Lords Sitting of 23 June 1993

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Portsmouth.
Lord De Ramsey—Sat first in Parliament after the death of his father.

Miscarriages of Justice: Sir John May Reports
Lord Hylton Lord Hylton asked Her Majesty's Government:
Whether they will publish the evidence given to, and the conclusions of, Sir John May's inquiry into miscarriages or justice, and if not, why not.
The Minister of State, Home Office (Earl Ferrers): My Lords, Sir John May's two reports on the convictions of the Maguire family were published in July 1990 and December 1992. He is currently examining the case of the Guildford Four. His report on that case will be published in due course.
Lord Hylton: My Lords, I am grateful to the Minister for his Answer, which I find helpful. Does he agree that the second stage is just as important as the first. given that Mr. Giuseppe Conlan died in custody; that the Maguire family were rehabilitated only after serving their full sentence; and that the Guildford Four have had their names blackened in a recent case in which they had no right of reply?
Earl Ferrers: My Lords, I do not want to go into the detail of whose names were blackened and whose were not, but I agree with the noble Lord that all parts of the inquiry are important.
Baroness Mallalieu: My Lords, does the Minister appreciate the urgency of this matter? I speak as someone who was involved in the initial Maguire trial and in a case in the Court of Appeal just two weeks ago in which it appears that failures to disclose relevant information to the defence, a matter which was part and parcel of Sir John May's inquiry, are continuing to occur. When those matters are published, which I hope will be rapidly, will the Minister say that steps will be taken to address any recommendations made so as to prevent the miscarriages which are clearly still continuing?
Earl Ferrers: My Lords, the Royal Commission on Criminal Justice has been set up to consider such matters. Of course, Sir John May is a member of that Royal Commission, and I have no doubt that it will take his views into account.
Lord McIntosh of Haringey: My Lords, the Minister said that the report will be published in due course. Is he aware that there have been press reports that the report will be delivered to the Home Secretary by September of this year? If that is the case, will he confirm that it will he published before the end of the
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year at the latest? If, as we hope and understand, evidence is to be published, will he say upon what basis any evidence might be excluded from the published version of the report?
Earl Ferrers: My Lords, I understand that Sir John is currently taking oral evidence in private and hopes to report on the Guildford Four case in the autumn. The report will be published as soon as practicable after it is received by my right honourable friend the Home Secretary. Of course, it is entirely up to Sir John what he puts into his report.

Social Security Budget
2.42 p.m.
Earl Russell Earl Russell asked Her Majesty's Government:
Whether before implementing any cuts in the social security budget they will attempt to calculate their effects on the budgets of other ministries, and therefore on the total level of public spending.
The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley): My Lords, social security expenditure has increased by 67 per cent. in real terms since 1979. In the annual Public Expenditure Survey, and in the current review of social security spending, the Government will take account of the impact of policy changes in one area of public spending on other areas of public spending.
Earl Russell: My Lords, I thank my noble kinsman for that Answer by which I am encouraged. Does he accept that if people have their benefit reduced or taken away, they do not disappear? They may do something else. That might include becoming homeless, becoming ill, or committing crime. Does he agree that any of those would make them a charge on the demand-led budget of another department.? Should those costs exceed savings in social security, the Government might risk finding that they were merely rearranging the deficit on the deck of the "Titanic".
Lord Henley: My Lords, as I made clear, we take account of the effects of any changes in expenditure between one department and another in any departmental budget. When my right honourable friend sets benefit levels, in particular levels of income support and unemployment benefit, he has to take account of a number of factors. Those include the burden that benefits place on the taxpayer, the effect that those benefit levels can have on the labour market, and the increased risk of greater benefit dependency which, in the long term, imposes even greater costs upon the economy and the taxpayer.
Lord Molloy: My Lords, bearing in mind the fact that the Minister's replies have been a little encouraging and that social security covers so many families and individuals, will the Government exert extreme caution in respect of those who in future may have to put up with less?
Lord Henley: My Lords, it is the noble Lord, and noble Lords opposite, who seem to be saying that

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people should have to put up with less. Expenditure on social security has reached £80 billion, which is a large sum. The expenditure has grown by a large amount over the past 12 years.
We are looking at expenditure on social security and we shall look at all expenditure on social security. We shall ensure that it continues to reach the most vulnerable people but we must see why it has grown at such a rate. In order to have a system which is sustainable for our children and grandchildren we must necessarily make difficult decisions in the future.
Lord Skelmersdale: My Lords, does my noble friend agree that in many areas social security schemes are over-generous and misdirected? Does he further agree that in correcting the situation it is essential to deal with new rather than existing claimants?
Lord Henley: My Lords, I should not like to comment on any specific benefit, but my noble friend has made a valid point. For various reasons expenditure on social security has grown by some 67 per cent. We cannot allow expenditure on social security to continue to grow at such a rate for the indefinite future because we shall create a system which is not affordable to ourselves, our children or our grandchildren.
Lord Ennals: My Lords, was the Minister able to attend yesterday's big rally for carers? They represented about 6 million carers who save the Government an enormous amount of expenditure by looking after disabled relatives. Is the Minister aware of the desperate anxiety felt by those people about what the Government might do to invalidity benefit—either by decreasing it, taxing it or introducing new criteria—which will reduce the ability of people who are invalids to receive it? Is the Minister aware of how much anxiety there is and can he not do something to relieve that?
Lord Henley: My Lords, as I said earlier, I shall not comment on specific benefits. I have no intention of commenting on invalidity care allowance or the benefits for carers. I should not wish to be drawn into what the noble Lord no doubt would like; that is, a degree of scaremongering about individual benefits. I am trying to make perfectly clear that expenditure on all benefits has grown by a very large amount. We in the Government must look at that growth in order to see where it occurs faster than it ought and how it can be restrained.
Lord Clark of Kempston: My Lords, does my noble friend agree that many people draw child allowance who do not need it? Is it not high time that that allowance was taxed?
Lord Henley: My Lords, my noble friend makes a valid point about child benefit but I have to say that we have a manifesto commitment to continue to make child benefit available to all. We also have a manifesto commitment to continue to increase child benefit in line with RPI.
Lord Ezra: My Lords, while the Minister's reply to my noble friend's Question was encouraging in the sense that the Government have said that they will consider the impact on the total budget of any cuts in social expenditure, does he agree that recent leaks about government intentions have created the impression of a somewhat spasmodic and arbitrary approach to the matter? When the Government finally decide what to do, will they put that in the total context of public expenditure?
Lord Henley: My Lords, I shall not comment on any particular leaks. I have been trying to make it clear that we have a review of the social security system. That is designed to ensure that the most vulnerable people in society are protected and that expenditure on social security—and for that matter in all other departments—does not outstrip the nation's ability to pay.
Lord Ewing of Kirkford: My Lords, when noble Lords opposite express the view that benefits are too generous and that families receive child allowance which they do not need, why does not the Minister tell his colleagues that during the 14 years of Conservative Government the gap between rich and poor in this country has widened enormously? Why does he not tell them that the poor are very poor, that they watch on television the examples of tax avoidance on a massive scale and that they have great difficulty understanding why they should be made to pay through cuts in their benefit as a result of the Government's mismanagement of the economy?
Lord Henley: My Lords, I do not accept the noble Lord's analysis of the figures which allege that the gap between the rich and the poor has widened during previous years. On average the incomes of all people have increased by over 30 per cent. during the 14 years since 1979.
Lord Richard: My Lords, is the Minister really endorsing the view expressed by his noble friend on the Back Benches that social security benefits in this country are over-generous and misdirected? Will the Minister take the opportunity to reject that as a criticism of our social security system? Are the Government not aware that the bottom 10 per cent. of the population of this country pay 46 per cent. of their income in tax while the top 10 per cent. pay only 32 per cent? Is that fair, misdirected and over-generous?
Lord Henley: My Lords, the noble Lord will know—if he does not I will tell him now—that we probably have the most generous safety net system for the less well-off of any country in Europe, in the form of income support and income related benefits. The noble Lord will know also that some benefits are universal and go to all classes. Therefore, it is possible to argue—I do not argue it but some of my noble friends have done so and I do not refute what they say—that some benefits are less well directed than others. That is a perfectly valid matter to consider.
Earl Russell: My Lords, when the Government consider the implications of the Question, will they consider that the best ways of reducing the social

