EC: UK Presidency

HL Deb 02 July 1992 vol 538 cc885-980

3.37 p.m.

The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey) rose to move, That this House takes note of the United Kingdom presidency of the Council of Ministers of the European Communities.

The noble Baroness said: My Lords, today's debate is timely, coming at the very beginning of the United Kingdom presidency. Last Session your Lordships held several debates and other exchanges on specific developments in the European Community and on certain visions of its future. We shall shortly debate your Lordships' Select Committee's report on enlargement of the Community. Today we can consider those and other issues in a wider debate.

The Community is about enhancing basic political and economic freedoms. Maastricht showed that clearly. However, we do not always appreciate the extent to which those freedoms are being advanced in the day-to-day work of the Community. I hope that many more people will appreciate this when they see the British presidency in action.

Secondly, I think we should be quite clear that the presidency is a first-class opportunity to promote and protect Britain's interests while at the same time serving the common good. This objective requires leadership and quiet authority. There is no one better to provide that than our Prime Minister, John Major.

There has been plenty of good news in the run-up to our presidency that should not be masked by the Danish referendum result. The debates in Parliament beforehand formed the position taken by the Prime Minister at Maastricht and greatly influenced the outcome. The emphasis that Britain laid on liberalisation was fully reflected in the emphasis placed in the treaty on decentralisation and subsidiarity, and on greater accountability—for the Commission in its spending and its bureaucracy and for the member states in their compliance with Community law. Significantly, foreign policy cooperation will continue to take place in the context of intergovernmental co-operation outside the Treaty of Rome.

At last our partners are joining us in reforming the Community. Clearly those calls for reform place the focus on what the Community still needs to do. But let us not forget the achievements which many planned, especially my noble friend Lord Cockfield. In the past few weeks the Community has delivered the very internal market measures for which he worked so long and hard. It is a real success that over 90 per cent. of single market measures have now been completed. They will be of benefit to British citizens, as well as to the citizens of our 11 partners.

I shall outline some of the successes that are too easily overlooked. Two weeks ago the Transport Council approved the third aviation liberalisation package. That will virtually complete the single market in aviation by 1st January 1993. There can be no clearer benefit to the travelling public than the lower fares, greater choice of routes and better service that will result. The Agriculture Council has now agreed to the legal texts implementing the CAP reform agreement. We shall press ahead in our presidency and put the agreement into practice. We shall also tell our GATT partners how far the Community plans to reduce farm subsidies. That should give further, much-needed impetus to the Uruguay Round. My right honourable friend the Prime Minister impressed yesterday on the whole Commission the need to have an immediate round of negotiations on agriculture, which holds the key to the Uruguay Round.

With regard to financial services, Britain has always had the most liberal market in the Community. We can now share this with all our partners in three ways. The Third Life and Non-Life Insurance Directives will open up the insurance markets within the Community; the Capital Adequacy Directive will set capital requirements for securities trading for banks and investment firms in the single market. Thirdly, major progress is now being made on the Investment Services Directive. Securities firms will be enabled to do business in the Community on the basis of home state authorisation similar to that for the Second Banking Co-ordination Directive. The hallmarks of the new financial services are freedom, financial soundness and open competition. Savers and investors alike will benefit. Above all, Britain's outstanding financial services industry will lead the European market.

The Lisbon European Council has built on those developments. It is Britain's presidency that will open the benefits of the Community to a wider Europe, establish better financial disciplines and develop the guidelines on subsidiarity.

On enlargement, we must ensure real progress in the negotiations with the EFTAN countries. That requires the preparation of negotiating mandates and the Community's general negotiation framework in time to be approved at the European Council in Edinburgh. That is what we wanted. Now all 12 nations are agreed that it should happen.

On future financing of the Community, Lisbon set the stage for the detailed discussions on the Delors II package. These will be tough negotiations. But a climate of financial discipline is growing within the Community. Member states are aware of the need to look closely at Community spending when many face economic retrenchment at home. Budget discipline and value for money are two principles which we have always pressed in the EC and which were pressed with outstanding success by my noble friend Lady Thatcher. The wisdom of our approach is now impressing itself on some of our partners. This will be an important area of work for us; and I am sure my noble friend Lord Caithness will have more to say on it in his closing speech.

Thirdly, the Lisbon Summit gave the UK presidency a clear remit to take forward urgent work on the subsidiarity principle of minimum interference. The European Council noted that: harmonious development of the Union over the coming years depends to a considerable degree on the strict application to existing and future legislation of the principle of subsidiarity by all the institutions". All institutions will need to address this in the coming months. In particular, the Commission and the Council are required to report to the Edinburgh Council on practical guidelines for applying the principle. That good news offers us the opportunity to turn back the tide of centralisation and set the Community on a new course.

I come now to running the presidency. The British presidency has a very heavy agenda. We believe that free trade and competition have helped create a prosperous Community. These are benefits which should be made available outside the Community; and that is why we shall strengthen the Community's role in seeking a sensible outcome to the GATT Uruguay Round.

As part of a wider perspective we shall use the presidency to put flesh on the bones of the association agreements signed this year with Poland, Hungary and Czechoslovakia. As these countries emerge from the position of decades of isolation and centralism, we must do all we can to open up their trade opportunities, increase their know-how and build a political dialogue with each nation.

We shall not forget the other neighbours. Turkey, Malta and Cyprus have existing relationships which will be deepened. With others, like Bulgaria, Romania and the republics of the former Soviet Union, we shall continue to build economic and political ties.

We shall also seek to break down the Community's remaining internal barriers and so steer the single market project to a successful conclusion. The 1992 programme was largely a British initiative. Over 90 per cent. of the measures have now been agreed. The Portuguese presidency made good progress in many areas, particularly in insurance, animal and plant health and transport. We must now finalise the necessary legislative proposals remaining. That will be a significant achievement, offering more choice to the consumer, opportunities for British business in Europe and the freedom to create wealth and jobs throughout the Continent. Those undoubted benefits would have been unattainable without the very majority voting mechanism provided for by the Single European Act. We willed not only the end but also the means. But we shall look beyond the legislative phase to ensure that the market works. That will need a new emphasis on enforcement and compliance.

My right honourable friend the Prime Minister has made no secret of the fact that preparing the way for enlargement of the Community is a key priority of our presidency. There are at present seven bids for membership on the table. That is a tribute to the success of the Community and to its magnetic attraction as a core of stable government and economic prosperity. Other nations wish to join and it is our clear intention that room should be made at the Community table for all those able to take on the practical responsibilities of membership. In the immediate future that means the EFTA applicants: Austria, Sweden, Finland and Switzerland. Norway may also apply. We shall prepare as much of the ground as possible during the next six months to make sure that the formal accession negotiations can begin early in 1993. My right honourable friend the Prime Minister is achieving the very vision of a wider Community which I know my noble friend Lady Thatcher so deeply shares.

The agenda for European political co-operation is a very full one. The tragedy of the former Yugoslavia is the most immediate priority. As many noble Lords will know, we discussed that for an hour or so last night in this House. We are taking action. I shall not repeat the debate from last night. However, your Lordships may care to know that my right honourable friend the Foreign Secretary will be addressing this issue substantively in another place today.

We have much to do in relation to the countries of the former Soviet Union and Central and Eastern Europe. As your Lordships know, we are already helping. We plan high level meetings with the Visegrad Three during our presidency. But the Twelve also have important contributions to make elsewhere in the world: to the Middle East peace process, which we wish well. We are working together for the earliest possible resumption of the constitutional talks, so deeply needed, in South Africa. We are seeking to find practical ways to help the South African Government and people stop township violence. With Turkey we are working for relations that will reflect her growing regional role.

I could go on much longer. The agenda is huge. It is varied and it is demanding. What I can assure your Lordships is that the British Government will be fully involved in our presidency and on our own account in ensuring that all 12 nations exercise their positive and full influence in world affairs for peace and prosperity.

I have left until now the question of ratification of the Maastricht Treaty which has so dominated commentary on Europe in the past month. We cannot afford to let it dominate our presidency. It is clear from what I have already said that the Community has a large agenda of work regardless of Maastricht. Clearly it needs to examine the consequences of the Danish referendum. We stand by the Maastricht agreement as the best foundation for building a wider and more decentralised Europe.

The value of co-operation in the Community and the need to develop that co-operation further in the political, economic and other fields remains as strong as ever. That was confirmed at the Oslo meeting of Foreign Ministers immediately after the Danish referendum. The Lisbon Summit renewed commitment to the Maastricht Treaty. In the coming months we shall explore how the Community can progress as Twelve. We must respect Danish democratic procedures and Danish views on what they want to do next. We must also respect the firm commitment to the Maastricht Treaty which this Government negotiated, signed and successfully commended to both Houses for approval in December last year. Finally, we must accommodate the desire to see the Community progress as Twelve together in the tradition of strong and enduring consensus that has brought us thus far.

Those are not easy objectives to reconcile. It would be wrong to try to impose a solution on Denmark or on our partners. There would be no surer way to lose the positive gains that my right honourable friend the Prime Minister won for Britain at Maastricht. The Government would not contemplate such a course.

Denmark has asked for time to consider its options. That is fair enough. We need to know in the autumn how it intends to proceed and how the rest of us might help. Denmark cannot be coerced. She cannot be excluded. She is a member of the European Community in good standing. She will take over the presidency from us on New Year's day. When we know in the autumn how she intends to proceed we can then judge when it would be right to ask Parliament to proceed with our legislation.

The Heads of EC Governments will meet at Holyrood House in Edinburgh, the first European Council in the United Kingdom ever to be held outside London. Wales will host an important meeting of Employment Ministers. The special events of the arts, sport and business programme indicate the wide range of activities taking place in the United Kingdom at a European level. It is a first-class opportunity for community groups and individuals in the United Kingdom to become involved in our presidency: to join in, to learn, to understand and to participate.

It is the programme for our presidency that forms the Motion for our debate today. There is no doubt that it will be a busy and interesting six months. It will be a period in which Britain will use all the influence at its command to shape the Community for the future. This must he a Community where political and economic freedom are our way of life. I hope that your Lordships will lend your support to a sound, businesslike presidency which will achieve a great deal for the British people and a firm basis for success in the wider Europe where Britain so clearly belongs.

Moved, That this House takes note of the United Kingdom presidency of the Council of Ministers of the European Communities.—(Baroness Chalker of Wallasey.)

3.56 p.m.

Lord Richard

My Lords, it is indeed an important debate, not only because of the subject that we discuss but also because of some of the personalities who will take part in the debate. We on this side of the House welcome the former Prime Minister, the noble Baroness, Lady Thatcher, to this House. I look forward greatly to listening to her later this afternoon.

The debate is being held at a critical stage in the evolution of the Community, thrown into some confusion as it has been by Denmark's recent vote against ratifying the treaty. The noble Baroness who opened the debate on behalf of the Government will forgive me, I know, if I say at the outset that while she gave us a catalogue of problems she was not very revealing about the Government's approach to those problems and how they seemed to consider tackling them. However, today provides the House with an opportunity to assess the implications of that Danish vote both for the future of the treaty itself and for its likely impact on the overall development of the Community.

The problems that the Government will now face in this presidency cannot and should not be underestimated. Demands on the Community have never been greater. A number of countries are queueing up to join. They are doing so at a time when the Community is in the midst of a fundamental reappraisal of its own structure and development. Rarely can a country have assumed the presidency at a time of greater uncertainty and doubt. Unfortunately it is also a period of political turmoil and ethnic strife in Central and Eastern Europe. With that background it is little wonder that those countries look to the Community as an institution which offers them stability, the means to facilitate sustained political and economic growth and, perhaps most importantly, permanence and some order.

The Lisbon Summit seems to have decided that membership of the Community for those countries will have to wait. But if membership will have to wait, the problems cannot. In the meantime, the British presidency should attempt to develop closer ties with and extend assistance to the countries of Central and Eastern Europe. They need our support as a matter of urgency and we should not be slow to respond.

Reflecting this, the Lisbon Summit was deeply concerned at the civil war in Bosnia and Herzegovina. It is inevitable that events in the former Yugoslavia will be one of the most pressing and urgent issues demanding the attention of the new presidency. The Lisbon Summit concluded, and it was an important decision, that the Community would back United Nations action to support a humanitarian relief operation in the event that fighting continues and the UN becomes more involved. Britain, therefore, in its role as president, will have a major part to play in attempting to secure a lasting ceasefire in Bosnia and Herzegovina and in promoting a negotiated settlement to end disputes between the former Yugoslav republics. That is a fairly mighty item on anyone's agenda to begin with.

But the Community has its own urgent internal problems as well. The British presidency will have to pick up the pieces of the Danish referendum result, which temporarily at least has derailed the treaty ratification process. It is all very well for the Minister to say that that will not be allowed to dominate the British presidency; it is bound to dominate the British presidency because it goes to the heart of the continued existence of the Community in its present form.

If the Government have that responsibility it is deeply ironic that it has now descended upon this Government's shoulders. It is ironic that this Government—the Government whose Members are sitting across the Dispatch Boxes—which was so obstructive in the negotiations leading up to Maastricht and whose insistence on opt-out clauses in relation to the Social Chapter and economic and monetary union has created a two-speed Europe with Britain in the slow lane, are now assuming the presidency at a critical make-or-break stage in the history of the Community itself. I am afraid that one result of that is that a large number of our Community partners believe that this country now has a special responsibility to formulate a solution which can save the ratification process. However, at the same time they doubt our national determination and wish to carry that out.

The Prime Minister must now demonstrate that the Government have the will and, dare I say, the unity to put the ratification process back on course. Perhaps that will be more difficult for him than it might have been for others. The role of the presidency is essentially one of leadership by consensus and by compromise. Whatever one thinks about Britain's approach to the Community during the past decade "consensus" and "compromise" are not the words which automatically spring to mind. Twelve different national interests must now be accommodated by the presidency. That can be done only by listening, by understanding and by taking them into account.

Some observers appear to believe that the Irish referendum, with its resounding "yes" vote, and the Oslo meeting of Community Foreign Ministers, which left the door open for Denmark, have put the ratification process back on course. I believe that that assessment totally underestimates the profound political and legal questions raised by the Danish result. Certainly the difficulties caused by that result proved to be too hard for the Lisbon Summit. The summit failed significantly to produce a definitive solution to resolve the question of ratification. In order to try to help with that problem the summit agreed to re-examine the powers of the Commission by defining "subsidiarity" and it also agreed to a review of all existing EC legislation.

The other 11 member states appear to be pinning their hopes on those initiatives, coupled with what they hope is a growing realisation in Denmark as to its potential isolation, proving sufficient to make the Danes change their minds and ratify the treaty. We should respect the Danish decision for what it is; neither underestimating it nor elevating its importance. It should be treated with constitutional respect. I agree with the Minister that the Community should not apply overt pressure on the Danes. In my view that would not only be wrong but it would be self-defeating.

The difficulty is that we are not negotiating with a government. After all, the Danish Government accepted the treaty. One is negotiating with, or trying to accommodate or deal with, an electorate. One is seeking to influence an attitude. It is not a matter of sitting down with a government and changing one or two clauses or sub-clauses in the treaty; it is a matter of somehow producing a different view of the Community in the minds of the Danish electorate.

The Danish Government must be given time to handle the situation as they think best. No doubt they are making their own dispositions accordingly. But of one issue I am quite convinced; that threats from outside will not do it. Quiet and sympathetic diplomatic support might, but, again, quietness and sympathy are not exactly the most obvious qualities which have guided policies towards the Community during the past decade.

So the presidency faces an uphill task in salvaging the ratification process prior to this autumn's European Council in Edinburgh. In view of the difficulties involved it would be useful if the noble Earl, who is to wind up the debate, could elaborate on the way in which the Government propose to approach the matter in concert with our partners. It would also be helpful if he could advise the House of the current status of the European Communities (Amendment) Bill and give an indication when or whether the Government propose to return it to Parliament.

The Prime Minister appears to feel bound in honour to secure the ratification of the treaty. So be it. Certainly he was right, as was repeated this afternoon, when he said that it had been approved overwhelmingly by the House of Commons. But how does he hope to secure that? Does there come a point when the Government state that they will wait no longer for the Danes and then proceed to try to pass the Bill through this Parliament? If so, when do we reach that point? Certainly it will not be reached before the French referendum is held. If that referendum produces a "no" vote, realistically the treaty will be dead and it will be back to the drawing board with a vengeance. If, however, the French referendum produces a firm "yes"—and present indications suggest that to be more likely—can we expect the Bill to be returned to the House in the autumn?

It is true that those decisions can be avoided for a while longer. However, drift is hardly a policy and delay is no long-term strategy. What people want from the Government—and it is not an unreasonable request—is a clear indication of where the Government believe the Community is now going and how they believe it will get there.

Member states will also be looking to the presidency for leadership in addressing the issues relating to the Social Chapter of the Maastricht Treaty and the transition towards economic and monetary union. They are perhaps two difficult issues for the Government. They will also be looking to see what the Government, as president, have to say about enlargement, further reform of the common agricultural policy, the future of the GATT negotiations, as well as the future size of the Community budget. It promises to be a busy six months for those Ministers who are concerned with the Community.

The Government could perhaps secure the trust and confidence of our partners, and perhaps hope to revive the ratification process, by taking steps to sign up for the Social Chapter of the Maastricht Treaty. That would indeed be a significant goodwill gesture towards our partners, all 11 of whom have accepted it. It would also possibly reduce Danish opposition to the treaty itself. It is widely believed that British hostility to the Social Chapter weakened its status by forcing the other 11 member states to take majority voting procedures outside the treaty. That in turn undermined the enthusiasm of the Social Democrats in Denmark.

Moreover, approving the Social Chapter would give British workers a chance to benefit from a commitment to a framework of rights for people at work, which is recognised as good practice by all our partners. Equally, it would help to meet the convergence conditions for economic and monetary union. In order to meet those conditions member states must work together. That, too, underlines the importance of the Social Chapter based as it is on the experience of countries such as Germany, which seem to have grasped the fact that the key to a successful future lies in fostering social cohesion and not in division.

We should also use the presidency to review the opt-out with respect to economic and monetary union. That has created uncertainty for British business and for those foreign companies contemplating long-term investment in Britain during the next five to 10 years. It has also weakened Britain's ability to help convergence, to promote regional development and to modernise our industrial structures—all of which are crucial to the third stage of EMU. I think, too, that one of the things in which the presidency should be engaged is to try to ensure that the proposed European central bank is accountable and that may best be achieved through ECOFIN.

With respect to the location of the bank, I understand that the meeting in Lisbon failed to reach a decision and that that will now become the responsibility of the Edinburgh summit. The Government seem to have been outflanked on that question with the bank now apparently heading for Germany. Can anyone really be surprised if that happens? To say that you may well not join in the game is hardly the best posture from which to insist that it must be played on your pitch.

The Government had hoped to make enlargement one of the central planks of their presidency but the uncertainty created by the Danish referendum forced the Lisbon Summit to conclude that there should be no preliminary enlargement negotiations before the ratification process had been resolved. I was glad to hear the Minister say this afternoon that a great deal of the preparatory work on enlargement can certainly be carried out during this presidency.

As regards subsidiarity, the Government are committed to developing a more concise and practical definition of subsidiarity. It would be helpful if the noble Earl could give an indication of the kind of proposals which the presidency would be making in relation to subsidiarity. It would also be helpful if the Minister could advise the House as to how the presidency would proceed in relation to the review of existing Community legislation.

However, subsidiarity is no policy as yet. It is at best a reassessment and a rearrangement of the balance of powers between the nation states and the Community institutions, even if it could be satisfactorily defined. So far, I have seen no workable or acceptable definition of what I understand to be a one-time theological concept.

I suppose that the presidency will also afford the opportunity for the Government to make a concerted effort to implement further reforms of the CAP. I was grateful to hear what the noble Baroness said about that, particularly in relation to reforms of the CAP and GATT.

Then, there is the budget. As regards the Community budget the Government are in some difficulty. As the Government of the United Kingdom, they may have one view. As the holders of the presidency, their duty is to try to produce movement in the direction of a compromise. It will require flexibility and a delicate hand to run those two together.

We are assuming the presidency at a critical stage in the Community's history. Decisions must be made over the next six months which would have an historic bearing not only on the development of the Community but on the future of Europe as a whole. Reservations have been expressed about this Government's suitability to play the crucial role they have been given. I believe that our partners need some reassurance from the Government as to the way in which they are approaching the Community and Community affairs. It is to be strongly hoped that the Government can rise to the challenge of their presidency. Failure would heighten political uncertainty in Europe precisely at the time when the whole of Central and Eastern Europe is in danger of becoming embroiled in ethnic and nationalist conflict. The Community needs firm leadership and a constructive approach to those problems. The Government must prove that they are equal to the challenge ahead and must provide that effective guidance. Failure to do so would have ramifications far beyond the borders of the Community.

To do that will demand a change of attitude on the Government's part. For the next six months they are in effect on probation in the eyes of our Community partners. We must be seen to be representing the interests of the whole and not merely our part of it. Incumbent as the Government are with the ideological baggage of the past 10 years, that task will not be easy. If they pursue it with imagination and determination, they will have our support. If not, they should not be surprised if criticism inside Britain continues to grow and the demand for a referendum, whatever the Government's attitude may be now, becomes louder and perhaps irresistible.

4.15 p.m.

Lord Jenkins of Hillhead

My Lords, in your Lordships' House it is common but courteous form to say how much we are looking forward to an impending maiden speech. But on this occasion I can do so with more than common courtesy. Indeed, there is a certain breathless hush in the close this afternoon as we await the non-controversial remarks of the noble Baroness, Lady Thatcher.

I suspect that the tradition of non-controversial maiden speeches, like most traditions, is of fairly recent origin and, indeed, it is not invariably observed even in the past few years. Even though it was before my day in your Lordships' House, I seem to recollect that the first speech of the noble Earl, Lord Stockton, was not wholly uncontroversial, certainly not from the point of view of the noble Baroness. I beg her today not to be too inhibited. We should much rather that she were herself than that she became hidebound by convention.

I must crave your Lordships' indulgence this evening. I know your Lordships' attitude to attendance throughout debates, "waiving all excuses" as the Writ of Summons says, which we hear so often these days. However, after consultation with the Leader of the House I must ask your Lordships to accept my absence after about 8.15 p.m. I have a very long-standing engagement to preside at a dinner of British European Commissioners present and past. No doubt some of your Lordships' will regard that as a true gathering of a nest of vipers, but at least it is no routine or easily postponable occasion.

I have been greatly encouraged by the forthright attitude towards Europe which the Prime Minister has taken in the past few days. If he sticks to that, as I believe he now must and will, I can assure him that he will have my unwavering support for the ratification of Maastricht, at least as much support as another Conservative Prime Minister had on the European issue 21 years ago. I believe that there will be many of us, not only in my party but also in the Labour Party, who will support him if he is firm and consistent.

The facts of political geography in this country are that the European majority—and I believe that there is one when the issues are duly considered—is essentially a cross-party majority. In 1971 it was the Labour Europeans who turned what would have been a minority of 46 into a majority of 112 for British entry. That cross-party fact may be awkward for party leaders of different parties but it is one which they cannot ignore if they wish to play an effective hand in Europe. There have been several examples of party leaders playing too much of a political hand which has not brought much success to the country or profit for their own parties.

Last December and January I thought that the Prime Minister was in some danger of overselling the degree of success at Maastricht; but that is no longer of significance. What is of significance is that an unravelling of Maastricht, so far from easing British problems in Europe, would make immensely more difficult what I understand to be the two main objectives of British Government policy for the presidency. First, if the response to the Danish difficulty were to go for a Europe à la carte in which some countries take more courses than others, I doubt whether the British would be prepared to take the full menu. That would undoubtedly mean that Mr. Major's proclaimed aim of Britain at the heart of Europe would be scuppered because only the fully participating countries will be there with full interest.

Nor, with Maastricht unravelling, will a rapid enlargement of the Community be achievable. Whether or not there is any attempt to establish a formal link between ratification and enlargement, it is inevitable that a Community which loses its self-confidence will not achieve the unanimity necessary to take in the relics of the old free trade area, let alone the westernised trio among the former Soviet bloc countries of the Poles, the Czechs and the Hungarians.

There is no sense in living in a world of illusions. It is undoubtably an illusion that a Community in disarray could be persuaded to turn itself from one of 12 into one of 20 or more. I agree with the noble Lord, Lord Richard, that it is a similar illusion to believe that Britain, which claimed special opt-out rights in relation to a single currency, could field a serious claim to be the host country for the European Central Bank. I greatly regret that we were not able to do that.

I take a slightly more optimistic view than the noble Lord, Lord Richard, in regard to the British presidency. At the present time and over the period of our presidency there will be exceptional opportunities for Britain to play an effective hand in Europe, perhaps more so than at any other time during our 20 years of membership. Nor do I dissent from the view that many noble Lords on all sides of the House hold, that the Community defeats its own purposes if it is over-obtrusive and tries to do too much that is unnecessary.

I want to see the Community proceed in certain specific directions. I certainly want it to proceed to a single currency, to effective foreign policy coordination and to a more powerful Parliament as a democratic instrument. But I do not believe that any of that involves the sacrifice either of a strong sense of national identity in this or other countries, or of effective democratic decision making, preferably at a level closer to the people than is the case today in our grossly over-centralised Britain.

I can claim a certain consistency in the matter. It was recently pointed out to me, though I had completely forgotten it, that in a Jean Monnet lecture I gave in Florence in 1977—which some people believe started all the trouble about the European monetary system and long before the obfuscating rather than clarifying word "subsidiarity" had been heard of in a Brussels context—I attempted a non-dogmatic and non-centralising definition of what the Community should and should not do.

I said that we must build Europe upon the basis of our late 20th century nation states; that we must only give to the Community functions which will, beyond reasonable doubt, deliver significantly better results because they are performed at Community level. We must fashion a Community which gives to each member state the benefits that it cannot achieve alone. We must leave to them functions which they can do equally well or better on their own. However, just as strongly I reject the view that we are teetering on the brink of an all-powerful and all-obtrusive superstate which will dominate our lives.

For instance, I do not believe that nearly as close a polity as the United States of America is or will be appropriate for Europe. Nor do I believe that we are within miles of that. Let us take the practical and important test of expenditure. The Community at present takes 1.2 per cent. of the gross national product within the total of the member states. M. Delors announced that he wants to raise it to 1.37 per cent. over five years. In the United States the federal budget takes 21.5 per cent. of the gross national product. Let us preserve some sense of proportion when we talk of an all-powerful state based on between 1.2 per cent. and 1.37 per cent. of gross national product.

