability of the Community as a whole.

On defence, a subject mentioned by the noble Duke, the Duke of Manchester, in his excellent maiden speech which carried all the more weight for being brief, we are negotiating in the IGC on the basis of three broad principles, which I believe command the broad support of the House, including, I hope, the support of the noble Lord, Lord Stoddart of Swindon. First, the importance of the Atlantic Alliance. My noble friend Lady Park will be pleased to know that we are firm that NATO must retain sole responsibility for the defence of NATO territory.

The Western European Union should be developed to be the instrument of a European defence identity. It should have links in different ways to both the Union and NATO, but it should be subordinate to neither.

The third point is that defence co-operation in Europe should not force our other allies to be periphery, nor should it present them with a fait accompli which they have no choice but to accept or reject. We are confident that an agreement can be reached which protects those three principles at Maastricht. The Anglo-Italian declaration on European defence was widely welcomed, and I would put it to the noble Lord, Lord Varley, that it is but one example of the positive role that we have taken. It has been by no means a reactionary role.

Another question that has naturally commanded much attention is the issue of a common foreign policy. This is nothing new. In practice we have been seeking to operate such a common policy for some considerable time. Strengthening the commitment to achieve such a policy is a long-standing British objective. We hope that the mechanisms agreed at Maastricht will deliver one, but I would put it to the noble Lord, Lord Bonham-Carter, that this does not mean putting it within the Treaty of Rome. Thus we do not agree that this need contain any provision for qualified majority voting. A common policy will carry most weight when it is unanimously agreed. Majority voting will not long hide disunity and disarray when it is exposed to the pressures of the real world.

I was going to answer a question of the noble Lord, Lord Weidenfeld, at this point, but as he is not in his place, I shall not do so. But let us be clear, nobody is suggesting that majority voting should be introduced for significant issues of principle, but only for implementing decisions of a very secondary nature. I believe that the noble Lord, Lord Monson, would agree that the burden is on the other member states who favour this distinction to convince us that it can ever work in practice.

I am not in the least surprised that a number of your Lordships raised the question of a referendum. I appreciate the strongly-held views in all parts of the Chamber. I agree with the sentiments expressed by my right honourable friend the Prime Minister in another place last week and repeated this afternoon by my noble friend the Lord Privy Seal. We believe there is no need for a referendum after Maastricht. I admired very much what my noble friend Lord Beloff said, and my noble friend Lord Boardman put it more succinctly for us non-academics when he said that we live in a parliamentary democracy.

The noble Lord, Lord Cledwyn, asked about social policy, and I am sorry that the noble Lord, Lord McCarthy, is not in his place to hear what I have to say on this particular point. I agree that we do not want to give up so much of what we have achieved in the past 12 years, and it is worth pointing out that just three draft directives in the social action programme, including those on part-time work and working time, would cost British employers up to £6.5 million and lead to the loss of as many as 100,000 jobs. I agree with my noble friend Lord Harmar-Nicholls, whom I am pleased to see is in his place. We need to look at this area with great care.

The noble Lord, Lord Bruce of Donington, showed his expertise with regard to the Court of Auditors among the other areas that he mentioned. The Treaty of Rome already provides that the Court of Auditors should be completely independent in the performance of its duties. It is not subservient to the Commission. There are proposals in the draft treaty put forward by the United Kingdom which should improve the workings of the court. I agree with the noble Lord—none is too soon. I shall write to the noble Lord on the details and on the other points that he raised.

Finally, I should like to echo the words of my right honourable friend the Prime Minister in another place last week. He made it quite clear that Britain's place is at the heart of Europe, and that the Community's best interests lie in reaching an agreement at Maastricht which will satisfy all of its members. We will not be afraid to argue our corner where we believe our position is right. That has always been our approach. It has worked of course in our own interests, but also in the long-term interests of the Community. Our stands in the Community in the past, calling for sound finances and a reformed common agricultural policy, are in retrospect seen not as wrecking or isolationist but as fundamental good sense. It has not damaged our interests to be a little sceptical, as the noble Lord, Lord Ardwick, described it.

For a consensus agreement to be reached at Maastricht, there will need to be give and take on all sides. There are some points we should prefer to see agreed which may not be. But some points are more important than others. I shall summarise what are among the most crucial for us. On EMU, we must see the incorporation in the treaty of strict conditions of economic convergence and a provision which will allow government and Parliament to decide whether and not just when to join a single currency. On political union, we must safeguard NATO as the principal vehicle of our defence, and avoid the creation of any competing European defence structure which would undermine it.

On foreign policy, we want stronger and closer co-operation, outside Community competence. But it must not interfere with our ability to take decisions in our own national interest. We need to increase the European Parliament's role in controlling the Commission, but we should not allow the Parliament to become the legislative equal of the Council in making policy for the Community.

We want greater co-operation in Europe in the fights against cross-border crime, drugs, terrorism, illegal immigration and other Home Office issues. This treaty provides a chance to give such intergovernmental co-operation a sound basis in its international law; again this is best pursued outside the framework of the Community.

Finally—and here I agree with my noble friend Lord Joseph —we must constrain the extension of Community competence to those areas where Community action makes more sense than national action, or action on a voluntary inter-governmental basis. Again, I was going to say something to the noble Lord, Lord McCarthy, on this subject.

This is the approach which we believe will have the support of the majority of people in this country. It is a policy designed to maximise our influence in the Community; and we must use that influence. We must use it to ensure that the Community fills the important role in world affairs which the changes elsewhere in Europe and its growing economic strength dictate it must. We must keep the Community open, liberal, true to its original free-market philosophy; and we must see that the Community does not turn its face away from the newly-emerging democracies of eastern Europe. We should offer them the prospect of Community membership along with the other applicants in a lengthening queue, once they can satisfy all the conditions of membership.

That is the challenge before us. It is a challenge, as I have said, to which the Community can rise only if the structures and procedures we agree at Maastricht for this next stage of the Community's development are workable, practical and command consensus. It is with this vital goal in mind that the British Government approach the Maastricht European Council. We continue to participate forcefully at the heart of debate in helping to shape the structure, the processes and the future development of an organisation which is set to play an ever increasing role in the wider world, and an ever more beneficial one in all of our lives.

On Question, Motion agreed to.