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security budget are by reversing the trend towards wages that are below benefit levels and by generating a higher level of employment?
Lord Henley: My Lords, my noble kinsman always tries to argue that increasing expenditure on social security will in some way reduce the costs. I do not accept what he says on that matter. Increasing levels of the income related benefits in particular would have a major effect on the labour market, would increase the risk of benefit dependency and, as I said earlier, in the long run that would cost the country a great deal more than it does at present.
Lord Campbell of Alloway: My Lords, is the Minister prepared to draw a distinction, which I would draw, between the suggestion that the benefits are over-generous, which I do not accept, and the suggestion that they are misdirected in certain circumstances, which I do accept? Without dealing with specific benefits, which he quite rightly refuses to do, will he consider the general question of abuse, particularly as regards housing benefit?
Lord Henley: My Lords, I accept that there may be abuse throughout the social security system. I accept that there is an abuse of the housing and invalidity benefit systems. One could argue that some benefits are misdirected or partially misdirected as access to them has become somewhat lax. Whether some benefits are over-generous is another matter. As I said, I do not intend to be drawn as regards specific benefits. It is arguable that some elements of some benefits are over generous.
Lord Stoddart of Swindon: My Lords, will the noble Lord recall that when we discussed the abolition of wages councils during our recent debates on trade union legislation the noble Lords, Lord Campbell of Alloway and Lord Skidelsky, advocated the use of the social security system to subsidise low wages? Is that the Government's view?
Lord Henley: My Lords, that is not the Government's view, but there are various benefits which arc called in-work benefits—family credit and the disability working allowance—which are designed to assist those on low wages to have help in the labour market.

Lambeth Borough Council
2.52 p.m.
Lord Boyd-Carpenter asked Her Majesty'sLord Boyd-Carpenter asked Her Majesty's Government:
What action they are taking in the light of the reports by auditors on the operations of Lambeth borough council.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Strathclyde): My Lords, the state of affairs revealed by the external auditors at Lambeth borough council is deplorable. Under the competitive tendering legislation my right honourable friend has issued five notices alleging financial and accounting irregularities in respect of
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Lambeth's direct labour organisation. He is currently considering whether further statutory action is justified. If appropriate, my right honourable friend can direct that the council cease carrying out certain work or put that work out to re-tender.
Lord Boyd-Carpenter: My Lords, I thank my noble friend for that reply. Will he indicate whether it is likely that the Government will take the action that he indicates is possible? Furthermore, will he tell us whether there is a case for referring some of those issues to the Director of Public Prosecutions?
Lord Strathclyde: My Lords, from the Government's point of view, we must await certain responses from Lambeth borough council so that we can take a view as to what is the appropriate action. As regards the district auditor's report, it is entirely a matter for the district auditor to decide what to do next and whether to address those issues with the Director of Public Prosecutions.
Lord Williams of Elvel: My Lords, will the noble Lord, Lord Strathclyde, accept that it is a policy of my party, and I hope that it is the policy of all your Lordships, to root out fraud and maladministration wherever it occurs whether it is at Community, government, quango, NHS trust, local authority or any other level? That is our policy and I hope that the noble Lord will recognise that.
Lord Strathclyde: Yes, my Lords.
Lord Mellish: My Lords, will the Minister understand clearly that, while we certainly do not approve of what Lambeth borough council is doing or the way in which it is doing it, we ask him to give us an assurance that as a Minister he will not regard Lambeth as the be-all and end-all of all local authority work? The vast majority of local authorities do a first-class, fine job and they should not be treated in that way.
Lord Strathclyde: My Lords, I agree entirely with the noble Lord, Lord Mellish, that most local authorities do an extremely good and effective job of running their local authorities for the benefit of local people. But clearly something has gone wrong in Lambeth.
Baroness Seear: My Lords, will the noble Lord agree that we all—and particularly those of us who live in Lambeth—owe a considerable debt of gratitude to Mr. Herman Ouseley, the former, very courageous chief executive who exposed what was going on in Lambeth in what must have been an extremely difficult situation? Will the noble Lord agree also that had Lambeth council been elected on the basis of proportional representation, that extremist group would never have been in power?
Lord Strathclyde: My Lords, we must live in the real world. Proportional representation is not with us. I agree with the noble Baroness's comments about the former chief executive.
Lord Dean of Beswick: My Lords, in accordance with what my noble friend Lord Williams of Elvel said