The biggest danger for Western Europe is not some exaggerated phantasmagorical fear of a superstate. The greatest danger is that it should begin to emulate Eastern Europe and turn from being an area of stability and hope to one of disintegration and nationalistic destruction. I hope that the British presidency will make a major contribution towards avoiding that.

4.25 p.m.

Baroness Thatcher

My Lords, it is a privilege to take my place on these distinguished and tranquil Benches after 33 testing years before the mast in another place. I thank my noble friend for her kind references to me, I thank the noble Lord, Lord Richard, for his explicit and implied references to me, and I greatly thank the noble Lord, Lord Jenkins, for parts of his speech.

Mine is a somewhat delicate position. I calculate that I was responsible as Prime Minister for proposing the elevation to this House of 214 of its present Members. That must surely be considerably more than most of my predecessors—and my father did not know Lloyd George!

As Prime Minister I made a point of following your Lordships' debates and the reports of your Select Committees and found them invaluable for the wealth of experience and worldliness which they contained. I must confess that your Lordships' voting record occasionally gave rise to other and more violent emotions, particularly when the votes were on matters of finance. My frustration was too often and unfairly visited on the thankfully broad shoulders of my noble friends Lord Whitelaw and Lord Denham. I am sure that the view from here will look quite different.

I ask for your Lordships' forbearance for speaking so soon after my arrival in your Lordships' House rather than allowing a decent interval to elapse. But Britain's presidency of the Community comes round only once every six years and in future it may be longer than that. Notorious as I am for patience and restraint, I can hardly wait that long.

As the noble Lord, Lord Richard, said, I find that the late Lord Stockton managed 33 minutes during which he was not exactly complimentary about the then government's economic policies or its handling of the miners' strike. Therefore speeches are not always non-controversial. The noble Lord, Lord Wilson, for his part spent 20 minutes trampling politely on the Government's record on training and higher education. I therefore take heart that the non-controversial tradition may sometimes be honoured in the breach. But of course what is controversial to one may be music to the ears of another. Without differences of view there would be no debate; and if Parliament lost its powers to another body there would be little point in debate.

I notice from the speeches that have already been made that one point has forcibly emerged. Bearing in mind that all three parties are of the same view about ratifying Maastricht, the electorate has had no way during the general election of expressing its view. It had in fact no choice.

Britain has usually set itself rather modest and limited objectives during its turn at holding the presidency of the EC. True, our last presidency launched the single market; and in view of some of the comments in regard to the Single European Act which I heard in this House on Tuesday, I shall have something to say in that regard later and my noble friend has already referred to it. But generally we have concentrated on organising the Community's business efficiently and drawing precise conclusions from wordy and chaotic debates.

That was necessary, but it will certainly not be enough this time. Rarely, if ever, has the Community had a greater number of important issues demanding its attention than now. Most of them were mentioned by my noble friend the Minister of State and I shall not repeat the list which she gave so ably, but start with what is on everyone's lips and the most pressing question—that is to say, what to do about Maastricht after the Danish referendum.

Many people who travel through Europe, as I have done in recent months, are struck by the very sharp change in attitudes towards the European Community, brought about by the Maastricht Treaty. Scepticism, justifiable scepticism, is on the increase. People feel that their governments have gone ahead too fast so that now the gap between government and people is too wide. Perhaps that is not surprising when in the modern political world European Ministers spend so much time in each other's company: they get out of touch with the people and too much in touch with themselves.

The particular concerns are different in each country, but the basic misgivings are mostly the same. People feel that too many of the powers and rights, which have been theirs for decades and in some cases for centuries, are being given away to the centre in Brussels. We had echoes of that in the speech of the noble Lord, Lord Jenkins. I find it very difficult to understand that two arguments are being run alongside and they are mutually exclusive. There is far too much centralisation going on; far too much bureaucracy going on which we do not like, but nevertheless we are going to ratify the Maastricht Treaty. To me, these things do not add up.

There is also among people a good, healthy understanding that bigger is not always better and that variety is more desirable than conformity. The Danish "No" to Maastricht is just one sign of those things. A recent opinion poll shows that seven out of 10 Germans do not want a single currency and that seven out of 10 do not want either to surrender significant powers in order to have a common foreign policy.

People understand that Maastricht is more, much more, than just a technical adjustment to the Treaty of Rome. The people of Denmark saw that when they received their copies —free copies, I would stress—of the Maastricht text. One figure illustrates better than anything else the scale of the extra intrusion into the authority of national parliaments and governments and into people's lives, which Maastricht would bring about.

The Treaty of Rome provides for the Commission to have the sole right of initiative in 11 areas of policy. In Maastricht that reaches 20, to which one has to add at least five other areas of co-operation where the Commission is fully involved—that is to say, monetary, judicial and immigration matters as well as foreign policy and defence. No wonder people feel that they have a right to be consulted about such a major change in the way in which they are governed, especially in the light of M. Delors' notorious statement to the European Parliament that 80 per cent. of the decisions taken on economic and social matters will soon be taken by the European Community rather than by national governments and parliaments.

It is being alleged that no less substantial powers were conceded to the Community in the Single European Act. I hope that your Lordships will not accept that assertion, but will look at the debates in another place in 1986 about the Single European Act. I hope that noble Lords will look in particular at the assurances given at that time by the then Foreign Secretary, now my noble friend Lord Howe, and by my noble friend the Minister of State who opened the debate.

Qualified majority voting is of course in the Treaty of Rome itself. My noble friend, the then Foreign Secretary, made clear that in the Single European Act qualified majority voting replaced unanimity only for the measures which were major components of the construction of the Common Market. He said explicitly that their scope was not indefinite. He pointed out that, some subjects were of such importance to the national policies of individual member states that they should remain subject to unanimity voting—namely—tax measures, measures relating to the free movement of individuals and measures affecting the rights and interests of employed persons". He recognised that there would be some people who would be anxious that, in extending qualified majority voting to promote the achievement of an internal market, we might diminish the essential protection of our national interest. He concluded, I would not accept that". He gave his reasons for doing so.

The suggestion that there is any comparison between the powers transferred to the Community in the Single European Act and in the Maastricht Treaty is misplaced. Bearing in mind the burning and urgent problems of the moment, one also has to ask: What is the relevance of the Maastricht Treaty to these? What, for example, does it do for fragile democracy in Eastern and Central Europe? It makes it more difficult for those countries to join. Last week the European Council refused even to open negotiations with the much more advanced EFTA countries. The attitude is that we have to form our own tight little huddle before we can even contemplate admitting others.

What does Maastricht do to help lift Europe out of recession? It shackles and burdens our economies with the extra restrictions and intrusive regulations imposed by the Social Charter. We found out last week that the Commission is still trying to do that despite our having opted out of that chapter of the Maastricht Treaty, thanks to the Prime Minister. Unfortunately, the Commission has not yet had its action challenged in the European Court. The Government have indicated that they may do so and I hope that they will. We shall then know where we stand on this matter.

The reason for all this is that Maastricht does not tackle today's problems. There has been a hint of that in the other speeches. The world has changed dramatically in the past two years. The Community must adapt to that or it will lose its purpose and lose support. The result of the Danish referendum is an opportunity to think again, but there is regrettably little sign from last week's European Council that the Community as a whole is ready to do that.

Certainly, it will take more than a self-denying ordinance on the part of the Commission or a promise to give back some of the powers which it has arrogated. Its record of evading the unanimity provisions of the Single European Act deprives it of the good faith that we should otherwise have accorded it.

I am very glad that the Foreign Secretary has said (my noble friend has repeated it today) that Denmark cannot be coerced and cannot be excluded. If that were to happen the Community would be breaking its own laws which state with absolute clarity that Maastricht has to be ratified by all 12 member states if it is to come into force. If we allow that to be overridden in Denmark's case, each and every one of us will become vulnerable to being coerced or excluded on some other issue or on some other occasion in the future.

We are an association of free peoples, free to take a democratic vote. Denmark has exercised that freedom. Is it now to be suggested that she did something wrong or somehow she must change her mind? After all, fortunately our Prime Minister exercised our right to be different and not to be governed by the Social Charter and not to be governed automatically by a single currency although we agreed the idea. We have done it. We are perhaps the oldest democracy and the freest. It is not for us to criticise others. If ever it is suggested that the people of any member state cannot say "No" without an attempt at duress, that is a very serious matter for the Community and one would need to revise one's views about whether it is a community now of free peoples.

Searching for a definition of subsidiarity is not a satisfactory way forward either, if only because it is based on the notion that it is the Community which has the power which it then parcels out to the member states. The true situation should be the reverse. It should be the member states which exercise all powers, except those which are specifically and legally granted to the Commission.

My own immediate, albeit limited, suggestion at this stage is that the Government should propose a formal and binding restatement of the Luxembourg Compromise. It is not a lot, but it is a little. Your Lordships will recall that this provides that if any member state considers that its vital national interest is at stake, then no vote will be taken. It can be postponed until agreement is reached between all parties. I believe that that would go some way to restore people's confidence in the Community—and hard as it will be to get agreement, I hope that the Government will consider it because technically the Luxembourg Compromise is still there. In practice, there is some doubt as to whether and how effectively it can be used.

I make one further plea before concluding this particular section of my speech: the plea that the Maastricht Treaty be not discussed in terms of personalities—it is too important for that—but in terms of the issues involved. The Government have a most difficult and complex task on their hands with this whole issue during the British presidency. I am sure that they will acquit themselves with distinction in dealing with it and uphold the freedoms of our respective peoples.

I shall deal with the other issues that will affect our presidency more briefly. My noble friend has already dealt with enlargement. As urgent for the presidency as the Maastricht agreement is the issue of the enlargement of the Community. And it is depressing that, despite our Government's best efforts in Lisbon, other member states have refused to embark on the necessary formal negotiations. I sometimes wonder whether other governments fully comprehend the scale and the consequences of the bloodless victory over communism in Eastern Europe and the Soviet Union. In the space of two years, it has become a different world—not the end of history, as some foretold, but the return of history. First Yalta was swept away—and a very good thing too. Now Versailles is following it, which some of us do not find surprising.

The real urgency now is to stretch out a hand to the countries of Eastern and Central Europe. We were not able to free them from communist tyranny. When they escaped, it was by their own efforts. Now we have a pressing moral obligation to sustain democracy and free economies—just as we did in earlier times for Greece and Spain and Portugal —by bringing these East European countries into the Community as soon as possible even though it would require a very long transition period. This is not just in their interests, but also in ours.

We do not want the Community to be in the position of Dr. Johnson. Your Lordships will recall his reply to Lord Chesterfield's congratulations after he had completed his dictionary in the cold and poverty of his garret. He said: Is not a patron my Lord one who looks with unconcern on a man struggling for life in the water, and when he has reached ground encumbers him with help". I recognise that we have association agreements with East European countries, but that is not enough for the assurance that they need. The widening of Europe to include the post-communist countries is, I believe, of much more importance than the early admission of other countries. If the European Community does not respond more rapidly to the needs of Eastern Europe, the problem will still arrive on our doorstep because many peoples from those countries will join the Community even if their governments cannot. They will vote with their feet and arrive in even larger numbers. I hope that the Government, undaunted by last week's setback in Lisbon on enlargement, will return to the charge.

There are many other pressing issues for the presidency, but I shall touch on them only very briefly. On finance, there is still plenty of room under the present own resources ceiling to do the things which are most urgent. We heard at Question time that all the money is apparently not being well used and could be put to better use. I commend the Government for their robust refusal to contemplate additional funds for the Community. There will no doubt be attempts to re-open the issue of the British rebate. I had some great budget battles in my day. The noble Lord, Lord Jenkins of Hillhead, was there and witnessed some of them and understood the point that I was trying to make. I always found that the most effective weapon was, "No"—or sometimes, "No, no, no". I am glad that this continues to be the policy, even if it is more sweetly expressed.

Britain, with the Commission, was the main driving force behind the launch of the single market, and I pay particular tribute, joining my noble friend, to the work which my noble friend Lord Cockfield did to bring about free trade within Europe—one of the original objectives of the old EEC. I hope that we shall use our presidency for a final drive towards its completion. This is especially important, as my noble friend says, for our service industries. They are one of our particular strengths, yet their opportunities have been greatly constrained by protectionism in other member states, often masquerading under the false flag of restrictions required for regulatory purposes. The remaining obstacles should be removed quickly, and no new bureaucracies created. Indeed, in a sensible world, we would never have gone ahead with a new treaty at all until the single market had been first completed and was in operation.

At long last the Community is realising that statements, declarations and even sanctions are not a strong enough response to the terrible slaughter in what was part of Yugoslavia—not in some remote country, but little more than a two-hour flight from London, and in the heart of Europe. Some of us have been warning for a time that the use of force might become necessary. I am sure that one of the first actions of our presidency will be to help to organise sustained relief supplies for Sarajevo and for other places where people have been brutally attacked and their cities devastated. If attempts are made to interfere with those supplies, I believe that we should be ready to use the air power available to NATO in the area to deal with them. After all, we gave the Kurds air power and there is no reason why we should not have given it earlier to some of those people in Yugoslavia.

It is sad that once again the lead had to come from America, in particular from James Baker, rather than from the European Community, although we applaud President Mitterrand for his visit to Sarajevo which raised the morale of those suffering people. The fact is that with a common foreign policy we would be dependent on the lowest common denominator among the Twelve—and we all saw what that meant in the Gulf war. Tyrants are not defeated by the action of the United Nations—it does the resolutions—not by the action of the Community; tyrants are defeated by the lead of nation states which have sufficient defence to go and to do the necessary task.

I agree with my noble friend about the importance of the GATT negotiations. I recall very well that at the last European Council which I attended as Prime Minister just over two years ago, despite all my efforts my fellow Heads of Government refused even to discuss the negotiations, even though the deadline for the Uruguay Round was only three months away. It has, in fact, been extended twice and the matter is still not resolved. In the meantime, we have in fact perhaps lost a very great deal of trade which would have helped us during the recession had we come to agreements earlier.

This debate about the presidency coincides with one of the great constitutional issues of our time. In such matters your Lordships' advice carries very great weight and I am sure that we shall come back to the Maastricht Treaty and I hope that we shall debate its implications in full after the Recess.

It will be obvious to your Lordships by this time that I have never knowingly made an uncontroversial speech in my life. Nevertheless, I hope to be more controversial when we get down to discussing the details. I believe that my right honourable friend the Prime Minister can have a very great influence on the whole future of the Community. I have made my view clear on the Maastricht Treaty. For the reasons that I have indicated, I do not believe that the situation will be resolved during our presidency. I think that noble Lords know how I would vote. But there are so many other things which are more immediate and which I am certain that our Prime Minister is the best person to address. I am sure that he will do that with effectiveness and distinction. I wish him well during Britain's presidency.

4.50 p.m.

Lord Callaghan of Cardiff

My Lords, it is a very great pleasure for me to welcome the noble Baroness to this House and also congratulate her on her maiden speech, especially on getting it over so quickly. She said that she had served for many years before the mast. I thought that this afternoon she was perhaps hoisting the Jolly Roger when I heard some of her comments. The noble Lord, Lord Jenkins, was quite right. We were all agog to hear how she would handle this speech, about which there have been a lot of rumblings. I suppose she must have felt quite at home on Tuesday when she was introduced and found herself surrounded by so many of her former colleagues—those whom she had promoted, those whom she had elevated, those whom she had fired and of course we must not forget the one who took his bat home. It must have made her feel very much at home to see a collection of ghosts like this which cannot have been witnessed since Dickens' Christmas Carol, all waiting to strike.

But in all sincerity I should like to say to the noble Baroness that her matchless record as Prime Minister —being the longest serving Prime Minister of this century—together with the experience and knowledge that she has accumulated during that period, will be of very great value to your Lordships' House. I am sure that we all genuinely welcome her addition to our ranks.

Noble Lords

Hear, hear!

Lord Callaghan of Cardiff

My Lords, to be truthful, when I listened to the noble Baroness it was not Dickens who really came into my mind; it was Midsummer Night's Dream. I recall very clearly the asperities in another place which used to be flung across the Dispatch Box from side to side. When I contrasted that with the dulcet tones which we heard this afternoon from the noble Baroness my mind turned to Bottom. Noble Lords will recall that Bottom, when addressing the assembled workers, said: I will aggravate my voice so that I will roar you as gently as any sucking dove; I will roar you as 'twere any nightingale". Listening to the noble Baroness this afternoon I saw that she had rapidly come to the conclusion that your Lordships will always concede to persuasion what they will not yield to coercion. In those circumstances she will have a very considerable influence in this House.

The noble Baroness will add great vigour, vitality and clarity to our debates. I am looking forward to them with great interest, especially that on the Maastricht Treaty, as, indeed, are most of my noble friends. I noticed that the Government Chief Whip was looking with intense interest at the noble Baroness —as we all were—during her speech. I am not sure whether his pleasure at the end of some of those future speeches will be as intense as his interest today. At any rate, we are very glad indeed to have the noble Baroness in our midst because it will certainly add to our strength.

As the noble Baroness said, the Denmark result was a shock, but in my view a very necessary shock. In some ways we seemed to be almost sleep-walking into the consequences of what we were doing. Yet it seems to me to be imperative that we should have a very full debate not only in this country, where I believe that we have debated the issue more fully than in most other countries, but also in the rest of Europe where—and here I agree with the noble Baroness—there has been a change of atmosphere and approach during the past few months. It is for that reason that I believe we must have a most full debate throughout the whole of Europe on what is being done.

There is no doubt that what is being proposed is probably the most momentous decision that has been put before member countries since the actual creation of the Community of Europe. In that sense we must be clear as to what it is that we are inviting people to do: we must not play down the issue in any way. There must be no division, as the noble Baroness suggested there might be, between what I might call the "political class" and the people.

I speak as one who believes that the treaty should be ratified, despite its faults and its shortcomings. But, nevertheless, I do not think that we should allow our people to feel that it is something of small matter which does not really concern them or, indeed, change their position in the world; it changes it very drastically. It is a continuation of the struggle which has gone on ever since Ernest Bevin sent me to the first Council of Europe in 1949 and asked me to defeat the Federalists. It is a continuation of the struggle between what we then called the Federalists and the Functionalists.

On this issue I have no hesitation in saying that the Federalists have won against the Functionalists. I do not say that we are entering a federal Europe. That would be wrong; indeed, the Federalists in Europe, as I have read, are disappointed at what came out of Maastricht. But in this area of economic and monetary union it cannot be denied —indeed, it must be clear—that we are yielding up a portion of national sovereignty that I would not have expected to see. The issue should be faced and dealt with. Those of us who believe that it is the right way to go should assert that view very strongly. In fact we should not only assert it; we should go out and convince people that it is proper for the reason or two that I shall give in the few minutes left to me.

For that reason, perhaps I may urge the noble Lord the Leader of the House to tug the Prime Minister's elbow about a referendum. The noble Baroness has a point. I have a history on referenda and I have not seen any weakening or destruction of the constitution because we had a referendum 15 years ago. If the momentum builds up, and if it is felt necessary to have a referendum—which, incidentally, I believe would be won and that is one of the reasons why I am ready to back it, as I was last time; I always believe in backing winners if possible—in order to get the clear opinion of the British people, I would certainly suggest that the Prime Minister should reconsider what he has said so clearly about not having one.

Perhaps I can state it more clearly: the Bill should be placed before Parliament. I do not think that the Government should hesitate about that. They should not wait for Denmark or for the other countries. They should place the Bill before Parliament. It is a matter of honour that they should do so. They should fight it through Parliament and get it through. Then the Government should present their case to the people if they think that necessary. For example, the noble Baroness seems to be carrying many people with her in her views. The Government should be ready to place the matter before the people and argue it out. I believe that they would obtain a majority, and that would put the issue to sleep for some years, as happened the last time that we had a referendum. I am not against referenda in principle—provided that there is only one every 15 years or so. Then it is perfectly all right.

One reason why we can give what I might call a conditional yes to ratification is the Prime Minister's success in securing the decision that there should be no commitment on Britain to enter Stage Three in 1996, or 1999, without a separate decision. Other nations have forgone that right. We have a valuable concession at which we must look again.

I am not as optimistic as the noble Lord, Lord Jenkins of Hillhead. I have practical difficulties in believing that by 1996, or even by 1999, it will be possible to achieve a common currency, with a single economic and monetary policy. I should like to hope and think that the people of Europe are ready for that in view of what is happening and what we are seeing and hearing from Germany about its adherence to and belief in the deutschmark and in view of the difficulties some of the smaller nations are voicing now: if decisions are to be taken on a majority vote instead of by consensus, where will that leave them because their votes are so small? All those things will take a great deal of persuasion and conviction. On the whole people move in such directions only when they see the absolute and imperative need for it.

As the 21st century approaches I believe that people will see that the kind of situation represented in the Maastricht Treaty will meet the needs of the 21st century. There must be an era and period of persuasion before we can reach that point. While I have my hopes, I fear that a number of countries will not match the stringent requirements on government deficit, government debt, inflation levels and the other areas which are referred to in the protocol and set down in the Treaty of Maastricht. If that is so, we shall have to take the time necessary to achieve what it is that I am hoping for.

To vote no would be wrong. It would send entirely the wrong signal to the other countries of Europe. It could unleash the rampant nationalism which has been dormant but which is already showing its head in Eastern Europe and the Russian republics. It would moreover, I believe, disconcert many people who are now looking to the Community as a source of stability and strength. The effect would not be just that we fail to pass the treaty and things would then go as before. The Community cannot stand still. Unless it goes forward in this way, now that the gauntlet has been thrown down, it will go backwards. If it goes backwards I very much fear the consequences.

There is, moreover, a security vacuum in Eastern Europe; and here I have some differences with the terms of the treaty. There is an attempt to fill that vacuum with a common foreign, security and defence policy. I beg the Government not to overload the Western European Union with tasks that it cannot fulfil. Of course the United States has taken the lead in Yugoslavia. There is no body in the WEU—there is no capacity—with the intelligence, the logistics, the communications or the air transport to carry out an operation. In every one of those operations, as we demonstrated during the war, we must be supplementary to the great effort that the United States makes.

That brings me to my next point which I have emphasised time and time again in the House: we must concede to no one anything that will undermine NATO. It is the fundamental of our defence. It has, moreover, a particular value in relation to Germany because a non-nuclear Germany in the future—I am not referring to today—demands the cover of American forces in Europe; and so NATO must be maintained at its fullest strength and level. The Government must use the period ahead clearly to define the treaty's field of authority in the matter of foreign and security policy. Some of us will watch closely to see that they do not concede for political reasons what genuinely belongs to the security area. It would be wrong if we did so.

There is also a requirement to satisfy the need for accountability. That is another uncomfortable issue. It would mean increasing the powers of the European Parliament. I do not believe that the Prime Minister will handle all those matters within six months. Let me say in passing that I think that six months for the presidency is too short. If we are looking for reform, one of the things we might do is to make the presidency at least 12 months to give people an opportunity. After all, we are in July now. August will soon be here and everyone will go away on holiday. They will start to come back in September. By October they will be thinking about meetings. They will have one in November and it will all be over by December. Even given the galvanic nature of the Government, about which we all know —when I look at the business for the past fortnight I recognise how galvanised we have been—six months is too short a time for the presidency.

I must conclude because 15 minutes is quite long enough. The details of the treaty will have to be worked out and the subsidiarity—that awful word—provisions taken care of. They cannot of course affect the final and basic decision on economic and monetary union. One is either for it or against it. One cannot have subsidiarity in an economic and monetary union with a single currency. But if in the other areas of the treaty, many of which are important, that subsidiarity business can be worked out and we can have a clear definition of what people are doing in particular areas, I believe that if properly handled the Treaty of Maastricht can in the end—this is my profound conviction —meet some of the conditions that will be required in the 21st century and can strengthen peace in Europe.

5.7 p.m.

Lord Weidenfeld

My Lords, what I found so admirable in the maiden speech of the noble Baroness, Lady Thatcher, was her unfailing ability to fit urgent issues and current events into a wider historical and philosophical framework.

The agenda of the British presidency may be dominated, but must not be daunted, by the Maastricht Treaty. If I have any misgivings about Maastricht, they do not stem from Euro-scepticism, but, on the contrary, from a lifelong commitment to Europe. It is not the direction, but the hasty pace; it is not the ultimate vision, but the immediate genesis of the treaty which causes unease. I suspect, as do others, that the tempo, timetable and the brisk, almost abrasive, presentation were products of French electoral domestic policy and German perceptions of their priorities in foreign policy. In short, they are the product of a seemingly deep German desire to mitigate France's malaise about German unification.

Chancellor Kohl is, with Dr. Adenauer, the most remarkable German statesman since Bismarck. Like Bismarck, he united the Germans. Moreover, while Bismarck needed two wars—one against Austria which crippled the Hapsburg Empire and another against France which struck deep wounds into the French soul from which it is still not wholly cured —Germany has now achieved unity without bloodshed. Yet the German Government seem to feel a further need for expiation and that might explain why they have allowed themselves to fall in with France's galloping momentum.

We should support fully the Prime Minister on Maastricht. It must be made to work. I agree with the noble Lord, Lord Jenkins, that withdrawal would be political arson; it would set the house of Europe ablaze. Renegotiation in a formal sense would open a whole row of Pandora's boxes. Clarification through consultation and justification should be the main goal of this presidency. Favourable winds are blowing in our direction. There are many voices searching for clarification. Although M. Delors has reassured us somewhat on the question of the bureaucratic centralisation of Brussels, we still hear day by day on different levels in Whitehall and elsewhere, indeed even in Bonn, expressions of resentment at interference in the everyday life of European peoples.

The meaning of the Danish "No" was a protest vote in which the governed chided the governors for being too insensitive. Throughout Europe during the next few months we shall hear many loud voices asking for further clarification, for a more detailed presentation or interpretation of the treaty. In Germany, for example, there are waves of criticism. The regions—the Länder—have considerable reservations, especially the free state of Bavaria. Financial circles around the Bundesbank voice doubts about the ecu and favour an independent deutschmark. Even in France, though President Mitterrand may win his referendum, a substantial minority vote of disapproval would strengthen Le Pen's prestige of being more Gaullist than the official heirs of de Gaulle.

We are entering a new, though in some ways familiar stage of diplomatic history, with the decline and near end of the adversarial superpower. Subtle differences of aim and outlook between the historic nations of the Western Alliance have resurfaced. It is Britain's duty and great opportunity to nurse bilaterally and multilaterally the concord between the historic nations of Western Europe and equally to try to quell feuds among them and especially between them and our great western ally—the United States of America.

The Prime Minister's friendly relations with the German Chancellor are of paramount importance. The Franco-German corps, if intended as a matrix for a European defence system, must satisfactorily fit into NATO and there must be absolutely no ambiguities. Of course, the easiest solution would be for France to join NATO, lock, stock and barrel. The United States must in no way be marginalised. If we recall the first effort—the plan for a European defence community in the 1950s—the constellation was different. Britain was evasive, Germany positive and yet the French chamber effectively killed the Schuman initiative. But —and this is the whole difference—the United States was behind it. Indeed that great American ambassador at the Court of St James, David Bruce, was the most indefatigable intermediary, trying to help to overcome British reluctance and French misgivings.

The enlargement of the European Community will soon be separately debated but in any preview, however brief, of the British presidency, it must be stated that it is not only a political but a visceral psychological priority. Since the lead time in negotiation will be a lengthy one in any case, there is no reason whatever to postpone the start of the negotiations. Conversely, the and dismay among the first batch of the richer EFTA candidates will be more than matched, it will be absolutely marked, by the deep bitterness and despair among those who deserve to be included—that is, those between the Baltic and the Black Sea who pinned their hopes and their children's future on a place in Europe by the end of the century or not long thereafter.

However, the British presidency will also have to deal with tests of its statesmanship on the further shore of the Mediterranean. The Israeli elections have paved the way for a much more vigorous peace process. Mr. Rabin is on record that he wishes to complete autonomy talks on the West Bank and Gaza within six to nine months. He is pledged to deepen and widen the scope and substance of Arab self rule. He has not yet completed his team of ministers. We must not underrate his task.

If we wish to help the cause of moderation, then both sides must tread tactfully and restrain their rhetoric. Europe, led by Britain, should prove that it can build confidence among the parties and do so symmetrically. If Israel under Rabin freezes settlements, the Arab world should lift the boycott and the Community should strengthen legislation against political trade discrimination. If Israel is to facilitate the work and raise the status of the Palestinian Arab leadership on the West Bank and Gaza, then Europe should stick to the Madrid formula evolved by Secretary of State Baker—that is to say, the practice of distinguishing between the Palestinian leaders on the West Bank and Gaza but excluding East Jerusalem on the one hand and, on the other, the PLO leadership abroad, which is still tainted with the terrorists' brush and their murky links with the despots of Baghdad and Tripoli. The raising of contacts on a ministerial level with Yassir Arafat and his closest associates would hit a raw nerve in Israel and only weaken the advocates of accommodation, for no obvious advantage.

A powerful incentive within the gift of the Community would be to give the whole area of greater Palestine (which, of course, includes Jordan) preferential treatment economically. Her Majesty's Government know about Israel's desire to adjust the agreement with the Community dating from 1975 and to grant it anchorage in the free economic area.

In conclusion, may I ask the noble Baroness to persevere in a field which I know is dear to her heart and worthy of Britain's role in Europe—the intensification of inter-European educational and cultural exchange. The events in Yugoslavia and Czechoslovakia have shown, quite apart from the inherent tragedy, the scant knowledge of general European and especially East European history among wide sections of the British public.

Nor is it much better across the Channel. I was recently taken by an Austrian educationist to look in on a history class of a typical Viennese high school. I asked a boy whether he could name a British king or queen. He knew, of course, the Christian name of our sovereign, but the only king of England he could name was Richard Coeur de Lion, and that only because he had been held captive by an Austrian duke on his return from the Crusades. It is this educational and cultural endeavour that should form a prominent point of a British steered agenda and not be relegated to the end under "any other business".

5.17 p.m.

Viscount Eccles

My Lords, I greatly looked forward to my noble friend's maiden speech. I remember her maiden speech 32 years ago in another place, which took 32 minutes. Of course that is much longer than people were supposed to speak for, but she spoke in support of a private Bill, if I remember rightly. As we left the Chamber, my colleague said to me, "We're going to hear a lot more from that girl". We have heard a lot more, very much in her favour. This House will be a better place for having a strong, controversial voice backed by such experience.

My noble friend the Minister described very well the opportunities that the presidency of the Community offers for improving and perhaps smoothing the way for the Maastricht Treaty. We all recognise that it will be a difficult negotiation. The question to which we want an answer is: does this House want the Prime Minister to succeed? I believe that we can bring forward any number of small points about the Maastricht Treaty which do not look very good. But what is really necessary to know is how great the enthusiasm is—the real wish of the British people to make the best that we can out of our hand in Europe. How far Mr. John Major succeeds must depend to a great degree on the support which he is seen to have in Parliament. Therefore, we ought to return a clear answer at the end of this debate.

I can only answer the question for myself. I am sure that we were right after the war to encourage economic co-operation in Western Europe to help repair the damage and to reduce the possibility of another war between Germany and the rest of us. We were not at all interested at that time in political union. We thought our defences would be safe with the Americans, and indeed in the hands of NATO they have been. There was no reason or desire to pool sovereignty on political and social issues. However, in the past two or three years two things have happened to persuade an insular Englishman like myself to take another look at our relations with countries overseas.

In the first place there has been a steady growth of power that is outside the control of any one government. Science and technology have been concentrating resources in the hands of international and multinational groups that know very well how to make rings round one government and, alas, too often give rise to huge financial scandals. Governments have to combine to deal with those modern Goliaths. In combination governments can both stimulate the good work of scientists and technologists and regulate that work in the interests of the people they represent. Of course we do not want them to overdo it, but there is a problem there that did not exist even three years ago.

How have our neighbours in Europe reacted to the loss of power of their separate governments? In the war all of them, except those that were neutral, were defeated in battle or occupied by the enemy. Naturally the ex-combatants wanted to turn a new page in history, as much in politics as in economics. But things never looked like that to us. We have always had a different background. But now the collapse of communism has shown us that we must hurry to take a hand in the redistribution of power which is gathering pace in western Europe.

The second change that has occurred is of fundamental importance. My noble friend Lady Thatcher deserves full credit for this most welcome event. She gave the British people a quite new sense of choice in their lives. She taught them to relish the chance of making things happen, with the prospect of rewards for themselves and their families. What a difference that has made. Young people now know far more than we did at their age and every day television shows them what is going on all over the world, from Tiananmen Square to Wimbledon.

Millions now not only own their own homes but also leave them to travel far and frequently. Many have friends abroad and look forward to the opening of the Channel Tunnel. That is a great renewal of self-confidence and it has turned their thoughts, not inwards, as those on the far Right expected, but outwards. Their thoughts are not fixed on the last drop of sovereignty or on the last stitch on the robe of the Mother of Parliaments. They are fascinated by the prospect of an expanding future.

I have been a Member of Parliament for 49 years and I love the Palace of Westminster. I love its smell of history and the responsibility of its Members for the electorate. However, all great institutions have to change with the world outside. Powers and practices have to be brought up to date in this shrinking world. But the spirit and vigour of the people must not be diminished in any way. That spirit which prompted our fathers to leave home, go overseas and build the Empire has since the war been half asleep under the blanket of socialism. My noble friend Lady Thatcher woke it up and got it out of bed. If she had not done that, the Conservative Party, in the middle of a severe recession, would have lost the election. What grieves me is that my noble friend does not seem to notice that the effect on the young of that revival is to make them ambitious to accomplish great things in the converging and wonderfully exciting new Europe.

I have a large family and I have plenty of opportunity to talk to young people. I am sure they realise that the problems next door, and all over the world, are now on such a scale and demand such a great space for their solution that young people here must throw in their lot with friends on both sides of the Atlantic, even though that may mean that we have to share responsibility for many decisions which before were wholly in our own power.

As far as I understand, the Prime Minister and the Foreign Secretary hold views similar to the view which I have expressed. The opportunity is right there now to influence what happens in Europe in a way that has not been possible in the past two or three years, provided the Europeans think we really mean what we say and do not think we are playing around on a high level. I hope therefore that the House will give unmistakable support to the endeavours of those Ministers to secure the best possible space, position and any other form of advantage for us which will contribute to the expansion of peace and prosperity everywhere and will be in tune with the new spirit of independent personalities for which, as I have said before, we must thank my noble friend Lady Thatcher.

5.27 p.m.

Lord Stoddart of Swindon

My Lords, I join with other noble Lords in congratulating the noble Baroness, Lady Thatcher, on her maiden speech which was heard with approval by many noble Lords on all sides of the House. The noble Baroness referred to the 214 Peers she had made or recommended. I hope those Peers will be duly grateful if the noble Baroness moves some amendments on the Maastricht legislation, if and when it returns to this House.

I was also interested in the remarks that the noble Baroness made to the noble Lord, Lord Jenkins, about her experience with the Commission. The noble Baroness said she had said "No" to the Commission and sometimes "No, no, no". That reminds me of the words of an old song which ran, "No, no, a thousand times no. I would rather die than say yes". I hope that when the Maastricht Treaty is debated in this House, the noble Baroness will then say, "No, no, a thousand times no". I can assure her that she will have my support in that. The speech of the noble Baroness was well received and I hope that we shall hear a great deal more from her, particularly on that subject.

The British presidency is bound, in spite of what the noble Baroness, Lady Chalker, said, to be dominated by the Maastricht Treaty. The Danish "No" has made the Community face a situation it has never faced before. Therefore the British presidency will be dominated by the treaty. Furthermore, there is the French referendum to come. I should have thought that we would have learnt by now not to take the people for granted. We should have learnt that although according to the opinion polls the French will say "Yes" it may very well be that when 20th September comes, like the Danes, they will surprise the world and say "No".

What is more, as the noble Baroness reminded us, there are doubts in Germany concerning the deutschmark and whether Germans want to be part of a centralised, corporate state. Indeed, the Government have problems at home with their own Back-Benchers. Not only the Government: the Opposition, too, has its political problems with people who are sceptical about the Maastricht Treaty and the direction we are taking within the European Community.

My fear is that for members of our own Government ratifying the treaty has now become a matter of personal machismo rather than of what is good for Britain. I hope that that is not so, but I fear that it may be.

The noble Baroness has described Maastricht as a treaty too far. When I watched the Frost programme I thought that that was a nice turn of phrase, but I believe that it is an understatement. Maastricht is a treaty much too far; and, worse, it will not be the last. That is what worries me more than anything. The road to a single Western European state is paved with treaties. One leads to another. Thus the 1951 Treaty of Paris led to the Treaty of Rome, which led to the Single European Act which has in turn brought us to Maastricht. There will be others in 1994 and beyond until, I suppose, we arrive at the final treaty, the treaty of final assimilation. Perhaps that will be called the "Treaty of Berlin"—and what an irony that would be to those of us who remember the past 60 years of history.

The next six months should not be used to pressurise the Danes into submission over Maastricht, and I was glad that the noble Baroness, Lady Chalker, was able to give the assurance that there would be no improper pressure. The Government must go further. They should protect the Danes from the open hostility which has been shown by some countries, in particular Germany and Portugal. It will do this country's presidency no good if the Government do not protect the Danes from such undue pressure.

The opportunity should be taken during the next six months to re-examine in detail the true implications of the treaty. It is nonsensical to pretend that Maastricht is not federalist. It is. It involves citizenship. Article 8 of the treaty says that we will be made citizens of the European Union, owing a duty to the union. What does that mean? Does it mean allegiance? It may very well. That has to be explained. Certainly it makes us citizens of a completely new entity.

What will follow? Will a single electorate follow from that? I should have thought that it might. With a single electorate will there be a single parliament and a single government? We need to know exactly where that citizenship will take us. In addition, of course, there is economic and monetary union with a single currency, which has already been mentioned by noble Lords, which would restrict in enormous measure the ability of a British government to decide their economic future and day-to-day economic management.

Perhaps we could also have a half year of truth. The whole edifice of the EC has been built on misrepresentation, half truths and even, in some cases, downright lies. That is still going on. The British people are being told that they are winning rights when in fact they are losing them. In the case of the employment discussions we were told that Britain had won the right to do certain things. That is not true. What Britain had done was to lose the right to do things which up till then we had been able to do without let or hindrance. So we have been told downright lies. It simply is not true that we have won any rights in relation to employment.

Again, on the matter of VAT we have been told that we are winning rights on excise duties. We are not winning anything at all. What the EC wants to do is to take away our rights to put the duties which we think are correct on British spirits. So again, we are not gaining anything by submitting on VAT, we are losing rights which we have had hitherto.

I also hope that there will be six months of respect for those who genuinely believe that Britain is not only losing her sovereignty but is also paying dearly for that loss in terms of unemployment, living standards and the contraction of our industrial base. In that regard I would remind the Foreign Secretary—who, I am sorry to say, is so meek and mild and docile when dealing with other EC countries or the Brussels Commission but becomes so outspoken and macho when attacking his own countrymen, particularly those in his own party—that spivs are people who sell inferior goods by dubious means. It is the Government, not the Euro-sceptics, who are engaged in selling the Maastricht Treaty, which the Foreign Secretary admitted he had not read in detail before he signed it. The Government are trying to sell Maastricht by concealing the truth about its real effects and refusing the customer—the British electorate—the opportunity to examine it in detail and to make a free decision whether or not to buy it. That is what should happen but it is not happening.

I have to make it clear that I am not making a party political point.

Baroness Nicol

Hear, hear!

Lord Stoddart of Swindon

My Lords, my noble friend is right. I shall confirm that. At present the Labour Party has an acute attack of Europhoria, from which I sincerely hope it will eventually recover. The issue of who governs Britain transcends party politics and concerns us all as individuals rather than as members of individual parties.

I should like now to turn to the Community budget. I urge the Government to resist any attempt to increase the Community budget by any means at all, whether by cohesion funds or any other means. Britain's net contribution, at £2.5 billion, is already much too high. Other countries have receipts which in my view are much too high, and they are still not grateful for them. I refer in particular to the Republic of Ireland, which receives no less a figure than £1,800 million a year for 3.5 million people. That amounts to £35 per family every week—not every year but every week. Yet Mr. Reynolds, the Prime Minister, wants more. He is not satisfied with £35 per week per family. What is more, he had the audacity to say—I saw him on television—that it was good for the British taxpayer to subsidise his country in that way. I do not believe that the British taxpayer would quite agree with that. Certainly the British taxpayer does not want to pay any more and I sincerely hope that the Government will not agree to any further increase in funds, even if the Irish Government, as Mr. Reynolds said, or the Portuguese Government have threatened to block enlargement of the Community.

The ERM too must be looked at. I say to the noble Baroness that I fear that the ERM is doing considerable damage to this country at the present time. If we do not obtain a realignment of currencies, we shall find ourselves in a very serious economic situation indeed. We must have the courage to tell the Germans that we shall not allow German reunification to wreck our economy completely. The economy is already teetering on the edge of a 1930s slump. Noble Lords do not have to listen to me; they just need to read the newspapers in order to understand that—a situation of mass unemployment, collapsing businesses and a stock market on the verge of another Black Monday. We need to reduce interest charges very firmly indeed. Real interest rates are at a record high and our economy cannot recover unless something is done about it. The next few months ought to be used by the Government during their presidency to ensure that there is a realignment within the ERM.

Finally, I deal with the issue of the referendum. I simply cannot understand why the Government are so opposed to a referendum. It was quite ridiculous for the Prime Minister to suggest that referendums are a device of demagogues and dictators, when the reverse is true. I am and always was an admirer of Clement Attlee but even he made the occasional ill-considered remark, and that was one of them. Are the Danes, the Irish, the French and, above all, the Swiss ruled by demagogues and dictators? Of course not. The Prime Minister is wrong to imply by his quotation that they are.

The essence of democracy is that the people are allowed to debate and speak out. On this issue, which is so vital to their future, the people must be allowed to speak as a free and independent nation. They must be allowed their say. Like my noble friend Lord Callaghan, I believe that it would redound to the Government's credit if they allowed the people of this country to have a say before the Maastricht Treaty is finally given Royal Assent. I do not believe that the people want more centralism; they want to have back more of their government. But if the Government win, they will be able to go forward with their policies in Europe with far more authority. I sincerely hope, as my noble friend has urged, that the Government will reconsider their policy on this matter.

5.45 p.m.

Lord Cockfield: My Lords, I am sure that it must be a matter of great concern to my noble friend Lady Thatcher that the noble Lord, Lord Stoddart of Swindon, promises her his support. It is almost as bad as if the noble Lord, Lord Bruce of Donington, were to say that he agreed with me. Having made that point, the Companion to the Standing Orders states that in the case of a maiden speech the speaker is: "to be congratulated by the next speaker only, on behalf of the whole House".

I am absolutely certain that the words "on behalf of the whole House" are entirely true in relation to the tribute that the noble Lord, Lord Callaghan of Cardiff, paid to my noble friend. Despite the injunction in the Companion, I should like to say how very much I appreciated a speech of such unusual quality, outstanding interest and great eloquence. As my noble friend said, it was somewhat short of unprovocative content, but that perhaps was one of its advantages rather than being a disadvantage.

Before I turn to the substance of this debate I must apologise to the House. I am involved in the same Europe-related event as the noble Lord, Lord Jenkins of Hillhead. I fear that it means that at some later stage in the evening I shall ask permission to depart from your Lordships' House.

I entirely agree with the noble Lord, Lord Callaghan, that a change has occurred in public opinion and public outlook over the past 18 months or so. At the time I launched the internal market programme in 1985—I greatly appreciate what my noble friends Lady Chalker and Lady Thatcher said about my involvement in that programme—the future appeared to be opening up. We had come out of recession and were moving into a period of expansion. It was a period of political stability in the world; and though it was not a pleasant stability, it was at least stability. We now live in a very uncertain world, a world beset with recession. Not unnaturally, there are doubts and hesitations in many places. These are matters to which we need to pay due regard.

A point which the noble Lord, Lord Callaghan, did not perhaps emphasise so much was that there is also a gap opening up between peoples and their governments. That is most clearly illustrated in the case of the Danish referendum. But one sees it elsewhere as well. It is a very worrying circumstance because, at the end of the day, it is the nexus between government and people which is the guarantee of the continuation of democracy. If that gap is beginning to open up, it is incumbent upon governments to play their part in trying to close it.

I turn more specifically to the Maastricht Treaty itself, which I regret is tending to dominate the British presidency. It is an important treaty and I believe that we ought to ratify it. I believe that it would be in our interest to ratify it. Equally, I believe that its importance has been somewhat exaggerated. To a very large extent the policies in it are already agreed policies of the Community. To a large extent those policies already have a legal basis in Community law. To some extent some of them have already been carried out in Community law.

Because I am trying to be non-controversial, which is an unusual role for me, I mention the case of the liberalisation of capital movements. The Maastricht Treaty provides for the total liberalisation of capital movements. In fact, the position is that we, among eight member states, have already had that since 1st July last year. The other four member states are under an obligation—some of them are ahead of their obligation—to achieve total liberalisation by 31st December this year. So in those respects there is nothing objectionable at all in the Treaty of Maastricht. It gathers together many strands of Community policy. It is also doing something else: it is dotting the i's and crossing the t's. It is dealing with many of the institutional arrangements to which the Single European Act specifically referred. Those of you whose memories are long enough, will remember, as I am sure does the noble Lord, Lord Stoddart of Swindon, that the Customs Union, the foundation stone of the Community, was created by a short provision in the treaty with a vast mass of subordinate legislation by way of regulation.

The great merit of the Maastricht Treaty as at present drafted is that, instead of having those matters spread over an enormous mass of regulations, much of that subordinate legislation is in the treaty. That conforms exactly to the pressures that we have had in your Lordships' House in relation to domestic legislation. Noble and learned Lords, as well as the rest of us, have on many occasions pressed that all the important legislation ought to be in the principal Act; it ought not to be dealt with by subordinate legislation. In that respect, although I do not say that the draft of the Maastricht Treaty was influenced by the views of your Lordships' House—I would have hoped that it was—that approach is entirely in line with the approach that we in this House have taken in relation to domestic legislation; and it is a sound approach.

I wish to say little more about the Maastricht Treaty. We may be debating it in more detail. I can substantiate each of those points individually and in detail. I make one final comment. Not only when I was at the Commission, but subsequently, I have said that I would have preferred matters to be dealt with sequentially: that we should first provide for the single market and, when we had done that, we should move on to the single currency. We should learn as we went along so that each step forward was built upon the success of the step before. After all, that was the policy that was laid down by Winston Churchill in his 1946 speech in Zurich. I believe that it is a wise way to proceed in such a difficult area.

I also made one other point; I have made it in your Lordships' House. I said that I would work towards economic union because we would see economic union in my lifetime. I would not do anything about political union because I felt that that could be left to a future generation. It has not proved to be thus. Either events have moved faster than I had anticipated or I have survived longer. Which is the explanation, I do not say. However, I believe that there is an element of having rushed the fences. Nevertheless, do not exaggerate the dangers involved because the treaty as it stands deals with political union matters as intergovernmental co-operation. In foreign policy—one of the most sensitive areas—there was such intergovernmental co-operation in the 1970s. It preceded the Single European Act. It was given a legislative base in the Single European Act.

If one considers the other limb of political co-operation—namely, justice and home affairs—such matters have been dealt with for many years by political co-operation in two bodies called TREVI (which is a fountain in Italy), and Pompidou (who is a past president of France). There are therefore ample precedents for dealing with those matters in that way. The Maastricht Treaty rationalises the issue and sets it down in writing.

Let me leave the Maastricht Treaty. On the single market, I greatly appreciate what both my noble friends Lady Chalker and Lady Thatcher said. When I launched the programme in 1985 there was considerable scepticism as to whether we would succeed. I was one of the few people with sufficient mathematical ability to work out that 1992 would be the year in which the United Kingdom held the presidency of the Community. I believed that in the end that was the guarantee of success for the programme; and so I hope it will turn out to be.

I shall not say anything about subsidiarity; it would take me too long. In its origin it is a religious term. It is an extraordinarily useful concept in theological or philosophical disputation but its value as a guide to practical experience and application is somewhat limited. I could explain that with innumerable examples. One of the most important is this. We have an old-fashioned saying in this country that one cannot put square pegs into round holes. One of the troubles is that the British insist on making their electric plugs with square pegs and the French insist on making their sockets with round holes. The only way one can get over that problem is by legislation at European level. Incidentally, one will find that factor in all the high-tech industries. Such legislation does not come from the Commission. It does not come from the Council of Ministers. It does not come from the member states. It comes from pressure from industry. That is where it ought to come from. I shall say nothing more about subsidiarity.

On enlargement, I know that the words used in the final communiqué—that the formal negotiation should not start until after the treaty has been confirmed—have given rise to comments that that has been a set-back for the United Kingdom. I do not regard the situation as such. There are three important steps when dealing with an application for succession to the Community. The first is the production of the Commission's opinion or avis. The second is the decision by the Council. The third is the Treaty of Accession. When we joined the Community, the Commission avis was published on 19th January 1972, a Wednesday. The decision by the Council was on 22nd January, a Saturday. Obviously in those days they had no working hours directive; they had to work on Saturday. The treaty was signed on the same day, 22nd January. Therefore when the whistle was blown —if I may use such a familiar phrase—it took three days.

Let me take Austria only as an example. Austria applied two and a half years ago. Two and a half years of work have been done. If the treaty is ratified by the end of this year it is perfectly feasible to have Austria as a member of the Community before 31st December, and what a feather in the cap it would be for the United Kingdom presidency. It is feasible because I have referred to the dates relating to 20 years ago.

Finally, when my noble friend Lady Thatcher occupied the presidential chair of the Community, it was an extraordinarily successful presidency. She was unduly modest. It was a very good and successful presidency. I look forward to the present presidency being equally as good and equally as successful.

5.59 p.m.

Lord Houghton of Sowerby

My Lords, I nearly always agree with the noble Lord, Lord Cockfield, on this subject. His speech was no exception. I am sure that he is a very wise former member of the European organisation. He is listened to with great respect on that account.

This is a most unusual day for us all. Never before has a former Prime Minister come to your Lordships' House, with a former Prime Minister responding to her arrival and her speech, who between them cover 25 years of our recent history of politics and Parliament. I hope that the added prestige and the value of the experience and wisdom that we can offer will lead to a decline in the scornful references which are made sometimes by responsible people about the position and functions of your Lordships' House. This is the best House of Lords that we have and it is indispensable to our parliamentary system. Say what you like, we are worth a great deal more than a bundle of county council members who might come here as a result of proportional representation, and with no clothes on! We are fortunate to be serving in your Lordships' House at this time.

I remember the maiden speech which the noble Baroness, Lady Thatcher, made in the House of Commons. I believe that she drew a place in the Ballot for Private Member's Bills before she had made her maiden speech. That appeared to create difficulties. I also remember that she chose a controversial subject for her Bill; it was the secret sessions of the committees of local authorities. I remember that there was chuntering among her own Back-Benchers because a new Member had arrived and had thrown that little brick of controversy into the field of Private Member's Bills.

A dear friend of mine also saw the noble Baroness enter the House of Commons. He had met her at Dartford when she was Margaret Roberts. He came to this House with me in 1974—I refer to the late Lord Pannell. When the events that I have described happened in the House of Commons Lord Pannell said to me, "This girl is out to captivate this place". Captivate it she did—I believe that she came near to dominating it but I shall not pursue that line of thought.

We are grateful that the noble Baroness has said it all this afternoon. If she had wished to speak for an hour we should have permitted her to stretch the courteous length of maiden speeches in order that we could hear the lot in one go. In doing so it helps us later to sort out our differences in respect of the legislation which may come forward. Perhaps I may say too as an elder statesman—after all, I am getting on in years—that the noble Baroness. Lady Thatcher, chose a certain style of delivery. Her judgment in that allowed her to say all that she intended to the acceptance of your Lordships in manner if not in substance.

In speaking in the debate I must first declare that we must believe in the EC no matter what its bureaucrats may do to it. Unless we do so and have faith, we shall run into numerous needless and acrimonious difficulties with our friends in the EC. If we do not have faith in the EC as an institution and as a concept of European unity we shall not be in business in the EC.

I shall not trespass on your Lordships' time by explaining that, for me, it is a moral issue going back to the war. Two world wars destroyed millions of lives in Europe and caused devastation beyond belief, and all because of European disunity. During the First World War, of which I am one of a dwindling number of survivors, those of us who fought thought: what price would be too high to pay to ensure that this never happens again? Almost anything that we could give but our lives would be justified for peace in Europe. Many people gave their lives. I derive my faith in Europe from that experience. While Europe is in harmony and in unity of association it will be at peace. We can enlarge the scope of the European influence and bring within it newly-liberated countries which will add to the peace and prosperity of Europe.

Furthermore, we must get rid of all the nonsense about nightmares. There is no monster of a superstate which will swallow us up unawares. There is no army of bureaucrats with a special desire to irritate the British public and to make life difficult where it is unnecessary to meddle at all. We have a new institution in historical terms and it is a wonder that it is going as well as it is. It is a wonder too that we remain in such accord, having regard to the aggressive nature and disputatious manners of human beings. If we can establish our faith in the EC the Europeans will take a great deal from us in our suggestions about the future of the institution.