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from the Front Bench, I say today and I have said before that I have no time for local authority people of any party who act in an arbitrary manner and who may go outside the law. Is the Minister aware that some of the councillors deemed to be involved in Lambeth have triggered a court action against a Member of another place who made certain statements questioning their honesty? If that is the case, I believe that your Lordships should be extremely careful as regards discussing this matter at present, bearing in mind that court action.
Lord Strathclyde: My Lords, I believe that there is no harm in anybody in this House declaring that fraud is wrong wherever it occurs, and particularly where it occurs in local authorities.
Lord Dean of Beswick: My Lords, is the Minister aware that the London borough of Bromley, which is Conservative controlled, is becoming the subject of the same searchlight as Lambeth? Is it not strange that the noble Lord, Lord Boyd-Carpenter, has not included that borough in his Question?
Lord Strathclyde: My Lords, the procedures of the House allow the noble Lord to ask any question that he wants. If he wishes to table such a Question on the Order Paper, I shall be delighted to answer it.
Lord Boyd-Carpenter: My Lords, is the Minister aware that there is no duty on any Member of this House to take up every case of fraud by local authorities? If there were such a duty, would it not mean that we should be likely to exceed the ration of two Questions on the Order Paper at any one time?
Lord Strathclyde: My Lords, I always enjoy my noble friend's Questions, but in this case he is probably quite right.

Boxing: Health Risks
2.57 p.m.
Lord Taylor of Gryfe Lord Taylor of Gryfe asked Her Majesty's Government:
Whether, in the light of the British Medical Association's report The Boxing Debate, they will consider setting up an independent inquiry into the risks of brain injury associated with boxing.
Viscount Astor: No, my Lords. The Government believe that individuals should have the freedom to participate in the sport of their choice, in the full knowledge of the risks involved. Medical safeguards in Britain are among the most stringent in the world.
Lord Taylor of Gryfe: My Lords, is the Minister aware that the report is a very thorough and objective analysis of the extent of brain damage, injury to eyesight and occasional death arising from the practice of that so-called sport? Is he aware also that, while other sports incur some danger of injury, boxing is the only so-called sport in which success is measured by one man knocking another man unconscious? Does it not encourage violence at a time when violence is a major social evil in our society?
Viscount Astor: My Lords, we welcome all views on how safety may be further enhanced in sport. It is for the boxing authorities to consider whether any further improvements in medical safeguards can be made in the light of the BMA's report. I am sure that the report will be studied carefully by the boxing authorities.
I feel that I should correct the noble Lord, Lord Taylor. I am sure he will be aware that in 1867 the Marquess of Queensberry Rules were introduced with an emphasis on points awarded for solid blows struck and decisions made by judges on points. Most matches are decided in that way and not by knock-out blows.
Lord Renton: My Lords, on the assumption that Her Majesty's Government never close their mind, is my noble friend aware that brain injury caused by boxing is nearly always incurable and scarcely ever accidental? It is caused by deliberate punches at the head. In other sports nearly all the injuries—as in cricket, football, hunting and so on—are caused by accidental injury and not by deliberate action.
Viscount Astor: My Lords, assessments of long-term damage to boxers are based on relatively small samples drawn predominantly from the United States of America. That makes it difficult to draw firm conclusions. There may be need for further research into the long-term consequences of boxing, but I should stress that the safeguards in Britain are among the most rigorous in the world and that they have been significantly strengthened in the past 18 months.
Lord Mackie of Benshie: My Lords, can the Minister tell the House how many Members of the Government were boxers in their youth?
Viscount Astor: No, my Lords, not precisely. However, I can tell the noble Lord that there are a number who are sitting on the Front Bench today who indulged in the noble art.
Lord Howell: My Lords, although it is essential that the Government should take account of all such research into injuries occasioned through sport, it is important to make a balanced judgment of such matters. Is the noble Viscount aware that some years ago I commissioned research into sports injuries at school based on the percentage of youngsters taking part? The result of that research showed that boxing was at the bottom of the list and that swimming and rugby were at the top. Therefore, should we not be most careful as regards the criteria that we adopt when making such judgments?
Viscount Astor: My Lords, the noble Lord has great experience in sports and has made an important point. It is essential that risks should be kept in perspective. Statistics collated by the Office of Population Censuses and Surveys show that there have been only three instances in England and Wales since 1986 where boxing has resulted in death. That is less than in several other sports; for example, riding, mountaineering and motor sports. The figures show that there were as many deaths in cricket as there were in