I now turn to what I believe is the nub of the debate; it is what Mr. Major may do in his short term as President of the Council of Ministers. That is not an elective office and no claims can be made that those who occupy it are endowed with great gifts of unity or anything else. Each country holds the office strictly in alphabetical order and it is our turn now. The period of office is short; shorter than those of the President of the Commission and the President of the European Court. During the six months that are available to Mr. Major what can he do? I agree entirely with my noble friend Lord Richard that Mr. Major will not be there to advance national interests; he will be there to look after the business and welfare of the whole Community. An article published in the Financial Times on Tuesday 30th June stated that Mr. Major wanted to undertake a review of all areas of EC activity to ensure that the only decisions taken in Brussels were those which could not be effectively taken by national governments. There is more to the formula than that. Some decisions must be taken which require conformity in order to put in place essential or strongly-desirable conditions to provide a framework of fair competition in a free-trade area.

Many issues arise from the Commission which irritate people but they have in their origin an important purpose. That purpose is either economic or the economic consequence of another purpose. Perhaps I may give your Lordships a simple example. Recently the European Parliament passed a Motion by 244 votes to two votes in favour of banning the entry into the Common Market after 1998 of any cosmetics which have been tested upon animals. That cosmetic ban represents a strong line of thought of many people in Britain. A good deal of public opinion is firmly behind a ban on the painful tests on animals of beauty treatments or other cosmetic products. I believe that that has gone to the Commission now and it will have to look at that. If the Commission wishes to pass anything on to the Council, it will do so this Autumn.

What do we do? The promotion of animal welfare is the purpose of that provision but it will have economic consequences because we are a large manufacturer of those products. In order to export such products to the United States and Japan we are required to send certificates relating to animal testing. Those are the conditions. Therefore, the pharmaceutical industry will be affected by the ban on those exports. That will affect other countries too and yet, as far as we know, only two member states have raised difficulties about that in the Parliament of Europe.

Let us take another example. There are some difficulties as to whether we should agree not to reduce the rate of VAT below 15 per cent. Why is that? VAT has an effect on prices and prices have an effect on trade. Therefore, from the point of view of the level of indirect taxation, there is some point in having the rate as uniform as possible throughout the whole system. The harmonisation of indirect taxation goes right back to the Treaty of Rome. That is a matter which we must face. Is that pettifogging interference?

I must mention another point in the presence of the noble Baroness. The fact that Parliament has previously settled certain matters in this country does not disqualify us from transferring our prerogatives to the Common Market. It is all a matter of what are those prerogatives. I take the economy as an example. There is a great deal of detail in our legislation on economic matters and I believe that the structure of the European Community does not produce the necessary scrutiny of the justification and economic purpose of what is proposed in legislation.

Perhaps the Prime Minister will set that review in motion and we can begin to see lines of demarcation. Those problems are common to all federal bodies: what is due and appropriate to the centre; and what can be left to the members of the federation? In a very tentative form, the European Community is a form of federation.

That is the task which the president of the Council of Ministers has on hand. If that can be provided for either by the machinery or by scrutiny of the directives which are coming forward and by more communication with the peoples of the countries which may have to accept them, that will do a great deal to remove a lot of low secular criticism of the Common Market when, after all, its purpose is lofty. I believe that the means which it is adopting are worthy of the maximum understanding and support.

6.14 p.m.

Lord Bethell

My Lords, I am extremely pleased that three Members of the European Parliament who also sit in your Lordships' House are here to show their support for my right honourable friend the Prime Minister and the President of the European Council.

It is perhaps surprising to look back a few months to see the universal applause which greeted the Prime Minister's return from Maastricht after he achieved the Maastricht agreement. Who would have thought that so much could have changed in a few weeks? At the time of Maastricht he was under very grave threat and great danger of failing to reach an agreement and of being blamed by the rest of the 12 member states for the collapse of that extremely important treaty. If Britain had been the cause of that collapse, we could have said goodbye to serious movement towards the single market and enlargement, the main aim of our presidency.

It is very much to the Prime Minister's credit that he was able to reach agreement in Maastricht in spite of the various opt-outs that were agreed by him and the other member states. It shows that one can sometimes win concessions by saying yes to the ideals of European co-operation and no to the detail, rather than saying no overall.

That is why the European Parliament in general has reacted favourably to the Prime Minister's attitude and to his determination and courage in saying that he will persevere with ratification. It would be wrong to over-estimate the effect of one vote by a small majority which seemed to challenge the achievements of that agreement. Sometimes elections are fought and voted on not for the purpose for which they were originally called; for example, during the recent referendum in Ireland, abortion was the main issue discussed rather than European issues. Also, there is a capriciousness which sometimes overtakes electorates when matters are put before them which may not have an immediate effect upon the government of the day. I believe that there is a danger that referenda may become something akin to mega by-elections, enabling an electorate to let off steam and to express a general dissatisfaction with the state of affairs, knowing that what they do may not have an immediate effect on changing a government.

I should like to join other noble Lords who have expressed their congratulations to my noble friend Lady Thatcher. She made a speech of considerable brilliance and, while not entirely uncontroversial, it was extremely moderate, well-phrased, erudite and eloquent. I am sorry that she is no longer in her place because I intend to make reference to, perhaps, one of the few controversial points upon which she touched; namely, the Single European Act. Of course, it was on her advice that that Act was accepted by Parliament.

She said that the Single European Act was not in the same league of importance when it came to transferring powers from the member state to the European institutions. One need only look at the text of that short document to see the far-reaching effect of the Single European Act. One perhaps looks with wonderment at how easily it passed through both Houses of Parliament.

The Single European Act speaks of the transfer of relations as a whole into a European union. Of course, it was some years ago that the 12 member states committed themselves to the ideal of European union. The Act spoke of a progressive realisation of economic and monetary union. One of the most interesting paragraphs in that Act is Article 30 which makes it clear that the member states would formulate and implement a common foreign policy. It went on to state that that area would encompass economic aspects of security.

I remember thinking, even as a Euro-enthusiast, that perhaps that was going too far, especially since in the final resort it placed the foreign policy of the United Kingdom under the control of the European Court of Justice in Luxembourg. Euro-enthusiast though I be, I am relieved that the Maastricht agreement would repeal that section of the Single European Act and, if it is ratified, it will allow the foreign and security policies of this country, under the intergovernmental aegis to fall outside the scope of the European Court of Justice. If the Members of another place and your Lordships decide to vote against ratification, the foreign policy and defence of this country will remain under the control of the Luxembourg court. I wonder whether that particular aspect has been noted by those who proudly call themselves Euro-sceptics.

Is it really being over-enthusiastic to insist upon the subsidiarity paragraphs of the agreement? My noble friend Lord Plumb knows more about this than I and he will speak very shortly, but I hope that the subsidiarity paragraphs of the agreement can he used to bring about fundamental reform of the common agricultural policy to transfer much of its operations back to member states. I have in mind in particular the area of intervention in the purchase of agricultural products. That is one of the aspects of our membership of the European Community that causes particular offence in urban areas, one of which I represent in the Strasbourg Parliament.

The question of the implementation and observance of European Community laws has annoyed and irritated us for many years. There are some countries which do not scrupulously observe the laws made by European institutions. However, largely at British insistence, there will be provision for member states, institutions or companies that violate those laws to be brought before the European Court of Justice (and I think before national courts) and fined. I believe that that will have a good effect on the implementation of law—something that Britain is better at doing than some other countries.

On the question of the European Parliament I have to declare an interest. But I sometimes wonder why those who are sceptical about our European membership do not draw the obvious conclusion from their rightful claim that there is too much power in the civil service of Brussels. Surely, the whole purpose of an elected parliament is to control bureaucracy. That is what the European Parliament is all about. Its duty under the treaty is to supervise the Commission. Yet some member states are unwilling to give us the tools we would like to do the job. We do not yet have the same influence and control over the Commission as your Lordships (let alone the Members of another place) have over civil servants in Whitehall. We do not have the same ability to probe, seek answers, get letters from government departments, ask parliamentary questions and initiate debates with which your Lordships are so familiar. We do not have the incisive power that we need.

The Maastricht agreement takes us some steps forward. If ratified, it will give us the ability to run for election in 1994 and ratify or reject the Commission with its presidency which will be appointed in the second half of that year. It will give a purpose to the political composition of the Parliament because it will be able to make clear the sort of commission it will vote for and the sort of commission in which it will have no confidence. If it works it will give the European Parliament considerably more meaning than would be the case if Maastricht was discarded. In short, I believe that the agreement combines the benefits of European co-operation and economics of scale economically with the protection that is needed for the maximum amount of sovereignty for the member states that comprise our European Community.

The Prime Minister has done an excellent job in making his opinions known across the European Community. He had overwhelming support in the House of Commons a few months ago. The only criticism at that time made by Members of the Labour Party was that he had not gone far enough in particular over the social chapter. It would be very sad if, having made his position clear and given his word, the agreement was ratified by the House of Commons twice—remembering he was applauded when he came home after the agreement—and he then had to back down and change it. He would look like someone who had given his word and shown himself unable to carry it out. I believe that in the difficult six months that lie ahead we should give our unequivocal support to the Prime Minister as President of the European Council, as Leader of our country and as one of the great supporters of Britain being at the heart of Europe.

6.27 p.m.

Lord Cobbold

My Lords, it was a privilege to be present in your Lordships' House today on the occasion of the maiden speech of the noble Baroness, Lady Thatcher. Her arguments are strong and her eloquence is unrivalled. We look forward to further instalments of the great European debate. It is a great debate because now that mass capitalism has taken root we may perhaps see a realignment of British politics in the next century away from labour versus capital towards "nationalist" versus "European".

The present period is momentous in the development of the European idea. Managing the whole range of vital issues listed by the noble Baroness, Lady Chalker, presents a real challenge to the Government over the next six months. Whether we like it or not, as the noble Lord, Lord Richard, said, the Maastricht issue, in the light of the Danish referendum, will dominate much of the period of our presidency. The debate on Maastricht has often confused issues of principle and practice. The main issue of principle remains whether or not European nations should work together towards closer integration and, if so, it is in the interests of this country to participate in the process. The practical issues relate to the mechanics of how far and how fast the process should go and how it should be managed. Maastricht is principally concerned about planning the next very important steps along the road to greater integration, not about the direction in which the road is leading.

I work for a small Danish-owned company. My Danish colleagues, who to my initial surprise voted "No", have said subsequently that they were not voting against European integration as such but only against the way it was currently being implemented. That echoes an emerging feeling of many people throughout the Community, as Lord Callaghan and several other noble Lords have noted.

On the issue of principle, the United Kingdom made its decision in the early 'seventies; but from time to time the issues need to be restated. Nationalism in Europe does not have a good track record. It is the very stability and success of the European Community, albeit under the umbrella of NATO, that has been the inspiration for the people of Eastern Europe in their struggle against the economic and intellectual poverty of communism. Some argue that it is illogical for Western Europe to be forging greater union while the peoples of Eastern Europe and the Russian empire are struggling to rediscover their identity and independence. On the contrary, it seems to me to be even more important for the free peoples of Western Europe to demonstrate their solidarity during this turbulent period.

It would be a tragedy if failure to ratify Maastricht were to put Europe into reverse and, in the words of the noble Lord, Lord Callaghan, to unleash rampant nationalism. It will be a sad day when the likes of the noble Lord, Lord Houghton of Sowerby, are no longer here and their memories cannot be shared. I do not have as much confidence in the ability and experience of the next generation, and I wonder whether they will be so keen to press forward with political union. I hope that the noble Lord, Lord Cockfield, lives long enough to witness that full union.

The Danish decision must be turned to advantage. As many noble Lords said, there is a widely-held perception that politicians have been moving too far ahead of the people and that the Commission in Brussels has grown too big for its boots; that it is interfering tiresomely and unnecessarily in matters of local concern. There is a fear of imposed uniformity and of the gradual whittling away of the diversity and local traditions that are the essential essence of European culture. There are also worries that rules painstakingly negotiated at the European level are not being enforced uniformly by all member states. Those that are conscientious and comply are disadvantaged by those who sign up but do not change their ways. Those are the fears that the British Government must address during their six-month presidency. Denmark has given a warning.

I say a brief word in regard to subsidiarity: clearly that concept is in need of clearer definition and more rigid application at the European level. But Brussels is not the only interfering bureaucracy in Europe, and some of the others are considerably larger. The administration presided over by the noble Baroness, Lady Thatcher, was not famous for its application of subsidiarity. If it is to be enshrined as a fundamental principle of European decision-making, it must he applied at all levels of government.

Turning to specific issues of the Maastricht Treaty, I should like to make a few comments on economic and monetary union. First, I hope that it will be possible to maintain the timetable for monetary union embodied in the treaty. Any weakening in the commitment to convergence and to a single currency can only lead to uncertainty in financial markets. Uncertainty commands a risk premium. Sterling interest rates would almost certainly rise in relative terms and the risk of an old-fashioned sterling crisis would re-emerge. I believe that a single currency in Europe passes all the subsidiarity tests. It is essential if full advantage of a single domestic market is to be achieved. If member states retain their individual currencies governments will always be tempted to pursue policies of competitive devaluation.

The proposals for introducing a single currency under the Maastricht Treaty are not exactly user-friendly as they stand. If the public are not persuaded that a single currency is a good idea, there is a serious risk that they will apply a Danish solution to its introduction. Much more attention must be paid to marketing the idea to Europe's 340 million consumers. For example, the ecu as a name may sound well in French but it has an Esperanto feeling about it in English. A currency is both a store of value and a means of exchange. The name is therefore psychologically important. There is no reason why the ecu should not have a different name in each language. For example, we could resuscitate the guinea, which has a familiar ring to it and a strong sense of value. There are plenty of other options and the public in each country should be invited to choose.

Mention was made of the fact that 70 per cent. of Germans do not want to lose the deutschmark. I believe that that percentage could be sharply reduced if the central rate of the deutschmark against the ecu was moved from 2.055 to 2.00. The deutschmark would then be exactly half an ecu and the Germans could continue to think and talk in terms of the deutschmark. Some attention to that kind of adjustment would help greatly to make the treaty proposals more acceptable.

The message from Denmark is that the people want more say in how Europe is managed. They object to seemingly petty interference with local values and cherished diversity. I believe that the Maastricht Treaty should go forward to ratification. But it is the task of the British Government during their important six-month presidency to find a formula for its implementation which firmly enshrines the principle of subsidiarity and reassures the people of Europe that their diversity of culture and lifestyle are not threatened. I wish them well in that difficult task.

6.34 p.m.

Lord Plumb

My Lords, as many have said, today is an historic day in every sense. As one of those 200 Members of this House who were invited to serve by our former Prime Minister, I welcome her maiden speech today. It was a fine and eloquent speech. I am sure that it will receive wide publicity and I look forward particularly to the debates that will ensue from this one.

I particularly welcome the comments made by my noble friend Lady Chalker who set out so clearly the programme of events which our Government must face during the next six months under the British presidency. I believe that the citizens of the United Kingdom can feel well satisfied that during those six months of the European Community's development they will be safe in the hands of our Prime Minister, the right honourable John Major, and his Government as we move towards that single market which was so brilliantly pioneered by my noble friend Lord Cockfield. We have a responsibility to make sure eventually that it works and works, we hope, to his satisfaction.

The programme that has been set before Britain and the British Government is an extremely ambitious one. I should like to try to explode the myth that is in the minds of many people that the Danish referendum has stopped progress. Far from it. That progress is still developing. I find it difficult to understand those who say that the Maastricht Treaty is dead when it has not yet had the chance to live. It certainly delayed some of the agreements which were reached and which we hope will be back on course before too long.

We should remind ourselves that since the outcome of Maastricht we have seen a reform package of the common agricultural policy that probably goes further than is appreciated by many noble Lords in this House. We heard from my noble friend Lady Chalker that the aviation package—which is considerable—is there before us and settled. Many other issues have been cleared under the Portuguese presidency.

I hope that during the rest of this year we shall see the important settlement of GATT where the European Community plays a prominent and important part and which will be led by the British presidency. The Prime Minister made it absolutely clear that in his opinion we should ratify the Maastricht Treaty as soon as possible and that that must be in Britain's interest.

It is clear that the upsurges of extreme nationalism are producing divisions in Eastern Europe and many other countries. They are producing divisions that we can ill afford. We must therefore set an example in Western Europe, which I believe we are doing, as the last bastion of peace, democracy, respect for human rights, prosperity and stability.

Subsidiarity, which is so important to us—or at least its definition is—contrary to the opinion that many have already expressed, limits the powers of European institutions and rules out centralism. The Community can act only within the limits of the powers and objectives assigned to it by the treaty. It does not give more power to the Commission. People's rights through democratically elected parliamentarians can therefore be safeguarded. It takes a big step away from the present Community system in which the European Court ensures the rule of law and the European Parliament plays a greater part in legislation. It moves us towards the intergovernmental system for which our Government fought so hard two or three years ago. We are now in the ball game that we asked for. It gives governments greater power and a veto over policy decisions. Therefore, it moves the centre of European activity away from the common agricultural policy and some of the technical matters which are of concern to us towards greater flexibility in decision-making.

I sense that wind of change which is blowing through the corridors of Europe at the moment and which we ask for. It is very British. It is giving us the opportunities that we have been demanding for so long. In all of this the European Parliament will have a right to be consulted over the appointment of the Commission president. It will be asked to approve the Commission as a whole, together with its programme, before it is appointed. Therefore, this is a major change towards greater democratic control.

It also envisages much closer co-operation between the European and national Parliaments which is a crucial move towards more democratic control. I am sure that during the British presidency we shall see more common sense in what is often described as a very uncommon market.

We shall undoubtedly move towards greater cohesion and convergence as we recognise the benefits to Britain of economic and monetary union. I am convinced that the strength of our financial institutions in the City of London can lead the economy of the European Community in the right direction, given the backing and the political will. The fact that so many countries are knocking on the door to join speaks for itself. I believe that they must be encouraged by the support that they are receiving from our Prime Minister, this Government, our leaders and, we hope, from this House.

It would be folly and irresponsible to stop the progress of European unity when the world is envious of the contribution that we are making towards peace and security. During my two-and-a-half years as the President of the European Parliament I had the privilege, on behalf of the Parliament, of going to 32 countries outside the 12. In every one of those countries I was received like a head of state. I was received as someone who was trying to bring unity into the difficult situations which they had seen, witnessed and perhaps read about in history concerning the European Community. Therefore it would be folly to let them see that we are not bringing about that unity that they believe is a great possibility and a great breakthrough in the interests of peace in the world. It would also be folly to make the important work of the Council of Ministers any more difficult than it will he under the normal procedure. They are therefore deserving of our support so that they can shape events for the future rather than react to them.

6.43 p.m.

Lord Jay

My Lords, I thought that the Prime Minister was going a little far earlier this week when he said, or appeared to say, that it would be a breach of faith and almost dishonourable for anybody to disagree with what he had been doing in the agreements made at Maastricht and Lisbon. Of course, governments have the right to make agreements and sign treaties, but that does not mean that Members of Parliament have not also the right to exercise their judgment and say so if they do not wholly agree. Ministers must remember that they are just as accountable to this Parliament for what they do in Brussels as for what they do in Brixton.

In this case the Prime Minister, despite a large number of brave words, surrendered quite a few further points at Lisbon over and above what was agreed at Maastricht. The noble Lord the Leader of the House, I am sure unintentionally, slightly misled the House on Tuesday when he said that the Government had not agreed that enlargement of the EC could not take place until the Maastricht Treaty was ratified. In fact they agreed not only that the EFTA countries should not actually join before ratification, but that even formal negotiation should not begin until ratification was complete. I do not believe that the Government would now deny that is what happened.

That was something of a setback for the Prime Minister and for his fine sentiments about enlargement. M. Delors can now say to us "If you want enlargement then get on quickly with ratification". He can tell the EFTA countries that it is simply those obstinate British who are holding up their entry because they are going so slow on ratification.

The efforts of what one might perhaps call the extreme federalists in Brussels to exclude half of Europe from the club are still going on. If this attitude is persisted in, so far from uniting Europe, it will actually divide it. Instead of an iron curtain we shall have a kind of bureaucratic curtain between East and West. Therefore, I hope that those efforts will be resisted.

The Prime Minister gave away at Lisbon the substance of the case about the huge increases in EC expenditure on so-called cohesion funds for poorer countries and continued CAP extravagance. It is true that no figures were included in the formal agreement. But it appears that the Commission is now assuring the applicants that it is only a temporary form of postponement.

As regards what the noble Lord, Lord Plumb, has just said about the common agricultural policy, we also see reports now that the Commission is going slow in preparing the full debate on GATT involving the supposed reforms of the CAP. It is very far from certain that they will be ratified. One would like to know exactly what the Government are doing about that.

As regards the cohesion funds, it is really absurd economics to force the poorer countries, by a fixed exchange rate, into chronic unemployment and then have to pay for the unemployed thus created. The right way to help weaker countries is to let them maintain a competitive exchange rate and so employ their populations in producing whatever they can do best and earning themselves the standard of living that that justifies. However, on top of that, we learned on Tuesday that while the Prime Minister was talking grandly about subsidiarity the Chancellor was quietly giving away the fundamental right of national governments and the British Parliament to decide the rights of VAT. We have been frequently assured that the Government would never give those rights away. We have been assured over and over again that that surrender would not be made. In the referendum held in 1975 the official leaflet urging a "Yes" vote expressly guaranteed that rights over taxation would not be given away in the EC negotiations. Are we really to infer that that promise is now in effect being broken, if only bit by bit?

Perhaps I may take a longer view. Already in the past 20 years the efforts of the continental federalists (one must admire their pertinacity) to create a superpower in Europe as a kind of rival to the United States, has done a good deal of long-term damage to the British economy as well as to our right to self-government. The permanent increase in food prices and labour costs forced on us by the CAP, which are still with us, have been the main cause of our visible trade deficit and particularly our deficit even in manufactures which never existed before 1973. The adoption of a grossly over-valued exchange rate in 1990 has been the main and predicted cause of the acute deepening depression, high interest rates and the ever-growing unemployment of the past two years.

Of course, all these centralised economic policies —from the CAP right through to the single currency —were not really designed or intended entirely for their economic merits, but were largely seen by the federalists as a means towards the centralised super-state which they had in mind. M. Monnet said so frankly from the beginning, and so did M. Spaak. It is no good M. Delors pretending now that he is not hankering after a super-state. As soon as Maastricht was signed, M. Delors semi-publicly proposed a far-reaching increase in the Commission's powers and in EC spending, and only withdrew it when somebody told him that it would lose him the Danish referendum. It was, however, pretty clear evidence of what he really wanted.

Indeed, if it is not a super-state that the federalists are seeking—as some people are telling us today—why do we have to have a central bank, a single currency or even a single citizenship? A single currency is totally unnecessary for a genuine free trade area, as has just been convincingly argued by Dr. Martin Felstein, a former chairman of the Council of Economic Advisers in the United States, in an article in the Economist two weeks ago.

If one looks at the whole spectacle, one is inclined to ask this question: When all is said and done, for what purpose and to what end is this vast centralised structure to be constructed and forced upon us? That question always takes me back to a three-hour conversation with Jean Monnet in 1952. For Jean Monnet, the only thing that mattered in the world was the avoidance of another Franco-German war. I believe that his view would have been echoed by my noble friend Lord Houghton of Sowerby. In his view, the way to avoid that war was to tie down Germany by a constitutional and political straitjacket which would have to be disguised in its early stages as a mere trading organisation. That was his message and it has been remarkably faithfully followed ever since.

Of course, it was well-intentioned, sincere and deeply felt, but as I see it, that view rested on two highly questionable and probably false assumptions of fact—first, that a Franco-German war was a real threat in the 1945 world and, secondly, that it could be prevented by tying down a future hypothetically aggressive Germany with legalistic strings. I do not believe myself that the threat of a future aggressive Germany after 1945 has been or is anything but exceedingly remote, although apparently Dr. Kohl does not wholly agree with that. But however that may be, the further idea that a renascent aggressive Germany, if it really did appear, would be deterred by a scrap of paper seems to me so unrealistic as to be almost absurd. And what an historic irony it would be if a mechanism intended to tie down Germany should end up with a group of German central bankers in Bonn determining the whole livelihood of Western Europe.

A better way of ensuring a peaceful Germany would be to ensure that it follows policies that provide employment and rising standards for its own people. I think that we all know that if such a highly improbable German threat—as I see it—ever did arise, the safety of this country would ultimately depend on one thing, the support of the United States. We all know that, and it is one reason why I agree profoundly with my noble friend Lord Callaghan of Cardiff that any weakening of NATO must be avoided at all costs.

For all those reasons and quite a few others, the duty of the British government now is, as I see it, to prevent damage to our economy and our democracy as a result of the loss of any more powers to Brussels. As I see it, the Government's objectives, therefore, in the coming presidency —and these are very much summarised—should be, first, the widening of EC membership to resist centralisation; secondly, no further increase in EC spending; thirdly, no transfer of powers, particularly over taxation, to the EC; and lastly, a subsidiarity agreement which is both clear and binding. Failing those assurances and those conditions and until we have secured them, I do not think that the Maastricht Treaty should be ratified. Until those conditions are secured, I believe that the duty of all of those in this country who wish to preserve our system of government is to resist ratification and to preserve a system that has rightly been described by Sir Winston Churchill as, With all its human faults, Better than any of the known alternatives".

6.56 p.m.

The Earl of Bessborough

My Lords, I should like to start by paying tribute to my noble friend Lady Thatcher for her quite remarkable, highly entertaining and only semi-controversial speech this afternoon. I thought that the tributes paid to her by my noble friend Lord Eccles were particularly pertinent when one considers the way in which she has changed the atmosphere in this country generally—quite apart from her position in regard to the European Community. I agree very much with what my noble friend Lady Chalker has said, and especially of course with my right honourable friend the Prime Minister when he said that Britain cannot afford to sit on the sidelines and watch others shape the European Community. Over the next six months Britain will have no alternative, in my view, but to be at the centre of the Community and to exercise appropriate influence.

I shall be brief. I have spoken so often on the importance of greater European integration both in your Lordships' House and in the European Parliament that I must not repeat what I have said in the past. Indeed, I even hesitated to speak at all today. However, it is good to see both present and past Members of the European Parliament taking part in this debate as well of course as former highly distinguished Commissioners who are also in their places.

At present we and our partners in Europe need to consider how to carry the Maastricht process forward but—again in my view—without getting too far ahead of public opinion. We must also look at the question of the financing of the Community. I am glad that the Government intend to continue to be firm over any increases in Community funding. We need to consider what needs to be done in order to make the single market complete, as well as drawing up mandates for negotiations to enlarge Community membership. No doubt we shall discuss this latter question in detail on 14th July on the Motion that has been tabled by my noble friend Lord Aldington, and I shall probably have something further to say then.