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boxing. However, most of them involved not the players but umpires overcome by heat, excitement or other ailments while umpiring the match.
Lord Mellish: My Lords, is the Minister aware that his original Answer was most welcome? May I point out to him—
Noble Lords: No! Ask!
Lord Mellish: My Lords, is the Minister aware that in my old constituency we have one of the finest boys' clubs ever known? The boys are taught under the Queensberry Rules and they suffer no damage at all. If such clubs were shut down, it would simply mean that such youngsters would go out on the streets. As I said, the Minister gave a very good reply.
Viscount Astor: My Lords, I agree with the noble Lord, Lord Mellish, that to ban boxing would drive the sport underground and remove boxers from the protection of the 'very important safeguards that they now enjoy. There are 35,000 registered amateur boxers in England, 2,000 in Scotland and over 900 clubs in the country. It is a large and significant sport. I should also point out that boxing is an Olympic sport; indeed, it has been since the 7th century when it first became part of the Olympic Games. Our boxers took part in the Barcelona Olympics and will take part in the next Olympic Games.
Noble Lords: Cross Benches!
Lord Weatherill: My Lords, has the Minister heard of the Croydon Ex-Boxers' Association, of which I am proud to be an honorary member? I agree with the remarks made by the noble Lord, Lord Mellish. If such an inquiry is ever set up, I hope that that splendid body will be called upon to give evidence. Those concerned will be able to show how many boys from underprivileged backgrounds have been taught self-discipline and good sportsmanship and have gone on to become first-class citizens as a result of participation and proper training in the noble sport.
Viscount Astor: My Lords, the British Boxing Board of Control will be forwarding the views of its medical panel on the BMA's report to my department. It is important to note that the BMA's opinions seem to be based more on moral judgments about the ethics of the activity rather than on medical facts. There are a number of activities, not just of a sporting nature, which do not meet with everyone's approval. However, we should recognise that, like all sports, boxing is essentially a contest where skill and fitness are primarily the determinants of success.
Lord Jenkins of Putney: My Lords, as distinct from the other sports mentioned by the noble Viscount in the course of his answers, is it not the case that the damage done to youths as a result of boxing can develop very much later in life? Could that possibly account for the punch-drunk condition of the Government?
Viscount Astor: No, my Lords.
Baroness David: My Lords, I am really sorry that the matter is being treated in such a flippant way. Is
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the Minister aware that there have been reports for 25 years or more from very famous ophthalmologists stating what damage can be caused to the eyes and to the brain? There are many other ways for young people to learn discipline in sport. Will the Minister kindly go away, find out and then read some of the older evidence that exists as regards the dangers of the sport?
Viscount Astor: My Lords, we believe that in a free society individuals should have the right to participate in the activity of their choice, so long as it is within the law and they are fully aware of the associated risks.
Lord Donoughue: My Lords, I am sure that the Minister will agree that it is a serious matter. Does he also agree that the right and sensible approach is not the total banning of the sport, where the injuries are probably less than is the case in some others, but the use of the best possible and tightest regulations, monitoring and medical back-up? I believe that that should be the approach.
Further, on sports injuries in general, does the Minister have any information—indeed. perhaps the BMA could carry out a study—on the potential long-term damage (either psychological or brain damage) to tens of thousands of sports lovers who have suffered long and punishing hours watching the England cricket team?
Viscount Astor: My Lords, I agree with the first part of the question from the noble Lord, Lord Donoughue. He made an important point. As I have said before, we regard safety as of great importance in sport. There is now always a doctor present during tournaments, and accident and emergency services are alerted. Further, there is regular HIV testing and hepatitis B inoculations. We take the matter most seriously. Of course, in any other sport there are injuries; indeed, high-risk sports are rugger, hockey and climbing. However, if we look at the survey of injuries in the low-risk category, boxing is found to be similar to billiards and golf.
Lord Morris: My Lords, with regard to injuries to the eyes, is my noble friend aware that the British Boxing Board of Control has for some years been investigating the design of the thumbless glove? Can he say whether the board has come to any conclusions on the matter?
Viscount Astor: My Lords, I do not know about the thumbless glove. However, I can tell my noble friend that in amateur boxing compulsory headgear and gumshields must be worn.
Lord Taylor of Gryfe: My Lords, is the Minister aware that his statistical analysis is totally misleading and invalid? There are thousands of people who play rugby football, but an average boxer only boxes, at most, four times a year. Inevitably, with rugby players playing every week, and thousands of them playing throughout the country, there are more injuries in that sport than is the case with boxing. ft is totally misleading to produce such statistics.
Viscount Astor: My Lords, I used those statistics while replying in agreement to the noble Lord's noble friend Lord Howell.
Noble Lords: Order!
Lord Hesketh: My Lords, we have passed the thirtieth minute and I have no intention of giving way to the noble Lord, Lord Airedale.

Business
Lord Hesketh: My Lords, it may be for the convenience of the House to know that the Committee stage of the European Communities (Amendment) Bill will be adjourned at about 7 p.m. for about one hour and that during the adjournment the one-hour Unstarred Question in the name of the noble Lord, Lord Henderson of Brompton, will be taken. Following the recent agreement by the House to this new procedure for time-limiting dinner break Unstarred Questions, the maximum time for each speaker will be six minutes, save for the opener who is allowed 10 minutes and the Minister who is allowed 12 minutes in reply.

European Communities (Amendment) Bill
3.10 p.m.
The Minister of State, Foreign and Commonwealth Office (Baroness Chalker of Wallasey): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(Baroness Chalker of Wallasey.)
Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Clause 1 [Treaty on European Union]:
Lord Tebbit Lord Tebbit moved Amendment No. 17:
Page 1, line 9, after ("II") insert ("except the following words in Article 2: "and an economic and monetary union"").
The noble Lord said: First, I am rather sorry, as I know a number of other Members of the Committee will he, that we will not have the Statement which will be made later today in the House of Commons on the outcome of the Copenhagen talks, as that would be relevant to our discussions. In particular I was struck by the Prime Minister's robust remark that there had been a lot of muddle-headed meddling in Brussels. It would be helpful to know whose heads they are, the nature of the muddle and the kind of meddling they have been performing, as I suspect that there will be rather more of that in future.
The first group of amendments with which we are dealing today, of which Amendment No. 17 is first, relates to monetary union. Yesterday's debates established in the minds of many Members of the Committee that one purpose of this treaty is to place new pegs into the Treaty of Rome upon which in future years will be hung many more directives, regulations and laws. Some Members of the Committee, not least my noble friend Lord Cockfield,
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deny that these pegs are new. My noble friend advised us to look at the treaty. He said that we would find all those pegs foreshadowed in the Treaty of Rome in 1972. Then he told us that a reference to a Union of the peoples of Europe actually meant that we were all to be conscripted as citizens of the Union some 21 years later. I felt that he had made the case for us not to take at their face value any words in this treaty, but to examine them most carefully and to consider what construction could be put upon them in future years by minds as ingenious and energetic as that of my noble friend Lord Cockfield.
Later my noble friend Lady Chalker told us that a reference to political parties in the Treaty of Union was innocent of purpose and was not a peg for future federalist advances. Finally, we were told at ten past eleven that the Minister answering the debate did not know—I do not for one moment blame him for that because obviously his officials did not know either—the meaning of paragraph 3 of Article F of Title I. I am very grateful to him for his undertaking that, when someone has found out what it means, he will write to me to let me know. I hope that he will let the Government as a whole know as there seems to be a little difficulty over that. I confidently await the speech of my noble friend Lord Cockfield, who I do not think is yet in his place.
Noble Lords: Yes, he is!
Lord Tebbit: My noble friend is assuming an uncharacteristically low profile today. My noble friend will tell us that monetary union too is, in his words, no more than a dotting of the "i"s and a crossing of the "t"s. However, it seems a little more than that to me. As the Committee will have had time to ascertain during these opening remarks, Amendment No. 17 is simple and direct. It would remove from Article 2 of Title II the commitment to economic and monetary union. I shall, subject of course to what the Minister says in reply, treat this amendment for the present as a probing amendment. I shall also discuss some of the other groups of amendments.
I begin by asking the Minister a specific, clear and unambiguous question. Is it the policy of Her Majesty's Government that there should be, first, economic union and, secondly, among those member states without "opt-outs" at least, monetary union? There must surely be a policy on this. The Committee should know that I find the public position of the Government on these matters ill-defined and confusing.
It is proposed to ratify a treaty which has at its very heart the concept of monetary union. I am sure my noble friend Lord Cockfield would agree that, without monetary union and without the concept of the single currency, this treaty would be like Hamlet without the Prince, although I have to say that the grave-digger is still present. Yet when I tabled a Question for Written Answer last November I asked Her Majesty's Government whether,
"it is their policy to create a single currency within the European union".