I should also like to congratulate my right honourable friends the Prime Minister and the Foreign Secretary, as well as my newly ennobled friend Lord Howe, all of whom I have always greatly respected, on securing a legally binding text on subsidiarity in the Maastricht Treaty. Surely we must now all understand the meaning of that somewhat obscure term—that we do nationally, regionally or locally what can best be resolved in that way and only refer major political, economic and international monetary issues to the Community in Brussels; for example, such issues as the future of Eastern and Central Europe, Yugoslavia and the Middle East. I was glad to hear what my noble friend Lord Cockfield said on the matter. I thought that his observations were very wise.

I am glad to see that our insistence on the application of the subsidiarity principle has gained wider acceptance and that M. Delors—for whom I think we should also show some respect, even if we have not always been able to agree with him—too is convinced that ever closer union will be achieved only if subsidiarity is a clearly defined part of the European process. Although, as I say, we may not agree with everything that M. Delors stands for, during his term as President of the Commission he has certainly strengthened the Community.

I also agree with my right honourable friend the Foreign Secretary when he says that we should not overlook the advantages of the Maastricht Treaty—that it will lead the way to a decentralised, market-led, wider-looking Europe. I only hope that our Danish friends—and I have many—may come to have second thoughts, recognise those advantages and thus move towards ratifying the treaty.

Finally, perhaps I may say that I find it curious that those who supported the Single European Act, like my noble friend Lord Cockfield, and those who supported our entry into the exchange rate mechanism, as well as those who opposed a referendum in the past, should now take up such an anti-Maastricht stance. I support all that my noble friend Lady Chalker said on these complex matters. We shall no doubt be debating them all, not only during the next six months but also longer than that. I thank my noble friend for tabling the Motion and enabling us to express our views.

7.4 p.m.

Lord Selsdon

My Lords, as our period of presidency approached, I found myself wondering why it was that the United Kingdom seemed to he falling into two camps: one at Bruges and another at Maastricht, only 80 miles away, while at the same time, near the Field of the Cloth of Gold, French lorry and tractor drivers were ganging together to cut us off from Europe. I realised that there was perhaps a fear abroad that our political strength and will and our very democracy might give us increased power at the end of the coming six months. From my point of view, I have the utmost confidence in my noble friends on the Front Bench who have opened and will reply to the debate. I have a few requests and questions to ask of them.

The first matter relates to trade. I have to declare an interest in that I am still president of the British Exporters Association. I remind noble Lords that it was trade that led us into Europe; indeed, when the referendum campaign was going ahead we said, "Britain in Europe; it is our business to be there". We are there. We are among the strongest in Europe. Emerging from all those countries now are the very scourge of the Labour Party: the multinational corporations. But, instead of one, two, three or four, there are hundreds of them, as people set up in each other's countries and integration of trade takes place, despite trying to put square plugs into round holes.

A major event will take place—thanks, in part, to my noble friend Lord Cockfield. I am afraid that we are in for a major dive in exports within a nine-month period. I say that because, at the end of this year, our exports to the Continent of Europe will he home trade. There will he no need for support; it will he the home market. There is no need for this vast initiative of government bodies because the traders and the companies are already there. It is they who are putting pressures upon government for harmonisation, and it is they who are encouraging the Germans, who say that there are no non-tariff harriers, to open up their markets. Therefore, on the trade front within Europe as it is today we have no worries.

However, I ask my noble friends to recognise that trade of a home nature only is detrimental to economies. We need to pay attention to our exports and to the new export markets. As regards Europe, perhaps we should ask why is it that someone used to say that in order to be pro-European, it was necessary to be anti-American, or in order to be pro-British it was necessary to be anti-European. It is almost as though many people in this country are going hack 30 years or so and trying to open up a debate on whether we should be in the EC. That debate is long past.

We are in a new era. We are in an era where the opportunity for change and slow change of progress is considerable. For example, instead of two counts trying to fight each other, we have one common enemy; namely, bureaucracy and—dare I say it—centralisation. I have not yet decided into which camp I shall go because I have not been appointed. As the leader of one camp announced today, she is looking for allegiances from those who hold a feu. Those of us who hold no appointment have complete freedom.

It is against bureaucracy that I now turn. I was reminded the other day by my noble friend Lady Elles that, in fact, there are no more bureaucrats in the Commission than there are in Lambeth. But what seems to have happened is that the initial and—dare I say it—"European groupies", who have no other axe to grind than the European theme, came together and took initiatives, the bureaucracy, in advance of the politicians. Therefore, in the early days, they seized more power than they probably wished and more power than they were entitled to. In general, that was because of the default of parliaments and politicians.

While I support the European Parliament, I personally would prefer to see it made up of Members of the House of Lords and of the House of Commons so that the divisions were not so wide. I welcome the fact that we do have Members of the European Parliament in this House and that in this Chamber, probably more so than any other, we have a greater knowledge of European affairs, even though we may be as critical as many Parliaments. We have heard today from Members of the European Parliament. I do not know what one would call groups of European commissioners. But, as they are always going out to dinner, I presume that one would say "a flight of commissioners". We have great intellect and great knowledge. I hope that we are listened to. However, we have one major disadvantage. In most groupings around the world people group around a language. But other than our friends the Irish, we are the only European country that speaks English as its first language.

We are moving towards the enlargement of the Community. I hesitate to say this, but I shall say it now: we are all pro-European in this country because we are all pro the initiatives that have taken place in Central and Eastern Europe and would support them irrespective of our views about the European Economic Community, as it was. It is here that we must look. We must look to support those countries not so much with aid but by the development of their trade. That needs Her Majesty's Government to look more carefully at the type of support they give to trade worldwide, whether it be to the second world or the third world. I take comfort from the death of the Secretary of State for Trade and the return of the President of the Board of Trade. I should like to ask my noble friend to let me know when the President of the Board of Trade intends to have his first meeting of the Board of Trade and what its new extraordinary powers will be.

Having dealt with trade, I have to turn to finance. I go back 30 years—just before I joined your Lordships' House —when I was seconded to Germany. I found myself working with German companies greatly involved in Wirtschaftsgebünde, as they switched from having made armaments to manufactures. I found myself with my own age group night after night in Kegelbahn bowling and drinking greater quantities than I have ever drunk before or since. Tears would roll down many of their cheeks, because the Germans are an emotional nation, and we would discuss the war openly: when young teenagers had been put in charge of anti-aircraft batteries with only one shell which they would not fire at the British because the British would not alter course. They fired into the American planes and hoped that the Americans would hit one another.

I sat with those people. As we cried, they would say, "Watch out. You know, we will rise again". I have often thought, as Germany improved in power, of those days when my MG could knock spots off a BMW going around the Nürburgring. There were 10 to 20 deutschmarks to the pound. Even on my humble salary of £500 a year, I felt rich. Things changed. I watched them as they grew. They had more fear of the growth of their own power, perhaps, than we did.

I had the privilege of attending a lunch in Downing Street given by my noble friend Lady Thatcher when she commented to one of the guests who had just seen Mr. Gorbache—and I mentioned this in another debate recently—"It will not be long before I talk to Mr. Gorbachev about the dangers of the reunification of Germany". I have been discussing the German subject, and I shall end with it.

There was a time when we were all worried about the dollar. We were worried about sterling as a reserve currency when the Labour Party devalued it and scared the living daylights out of our oldest ally, the Portuguese. The deutschmark is not really a reserve currency. I, as a humble ex-banker, ex-economist, ex-everything, cannot work out why we continue to bother about linking ourselves to the deutschmark. If I recall it rightly, there is a subtle, fundamental political difference here. I believe that it is Article 106 in—dare I say it? —the German Basic Law (the constitution) which says that by law the government are not allowed to let inflation rip or let currencies become weak. If we are tied to the deutschmark, is it right that we should have the German Basic Law dominating or running our economy?

Our economy is in better shape than we may think. It may be flat. We have had a double dip. We may even have stagflation bouncing along the bottom. But we are in a better state for recovery than we have been for many years. I do not see why we should need to go on being linked to the deutschmark. I should like to ask my noble friend Lady Chalker, whose fluent command of German is so great, to persuade the Germans, in their own language, to do something about it, or to agree that, if we separate ourselves slightly, the pound will not become weak.

I worry that we are becoming too tied to a country whose price for reunification is 13 per cent. recorded unemployment in Eastern Germany, but which is possibly 35 per cent. Those are worries that my Italian friends share. Many of us belong to various groups, and as I come to the end of my time my final request is a personal one on behalf of your Lordships' House and—dare I say it? —the nobility of Europe.

Knowing this debate was coming up today, one of my noble cousins—a noble Marquis in Spain—said that he was having a little trouble with his own government. His government had declared that, because of the bureaucrats in Brussels, all of the nobility now had to have European passports and identity cards, but were no longer entitled to have their titles on their European passports because there was no room for them. That meant that those who had historic, hereditary peerages—if that is what they are —could no longer be known as Marquis. They would be known as plain "senor". Even the "Don" bit was to be dropped.

I should like to ask whether that will be so in your Lordships' case, because we have our exits and our entrances, and I am sure that most of the new entrants have gone out of their way to ensure that they do not have European passports. I should like to ask that that matter be taken up. I shall write to my right honourable friend the Secretary of State and ask him whether what I have said is true, because it seems as though there is an anti-monarchist plot abroad.

I have to go back to the culture of Europe which we have imported, and which we have inherited, often without any culture of our own. We should be grateful for it and for their poets, plays and theatres. The final quote I have which I have to put to those who stand before the mast must relate to Maastricht. It is necessary to have treaties, but this one is already out of date. We had the revolt a long time ago. We are now in a revolution that is changing. We have an opportunity to add to this treaty or even to have a new treaty. After all, it is the German poet Heinrich Heine who said of the Dutch, I think: When the world comes to an end, go to Holland, because everything happens there fifty years later".

Lord Stoddart of Swindon

My Lords, before the noble Lord sits down, I was most interested to hear what he said about passports. Will he ask his noble friend Lady Chalker whether subsidiarity might extend to passports so that we can have our British passports back?

Lord Selsdon

My Lords, I have no intention of ever carrying an identity card or ever having a European passport. I am sure that my noble friend has heard the noble Lord's question.

7.16 p.m.

Lord Bruce of Donington

My Lords, the noble Lord, Lord Selsdon, has succeeded in reminding us that we are, after all, living in a world of real people and not merely of concepts and ideas. He referred, rightly, to the unemployment in Germany. In that respect I have, after my long years in political life (some 60 years) some sense of déjà vu. I have been here before. Unemployment is growing throughout Europe at present. European unemployment is already at an unacceptable level, not just in the United Kingdom and in France, but in Germany.

I seem to remember that unemployment was one of the principle reasons why demagogy and fascism developed in Europe. We should be unwise to remain too smug about the so-called successes of the European Economic Community. I do not wish to belittle anything that has been accomplished either by Europe as a whole or by its member states. But I am bound to say—this is in the Commission's own reports (the little seen documents that are not publicised in the press) —that the economic performance in Europe has been far less successful than that of Japan or the United States. I say no more about that.

We have recently been reminded again of the human factors. We have been reminded by the Danes. The Danes suddenly did not run true to form. The Danes, despite all the persuasion to which they were subjected by their own government and by their opposition parties as well—a kind of united Conservative/Labour effort—were not convinced, and they did not run to form any more than they did in European football. Suddenly, they became the awkward people.

An immediate flurry of activity followed. I believe that it is within the recollection of the House that the immediate and instinctive reaction of the Foreign Secretary, as an ex-career diplomat, was that this was a damage problem with which we had to be patient. We had to give the Danes time to recover, make up their minds again and when they had seen the light of day, everything would be all right again. But the initial reaction was that it was a damage problem.

However, that is not so. It is a problem of ordinary human beings everywhere in a democracy. At the moment, the Danes are just one example, as has already been acknowledged by the Prime Minister. In defending Maastricht he did not bother overmuch with detailing the advantages that Maastricht would bring to the people of Europe; he concentrated on the victory he had achieved in establishing the subsidiarity principle. Of course, he did not mention that much had been given away in Maastricht. He did not mention, as a professional politician in a group of politicians, that he had succeeded in agreeing that most political decisions affecting his country and Europe would be taken by—guess who? Bankers. They would be the independent people who would take all the vital decisions with which we would all have to conform. I shall later cite the article because I have read the treaty. Neither did Mr. Major say that the Commission—of all bodies—would be given the power to monitor our accounts, to see whether we were obeying the correct fiscal principles or whether we were keeping our books correctly.

Believe me, I jest not. For the Commission to look after other people's finances after the reports that have been made independently by the Court of Auditors is one of the biggest jokes in Europe of the last half century. Yet, we have surrendered that right under Maastricht. The Commission will now advise on whether we are looking after our finances prudently and on many other spheres. There is no point in denying it because the Prime Minister himself voiced this fact.

A report on 28th June in the Sunday Telegraph stated: Mr. Major held out the hope that some EC law could be repealed: 'If it can be scrapped, it should be scrapped,' he said. That is supposed to be enshrined in Maastricht.

I have already reproduced the subsidiarity clause in a letter to The Times. However, the Government have been singularly modest in revealing its text publicly, so for the record I repeat for your Lordships Article 3b upon which the Government rely. It is as follows: The Community shall act within the limits of the powers conferred upon it by this Treaty and of the objectives assigned to it therein". So far so good. I underline the opening 10 words of the next extract which should remain in our minds because they are important: In areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community. Any action by the Community shall not go beyond what is necessary to achieve the objectives of this Treaty". A former president of the European Court called this "gobbledegook", with good reason. Let us go over it again, and if the Government can clarify it, let them do so: In areas which do not fall within its exclusive competence". In effect, the next passage says that as regards the remainder, the Community shall determine which actions lie within Community competence and which do not. That is the ridiculous contradiction to which the former president of the European Court referred. If any further explanations can be given on that, I should be glad if, in his reply, the noble Earl, Lord Caithness, would give that elucidation, because in my opinion it remains gobbledegook.

Why should it be necessary now to take powers back from the Commission? If member states possessed the powers at issue —if the Council of Ministers had powers—how is it that they have for so long tolerated this progressive seepage of powers to the Commission? If it is now a virtue to limit it to taking action against the Commission under Article 3b, why, after all these years of the European Economic Community, did it have those powers in the first place? Of course, the reason is that power does not like a vacuum.

Perhaps we may deal with the proposed remedies. The first remedy is to enforce Article 3b which, unless everyone has taken leave of their senses, cannot possibly be enforced by any court. The other means of achieving this desirable rolling back of the frontiers of the powers of the Commission has been well put by Sir Leon Brittan, the competition commissioner and a politician of some reputation here in the United Kingdom. I quote from an article by him in the Financial Times as recently as 1st July: Strengthening that essential support can best be done by giving effect to subsidiarity. Both the Commission and the member states under the British presidency will have to work out a practical programme for determining the best level for taking decisions". I ask noble Lords to allow those words to sink in. The Council can take no action at all, save on a proposal from the Commission. Therefore, if the Commission wishes to restrict its own powers and hand back some laws to member states, it must itself produce a proposal to the Council to do exactly that. I very much doubt whether that can or would be done. No commission likes to propose a limitation of its own powers. That is why the Commission refers to administrative arrangements. They have the advantage, particularly in view of the limited duration of the presidency.

M. Delors, who months ago was saying that 80 per cent. of Community legislation would in future be dealt with in Brussels at Community level and only 20 per cent. in the member states, is now cooing like a sucking dove. He is now moderate. He may be pleased to propose any administrative arrangements. However, the British presidency expires in six months. It will be followed by Denmark, which will hold the presidency for six months. M. Delors might allow the administrative relaxations during the Danish presidency. He will certainly be on safer ground when Belgium succeeds to the presidency in the six months following that because of course Belgium is a net recipient of Community funds. What the Commission thinks on Monday, Brussels thinks on Tuesday, if not at the same time, because they are bound so closely together.

Of what value is all this? If there is to be any question of the member states getting power again it has to be through the Maastricht Treaty itself and that treaty must be amended. I am pretty well versed in the Maastricht Treaty and indeed in the Treaty of Rome. I am quite prepared, if necessary, to draft the necessary amendments to the Maastricht Treaty. I shall give the House a hint of the way I would go about it. Instead of having every operative clause state that the Council acts on a proposal from the Commission, in some suitable cases, after consultation with Her Majesty's Government—I should be glad to co-operate with the Government in this respect—there should be inserted the words, "or on its own initiative". That is all that is required. That would enable something to occur which cannot occur now because we have it on the Government's own authority that even if the Council is now unanimous in wanting to amend an existing regulation which has served its purpose, it cannot do so because the Commission has a veto.

That is an example of simple things that can be done that do not go to the entire root of the single market and the free trade area but go right to the root of where power lies. The noble Lord, Lord Selsdon, raised some questions of humanity. I must include politicians within that category and even Ministers. One of the main problems with the whole constitution of the Council is that it is composed of Ministers all of whom have domestic responsibilities in their own countries. They do not have the time to pay detailed attention to much of the material that emanates from the Commission.

Under Article 151 of the Treaty of Rome COREPER was established—the Committee of Permanent Representatives—which is composed of the 12 representatives and their deputies. Those civil servants meet two or three times a week. I shall not refer to "Yes, Minister" yet on an international scale but noble Lords may suspect what is in my mind. At any rate COREPER meets at least three times a week and it is attended by the Commission each time. COREPER is charged with preparing the agenda for Council meetings. COREPER will be well in evidence, in conjunction with the Commission, throughout the six-month period and, along with the Council secretariat, it will prepare the agenda and put forward items for Ministers to discuss. Those items are determined at COREPER or civil servant level.

COREPER has an A list and a B list. The A list comprises items which COREPER has agreed need not be considered by the Council at all. Those items can merely be signed on the nod. Included in that category are a large number of articles, chapters and titles within the budget. The Council will have to consider those items over the next few months and will have to reach a decision by October. Those items include, incidentally, the expenses incurred in the Council under the British presidency which will amount to £4.5 million, excluding salaries and some other expenses.

Members of the Council will all have their domestic affairs in their own country in mind. They will all have to read the contents of their Red Boxes at night, including items put at the bottom by their "Yes, Minister" civil servants who do not wish them to read those items until they are tired. The members of the Council are busy people and they cannot legislate and understand everything that is going on in Europe. A power vacuum results, and the Commission is aware of that. That is why, particularly under M. Delors, who is a most enterprising person, we have had a cascade of directives and regulations. Some of those items are ridiculous, for example the directive that instructed the inhabitants of Arbroath how to cook smokies. There was a whole series of other such directives. In 1990 those directives were printed on paper that consumed 1,600 hectares of timber in its production. That is how the whole thing works and that is what we have to change.

We have to change that system and the best way to do so is, as I have said, to give the Council of Ministers the power to ignore proposals by the Commission, if necessary, and to have its own right to initiate legislation. The Council may seek the advice of the Commission but, if my proposal were adopted, it would slow down the whole process of the cascade of directives which is becoming so intrusive in the lives of ordinary citizens. My proposal would stop the march to bureaucracy which has been inflicted upon us. The Government have at last admitted that that bureaucracy exists.

There are morals in this. The people of the Soviet Union not only rebelled against centralised economies but they also rebelled against centralised bureaucracy. Already there are murmurings in Europe—of which Denmark is only a symptom—that people are beginning to rebel against being told what to do by bureaucrats. Looking down on this whole matter from a high mountain, as it were, it seems faintly ridiculous that adult Ministers from various countries should scurry about at the behest of a Commission of 17 people, none of whom has exceptionally specific qualifications. The noble Lord, Lord Cockfield, is an exception to that and I have the most profound respect for him. But all those Ministers are bobbing about and obeying the dictates and the whims of an unelected body of Commissioners. The whole thing is ridiculous.

What we want in this country now, and what we hope will be achieved in due course, is not the tin whistle sounds of tiny politicians. We require something more of the mighty Diapason in which the voice of Britain was made known. We need a voice that says Britain is still, whatever its weaknesses and defects, the centre not merely of Europe but of the world. We want a voice that says that to be British and to be a member of Europe, the United Nations and the Security Council counts for far more than being merely on the fringes of Europe.

7.39 p.m.

Lord Mackay of Ardbrecknish

My Lords, it is always a pleasure to listen to the noble Lord, Lord Bruce of Donington, giving his clear views on the European Community. For a brief moment I thought that he was attempting to make sure that his pre-eminent position in the House was not upstaged by my noble friend Lady Thatcher by speaking for longer than she did. However, in the last few moments he shrank from playing the game into extra time.

Perhaps I may remind the noble Lord that in the case of Denmark the analogy with the football team is not a very good one. The Danes entered the competition only because another team had to withdraw due to troubles in its part of the world. So the Danes were not in the competition to begin with but came in at a rather late stage. However, they played very well and won the competition. Perhaps in the case of Maastricht the Danes will re-enter the competition and, come the beginning of next year, will perform their role exceedingly well on taking over the presidency of the Community.

I should like to revert to the main topics of the debate, which are the subjects which should be the main preoccupations of the United Kingdom during its presidency. I should like to start by saying a few words about finance and the Uruguay round of GATT. The noble Lord, Lord Bruce of Donington, has quite rightly drawn our attention on a number of occasions to the problems which the Community has in controlling its budget. I am quite certain that my right honourable friend John Major, the Chancellor of the Exchequer and other Ministers who will deal with financial matters in Brussels over the next six months will attempt to apply the same financial disciplines which my noble friend Lady Thatcher brought so successfully to the finances of the United Kingdom in 1979. I am sure that if they do that many of the problems which the noble Lord, Lord Bruce of Donington, has rightly drawn to our attention will cease.

The clock has been stopped on the Uruguay Round of GATT for some considerable time. I very much hope that during our presidency we can manage not only to have it started again but to bring the negotiations to a conclusion. They are vitally important for us as a major trading nation, not just in Europe but throughout the world. It is important that we bring those negotiations to a successful conclusion, not just for our own sake but also for the sake of people in the third world who depend on open trading arrangements throughout the world much more than on aid from donor nations. Therefore, I very much hope that we shall make progress with the Uruguay Round and do not fall into the trap or allow other parts of the world to fall into the trap of protectionism, which is always lurking round the corner. It lurks around the corner in the United States and, dare I say, it lurks around the corner in the Community as well.

I should like to say a few words about enlargement. I apologise to the House for doing so because I know that your Lordships will discuss the subject on 14th July. Unfortunately I cannot be here that day and I should like to say a few words on the subject, especially in relation to the Northern European countries of Finland and Sweden and also Norway and Iceland. It is very important from our point of view, as a Northern European country, that we do as much as we can in our six months to make sure that Finland and Sweden can join the Community as quickly as possible. I hope that both the Norwegians and the Icelanders will follow in their wake.

I say that for this reason. The whole centre of gravity of the Community has moved to the South, especially in relation to funds such as the European regional development fund and the like, where the concentration is on Southern Europe.

While the four northern countries I have mentioned are all prosperous, they all, like the United Kingdom, have rather fragile northern areas. I am not talking about Scotland but the northern part of Scotland, the north of Norway, the north of Sweden and the north of Finland. I believe that those countries will be great allies to us in doing what we shall have to do to ensure that the Community's attention does not concentrate solely on the poorer Mediterranean countries and that it remembers that there are areas in what appear on the face of it to be very rich countries where the economy and the human population, as I mentioned in your Lordships' House the other day, are fragile. Therefore, I very much hope that my right honourable friend John Major will make laying the groundwork for speedy enlargement one of his priorities during this six-month stage.

One of the things which will attract all four northern countries into the Community, especially Norway and Iceland, is a clear definition and understanding of that funny word "subsidiarity". I shall not go into its derivation, but its derivation does not give me a great deal of confidence that it will necessarily be carried out unless during our six-month presidency we take steps to carry it out. The definition which I offer your Lordships is: what you do not need to do on a Community basis do not do.

However, there are many matters which have to be dealt with on a Community basis if there is to be a common market. Many are exactly the issues which have arisen from the Single European Act. We need common manufacturing standards so that one country cannot say to another country, "Your goods do not reach our standards, they cannot enter". We need common standards of packaging and labelling, boring as that may sometimes be. We need common standards on health and hygiene. We need those if we are to have a common market in goods and in services.

In some other fields we also need the Community to act as a community. I cannot remember which of your Lordships mentioned that it would be a good thing if the CAP was sent back to the individual member states. I cannot share that view. The problem with the common agricultural policy at present is that it is not really common. Speak to any dairy farmer in this country and he will remind you that Italy has not even begun to do anything about the question of milk quotas. On a number of occasions the noble Lord, Lord Bruce of Donington, has rightly drawn our attention to the abuse of the grant system in many European countries. I believe that some good policing of many of those common policies is essential if we are to see a fair and proper common market.

There are other fields—and I shall mention one of them, the environmental field, that may bring some hostility down on my head—where I do not believe that we need Brussels to interfere. In many cases the issue has nothing to do with a common market or the effect of one country on another. We may all be concerned about pollution, for example, in the Adriatic, but that is a problem principally for the Italians and the other countries around the Adriatic, just as the problem of Blackpool beach and a few other beaches in our country is a problem for us.

I believe that we can define subsidiarity fairly easily. We should not be surprised that there is an argument. It is an argument which has raged within our own country, in this House and down the corridor, in terms of the relationship between local government and national government. I cannot say how many arguments I have heard about that particular form of subsidiarity—who should be doing what and whether it should be local government or national government.

That leads me to the final point that I want to make which concerns the Maastricht Treaty. Clearly my right honourable friend the Prime Minister had not intended to have as his principal objective during his presidency attempting to make sure that the Maastricht Treaty was ratified. It is interesting that the last time we had a major treaty in the Community the British presidency occurred at about the same time. I was interested to hear my noble friend Lord Cockfield say that he had done his sums and had worked out that we would hold the presidency again as the next step emerged and the Single European Act came to fruition in 1992.

In 1985–86 the Single European Act was very much the brain child of the United Kingdom Government under my noble friend Lady Thatcher. It was very much pushed forward in the Commission by my noble friend Lord Cockfield. It is an important step in bringing together and making a reality of the Common Market. It is a pleasant irony that we are in the presidential chair as the 1992 date approaches. If the noble Lord, Lord Cockfield, counted up on his fingers to bring that about, then good for him. It is also an irony that just as we held the presidency in the first half of 1986 while the Single European Act was being ratified, now we hold the presidency again when another treaty is being ratified.

I do not wish to go into the detail gone into by my noble friends Lord Plumb and Lord Cockfield about the Maastricht Treaty. I am sure, as I said right at the beginning, that given time the Danes will go along with the treaty. They will realise, as we have realised in the past, that if we are playing on the European scene we have to play in the game. We cannot, if we do not like the look of the game, take our ball home.

The Maastricht Treaty takes two important steps. I have mentioned one; namely, that it introduces the balancing concept of subsidiarity and counteracts some of the centralising tendencies of the Single European Act. The other step, in rather the opposite but nonetheless important direction, is in continuing to bind us together. My right honourable friend the Prime Minister went to Maastricht with a negotiating brief which had been applauded by both Houses of Parliament. He succeeded in achieving his objectives and that was recognised when he returned. At the election on 9th April, he received a clear endorsement of the policy and the manifesto on which his party and that of this side of the House fought the election. He said quite clearly that the Maastricht Treaty was a success both for Britain and the rest of Europe. British proposals helped to shape the key provisions of the treaty, including those strengthening the enforcement of Community law, defence, subsidiarity and law and order.

Not only did the Conservative Party fight on the basis of ratifying the Maastricht Treaty but the two parties opposite also fought on that basis, though I freely concede that they wished to go a little further. It is a strange constitutional thesis that, if all three parties fight an election agreeing on a subject, that somehow gives the general election result no credibility and there should be a referendum. That is a very strange theory. I am sure that noble Lords will agree that if we had known of that thesis we could have arranged to dispute the Maastricht Treaty at the election so that the result of the election would have determined whether the treaty should be ratified. It is a strange thesis.

Lord Stoddart of Swindon

My Lords, perhaps the noble Lord will give way. He makes the point about the Government having Maastricht in the manifesto, with the other parties being in favour of it, and indeed the Labour Party going further than the Conservative Party. But the fact of the matter is that there was no proper discussion of the issue during the general election. That is why 75 per cent. of the British population want a say before the treaty is ratified by Parliament. That is the point that noble Lords on this side of the House and throughout the Chamber have been making. I should have thought that the noble Lord would accept it.

Lord Mackay of Ardbrecknish

My Lords, it remains an odd theory that if the political parties agree on something, then somehow or other the issue has not been put to the British people properly and a referendum ought to take place. The issue was debated. I remember a speech I made pointing out that one of the most dramatic changes in the past 10 years was that we no longer had to argue about the pros and cons of our membership of the European Community and that all the political parties agreed. I cannot remember anybody in the audience disputing that fact with me. There has been considerable debate in this country. The two noble Lords opposite played their part in making sure that we had considerable debate, at least in your Lordships' House.

I want to draw my remarks to an end. The noble Lord, Lord Bruce, is edging to rise and intervene again. I hope that he will forgive me if I end on a particular note. The idea which I heard suggested the other day that there should be a free vote in the other place also filled me with some amusement. I do not recall that when the Single European Bill was passing through the House of Commons there was any suggestion made that there ought to be a free vote on it. Indeed no suggestion was made that there ought to have been a referendum. I suggest that the Single European Act was every bit as great a milestone as the Maastricht Treaty. I say to my noble friend Lady Chalker that when the Maastricht Treaty comes to this House and we have to vote on it, I shall follow her into the Lobby in support of our right honourable friend John Major and the Maastricht Treaty just as willingly and keenly as I followed Mrs. Thatcher into the Lobby in favour of the Single European Act.

7.54 p.m.

The Earl of Stockton

My Lords, at this stage of what has been a long and fascinating debate it is hard for a mere tyro in European affairs to add much to what has already been said on an issue of such importance. The House has been privileged to hear a number of significant and entertaining contributions from noble Lords on all sides. I fear I must crave the House's indulgence if I do not stay to hear the eloquence of all noble Lords. I have a less glamorous engagement as president of the Westminster Chamber of Commerce than have other noble Lords. I should like to congratulate the noble Baroness, Lady Thatcher, on her maiden speech. I am sure that her remarks caused no more than a mild frisson to my noble friends on the Front Bench. No doubt it was the same kind of frisson that I detected when my noble predecessor made his maiden speech, to which the noble Lord, Lord Jenkins of Hillhead, referred. However, he waited a quarter of a century between leaving another place and embarking on his maiden effort in your Lordships' House.

The noble Baroness said that governments were out of touch with people in Europe. I remind her that the door of No. 10 can be as great a barrier to maintaining contact with people as any door in Brussels. Her advocacy of the simple no—or was it the triple no, no, no—awoke certain memories. Since she spoke they have become clearer. I believe it was Mr. Gromyko who said, "Niet, niet, niet". My noble friend Lord Bethell has shown us that there is a proper balance between a niet and a da.

The treaty of Rome is the past. It is Maastricht that is the signpost to the future. I hope that the Government do not heed the siren voice of the past in the way that General de Gaulle did. It is a voice that seems to be as attractive to the noble Lord, Lord Stoddart of Swindon, in his rancour that a Treaty of Berlin might mark a future step in the development of Europe. To me that echoes the polemic that led to two world wars, so rightly and passionately recalled and denounced by the noble Lord, Lord Houghton of Sowerby.

For me too the issues of contention all stem from a remark by my noble predecessor who said: Europe is not about butter mountains or wine lakes. What Europe is about is the fact that I was nearly killed in the First World War, my son was nearly killed in the Second World War, and I do not want my grandson to be killed in the Third World War". The dream of European unity surely stems from that aspiration, shared by so many politicians in Europe in the immediate post-war period. Such hopes and the fears of what would happen if those hopes were dashed were enough to keep the dream alive through the creation of the Iron and Steel Community, the evolution of the original European Community and right up to the start of the collapse of the Soviet empire.

But despite the difficult and dangerous days in which we live, with so many nation states and regions poised on the brink of economic or political chaos, if not actually tearing themselves apart in the birth pains of nationhood—despite those perils impending—the threat that the nations of Western Europe and the world might be plunged into a final and terrible global conflict has receded. However, over the past 10 years has emerged another driving force toward European unity, generated not by leaders fearful of war but driven by the people of Europe fearful of the growing domination of world trade by the two non-European super-powers, the United States and Japan. The quiet revolution, which is maintaining the impetus toward a new European economic national identity, is taking place from the bottom up and not from the top down. It is driven by a growing perception of the relative failure of national economic programmes of the 1970s and 1980s compared with the performance of America and, above all, Japan, as was pointed out by the noble Lord, Lord Bruce of Donington. In West Germany domestic investment fell from 9 per cent. of output in 1975 to 5.5 per cent. in 1985. In the two decades to 1990 the German economy managed to grow in real terms only at an average annual rate of 2 per cent. while Japan boomed ahead at an almost incredible 11 per cent.

The reaction of the people of Europe to this stagnation and the Japanese threat was quietly, silently and determinedly to redefine the very nature of nationalism. Almost unperceived by politicians long on rhetoric and short on vision, the people of Europe were confronted by a reality of a future world dominated by two foreign economic superpowers. The shock of that realisation sowed the seed of a new loyalty. A pan-European economic loyalty is accomplishing what 2,000 years of top-down political history has failed to do.

Such loyalty must not be confused with national, political or cultural loyalties. The French will remain as steadfastly republican as the British remain staunchly monarchist. The Germans will ever be pompously and bombastically German, the Italians as parliamentarily anarchic as ever, and the British will continue in their happy linguistic delusion that everyone understands English if you speak it slowly and loudly enough.

Another difference between the present attempt at European unity and previous efforts is that rather than the vision of one person, group or nation state, the Community has become the point of focus of the differing hopes and expectations of a diverse collection of different peoples.

For the United Kingdom and Germany, the evolving Community offers the chance of increased trade based on a domestic market that easily outguns even the United States. For Portugal, Spain and Greece it spells more jobs as industries and companies shift south in search of lower labour costs. Because each country has a different reason for focusing on the Community, each country, and in many cases each region within each country, has a different order of priorities and a different agenda for the evolution of Europe. The wider Europe shares in some or all of those expectations and aspirations.

The diversity of expectation creates a political cauldron for those at the controls of the mechanical processes that will make it all happen. Every attempt to draft a piece of European legislation gets ensnared by crafty national interests committed both to unification and as much to individual national self-gratification as the other members will tolerate. That blending of national wills can be, and frequently is, so complex that the process is protracted to the point of absurdity, as the noble Lord, Lord Bruce of Donington, has so frequently pointed out to the House.

But if politicians and governments believe that exasperation with the mechanisms—as, for example, in Denmark currently —mean disenchantment with the vision, they run the risk of being left still further behind. The strength of the unification movement's organic nature protects the Community from instant death at the hands of an issue that has reached a political impasse. We saw that over the issue of the EMS and ERM; and we see it again now over the ratification of the Maastricht Treaty. Clearly there will be many such sticky issues, great and small, lying in ambush—some stickier than those that unification has had to deal with to date—but equally clearly the movement becomes more adept at sorting out such issues as the years go by and they do not smear the vision of the common focus.

The third force that marks out this effort at unification compared with others is that all previous attempts have been as part of a plan for world domination. The Caesars, Napoleons and Hitlers all saw European unification as merely a step on the road to world conquest. Therefore not surprisingly all those previous attempts in the perception of the conquered nations seem to involve little more than seeing who will be the last to be gobbled up by the alligator.

The European Community is different, for the movement is carried forward on the shoulders of the unemployed southern Europeans seeking jobs, the northern and central European managing directors looking for broader markets, and pan-European consumers wanting the highest quality goods for the lowest prices. Consequently the obstacles come from within rather than from without.

It is ironic therefore that the buzz phrase coined by those who are without, in particular in America and Japan, is "Fortress Europe". The notion is fed assiduously by protectionists in both countries who see that in future a united Europe will break their duopolistic stranglehold on world trade. That is the real reason why such liberalising efforts as GATT are forever about to be derailed. The Japanese perception of trade agreements, and to a lesser extent that of the Americans, is in effect to say, "Forget how we bashed you on our way to the top. Let us now learn to live as friends, with you staying where you are and where you belong—on the lower rungs of the ladder". Thanks, Mr. Honda, but no thanks.

I believe that a broader Europe is the way to go. Already there are signs that national politicians are, I regret to say, lagging behind the reality. European business has already moved into the wider Europe. Many companies have subsidiaries in former East European countries. My own company has set up a joint venture operation in Eastern Europe. Naturally it is a long-term business, but I am happy to report that Magyar-Macmillan Publications will be in profit by the end of this year. My noble friend Lord Plumb has shown us that the European Parliament is already regarded as the focus of attention in that wider Europe.

Even without the adherence of the former Eastern European bloc countries, the Community is a formidable economic force. It has often been proved, but it is worth repeating, that the economic force has no need to impact on national identity in order to achieve co-operatively a trade output greater than that of the United States and Japan combined. Unification may involve Eurobanks, Eurolaws and Eurocurrency, but it will not mean Eurosandwiches, Eurosausages, Eurohouses or Eurotelevision. A united Europe will not mean that noble Lords will be wearing their wristwatches over the cuffs of their shirts as their smart and fashionable counterparts do in Italy, but we shall probably all be wearing the same watches assembled on the same work bench somewhere in Geneva or Lucerne.

It is therefore as a businessman that I applaud the Maastricht Treaty, not so much as a political ratification of the way forward but as an endorsement by European and national institutions of the decisions that have already been taken by the businesses and people of Europe. However, there is a warning implicit in the revolution to which I alluded earlier. While national governments argue about subsidiarity from Brussels centralism, the people are also taken with the notion. For them subsidiarity involves Paris, Rome or Whitehall.

I trust that Her Majesty's Government are aware of that quiet revolution and will spend at least part of the next six months ensuring that the focus of Europe's gaze is raised occasionally from the sticky issues and is fixed on the dream that has been, and continues to be, the driving force behind that revolution.

8.8 p.m.

Lord Moran

My Lords, I must first apologise to the House that because of a longstanding commitment I cannot stay for the wind-up speech. We shall remember the debate for the notable speech delivered with such panache by the noble Baroness, Lady Thatcher. The case that she made against the Maastricht Treaty was powerful. What worries me in particular is the tendency of politicians and officials to insulate themselves from what ordinary people are thinking—a point on which the noble Lords, Lord Callaghan and Lord Cockfield, had some wise things to say.

In reply to letters urging that the people of this country should be consulted before irrevocable steps are taken to relinquish our national sovereignty, the Foreign Office says in a lofty way that a referendum will not be offered. Ministers in this House and in another place have repeatedly dismissed the suggestion that there should be a referendum. Listening to them I am reminded of some words said long ago, not far from this place. They were these: For the people, I desire their liberty and freedom as much as anybody whatever. But I must tell you that their liberty and freedom consists in having of government those laws by which their life and their goods may be most their own. It is not having a share in government; that is nothing pertaining to them. A subject and a sovereign are clean different things". That was said by Charles I on the scaffold in Whitehall.

I believe that our present leaders should keep in mind that the people of this country are not illiterate peasants and have not as yet been asked what they think. Before taking a fundamental step that would lead to our submergence in a European state they ought to be absolutely certain that they have the broad support of their own people. They can have no such certainty at present.

I am not sure that a referendum should necessarily be on the Maastricht Treaty itself. The real question that needs to be asked—that indeed must be asked —is: "Are you in favour of an ever-closer union in Europe, with common citizenship and a single currency leading in due course to a single European state, or do you prefer close co-operation between European countries, which would retain their national identities?". It is the single currency which is the key, as I have no doubt that that would lead inevitably to a single European entity.

It is not easy to judge the real significance of what was agreed at Maastricht. Undoubtedly, and against all the odds, the Prime Minister secured valuable changes in the text, conducting a successful exercise in damage limitation. The reference to the Community's federal goal was dropped and subsidiarity was defined in Article 3b. But the general thrust of the treaty is still towards an integrated Europe, not merely in provisions for European citizenship and greater powers for the European Parliament and in some areas for the Commission, but above all in the timetable for the second and third stages of EMU with all that that implies.

It is true that the Prime Minister secured the protocol providing that the United Kingdom need not move to the third stage without a separate decision, whereas other states are committed to do so. But does anyone think that at that stage it would be easy to resist the enormous pressure that there would be for us to come into line?

British Ministers have argued that the tide turned at Maastricht against excessive centralisation and towards inter-governmental co-operation. On 29th June in another place the Prime Minister said that: there are very few Conservative Members and, I suspect, very few—if any—hon. Members who want to see a centralised European Community and the nightmare prospect proposed by some of a central European state. We do not want it … and it is an unreal prospect—the stuff of nightmares for a few people".—[Official Report, Commons, 29/6/92; col. 592.] Those are strong words but the inexorable progress towards stage three of EMU and the single currency is hardly consistent with what the Prime Minister then said.

Indeed, after Maastricht President Mitterrand said that he was particularly pleased with the "irreversible" progress towards a single currency, which France favoured, while Chancellor Kohl, for his part, said: We have made certain that German conceptions, German interests and German intentions were fulfilled with respect to economic and monetary union… The European Central Bank… will be constructed at the end of the century to correspond directly to German measurements… We are getting what we wanted… irreversible progress towards economic and political union". As was stated in The Times on 1st July, the Government's claim to have permanently reversed centralism, rather than to have checked its momentum, is questionable.

The Lisbon meeting does not sound as though it was happy. It seems odd that we could not find anyone at all to succeed M. Delors on the expiry of his normal term and that we have had to agree to an extension of his mandate. Only two hours later we were, reportedly, again at loggerheads with him. Our partners were able to insist on the ratification of the Maastricht Treaty before any negotiations for enlargement, thus, most regrettably, putting a break on that process, while Spain. Portugal and the Republic of Ireland apparently continue to demand huge extra payments as the price of agreeing to progress. Meanwhile, the erosion of national competence, far from being checked, appears to continue as the Chancellor of the Exchequer's recent concession on minimum VAT rates, giving the Commission a say in our internal taxation policies, shows only too clearly.

Nevertheless, the Danish vote now gives us the opportunity, as the holders of the presidency for the next six months with the Danish presidency to follow, to put things on a better footing. It is a pity that we have so far merely re-emphasised our adherence to a treaty, which for the present at any rate cannot be brought into force, instead of seizing a chance to establish a more acceptable form of European co-operation.

But it is not too late. I believe that the Government do now recognise the strength of opinion in this country and elsewhere in favour of a looser arrangement and against the centralising vision of M. Delors. I hope that in the remaining months of this year we can really set the Community on a new and better course. The noble Baroness, Lady Chalker, suggested that we would try to do that. If the Government do so they will deserve and obtain the overwhelming support of the people of this country.

8.15 p.m.

The Earl of Bradford

My Lords, I wish to congratulate my noble friend Lady Thatcher on her entertaining, excellent and erudite maiden speech. We look forward to hearing her future, more controversial contributions to debates in your Lordships' House. The contents of her speech echoed so many of my personal feelings as to render my own speech almost superfluous. However, it will differ in one respect; it will be considerably shorter.

I am just old enough to remember the great enthusiasm for the cause of a united Europe that swept us on the tide into the Common Market and the joy of realising that we were not apart any longer. Sadly, the wonderful vision that we once had of a Europe that would work together to compete with the strongest economic nations or blocs in the world is rather different from the reality that we now face. My right honourable friend the Prime Minister will have a most tricky juggling act to perform, combined with an extremely difficult tightrope to walk, as Britain assumes the presidency of the Council of Ministers of the European Communities. We must all wish him well in the arduous six months ahead.

At this time so many federations appear to be falling apart at the seams. Sometimes, as in the case of Yugoslavia, it is with extreme violence and cruelty. The USSR is now a disunion in disarray. Even Czechoslovakia is to split up into Czechs and Slovaks, which would seem to leave the poor "Os" in the middle and out of it completely. Instead we appear to be being dragged or shoved into an unnatural cultural alliance, which would appear sometimes to have the potential of pure disaster.

The ideal of building a strong business-orientated economic Community is one of which, I am sure, most of the population of Britain has always been in favour. Within that we must of course reinforce the free trade area that has been at the heart of EC planning. However, many of the directives that are now coming out of Brussels appear to horrify and alienate the vast majority of people. Some of the directives appear to be aimed at the national institutions of this country and some appear to consist of extreme and unnecessary meddling in our affairs in a totally unacceptable manner. It is centralisation for the sake of it rather than for any actual need.

The trouble is that we Britons tend to play by the rules that are set us, which are then enforced by the best bureaucrats in Europe who take a positive delight in every latest directive that appears from Brussels. However, is the rest of Europe playing by the same set of rules; and are those rules being enforced by the officials as strictly as they are here? Of course they are not.

Any farmer in this country, who will now be all but forced to set aside 15 per cent. of his land on an annual basis, knows that in many areas of Europe set-aside will be impossible to police because of the lack of the necessary information. The situation in this country, however, will be relatively easy to control because we have a marvellous system of recording. As was pointed out by the noble Lord, Lord Bruce of Donington, and my noble friend Lord Mackay, every farmer who has been forced to dispose of his excess and often unexpected production of milk because conditions were better than anticipated, knows that many French and Italian farmers are not disposing of their excess production because it tends to disappear mysteriously from one pocket and reappear somewhere else, sometimes in two other pockets.

Many industries are finding that the supposed level playing field of competition within Europe is instead full of ridges and chasms. Hidden subsidies are distorting the position and ensuring that on many occasions we are trying to compete with our hands tied behind our backs, with our legs being swept from underneath us at the same time. For example, in William Cook of Sheffield we have one of the leading manufacturers of steel castings in Europe, a successful company formed from a rationalisation and integration of many separate smaller companies over the past 10 years. Despite the efficient production methods which William Cook employs, it finds great difficulty in competing with subsidised production from elsewhere within the Community. As a result, even when it succeeds in winning export business within Europe, it tends to be at the expense of profit margins. That same story is being repeated throughout British industry.

My right honourable friend the Prime Minister's speech in Lisbon and his responses at Question Time in another place earlier this week give hope to all reasonable supporters of the economic Community that he understands that many leaders are pursuing a disastrous and diversive course by putting the wrong priorities first, priorities which will cause many people to think that perhaps the result of the Danish referendum was the right one. There must be hope that the Prime Minister will take an extremely tough stance and achieve changes in direction which will take us back to what people perceive as the original ideals of European union. If we can provide strong leadership to the Community over the next six months, perhaps we can concentrate on returning to the basic aims of economic strength for Europe and creating the ability to compete on equal terms with each other and with the best in the world.

Sadly, if we continue to pursue the route of pettifogging, wasteful, bureaucratic muddling which is too high on the agenda of many leaders who should know better, then our federation will descend into the kind of chaos that we see elsewhere in the world.

8.22 p.m.

The Earl of Onslow

My Lords, I had a forbear who was called Barbara Villiers and she was made the Countess of Castlemain for sexual services rendered to King Charles II. I rather regret that my noble friend Lady Thatcher did not take a "countess-ship" or an earldom for three reasons: first, it would have enabled us Earls to have a little more backbone put into us; secondly, it would have made the giving of a "countess-ship" respectable rather than not respectable; and, thirdly, we could possibly have made jokes about Lord Finchley and the duties of the wealthy man to provide employment for the artisans. She disappointed us in that respect but she did not disappoint us in her maiden speech. It also seems to me that she has taken to this House like a duck to water. She was non-controversial and spoke in the manner to which we are normally accustomed.

It is wishful thinking to say that World War III did not take place in Europe because of the European Community. The reason that it did not take place was because there was a large and potentially aggressive Russian army sitting on the banks of the Elbe and we were too frightened of that to squabble among ourselves.

With the European Community we had what I hoped would be a proper common market. It seems to me that the Treaty of Maastricht has a lot in common with John Cleese's parrot: it is dead, deceased and passed away. I suggest to your Lordships that our Government thought to themselves, "Ah, the Continentals will be up to something. We shall say that we are right in the heart of Europe. We shall then alter the Treaty of Maastricht as much as we possibly can to our benefit". So far, those are good tactics and the Government did the maximum damage limitation that it was possible to do. Unfortunately that situation does not now exist. Perhaps I may be so bold as to say that it is extremely silly to plan for the Battle of the Somme when you are talking about the Battle of El Alamein. As I say, the Treaty of Maastricht is in the state of John Cleese's parrot. We should encourage the Government to take the maximum advantage of the good things in it and try to finesse some of the bad things out of it.

Subsidiarity has been described by the President of the European Court as gobbledegook. I am not a lawyer but the President of the European Court is and he says that as regards subsidiarity the treaty is unenforceable. Therefore we must allow the Government the opportunity to beef up the subsidiarity clause so that it means something.

I believe that with European events we have a tendency to say, "Yippee, we have a victory", when we really mean, "Oh drat, we have managed to do a damage limitation exercise". My noble friend Lady Chalker mentioned the great benefit to consumers of air traffic deregulation. There was an article in The Times which pointed out quite clearly that it is nothing of the sort. Any grade 2 French Civil Servant from L'Ecole Normale d'Administration could drive a coach and horses through it to the benefit of mercantilist French airlines.

That applies also to the 48-hour week rule. My right honourable friend Mrs. Shephard has said that we have won a victory while conceding the substance of the matter. The Chancellor of the Exchequer said that we have a victory on VAT regulations while conceding the substance of the matter. That is pure Alice in Wonderland. We must get the difficult, silly measures of the Community out of our hair.

There was an excellent programme on Channel 4 yesterday which showed that ring fences around the European Community increase the price of word processors by 26 per cent. because there is anti-dumping legislation. That is a restraint on trade of which we complained to the Japanese. We cannot have it both ways.

For example, there is a new directive which says that motor cars can only have spare parts made by the manufacturer concerned. That will put up the price of repairing motor cars. That programme on Channel 4 was quite excellent and I was faxed the script which is the basis of most of my speech. That programme showed that until now we have had a standard on teddy bears. In the toy directive there is now a universal standard on teddy bears. That means that we keep a high standard of teddy bears and we cannot import teddy bears from outside the European Community. We impose quotas on the third world for clothes, which is mad. What have we done? We have conceded the principle of taxing children's clothes because we have put a large duty on imported children's clothes in order to be protectionists. The European Community is in danger of being protectionist to the outside world.

The European Community has produced someone called Mr. Bangemann who said—and I am afraid I rather agree with him from a taste point of view but from a theoretical point of view I think he is wrong —that we cannot have prawn cocktail flavoured crisps. Actually, I believe anybody who bans prawn cocktail flavoured crisps is a saint from my personal taste point of view, but that kind of legislation cannot be right.

There is a standard on French letters (which I believe are also called condoms). The Italians complained that the size was too small but it does not matter. Surely, we should be allowed to sell French letters for either mice or elephants. If there is a market for French letters for mice or elephants there should not have to be a standard. It is that kind of thing which brings the European Community into disrepute and makes it unpopular. On the whole, it is a very good thing but we must not allow it to become unpopular.

The point about the election was that everybody, both Labour and Conservative, said, "What a good idea Maastricht was". The argument produced by my noble friend Lord Mackay and my noble friends on the Front Bench was that that gave it democratic respectability. I say to my noble friend Lord Cockfield that up to a point it does. It gave it democratic respectability because nobody got up to say what a bad idea it was.

Because of the Burkian principles that one is sent to Parliament to represent one's constituents by using one's mind as opposed to doing what one is told to do, I do not think that I could vote for a referendum. But we must be very careful not to ignore the fact that in this country and throughout the Community there is a growing irritation over a lot of the habits of the European Community. Perhaps the most important point raised by the Lisbon Summit was that it wanted to increase and get GATT right. I do not know whether your Lordships are aware of it but in 1914 Odessa was the greatest grain exporting port in the world. Growing corn is a fairly easy thing to do unless you are a communist Russian and make a mistake. It is very easy for the Russians to get it right. The moment the Russians get their corn-growing half right 40 million tonnes of corn will be taken off the export market. If they get it 100 per cent. right and go back to the days of the benign Tsar Nicholas II when the Russians were great grain exporters, it will do something horrendous to world agricultural trade and trade as a whole.

The European Community is not getting GATT right; it is not pushing for it. We have to get at the heart of the problem of agricultural subsidies which are the bane of everybody's life. I say that as a farmer who, if there is a trough, will place his face in it and slurp. I can still argue in your Lordships' House for the abolition of the trough. We have to get rid of the subsidies and remove the barriers outside the European Community. When we do that we will have peace and prosperity. The secret to peace and prosperity is light government, free trade and sound money. That is good, old-fashioned Manchester liberalism. I neither come from Manchester nor am I a Liberal, but I happen to believe that in that case they were right. That is the route down which the European Community should be going and the idea which my right honourable friend should be pushing as much as he can during his presidency of the European Commission. That is miles more important than some of the stuff that is in the dead, deceased and passed away parrot of this document.

8.35 p.m.