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I would have thought that is a relatively straightforward question to which one can answer, "yes", "no", or "don't know", or perhaps even "Maybe". However, I always think one should judge some of these answers by their length. On the whole the longer the answer, the greater the effort to obscure the meaning. My noble friend Lord Caithness replied,
"The UK is not obliged or committed to move to a single currency".
We know that. He continued:
"The Government believe that it is too soon to consider whether or not the United Kingdom should join any such move".
I did not ask that. He continued,
"That decision will be made in the light of the circumstances at the time".
We know that. He continued:
"No decision to move to a single currency would be made without the approval of Parliament in the form of an Act of Parliament".—[Official Report, 25/11/92; Cols. WA 68.]
We know that too. But what we are left not knowing, after the reply has been read, is whether it is the policy of the Government to create a single currency within the European Union. That is the heart of the treaty which the Government intend to ratify but somehow the Government seem shy of saying that it is their policy that this should be accomplished.
I believe many Members of the Committee will know from private conversations with Ministers that their great hope is that this whole section of the treaty will collapse. They may say quietly, "Look old boy, I do not know why you are making so much fuss about this single currency thing. It is not going to happen. That is why we signed up to it". I find that difficult to accept.
In May I again tabled a Question for Written Answer. I asked Her Majesty's Government whether
"it remains their policy that a single currency should be adopted by 1st January 1999 within the European Community member states not protected by opt out/opt in provisions within the Maastricht Treaty on Union".—[Official Report, 25/5/93; cols. WA 100.]
I will not read the reply as I do not wish to bore the Committee unduly, but essentially it merely recited the provisions of the treaty. It did not tell me what the policy of Her Majesty's Government was. I wonder whether, at an early stage in the reply of my noble friend—no doubt we shall have a little time before that moment comes and he can ascertain the Government's policy—he can tell us what that policy is. Is it that there should be a single currency within the Union, even accepting that that would leave us with our opt out or opt in provision?
Regardless of the particular position of the United Kingdom concerning sterling and that of Denmark on the krone, or the crown, do the Government believe that monetary union between the other 10 is desirable or not? I shall briefly express my own conviction on this matter. I would prefer that this part of the treaty collapsed. We in this kingdom have achieved monetary union. We know how it works. What we know, essentially from our own experience, is what Chancellor Kohl also knows: monetary union without political union is simply not credible.
On 4th January Chancellor Kohl wrote in the Financial Times:
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"Maastricht was an interim stage, albeit an important one, on the road to European union … An economic union will survive only if it is based on political union".
Indeed, on 11 th November last year—a significant date, one might say, for making speeches of that kind—Chancellor Kohl of Germany spoke at Oxford. I have a copy of his speech, which was published by the Conrad Adenaur Institute. On page 4, there is a heading, which I presume was approved by the Chancellor:
"No Economic and Monetary Union without Political Union".
Under that heading are his words on that subject:
"For me the part of the Treaty dealing with political union is just as important as the clauses concerning economic and monetary union. Everyone in Europe must realise that we can only preserve all our economic achievements if we secure them politically. An economic union can only survive if it is based on a political union".
I should like to ask whether it is the view of the Government that Chancellor Kohl is right or that he is wrong. Is it the Government's view that we can have an economic union and a monetary union without a political union? It is inconceivable to roe that there could be two, let alone 12, central banks for one currency. Of course the treaty provides in the light of that belief. It is inconceivable that there could be 12 Chief Finance Ministers, 12 Chancellors of the Exchequer, for one currency. We know that. Here in the United Kingdom we have but one currency, one central bank, one Chancellor and one economic policy.
I understand the degree of amusement on the Liberal Benches, but let us say that constitutionally we can have but one economic policy. It may vary a little from time to time. Let us say that we can have that "at one moment".
Is it the belief of the Government that the Community, or even ten-twelfths of it, would he better off with a single economic policy? Or is the establishment of the cohesion fund an acknowledgement that a single economy and a single policy which would be right for Germany would inevitably be immensely damaging to Greece? For how long would German and British taxpayers consent to maintain the cohesion fund at a level high enough to compensate Greece, Portugal and Ireland for the damage done to their economies if the economic and currency policies were advantageous to the developed nations such as Germany, or the United Kingdom?
I should like to turn now briefly to the British opt-out or opt-in clauses in relation to Stage 3 of monetary union. The amendments on the Marshalled List are slightly difficult to follow, but let me for the moment crave the indulgence of the Committee to deal with them generally. The treaty is complex and I hope that Members of the Committee will have their copies handy, because it is essential for following the argument to trace the matter through the treaty. I hope that I shall not lead the Committee into any error. If I do, I hope that someone will correct me along the way.
The protocol is to be found on page 114 of the command paper, which is the treaty. Perhaps I may direct the Committee at once to something which