Baroness Perry of Southwark

My Lords, I should like to add my congratulations to my noble friend Lady Thatcher on her excellent maiden speech. If I may, I should like to offer a welcome from this House to a woman who gave such great distinction to the highest office in the land.

As I have listened to some of the more negative contributions to this debate, I have been vividly reminded of my first encounter with the great scholar and teacher Gilbert Murray. He was speaking to a group of about 800 school sixth formers. Rising to his feet, he said with careful precision, Alas, alas, the world is not what it used to be". He waited for the resigned sighs of the young as we anticipated having to listen patiently to yet one more of our elders telling us how much better the world had been when he was young. With perfect timing, he continued, That, my young friends, is the inscription on the tomb of a Greek who died 3,000 years before Christ. It just goes to show that there is a very long history of the belief amongst the old that their yesterday was infinitely preferable to the tomorrow of the young". Alas, alas! we are now in danger I believe of trying to impose on the young generation of today our anxieties and fears about European unity, relying on instinctive feelings which derive more from our personal history than from political rationality.

I am privileged in my job to be in daily contact with the present generation of young students, and I can tell this House that, without any doubt whatsoever, for the young people of today Europe is an idea whose time has come. It has awakened their imagination, given them a sense of a tomorrow which will be full of new ideas and promise and enlarged their horizons in a way they find exciting and challenging. This is a generation which travelled to Europe on family holidays from early childhood; who in their late teens put on their backpacks and climbed on the ferry and wandered Europe freely, founding firm friendships with those of their generation from every country across the Community. This is a generation which has grown up believing that the boundaries of national states are infinitely permeable and who have never felt confined within the borders of the United Kingdom.

The students in higher education today are participating in a system which has, thank goodness, been recognised by the European Community as occupying a central and strategic role in achieving social, economic and political cohesion. For the single European market to succeed higher education in all countries within the Community must produce a higher trained workforce, with graduates who are mobile and flexible and able to operate confidently in the countries of the Community.

To meet this aim, the students of today are enabled through Community programmes like the appropriately named ERASMUS to follow a substantial proportion of their under-graduate or post-graduate studies in countries of the Community other than their own. Increasingly therefore they study in international communities of scholars in whatever country they find themselves. In my university, for example, students from every country of the Community can be found studying together perhaps on degrees which combine business studies with modern languages or architecture or hospital management. We are particularly proud to have been one of the first institutions to achieve co-operation with universities in other countries of the Community to produce graduates who are truly European engineers whose qualifications are recognised for full professional membership in several member states. Further work on the transfer of vocational and professional qualifications around the Community has already been accepted as one of the priorities in the field of education and training for the UK presidency. There is much still to be done, particularly in the field of membership of professional associations like that for chartered accountants, for instance. The Germans hate our loose use of the word "engineer".

I therefore welcome very much those aspects of the Maastricht Treaty which give the European Commission a greater role in developing Community-wide high quality education. The Maastricht Treaty calls for more co-operation on education policy between member states and encourages the Community to supplement member state actions while, respecting the responsibility of the member states for the content of teaching, the organisation of education systems and their cultural and linguistic diversity". Acting by qualified majority, the council will issue non-binding recommendations to encourage student, teacher and youth mobility and exchanges, distance learning and develop the European dimension in education. These are surely noble aims. We are recreating a community of scholars able to move freely across Europe, as did their ancestors in the days of Abelard or Erasmus. Knowledge and learning know no national frontiers, and I for one believe most passionately in the importance of young people experiencing the international and universal quality of knowledge and truth.

But the principle of subsidiarity, which some of us have acknowledged as the most significant and important step forward in the European Community and a triumph for the signatories of Maastricht, is perfectly exemplified in the treaty's provisions on education and training. Member states are by the treaty committed to achieving through concerted and Community-wide action the necessary elements of transparency, by which is meant the recognition of qualifications within the Community, trans-European networks for exchange of information and equal access to training in any member state. The goal of transparency can only be achieved by co-operation between all member states, and it is wholly proper that the Commission should play a leading role in its achievement. Nevertheless, much of what the Community has achieved in higher education has been by stimulating, through its central programmes, bilateral and transnational networks, which retain the initiative of individual institutions within member states, and which rely on encouragement and facilitation rather than compulsion.

And yet the most important lesson we have all learnt is that the generation which has been educated within this framework sees its future as European and not national. The graduates of today expect to live and work throughout the European community, and they will have the skills, both linguistic and professional, to make that possible. For them, the issues of monetary and political union seem logical, if distant, outcomes of a process of Europeanisation which has been a part of their lives for as long as they can remember.

On their behalf I salute and thank my right honourable friends the Prime Minister and the Foreign Secretary for the work that they have accomplished within the Maastricht Treaty. I offer them my full support and good wishes for the period of the UK presidency. They have laid a framework for the future which the younger generation will seize and celebrate. It is to them and not to us that the future belongs.

8.40 p.m.

Baroness Elles

My Lords, I welcome the opportunity to debate the British presidency. We all realise that it is an opportunity not for dramatic gestures but for carrying on British policy within the European Community context. It will enable the United Kingdom to control the agenda—an extremely charged agenda—in accordance with the list as spelt out by my noble friend Lady Chalker.

The scene is widely different from the last period of British presidency in 1986. The map of Europe has changed fundamentally with German unification, communism overcome in Central and Eastern Europe and the cold war ended. That gives me an opportunity to pay a warm tribute to my noble friend the former Prime Minister Lady Thatcher for her major contribution to that change in the map of Europe. If anyone could claim to have achieved individually so much, it is my noble friend. It gives me the opportunity also warmly to congratulate her on her maiden speech in this House.

However, we are in a period of greater political instability than before, despite that change. That in its turn requires closer co-operation among our European partners in the one area of political stability and comparative economic progress compared to the rest of the world.

In parenthesis it must be said that for older generations of Britons—in which I include myself though I am perhaps not quite as old as the noble Lord, Lord Houghton of Sowerby—it has been much harder to accept that close co-operation when many of us spent our youth contributing, in however modest and humble a way, to the defence of our nation and our country. I believe that it is a hang-up which we must learn to overcome in order to guarantee peace in the region, as we have had over the past 40 years, for the successive generations of young people.

Thanks to a closer economic integration it is unimaginable that our 12 members states could ever go to war with each other again. We have the horrendous example of Yugoslavia on our frontiers which brings home to us and the young people of this part of Europe what a real war means. As I believe my noble friend Lady Thatcher said earlier, it is only two hours from London.

The preservation of our democratic system is reflected in the way in which we must proceed to determine our future. As part of a group of institutions within the European Community the Government have, overall, the task of winning the argument; of making allies on a wide range of issues which affect us all, and of ensuring a majority or at least —if I may put it in Community terms—a blocking minority for the way in which we want to go together down the European Community road. It is a road that I hope we, the British, will guide and steer, but we cannot go it alone.

Before each successive enlargement—a topic we shall be debating later this month so I shall not touch on it tonight —we observed radical changes in European policies. Before our entry in 1972, a new fisheries policy, among others, was embarked upon by the Community. In 1987 the Single European Act was introduced to handle the entry of Spain and Portugal. Now, before another enlargement, which I hope will come as soon as possible, we have the Maastricht Treaty.

The Single European Act was a radical treaty leading to a shift of power in the institutions. I believe that when it was adopted it was perhaps not realised how much of a shift would take place. There was the combination of a qualified majority vote, particularly in matters concerning the internal market which covered around 280 pieces of legislation; the handing over to the Commission of greater powers under Article 155; the extension of competence in a number of policy areas to the Community without any bar to the level at which those competences should operate. I believe that that was one of the causes for the result of the referendum in Denmark.

Although I consider myself to be a comparative Europhile, I found the Danish result extremely beneficial in that it made European leaders recognise that it was time to take stock of the way in which European Community legislation was going. I do not say that I quarrel with most of it. It was the way in which it was being implemented and enforced that was becoming a burden to many people. Governments had perhaps not realised to what extent and how far down that road we had travelled. It is only when one is dealing with Community legislation, analysing what is happening, that one realises the effect of decisions being made in Brussels.

The noble Lord, Lord Stoddart, who is not in his place—would be surprised to hear that I agree with him with regard to VAT. In the United States there is a different basis of assessment as well as different rates of tax in all the member states and yet they have one of the most, if not the most, flourishing domestic economies in the world. It is not essential for an effective internal market to go as far down the road as we have. We must therefore be realistic and recognise some of the problems now facing us. From my point of view, I insist that that does not mean that we should renege on our undertaking to ratify the Maastricht Treaty, supported in another place on 21st May at Second Reading by 336 votes to 92 and, indeed, in this House by large majorities when the issue has been discussed.

Lord Bruce of Donington

My Lords, I am obliged to the noble Baroness for giving way. I am unaware, and perhaps the noble Baroness can enlighten me, that a vote was taken in this House upon the Second Reading. My recollection is that no vote was taken. I was wondering how the noble Baroness thought that it received such an overwhelming assent.

Baroness Elles

My Lords, perhaps I did not make myself clear. I apologise to the noble Lord, Lord Bruce of Donington. I said that there was a vote in another place on the European Communities (Amendment) Bill. In May it received a majority vote of 336 to 92. We had a vote much earlier on an amendment tabled by the Opposition on the subject of Maastricht, but before the signing of the Treaty. It was in a general debate and not on the Bill. The Bill is in abeyance and has not come to this House.

I believe that we should continue to support the work for ratification in line with the 10 other member states, subject to a successful result in the French referendum. Until we obtain that I do not believe that anybody is in a position to state what line we should take. However, I should like to comment on the Prime Minister's achievements during the treaty negotiations. They cannot be overlooked.

I refer to a parliamentary decision made before moving on the framework of EMU; the setting of financial and economic criteria before—indeed, if it ever happens—the adoption of a single currency; the intergovernmental approach for a common foreign and security policy; the decision not to go down the road of European political co-operation which was leading towards a Community system. That is in itself a great achievement. There was an intergovernmental approach to migration and asylum which will no doubt present considerable problems in the future. That is one aspect for which I welcome the establishment of Europol. That will be a useful institution to deal with the problems facing Western Europe such as crime, drugs and terrorism where we need the closest co-operation.

In my view it would be unthinkable for a Prime Minister of this country to sign a treaty on behalf of the United Kingdom and then withdraw before ratification. I personally know of no precedent although I know that in this House there are many noble and distinguished historians who might prove me wrong. I know of no precedent in this country where a treaty has been signed and then reneged on at ratification. If other countries decide otherwise—

The Earl of Onslow

My Lords, if a treaty is signed what is the point if it cannot be ratified?

Baroness Elles

My noble friend brings up a very interesting point. A treaty may not be ratified by a certain country. The legal chronology of many countries is such that many treaties are signed and then ratified much later because they usually have to pass through the national parliaments. I am saying that I do not know of any example of an international treaty, imposing international obligations, being signed by a Prime Minister on behalf of this country and which has not been eventually ratified. There may be examples and I shall be very happy if someone were to prove me wrong. However, I know of none myself.

I wish to continue with another aspect of the treaty which concerns subsidiarity. We are told that, largely because of Britain's insistence, the drafting of this clause to which the Prime Minister has said he will be paying the greatest attention, is in order to put a break on centralisation and supranational decision-making in areas where it is clear that they should be left to national governments or even regional or local authorities. This matter raises a particular problem. As drafted, subsidiarity will apply in certain circumstances but only, In areas which do not fall within Community competence". Unless member states are prepared to add a protocol to the treaty or follow some other legal or constitutional line, the effect of this principle will not be so great a blessing for national governments as is sometimes believed. Areas of Community competence have been considerably extended since the original treaty of 1957 not only through the Single European Act and the Maastricht Treaty, if ratified. There will also be included the case law of the European Court of Justice. In my view it is not certain that in interpreting this clause the European court will be as helpful as people are claiming unless there is further consideration as to how this particular principle is to be applied.

If my noble friend cannot reply on this point tonight I hope that he will take guidance and give us some information later. It is fundamental to whether the policy of subsidiarity can be implemented as it is said that it will be able to work for this country. At the moment, according to the way it is drafted, I do not believe that it will he as effective as it is meant to be.

The allocation of areas of competence to the European Community has given carte blanche to the Commission to propose legislation not only concerning major matters—that is to say, on the environment, such as pollutant emissions throughout the member states—but has enabled them, contested or not, to seek to control from Europe as a whole to Twyford Down in particular. That is the problem of competence in the area of Community affairs. It is a question not only of competence in subject matter, but in procedure which has been handed over to the Commission through the ever-increasing use of advisory committees formed with national civil servants but whose views can be overridden by the Commission when implementing common policies which have not been scrutinised as secondary legislation by any democratic process.

There are two points apart from those which I have already mentioned which it is hoped that the Prime Minister will press regardless of ratification of the Maastricht Treaty. The first is to increase the protection of European citizens in a general sense—I refer to nationals of member states —by the establishment of an ombudsman on the lines of our Parliamentary Commissioner. That is particularly in order that complaints of maladministration by Community officials or the violation of rights by a Community act, can be scrutinised and, where necessary, remedied. I believe that that is a fundamental right of our nationals within the European Community. They should be protected far more than they have been so far.

Secondly, I strongly believe that greater control of European Community expenditure can, if not achieved absolutely, be subject to far greater and more effective scrutiny by conceding greater investigative powers to the budgetary control committee of the European Parliament. It has already done excellent work in the past. It would also be in accordance with this House's report on fraud within the Community. Whether one likes the European Parliament or not, it is the only body which can monitor effectively expenditure throughout the 12 member states. It is for that reason that I believe that this particular committee should be given greater investigative powers and greater power over the Commission when controlling its expenditure. I believe that that is the only way in which it can be done in order to have some effect.

In conclusion, I merely wish to add to what many other Members of this House have said. We all recognise that the tasks of the Prime Minister and the Government are formidable, but they are based on agreement between the member states. Britain's success will depend on maximum support for our Prime Minister. We wish him and his colleagues in Government success in these next six months on which the future of the European Community will depend.

8.55 p.m.

Lord O'Hagan

My Lords, we have today listened to a spectacular, memorable and witty maiden speech. Over 20 years ago I made mine. There was a debate on student unrest. I was a student. My contribution was a little shorter than we heard today. I hope that I learnt something from coming here. Indeed, I have always regarded your Lordships' House as providing the best system of adult education available. I wish that it could be provided on a more general scale. Television is now doing so.

In due course I became an elected member of the European Parliament. Since then I have represented the constituency of Devon, having fought three elections. I come to your Lordships' House all too infrequently since Devon is closer to the Continent than to London and my duties as an elected member lie there rather than here.

We have heard a series of debates tonight. The theoretical title of the discussion—the Long Title, if one likes to call it such—has been the presidency. No doubt because I fully support Her Majesty's Government I have been put down on the list to speak last. Beneath the label there has been a series of other debates. We have had the beginning of a debate on whether we should be in the European Community at all from the noble Lords, Lord Stoddart, Lord Jay, and others. We have had the beginning of a debate about whether we should have another referendum. We have had a re-run of the old referendum debate. We have had a discussion about the ratification of the Maastricht Treaty. That is a very important subject and I hope that your Lordships will return to it in detail. I hope that all noble Lords who have spoken tonight will come to give their views on that occasion.

It has been difficult to disentangle the different strands of the debate. As the last contributor apart from the speakers on the Front Benches I can say that your Lordships' House has a role to play in this country in helping the public to disentangle the various strands. The word "subsidiarity" is one which nearly all of us find hard to say. It is a key to the dilemma which we all have as democrats about the future of a highly complex international and supranational organisation.

How do we make people understand it and feel that it belongs to them? How do we make it accountable and reassure everyone that it is not running away in the direction that my noble friend Lord Onslow indicated? I have one piece of advice to my noble friends on the Front Bench when they are seeking for a definition of subsidiarity and a method of applying it in practice when they attempt to translate it from a religious nostrum to a proposal for serious political judgment. Please read Lewis Carroll's the Hunting of the Snark. Noble Lords will remember that the intrepid party who started off in pursuit of one thing found it was another and what was found disappeared.

It is essential for the future of democratic control and accountability within the European Community that accountability in the form of subsidiarity is a snark and not a boojum. It should not be something that sounds good but which in practice disappears. I believe that the Government have a duty to the country to inform the citizens of our democracy what it is that they are now asking us to endorse—not through a referendum, I hope, because I support those who oppose a referendum. But because of the intricate detail involved in the cross-reference between the original treaty, the Single European Act and the current draft treaty, it is very difficult for Members of the European Parliament—let alone members of the public—precisely to discern to what we are being asked to assent.

Lord Bruce of Donington

My Lords, may I press the noble Lord on that point? Will he inform the House, first, whether he regards Article 3b of the Maastricht Treaty as an intelligible proposition, and, secondly, whether he is prepared to endorse it?

Lord O'Hagan

My Lords, I have Article 3b here. As far as I understand it, I endorse it. My intelligence is not sufficient to satisfy me that I would have the ultimate judgment, but if my noble friend and sparring partner were to continue this discussion in a friendly hostelry nearby afterwards, I am sure that we could reach a satisfactory outcome.

The point that I was trying to make is the one that he has brought to the attention of the House. It is essential that international lawyers' language is translated into the language of the people and that the vocabulary of Berlaymont be translated into the vocabulary of the individual electors in the United Kingdom and in all the other member states of the European Community. I do not think that there is any difference between the noble Lord and myself in this respect. If the average member of the public is asked to interpret the normal pieces of domestic legislation which this House deals with every day, there might be differences of opinion about precisely what each clause means. The referendum campaign in this House has started—

Lord Stoddart of Swindon

My Lords, but having translated the treaty into language that ordinary people can understand, how then are ordinary people to make their views known? Are we to have another general election if we do not have a referendum?

Lord O'Hagan

My Lords, I can tell the noble Lord that in my constituency we are having a two-hour "Any Questions" session before the annual general meeting so that the MEP can be asked the sort of question that the noble Lord, Lord Bruce of Donington, has just asked and can endeavour to give an answer. What I think is necessary is that all those who believe in democracy and the European Community should organise public meetings and hold discussions so that the individual citizen is well aware of what his or her representative is doing on his or her behalf in the Parliament to which that representative happens to belong. Perhaps the noble Lord can join the party elsewhere later—I do not want this private discussion to hold up the proceedings of the House.

This is a very important issue. Whether or not this draft treaty is ratified; whether or not there is an adequate definition of subsidiarity and whether or not the European Community continues in its present form, there must be a diminution of the gap in understanding between those who are governed and those who take the decisions in the European Community. This is the lesson that the Danes have taught us and I am very grateful to them.

I should like to conclude by talking about the Social Chapter and to refer to the remarks of the former Commissioner who sits on the Opposition Front Bench. The Social Chapter is used as a nostrum by members of the British Labour Party—as an escape route from daring to say that they are opposed to the Treaty of Maastricht. The social "opt-out", as it is called, as achieved by the present British Prime Minister, does not do what the noble Lord alleged.

In Denmark there is a system for deciding employment legislation which bypasses the national parliament. The Danes are and were jealous of the intrusion of Brussels into this system by a bipartisan system—what we tend to call "corporatism"—for dealing with such issues. They do not want Brussels to interfere with it. Therefore, far from it being what the noble Lord suggested, it is the opposite—the Danes wish their present system to continue because they feel that it works very well. Contained within the Social Chapter is a replication of a version of the Danish system for the European Community where the employers' representatives and the trade union representatives sit down together and legislate. They bypass the national parliament and they bypass the European Parliament—and that is why all the British Labour Members of the European Parliament are opposed to the Social Chapter. It undermines the democratic rights of British citizens—and it undermines the power of the European Parliament to use its legislative force on social issues.

I do not wish to inject a note of House of Commons style party debate into this House, but it is extremely important to underline the fact that debate about the Social Chapter in this country has not progressed very far. The Opposition are still using it in a bogus way to obscure the difficulties that their own Members of the European Parliament have in supporting this measure. I repeat that the British Labour Members of the European Parliament are opposed to that element of the Social Chapter which undermines both the national Parliament and the European Parliament when it comes to dealing with employment legislation. If noble Lords opposite would like the names of those Members if they do not know them, I shall be happy to provide them afterwards.

This is an important debate. We have not taken any decisions today so far and perhaps we will not do so later on, but it is symbolic of the way in which we do things in this country. As I said genuinely before, when I became a Member of your Lordships' House, this was my place of education. The detail into which we have gone as a country in the run-up to Maastricht is a tribute to our way of looking at highly complex international and political issues. We were the only country that had a national debate before the treaty discussions. It went on so much that some people thought that it was another general election. So when noble Lords, such as the noble Lord, Lord Stoddart of Swindon, say that we should have a referendum because the Treaty of Maastricht was not discussed at the general election, I say, "Maybe, maybe, but we had the most terrific discussion before the general election and the most thorough debate in both Houses of Parliament".

I conclude by saying that I welcome the courage, determination, sense of humour and tenacity of the Prime Minister in pushing forward on this issue. I hope that we can all support him—all of us. I hope that in future debates all those who have participated in today's discussion will be able to take the argument further.

9.7 p.m.

Lord Bonham-Carter

My Lords, it is always a pleasure to follow the noble Lord, Lord O'Hagan, and it is a particular pleasure tonight to follow such an extremely interesting and well-informed contribution to our long debate today on this extremely important issue. I shall leave it to the noble Lord, Lord Peston, to deal with the very pertinent argument which the noble Lord, Lord O'Hagan, produced at the end of his speech in regard to the nature of the social chapter and its consequences and implications.

It has been a characteristically good debate. We have had contributions from two former Prime Ministers, and one maiden speech which all of us will remember with pleasure. We have also heard from one former President of the Commission, from two former Commissioners and I think from five MEPs or former MEPs. Therefore, during the course of our discussions, there has been a wealth of first-hand experience on how the European Community and its institutions work from people who have actually operated them and been in touch with them. We also had a notable contribution from, as it were, the other side to that on which I stand. The noble Lord, Lord Jay, asked the fundamental question in the whole debate which has to be answered and which, after all, has been going on in this country for 30 years: for what end, for what purpose was the whole Community created and how have we arrived, inspired by that purpose, at where we are today and at the decisions which we will be taking in the next few months as a consequence of the Maastrict Treaty?

The noble Lord recounted to us a conversation that he had had with M. Monnet who said that the inspiration which lay behind the idea was to prevent another European civil war. He later raised the ghost —or whatever one wants to call it—of the German menace. Of course, the second object of the whole idea was so to integrate Germany within a European Community that it could, so to speak, never be unscrambled; therefore, to use the power of that great country—which had, let us face it, been misused in the past—for the benefit of the whole of Western Europe. That was a noble idea and one in which I still believe.

The second idea which lay behind the creation of the Community was thereby to underpin democracy. The events of the past few years seem wholly to have justified that ambition. It seems to me that it has succeeded. The idea embodied in the Community of the pacification of European conflict has been a magnet, as those of us who have been there all know, to Central and Eastern Europe. They are interested not so much in the economic benefits—although they are interested in them—as in the idea of political integration. We should always remember that. We are reminded of the urgency and the need today of that same formula by the outbreak of nationalism and war where individual nationalities have not been brought under the control of something like the Community.

Therefore, I start from a very different end of the spectrum from the noble Lord, Lord Jay. The noble Lord and the noble Lord, Lord Callaghan, both raised a point which is often mentioned and which I believe must be recognised. They raised the question of whether, by trying to develop a common European defence and foreign policy, we were encouraging the break-up of NATO and the transatlantic European relationship. In answer, I simply say that that should be the last object of any constructive European policy.

Nonetheless, let us recognise the fact that there are movements in America today which may lead, and are leading, first, to a very considerable and perfectly reasonable diminution of American troops in Europe; but, more than that, to the possibility of the recrudescence of some kind of isolationism. We should do nothing to encourage that. However, in prudence, I think that we should take steps to ensure that, if that were to occur, we have a defence and foreign policy commitment which we have organised to substitute in its place. That is not an encouragement. I am not saying that it is a good thing. Moreover, if there is one aspect of British policy which has irritated the Americans over the past 40 years, it has been our coolness towards Europe.

The Americans have always pushed us to have closer relations with the Community historically. Therefore there is no antithesis between what I am saying and a close and continuing alliance between Europe and indeed the United States, which has contributed so enormously to the peace of the world since the end of the war up until the Gulf war and today.

Therefore, as I said, I start from a very different position from that of the noble Lord, Lord Jay. I am now referring to notes that I read some time ago. I do so, because I believe that we must return to the beginning. When we joined the Community, it seems to me that it was very difficult for anyone who read the Treaty of Rome to believe that it did not in fact involve a de facto loss of sovereignty.

When the Single European Act was passed and majority voting extended, the so-called federal element in the amended Treaty of Rome was there for anyone to see who cared to read the terms bf the Act. When we talk about the need for subsidiarity—I shall return to that crucial subject—we are using language which avoids the dread word "federal" but which is about the division of powers between the centre and the nations. That of course is the heart of federalism. Federalism is about the division of powers between the centre and the nations or the parts. That all seems to me to be self-evident, just as it is obvious to me that in such a situation the powers of national parliaments must be diminished. I say that merely because we go on pretending that that is in some way avoidable. It is not. Those who are surprised by it now cannot have read the words of the treaty to which we put our names.

The noble Baroness, Lady Chalker, set out the full and testing agenda which faces the British presidency. To return to the main theme of the debate, although we on these Benches have criticised the Treaty of Maastricht and think that there are things about it which we do not like and things which should be extended, we are in no doubt that it should be ratified and then built upon. Those who oppose ratification have not counted the cost of following the course that they advocate—the fate of this country, its influence in the world or its ability to control its own destiny unless we are at the heart of Europe.

We also believe that the access of the EFTAns—as they have come to be known—to the Community will not merely add to its economic strength, which is important, but will also reinforce and strength the forces of democracy within the Community. When however we come to further enlargement we are talking about something very different. Of course it is desirable that the countries of Central Europe (Poland, Hungary, Czechland, I suppose we have to call it now, and Slovakia) should be brought within the Community as soon as it is possible for them to meet the conditions necessary for them to survive within the Community. But it will be costly. It will cost money. Those who advocate enlargement beyond that have not counted the cost or told us who will pay the bill.

I was astonished when the noble Lord, Lord Jay, advocated at one and the same time an extensive enlargement of the Community and no increase in the budget. The two are incompatible. I have said that the access of those countries is desirable. It is also much more difficult than it appeared to be six months ago. One of the matters that has become apparent is that, whereas we thought that the problems of economic reform were generally recognised, we have found that political reform is much more difficult to put into practice.

Enlargement gives rise to serious financial questions and will demand substantial financial input from all the countries of the West if it is to be successful. A second consequence of enlargement is institutional. That is one of the issues that the Government are reluctant to face. To continue with the existing institutional arrangements, which were devised for six countries on a largely consensual basis when voting hardly ever happened and which have become difficult with 12, will produce a complete deadlock if we extend to 17 or 20. The reform of the Community's institutional arrangements, if it is to be enlarged, must be considered now and considered carefully.

The Earl of Onslow

My Lords, the noble Lord says that the institutional arrangements must be reformed, and I agree with him. But does he agree that it is not sensible to put on top another layer called Maastricht, which will have to be reformed in 10 minutes' time?

Lord Bonham-Carter

My Lords, I believe that Maastricht makes it essential to reform those institutions. That is all I am saying. Enlargement is essential and the developments that Maastricht proposes are desirable; and that carries with it the need for institutional reform, but they do not seem to me to be incompatible.

I hope that the result of the Danish referendum will concentrate the minds of the Government and other people on these matters. I came to the conclusion that we should learn three lessons from the result of the Danish referendum. The first was that the work of the Community must be more open and democratic. Secondly, it is essential, as many noble Lords have already said, that the meaning of "subsidiarity" should be made intelligible to the ordinary citizen. Thirdly, whatever it means should be put into practice. To me, although the Government cannot admit it because it would mean using the terrible word "federal", "subsidiarity" is in principle a federal practice. It concerns how we divide powers between the centre and the nations. I do not see why this definition is unacceptable. I notice the noble Baroness, Lady Chalker, shaking her head. Subsidiarity lays down what should be exercised at the lower level and what at the centre.

Lord Bruce of Donington

My Lords, I am obliged to the noble Lord for giving way. On the assumption that he is correct in what he says about the implications of subsidiarity, will he say whether in his view Article 3b of the Maastricht Treaty is intelligible to him? If it is, does he agree with it?

Lord Bonham-Carter

My Lords, the noble Lord makes a grave assumption that I am right. I am flattered. I am interpreting Article 3b now, so the answer lies in what I am saying. The noble Baroness appears to have doubts as to whether I am right that "subsidiarity" means how we divide power between the centre and the nations. That is how I interpret it and it seems a reasonable interpretation of Article 3b.

I do not understand why this is such an awful idea or why this country is frightened to use the word "federal". We have set up more federal constitutions all over the world than any other country. There is nothing frightful about it. We ought to understand it. Subsidiarity is simply a word for describing how we divide power.

Moreover, directly there is majority voting we move in a federal direction. There can be no doubt about it. Immediately we allow that the minimum terms are settled in Brussels as opposed to being decided here, we are moving in a federal direction. It would be much better if we accepted this and took it seriously.

With the federal convention of 1787 in Philadelphia there were discussions on this and how the power should be divided between the federal government and the states. That is what we should discuss here. If we deny the need for institutional reform and the fact that there is a quasi-federal constitution, it is difficult to engage in constructive debate.

I must bring my comments to an end, but if we consider the institutions and the need for more open government as well as for more democracy, the institution we should look at is neither the Commission nor the Parliament but the Council of Ministers. Its members are the people who legislate.

They are responsible for much of the interference of which people complain and which is ascribed to the Commission. The Council of Ministers meets in private, its discussions are in private and we are never allowed to know how our representative voted.

My view is that when the Council of Ministers meets in its legislative mode it should be in public and we should know how our representative votes. It seems to me extraordinary that we have not insisted on that reform here in Parliament at Westminster.

At the beginning I argued that the opponents of Maastricht had not spelt out an alternative. They should do so if they are serious about what they say. The time has come—I am glad it has—when the Government and the Prime Minister should be slightly more open in their support of the Community and abandon Commission-bashing. Like my noble friend Lord Jenkins, I was glad to see the Prime Minister on 29th June engaged in a forthright defence of the Commission and its work. We should remember the origins of the European Community, the extent to which it fulfils them, the danger of abandoning them and the need today for an area of stability in a world which is full of conflict, nationalism and war.

9.25 p.m.

Lord Peston

My Lords, this has been a most interesting debate, if occasionally rather an eccentric one. I was particularly intrigued by the contribution of the noble Lord, Lord Selsdon, on the threat that the Community poses to the future of the Spanish nobility. I hope he will forgive me if I do not pursue that matter this evening but I am sure we shall return to it on some future occasion.

I must say immediately that as Members of a rather anomalous House, albeit one I am devoted to, we have a special duty to safeguard parliamentary democracy and to protect the constitutional interests of our people. In that connection I find it rather paradoxical —I shall say more on this matter—that many of those who proclaim most strongly the sovereignty of Parliament and talk of the threat to that sovereignty posed by the Maastricht Treaty are also advocates of a referendum. I am a supporter of Maastricht. I do not regard it as a perfect treaty. In my judgment many of the so-called opt-out clauses will turn out to be to Great Britain's disadvantage.

Our attitude to European monetary union, as was forecast at the time, has almost certainly prevented London from being the location for the European Central Bank. More generally we remain without reliable allies while the Franco-German partnership gets stronger. But having said that, I would rather have the treaty than have no treaty. In this connection I must say to the noble Lord, Lord O'Hagan, that his attack on my noble friend Lord Richard was nonsense. That is the nicest thing I can say about the contribution of the noble Lord, Lord O'Hagan, although I shall say more about that in a moment.

The Labour Party has consistently opposed the opt-out from the social chapter and has not wavered from that position at all. Wearing my professorial hat, I should say to the noble Lord, as he claims to have been educated in this House, that he has obviously failed the course. Nonetheless I do not believe that the people of this country have been properly consulted. They do not know what the treaty means, especially as regards sovereignty. Whether we say that the treaty diminishes sovereignty, or changes the way sovereignty is exercised, sovereignty lies at the centre of the treaty. An example of this has been emphasised by my noble friends. With EMU we can no longer pursue our own monetary policy and we are subject to significant fiscal constraints. I may favour that but my concern is whether the average voter knows at all what is involved in that. As my noble friend Lord Callaghan said in his important contribution, we are discussing a momentous decision. There is a need for a full debate and it is absurd to say that this matter was decided at the time of the general election in April.

Normally I agree with most of the speeches that the noble Lord, Lord Mackay of Ardbrecknish, makes. I agree with many of the things he says. However, I believe that on that matter he is mistaken. I was fully involved in the election; as the noble Earl reminded me, I was on the losing side. The subject hardly came up, let alone was debated. The parties were united, in the sense that they did not want a debate on the subject.

Lord Bonham-Carter

My Lords, I thank the noble Lord for giving way. Despite continuous efforts on the part of the Liberal Democrats to have the subject debated, it was consistently not debated, either in the press or by the Labour or Conservative Parties.

Lord Peston

My Lords, that is precisely my point. I am not engaged in an explanation for that; I am simply saying that I do not believe that the subject was debated. The noble Lord has confirmed that.

In that connection, as she made precisely the same point so effectively in her fascinating speech, I agree with the noble Baroness, Lady Thatcher. She- is entirely right. The matter has to be rectified. I shall not embarrass the noble Baroness by emphasising the many other parts of her speech with which I agreed. After all, I have no wish to undermine her position or to hold back her political career!

There is another matter which concerns me. As has again been mentioned this evening, the Sunday papers have said that Mr. Major intends to make this an issue of confidence within his own party. I believe that such a hysterical response to serious criticism would be unworthy of him. However. I do not believe that that is his view.

In my contribution to the debate on the gracious Speech I asked the noble Lord the Leader of the House, Lord Wakeham, who is now in his seat, whether the Government proposed to publish an exegesis of the treaty so that the public could understand it. I received no reply. I ask the question yet again. After all, I am an alleged expert and there are large parts of the treaty, not excluding but not confined to Article 3b, which I find difficult to the point of total obscurity. The Government must let the public know what the treaty is all about and then persuade them that it is a good thing.

Thus, although I am not yet finally convinced, I am increasingly coming round to the view that a referendum is worth taking seriously. I do not like the concept much as a general principle but it might be relevant in this case, as my noble friend Lord Callaghan said.

However, perhaps we are all wasting our time. As has been confirmed by the noble Lord the Leader of the House when repeating the Statement on the Lisbon Conference, the Maastricht Treaty requires amendments to the Treaty of Rome. That requires unanimity. There is no shadow of doubt about that.

On that theme I now turn to the Danes. What a great nation! I salute their most recent triumph, by which I mean, of course, the 2–0 defeat of the Germans. That was the one bright spot in a dreadfully dull European nations championship. It certainly put into perspective England's dismal performance, the worst of the eight nations in the tournament—worse even than Scotland, who managed to win a match.

To revert to minor matters, the Danes have rejected Maastricht and now, as I understand it, the treaty cannot become law. There is no question about that. I read in the newspapers that the rest of the Community intend to pressurise the Danes and even to expel them. My only response to that is, so much for Community democracy. However, again, I do not believe that that will happen. I hope that our country will never be a party to such action if for no other reason than, as the noble Baroness pointed out, our own self-protection in the future.

I think that I was reassured by what the noble Baroness, Lady Chalker, said in her opening remarks on that theme. I hope that we continue to say that we shall not put pressure on the Danes. However, we then have to recognise the consequence—that the treaty is dead. There is no way round that.

That is not a technical matter. It follows that there must be changes, and the Danes have made it clear where those changes must be; namely, in the area of subsidiarity. That points us in the direction that we have to consider.

With regard to subsidiarity we are discussing a form of words but that does not make the matter less important. The formulation that I like is the negative one: the Community should not do what the individual nations could do. That is the way I prefer to put it. The burden of proof should be on the Community to demonstrate that it can do something useful; it should not be the other way round. The presumption should be for the Community not to do things rather than the other way round.

That still gives the Community plenty to do. EMU, which I support, ex definizione, must be a Community matter. Therefore so will monetary policy be a Community matter; and so, though perhaps one or two of my noble friends do not like it, must be the monitoring of fiscal policy. There is plenty for the Community to do.

Again I find myself for the second time very regretfully disagreeing with the noble Lord, Lord Mackay. Overwhelmingly it seems that spillovers in environmental terms between member states—environmental policy—must have a very strong Community dimension. We simply disagree, but I thought that I ought to make the point.

I have a difficulty with subsidiarity and my approach to it which is a major difficulty. There is a problem common to commissioners—I also remember it from far distant days when I was an adviser to government—which is also common to Secretaries of State; namely, they hate a clean desk and hate an empty in-tray. They want to do things because they want to build a reputation. Incidentally, that is why, quite independent of ideology, it is so difficult to control, let alone cut down, public expenditure. What do Ministers do if they cannot spend? That also applies to commissioners.

The purpose of a strong presumption in favour of subsidiarity, decentralisation and the nation state is to limit the ambitions of the Commission. But having said that, I become enormously pessimistic when it comes to having any success. Another remark on subsidiarity is a rather theoretical one, but again the matter is not unimportant: bringing in the level playing field argument. Taken too literally and simply it leads to a conclusion of total uniformity in the Community. Almost any deviation from the norm in any field could be interpreted as a distortion of competition. Just as social affairs impinge on economic performance, the level playing field argument could lead to the conclusion that social policy should be the same in all countries. I for one find that quite unacceptable. Apart from anything else, it puts in a straitjacket any nation which wishes to move ahead more rapidly than the others.

Similarly, although we can all learn from each other, to impose common education and training policies, for example, would be preposterous. But again that could easily be justified on the ground of the level playing field. That is why we must be careful of that argument.

That brings me to another point which I particularly wish to emphasise to my own colleagues but which is no doubt of interest to noble Lords opposite also. Just because we agree with a directive —this directive rather than that one—it does not mean that the directive is appropriate. In other words, our approach to policy and choosing what ought to be done should be based on a matter of principle rather than saying, "I like this one, so I shall not raise the subsidiarity question; but I do not like that one and therefore the Community should not be in that field". We need general principles of where the Community should operate.

I am in favour of enlargement but I have to make an economist's point which will not appeal to many noble Lords, especially the more idealistic among us. It is not unconnected with the point made by the noble Lord, Lord Bonham-Carter. In considering enlargement, with regard to new members we ought at least initially to be interested in those states with a GDP per capita above the Community average, if for no other reason than that it will help to carry the burden of redistributing some amount of income to the poorer nations. In other words, enlargement, particularly enlargement involving the poorer countries, can only be had at a price.

More generally on the question of enlargement, although I favour it, I believe that there are so many difficulties which are so difficult that I counsel taking our time. I am keen to admit new members as quickly as possible, but I do not wish to take risks with the very viability of the Community.

It is late but I must comment on one remark in the contribution by my noble friend Lord Stoddart of Swindon. As he knows, I do not care for controversy at any time, and certainly not tonight; I am keen to get home to supper. However, he said that German reunification is completely wrecking the British economy. I have to say to him that I thought that it was the present Conservative Government who were completely wrecking the British economy and were continuing to do so. It is a proposition that I shall demonstrate more fully in your Lordships' debate on the Finance Bill during the week after next. I have no intention of allowing the Government off the hook by blaming the Germans.

I conclude with the theme that has been emphasised by so many noble Lords of all opinions and of all political persuasions; namely, the centrality of the Treaty of Maastricht. I believe that the noble Baroness, Lady Chalker, was wrong to state in her opening remarks that the treaty will not and should not dominate the six months of our presidency. Quite the contrary; I believe that it should and will. I say with great regret that for three months of that presidency your Lordships and Members of another place are being sent away. We shall not therefore he able to take part in that debate. Perhaps that is what the Foreign Office hopes: that we shall not be able to take part for three months. However, I assure noble Lords that we shall get our strengths back and in three months' time we shall simply double our efforts.

The Treaty of Maastricht implies vast changes for our country. If we proceed down that path, there can be no turning back. I reiterate this. I favour the treaty. But, more importantly, I want the people of our country to know and understand where we propose to go. If the Government are reluctant to inform the people and to persuade them of the validity of what they propose to do, your Lordships have the responsibility, and I believe the ability, to cause the Government to change their minds.

9.42 p.m.

The Earl of Caithness

My Lords, we have had a most interesting and stimulating debate this evening and I am grateful to noble Lords who took part. Not only are the Government committed to keeping Britain at the heart of the Community, but it is also clear that debate as to the future of the Community is now at the heart of our national life.

We have been very privileged today to hear the maiden speech of my noble friend Lady Thatcher. She said that the House had a wealth of experience. What is absolutely unquestioned is that my noble friend's presence not only enhances this House but adds to its wealth of experience. Through her vision, principles and determination, the self-confidence and esteem in which Britain has been held has returned. It is from that refurbished base that our presidency gives us the ideal opportunity to lead the Community at a time when we face great challenges and great opportunities.

It has been said that it is better to plan for the future rather than the present because there is so much more of it. My noble friend Lady Perry's wise words reminded us that it is the youth of today—your Lordships' children, grandchildren and great grandchildren—whose futures we are planning. The Maastricht Treaty has provoked vigorous debate throughout the Community. In this country of course we debated the treaty before it was signed. In the light of that debate we argued vigorously for British interests and we won considerable victories. That is why we signed the treaty, fully committed to its ratification.

At the start of the debate the noble Lord, Lord Richard, asked for a clear indication of how the British presidency intends to handle the ratification of the Maastricht Treaty and when the Government intend to continue with the progress of the Maastricht legislation through Parliament. I can only refer the noble Lord to what my noble friend Lady Chalker said at the beginning. Perhaps it would be wrong to repeat it.

I wish to take one moment to mention another subject which caused much comment in your Lordships' House today. It is the question of the referendum. The more that I listened to what was being said, the more I wondered what will happen and how events will prove the noble Lord, Lord Callaghan, to have been right in 1970. It was said that after the right honourable gentleman, the then Member for Bristol South-East and now the Member for Chesterfield, Mr. Benn, put the idea of a referendum on Europe to Labour's National Executive at the end of 1970, the noble Lord referred to a referendum as "a rubber life raft into which the whole party one day may have to climb". It was interesting to notice that the noble Lord, Lord Peston, is swimming hard to try to catch up with that life raft—

Lord Callaghan of Cardiff

My Lords, I was thinking that, although it does not matter a great deal whether an Opposition is divided, it is comfortable to have a life raft available if you are a government which are divided.

The Earl of Caithness

My Lords, there is much in the treaty which we can welcome. As spokesman for the Treasury, perhaps I may begin with one of the financial aspects which to many is the most important. The treaty encourages all member states to pursue stable exchange rates, low inflation and sound public finances. We welcome those principles and we are determined to follow them. We welcome their adoption by all our Community partners.

The treaty also turns the principle of subsidiarity into Community law. Much attention has been paid in the debate to the principle of subsidiarity. I agree with my noble friend Lord O'Hagan that it is a dreadful word but the Community is not noted for its plain English. That should not detract from its importance, nor from the beneficial effects that the principle will have when it is put into practice. I am grateful to the noble Lord, Lord Jenkins of Hillhead, for recalling his earlier words in the 1977 Monnet lecture. He had apparently discovered the principle of subsidiarity long before the rest of us. His definition then captured precisely the sense of the principle in practice.

The principle, as set out in Article 3b of the Maastricht Treaty, places a clear obligation on all Community institutions both to avoid over-regulation and excessive detail and, in areas outside exclusive Community competence, to refrain from all Community action where the objectives can be achieved by member states acting alone. My noble friend Lady Thatcher suggested that subsidiarity was in any event a false concept since it should be the member states giving powers to the Community and not the Community handing them back to the member states. I entirely agree with that proposition. That is why the Government negotiated hard and successfully for the definition in the treaty. That shows a clear presumption in favour of action by the member states and the onus of proof otherwise falls on the Community.

Perhaps I may answer two points raised by the noble Lords, Lord Bruce of Donington and Lord Peston. They made play of the treaty's Article 3b. There is no mystery; the article achieves two objectives. In areas outside exclusive Community competence—that is, in areas such as the environment, health, education, social policy and so forth —the Commission will have to prove that the objectives of any proposed action cannot be sufficiently achieved by the member state acting separately. In all areas any action by the Community, whether within exclusive competence or areas of mixed competence, must not go beyond what is necessary to achieve the objectives set out in the treaty. That will help to limit over-regulation in all areas.

My noble friend Lady Elles raised the issue of implementation and I hope that I can put her mind at rest. The Lisbon European Council gave a clear remit to the Commission and to the Council of Ministers to undertake the urgent work of putting the principle of subsidiarity into practice. That is a measure which the noble Lord, Lord Bonham-Carter, wants.

There will also be a review of existing legislation to see that it also passes that test. We shall expedite that work in the coming months in order to prepare for a further report to the Edinburgh European Council. Subsidiarity is now firmly on the Community agenda. The tide of centralism in the Community has turned. We must make sure that it now continues to flow in its new direction.

Although many of your Lordships concentrated on the treaty, there is much else on which we must make progress during the presidency. Your Lordships will know that 1992 is the year of the single market with its great opportunities for British business. It is sad that my noble friend Lord Cockfield, quite understandably, is not able to stay with us to the end of the debate. However, it is good to see his work coming to fruition. It is appropriate that having launched the single market, it falls to us to see it into practical reality. However, we have much to do to ensure that those measures which are essential to its completion are now agreed.

For example, at the latest meeting of the finance council we scored some notable victories. Agreement was reached on two directives. The capital adequacy and investment services directive will offer considerable opportunities for our financial service industries. At the same time, we made clear that we are not prepared to reach agreement at Britain's expense. We shall not accept measures which damage our drinks industries, and we shall not let bureaucracy destroy our thriving art market. I agree with my noble friend Lord Selsdon that we want a single market of truly free trade and not endless regulations which destroy our exports and drive away business.

I now turn to transport, an area of which I have some knowledge. I am surprised that my noble friend Lord Onslow believes everything that he reads in the newspapers. Perhaps I may suggest to him that his time would have been better spent reading the letters page where he would have found a letter from my right honourable friend John MacGregor pointing out to the editor of The Times how inaccurate was the article to which my noble friend referred.

On the maritime cabotage dossier it was a slightly different story. I remember starting negotiations on that dossier some seven years ago when I was the Minister with responsibility for shipping. At the end of considerable negotiations in which we have eventually achieved a liberal market but some years hence, it is ironic that the Dutch, the Danes and ourselves are the three countries which voted against the final package because it is not liberal enough soon enough.

My noble friend Lord Bradford raised an important matter when he said that agreement of any measure is not the end of the story; enforcement is important. He was right to draw that to your Lordships' attention. Britain has played a leading role in ensuring that enforcement is carried out throughout the Community. The noble Lord, Lord Cobbold, will be pleased to hear that we intend to continue in that prime role.

My noble friend Lord Bradford mentioned also what I believe to be one of the greatest threats to the proper working of the single market—that is, state aid and subsidies. That is why the whole question of state aids in transport is to be the subject of discussion at the informal transport council meeting of Ministers in two weeks' time.

We must remember that the Community does not live in a vacuum. In the shadow of Maastricht and almost forgotten by the media is another treaty agreed this year. That treaty will extend our single market to all the countries of EFTA, many of whom are already knocking at the door seeking membership of the Community.

Enlargement of the Community has long been a central feature of our presidency objectives. An insular Community can never be successful. Unusually the noble Lord, Lord Richard, was factually inaccurate when he commented about the remit from the Lisbon European Council. That did permit us to begin preparations for EFTA enlargement, and our partners clearly share that view. I assure my noble friend Lord Mackay of Ardbrecknish that the British presidency will continue to take that work seriously. I was pleased in particular that my noble friend mentioned the northern countries where there is affinity with northern parts of this country, particularly Scotland.

However, the Community must also look further ahead. My noble friend Lord Bessborough will be among the first to agree that a Europe of 12 countries is only half a Europe. It should he open to all applicants who are able to satisfy the responsibilities of membership. I know that that is a matter which will be welcomed by my noble friend Lady Elles.

The next wave of enlargement will not be the last. The new democracies of Eastern Europe stand in the background and the Community's range may one day extend still further. We shall play our full part in spreading the virtues of stable democracy, free trade and economic prosperity beyond the present borders of the European Community.

The United Kingdom's vision of the Community is a dynamic one. We see the Community as expanding to include other European nations as they are ready and, looking outward to the world, confident of its ability to compete in international trade in goods and services. That is why we have pressed so hard for a successful conclusion to the GATT Uruguay Round. The responsibility for negotiations lies with the European Commission, but the United Kingdom has been highly visible in pressing with considerable success for a liberal and open approach. I was grateful to my noble friend Lord Mackay of Ardbrecknish for reminding the House of the lurking dangers of protectionism. A successful conclusion of the round could, according to the OECD, add something like 195 billion dollars annually to world income, of which some 90 billion dollars would accrue to developing and former communist countries.

Put simply, I agree with my noble friend Lord Plumb. Concluding the GATT Round successfully is the single most important thing that can be done to boost the living standards of all nations, whether industrialised, developing or those newly-emerging from the shackles of former communist command economy regimes. My noble friend Lady Thatcher is right: there is no reason to hold back. As President of the Council of Ministers, the United Kingdom will do everything in its power to secure a deal as quickly as possible. The recent reforms agreed for the common agricultural policy will help, though we hope one day to make even greater progress in reforming that policy which costs the British consumer and taxpayer so dearly. There is also much we can do to liberalise our trade with countries of the former Soviet Union and Eastern Europe. Open access to markets will ensure their prosperity and ours far more surely than aid can ever do. That was why we pioneered the idea of association agreements with Poland, Hungary and Czechoslovakia and are pressing hard for similar agreements with Bulgaria and Romania.

The Community needs a global vision. We shall do much in our presidency to argue for freer trade and welcoming new members; but we shall not forget the debates about hard cash. We remain the second largest net contributor to the Community budget. We hope to use our presidency to improve value for money from Community spending. The noble Lord, Lord Bruce of Donington, will be pleased to hear again that we will step up the fight against fraud.

We shall also seek to make progress with the future financing review. This is important for the future development of the Community and for the finances of individual member states. Both the Foreign Affairs Council and Economics and Finance Council will continue to address this vital subject. In particular, we shall intensify the role of Finance Ministers in the negotiations given the significant economic and financial interests involved. The Community should decide its financial future in the same way that we decide national financial questions. There should be the same rigorous assessment of priorities, the same search for possible savings and the same awareness that the burden on the taxpayer must be minimised. This means ensuring that the Community abides by certain key principles to which all member states have subscribed: an open market economy with free competition; sound public finances; sound financial management; the maintenance of budgetary discipline; and, again, subsidiarity.

Seen against those principles, how do we assess the Commission proposals to increase the budget by about £14 billion in real terms by 1997? They are clearly unacceptable. Not surprisingly, I can see that the noble Lord, Lord Stoddart of Swindon, approves of that. If the proposals were fully implemented, the UK's net contribution to the Community—already the second largest—would rise by about £1 billion a year. There is no justification for such increases. If it is right to restrain public spending at home—which it is—it must be right not to let it run away in Europe.

This is not just a British view. At the meeting of the Economics and Finance Council on 9th June a clear majority of member states agreed with my right honourable friend the Chancellor of the Exchequer that the Commission's proposals were excessive. In view of what I have just said, together with the fact that the Government have not given way on the question of legally binding minimum rates of VAT, I cannot agree with what the noble Lords, Lord Jay and Lord Bonham-Carter, said on the matter.

Perhaps I may add a word about UK abatement. I should like to take the opportunity of assuring your Lordships that there is no question of the Government agreeing to any adverse change to the UK abatement. Since the abatement was negotiated in 1984 by my noble friend Lady Thatcher it has benefited the British taxpayer by some £12 billion. It remains essential. It can be changed only by unanimity. My noble friend will be pleased to hear that we will accept no —I too like the sound of the word "no"—adverse change.

Lord Bruce of Donington

My Lords, I am grateful to the noble Earl for giving way. Can he say whether the Commission has yet discharged its obligations, which should have been fulfilled months ago, of providing its own calculations as to what the figure will be?

The Earl of Caithness

My Lords, as discussions are continuing and no agreement has been reached, and in view of the strong words I have just used, it would be difficult for a proposal to have been put forward, fully costed or agreed.

The Lisbon European Council discussed future financing but did not reach decisions on spending either for individual policies or as a whole. It agreed to aim to reach decisions at the Edinburgh Council in December. During our presidency we shall therefore work to a resolution in Edinburgh. It will be a considerable task. We must recognise that there are a wide range of views among member states. But we shall work hard to achieve an agreement—one which allows the Community to meet the challenges of the future while recognising that all Community spending is paid for from the pockets of its taxpayers.

Our presidency could not have come at a better time. Ours is a nation which faces challenges and opportunities with determination and optimism. Ours is a nation which believes in freedom. We want an open Community which will welcome into its membership all our fellow Europeans. We believe in free trade and sound economic principles. We have a vision of the Community and of its role in the world. We have the courage to pursue that vision and for the next six months our hands are firmly on the tiller.

On Question, Motion agreed to.