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seems not altogether fully understood in some areas. I refer to paragraph 2 of the protocol, which is near the top of page 115. It states there:
"Paragraphs 3 to 9 shall have effect if the United Kingdom notifies the Council that it does not intend to move to the third stage".
Immediately below, paragraphs 3 to 9 set out what one could broadly call the British immunities. It is important to realise that those immunities have no effect whatever until Her Majesty's Government have notified their decision not to enter Stage 3. I do not know when that moment will come, or indeed if it will come.
We now have to take the treaty back a little and look at Articles 103, 104, 105, 107, 108, 109 etc. I am sure that they are familiar to most Members of the Committee. If the Committee would turn in particular to page 25 of the treaty —Chapter 4, Article 109e(1)—they will see the words:
"The second stage for achieving economic and monetary union shall begin on 1 January 1994".
That is in less than six months' time.
If one continues to paragraph 4 of Article 109e, one finds the interesting and perhaps not too controversial observation that:
"In the second stage, Member States shall endeavour to avoid excessive government deficits".
That is a topical matter. When he replies to the debate perhaps my noble friend will tell us whether the Government will endeavour to comply with that provision from January onwards and, in particular, whether they would regard a deficit of £50 billion or £35 billion as being excessive for the United Kingdom. If so, will he tell us how soon the Government expect the deficit to be not excessive and, in that context, what is not excessive? Those are commitments into which we have entered with no opt-out, and I am sure that the Government would want to comply fully with their commitments under the treaty.
Let me refer to paragraph 5, which reads:
"During the second stage, each Member State shall, as appropriate, start the process leading to the independence of its central bank in accordance with Article 108".
It is important to remember that Stage 2 might be as short as three years, as long as five, or, if the hopes of many of Her Majesty's Ministers are fulfilled, it may be eternal and will certainly not lead to Stage 3.
Let us assume for the moment that it is finite. Until the protections of the protocol are triggered by the notification that the Government do not intend to enter Stage 3 we are under an obligation to comply with Stage 2. That includes starting the process leading to the independence of our central bank, unless my noble friend tells me that the words "as appropriate" mean that we can breach the treaty and the other member states cannot. If that is indeed so, is it the view of the others that we can merrily proceed through Stage 2 without lifting a finger towards complying with the obligation to which we are committed under Stage 2?
I shall move on. The treaty provides that economic policies —and that must, of course, include the parity of currencies of member states—are a matter of common concern. The Committee will find the reference in Article 103(1) on page 18. It is a very
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important article. But what does it mean: that those policies are matters of "common concern"? What happens when an issue is of common concern in the Community? My understanding is that it becomes subject to the policies of the Community. One cannot behave with common concern over one's economic policy without allowing economic policy to be decided to some extent by one's colleagues in the Council of Ministers.
What is the interpretation which the Government place upon the obligations that will fall upon them under Article 103? Some people maintain—they maintain it with considerable force—that it means we shall be compelled to re-enter the exchange rate mechanism. I know that noble Lords have different opinions about the exchange rate mechanism. I know that different people have different opinions about the exchange rate mechanism at various times. I asked a Written Question recently about the speech which the Chancellor of the Exchequer made, on 10th July last year to the European Policy Forum, on Britain and the exchange rate mechanism. I know that not everyone follows Written Answers with the interest that I do. I asked Her Majesty's Government,
"Whether the speech of the Chancellor of the Exchequer to the European Policy Forum on 10th July 1992, which dealt with the exchange rate mechanism and inflation, remains the Government's policy".
That is a pretty innocent question, is it not? Again, one would imagine that it could be answered "yes", "no", or "don't know". Perhaps we shall have to devise multiple choice Written Questions for Ministers in future. I do not blame my noble friend for the reply; they are the Treasury's replies. However, he responded:
"The Government continue to believe that the control of inflation is fundamental to the long term health of the economy and that sterling's membership of the ERM helped to bring about a significant reduction in inflation".—[Official Report, 10/5/93; WA49.]
Noble Lords will notice that the reply does not state whether or not the Chancellor's speech remains government policy. I find it difficult to understand why Ministers cannot answer "yes", "no", "maybe", or "don't know" to very simple straightforward questions. Perhaps I pull my noble friend's leg just a little because I should own up at once to the most important statement that the Chancellor made in a very long speech on that day. Having made the points quite heavily earlier he stated at paragraph 64:
"But if—as I believe—it is the responsibility of Government not to debauch the currency but to ensure that money retains its value, then the question we must ask is how in practice we can best attain this objective. And I am convinced that the evidence of the last few years demonstrates that it is in the ERM that it is most likely to deliver price stability in Britain".
Is that still the Government's policy? When the Chancellor who uttered those words was fired a week or two ago, the Prime Minister said that his policies were very good, that they had been very right, that they were very successful, that they would not be changed and indeed that the Chancellor and the Prime Minister were very great friends and that was why he was being fired. Perhaps it would be better to be

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unfriendly to the Prime Minister and to have the wrong policies. It would seem to be the better way to survive.
Are we attached to the idea of the ERM? If I may interpret the Government's view for them, it seems to me that they are still attached to the concept of membership of the ERM, although not before an election. It seems to be a case of "Lord, make me bad, but not yet".
Let me return to the meaning of parity as being a matter of common concern. After all, if we are not to be in the ERM, are we required by common concern to shadow a parity against the deutschmark à la Lawson in the days of the uncontrolled boom; or are we to shadow some kind of ecu arrangement? What are we committed to? Are there any means of coercion if we do not do what the others regard as behaving in a matter showing common concern? Article 103(4) states:
"Where it is established … that the economic policies of a M:ember State are not consistent with the broad guidelines referred to in paragraph 2 or that they risk jeopardising the proper functioning of economic and monetary union, the Council may, acting by a qualified majority on a recommendation from the Commission, make the necessary recommendations to the Member State concerned. The Council may, acting by a qualified majority on a proposal from the Commission, decide to make its recommendations public".
Are those the only means of coercion, or are there other means of coercion? I find it slightly difficult to follow the treaty in this regard. I know that my noble friends in government understand the treaty backwards if not necessarily always forward. I shall be grateful if, when he replies, my noble friend will tell me whether there are any other means of coercion. In other words, I wish to know whether the United Kingdom's economic policy and exchange rate policy will be treated by the Government as a common concern. Does that mean that they will comply with policies which are formulated in accordance with Article 103(2) of the treaty? Do they accept that that may mean not only an end to "le social dumping" but also an end to "le antisocial" devaluations or floatings? I wish to be absolutely clear.
I believe that at this stage I have posed enough questions. I believe that it is now appropriate for other noble Lords to raise their questions or to express their views while the noble Lord considers his reply. I beg to move.
Lord Ezra: The noble Lord stated in his introductory remarks that it was a probing amendment. I believe that it is right to probe a little as to the significance of what he states. Amendment No. 17 is grouped with Amendment No. 45 which states:
"except the following words in Article 3a: 'the primary objective of both of which shall be to maintain price stability'".
I wish to raise the question of price stability. The problem of price stability has bedevilled us for years. We have had substantial inflation. Happily, we are at a period of low inflation and the challenge is to maintain it at that low level. The Government have repeatedly told us that that is a main issue which they face.
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Therefore, I am a little surprised that certain noble Lords should have put their names to an amendment which suggests that price stability is not of importance. Perhaps the amendment does not mean that, but that is what I read it to mean
Noble Lords may well say, "Yes, we agree with price stability but we do not agree with those means of achieving it". Let us probe that a little. We are now involved in the single market. In order to prosper in the single market, the conditions need to be conducive to our being able to trade there effectively. One of the biggest problems will be whether prices will be stable. I refer not only to sterling being stable in relation to other currencies but to other currencies being stable in relation to sterling. Surely if we wish the single market to be successful we should encourage a system in which there should be price stability. The whole concept of convergence of the economies is a British concept and the British representative prevailed upon our Community partners to adopt it. If we really wish to go ahead with the single market, then we must accept that we must have the right conditions in which to compete.
How do we achieve that? We achieve it by working towards convergence, by hoping that currencies will retain their relatives values as regards one another. I hope that sterling has now reached stability vis-à-vis the deutschmark at 2.50 at the moment, with the dollar at 1.50. If we can work towards that, it is highly desirable. But one cannot work towards it purely by chance—there must be agreement as to the ways in which one sets about it.
The position negotiated by the Government is correct; namely, that they have not ruled out the ultimate objective of a single currency and of convergence, but they have said that even if we were to reach the position of convergence, we would still have to put it through our parliamentary processes as to whether or not we agreed.
The ultimate purpose of moving into the single market—on which I believe we all agree—is that it should be a market in which we can trade effectively and fairly. One of the most important elements in that market, in my opinion, is price stability. Therefore, I query some of the amendments which have been put forward in the names of the noble Lord, Lord Tebbit, and those who support him.
3.45 p.m.
Lord Desai: Like my noble friend Lord Bruce of Donington, I have not changed my views in regard to a single currency for a long time. I am for it. Soon after I arrived in your Lordships' House we received a report following the Prime Minister's return from Maastricht. I raised the same question then as the noble Lord, Lord Ezra, has just raised. If the Government are not going to say that price stability is no longer their objective, what was the point of signing the protocol? Why was the opt-out obtained? Obviously, at that time we were still part of the ERM, so it was not as though we were not going to be part of it.
It seems to me that this set of amendments is too confusing. First, if we are to be in a single market, it

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is difficult, though not impossible, to envisage that we shall have several currencies which will fluctuate without any system at all. That I find difficult to envisage because if they fluctuate, then the costs of the currency fluctuations—especially the uncertainty caused by those fluctuations—will be a major cost on businesses which wish to compete.
Secondly, although our own ERM experience was somewhat unfortunate and we would like to blame the system rather than our own incompetence, it is quite clear that, had we joined at the correct exchange rate and had we not bid up the exchange rate before we joined by our monetary policy, if we had followed the fluctuations of the sterling-deutschmark rate six months before we joined, it would have been different. We deliberately bid up the exchange rate because it was thought at that time by people in Parliament that a high exchange rate was a good, macho thing to achieve. We wanted to inflict proper costs on the economy. Let us have discipline, of course, but Ministers thought that discipline on the economy at that time would be visited on the trade unions. Little did they think that the discipline of the ERM would be visited on businesses as well. Had they examined the experiences of France and Ireland, they would have seen that to achieve credible price stability is not easy. One may talk about it, but to achieve it involves much hard work and discipline.
Be that as it may, we did not achieve price stability, as I have often reminded the House. Twice within the past 14 years we have doubled the rate of inflation; we have doubled the rate of unemployment; and right now we pretend that we have price stability, but the Government are unwilling to state their policy. Of course, as the noble Lord, Lord Ezra, pointed out, the policy is that we are in the ERM, except that we are in its shadow. We have a policy for sterling of shadowing 2.50 for the deutschmark and 1.50 for the dollar. Everything that we observe about the Government's monetary policy follows from that.
I believe that it is quite a sound policy, but unfortunately in a world of free capital mobility, fixed exchange rate systems of the kind that we are going through are somewhat difficult to maintain. Free capital mobility causes problems in maintaining such a system. I am proud to say that in the course of my remarks on the Maastricht Treaty, I also said that I for one should like to go to a single currency now. Economists are quite agreed on this and there is plenty of good technical literature on it. The logic is that a single market such as we are about to enter, with deregulated capital markets, cannot maintain exchange rates within a certain band. If we abandon the band and go to fluctuating currencies, the costs of those fluctuations would be enormous on businesses, therefore the costs of the uncertainty would be massive.
Thus we should consider right now how quickly we should go to the single currency. I know that I am in a small minority and that logic never wins in these matters, so I am happy to wait for the single currency to come about under the timetable. I also hope that at that juncture, in 1997, when we are presented with the
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possibility of joining the single currency, we shall grasp the initiative. If we do not, it could only be because our economy will have been so badly run by the Government and we would be structurally so weak that we would not be able to sustain our currency within such a scheme. It is folly to think that being out of the ERM or out of the single currency is sovereignty. It will not be a sign of sovereignty to be out of the ERM or the single currency; it will be a sign of extreme weakness as regards the economy, a sign that we could not sustain ourselves within the single currency.
It behoves those people who champion the single market to point out to us a single historical example of a single market with many economies in which there was freedom for different countries to pursue different currency policies. The gold standard was different, it did not give any country economic sovereignty and we should not forget that. Let us not say that the gold standard was a good thing. If one liked the gold standard, one should go to the single currency—one would be better off there. If one wants fluctuating currencies plus deregulated capital markets, one should admit that we shall sacrifice price stability and economic stability, because that is the nature of modern economies.
I am somewhat surprised by the list of amendments. Turning to the details, the noble Lord, Lord Tebbit, pointed out that Article 109e paragraph 4 contained strictures about excess deficits. I am puzzled by that. I thought that all his life he had been against excess deficits. Are we to understand that he would like persistent excess deficits in the budget? I also point out to him, as I did during the Second Reading debate, that if we carefully peruse Article 104c, paragraph 3 states that government investment—that is public sector capital formation—would be taken out of the deficit. We have never had (as I have said before) a sensible approach to public sector accounts in this country. If we separated revenue budgets and capital budgets, the present PSBR would appear to be different. I do not wish to defend the Government, or give them a saving clause. Capital borrowing is perfectly all right. One borrows to generate future income, and there is no problem with that. It is borrowing for revenue purposes and not balancing the budget over the cycle which causes the problem.
Whether or not they are Keynesians, why should people be against that? It is fallacy to think that Keynes or the Keynesians are for perpetual deficit. If they are, they are stupid. But nobody should be for perpetual large deficits on a revenue account. That is irresponsible. Therefore we have to ask ourselves: what is the economic policy of the people who put down this amendment? Is it one of perpetual devaluation, as we experienced between 1973 and 1990, when sterling fell continually? Does anyone want to argue that those years were some golden age for the British economy, and that all of our problems were solved; that we achieved prosperity, balance of payments equilibrium, full employment, low inflation, as a result of devaluation? Can anybody argue that? Does anyone want to argue that maintaining large and

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continuous deficits will maintain full employment and prosperity in this country? What is the objection to those perfectly sensible strictures?
I would be the first to confess that when I was younger I was quite happy to contemplate a public sector deficit. But in those days it was possible to imagine countries in relative isolation, because capital movements were restricted. We did not have the free movement of capital. If one has free movement of capital, one cannot be Keynesian in one country. It stands to reason. Suddenly, the monetarists of old, the people who told us that deficits were bad, want to have deficits. People who said that fixed or high exchange rates were good, suddenly want to devalue. Why is that? It is because they think that there is something called economic sovereignty. Of course, we have made such splendid use of economic sovereignty for the past 20 years and are in such good shape as a result of it. I am told that we did not lose economic sovereignty until we joined the ERM in 1990. What did we do with economic sovereignty? What great show did we make of our economic performance when we had economic sovereignty?
It would be false to believe that such economic sovereignty could be maintained in the world of the single market and free capital movements. It behoves those who have put down this set of amendments to tell us very clearly whether it is their policy that price stability, full employment and economic growth no longer matter; and that some magic rule, or perhaps lack of rules, (perhaps they have given up on rules) will allow for freedom. Perhaps they want to privatise the central banks, and privatise economic policy. With no rules whatever, no objectives regarding policy, and no co-operation, they think that we can survive in a single market and achieve full employment and prosperity.
My view is that we have to examine very carefully our economic policy of the past 20 years and longer, during which time we have had a small episode of fixed exchange rates and 20 years of fluctuating exchange rates. People have to convince themselves and others that those fluctuating exchange rates were periods of superb economic management and prosperity, full employment, and so on. There is no evidence for that. Therefore they should say to themselves that perhaps there is something in this treaty—even though it has been written by foreigners. I believe it is still a good treaty. They have to be concerned with the logic of free capital movements and a single currency. I urge the Committee to think very carefully and to reject this group of amendments. They cannot be sustained by any logic compatible with the modern world.
Lord Cockfield: I intervene in this debate solely in order to assist my noble friend Lord Tebbit in understanding these matters—a thankless task, the Committee will no doubt think. Nevertheless I shall do my best.
The formation of policy in the European Community follows a very well defined path. It has nothing whatever to do with salami or sausages, or the other matters on which my noble friend extended himself in the debate yesterday. The pattern is this. The heads of government—or, in the case of France, the head of the state; Mitterrand is one leg up
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compared with everybody else—decide what the policies should be. Those policies are then given a legal status, either in a treaty or in an Act. That is then followed in due course by the detail being filled in by subordinate legislation in the form of directives, regulations or decisions. One sees this illustrated perfectly in the case of the single market programme. It started in June 1985 with the heads of government meeting at Milan, and endorsing the programme for the completion of the internal market. as we then called it. That was then followed by the Single European Act, which gave it legal status and a legal base. That in turn was followed by 300 directives which filled in all the detail.
The Maastricht Treaty that we are now discussing, and economic and monetary union, follows exactly and precisely the same path. It starts with the heads of government at Stuttgart in June 1983 deciding on European Union, including economic arid monetary union, social policy, economic and social cohesion and quite a lot of other things. That constituted the decision on the policies. That was then followed by the Single European Act, which gave economic and monetary union its legal status. At that time it was contemplated that the detail would be filled in by regulation and decision in exactly the way that it was done when the EMS was set up.
At that point a slight change occurred in the field of policy formulation (or formation). Instead of having the vast array of regulations and decisions, it was decided to put it all in a single treaty. That is the Treaty of Maastricht; and that is why the Treaty of Maastricht deals with economic and monetary union. That is why I have said in this Chamber on more than one occasion that the Treaty of Maastricht is a useful and valuable treaty. Essentially its aim is not to give economic and monetary union its legal base—that has already been done in the Single European Act—but to fill in all the detail. It does one other thing which is of particular significance to my noble friend Lord Harmar-Nicholls. It brings out into the open things which hitherto have been done in private. In other words, we are enabled to see what lies behind the arras. I have always said that he who wanted to see was always in a position to see. But that is exactly and precisely what the Treaty of Maastricht does.
Economic and monetary union is the natural consequence of the single market. One can, of course, have a single market without a single currency. But one does not garner all the benefits of it.
Perhaps we could look at the United States of America—there are people who sometimes cite the United States as an interesting example. It has had a single market ever since the present constitution was signed 200 years ago. I believe that it has had a single currency ever since 1866. When I first went to the United States in the early 1950s one would still occasionally have a dollar bill passed upon you which was denominated in silver. That goes back to the creation of the original single currency in the United States. Also, it has a single language. A great deal of the economic strength of the United Stales is founded on the fact that it has a single market, a single currency and, most of the time, a single language.

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In fact, that was the motivation behind the economic union. We wanted a start with a single market. We extended it to a single currency and beyond the single currency there are other areas in which one needs to create a level playing field for all the economic actors in the Community.
In this country we have decided that for the moment we will not go along with economic and monetary union. I believe that that is a wrong decision. Nevertheless, I respect it. One of the problems in this life—I say "problems" but perhaps that is the wrong term—is that if one joins any organisation, such as the European Community, or indeed if one is a member of any society, like the British nation, from time to time one is in a position of having to defer to other people's opinions. I know that that is an unpopular viewpoint in some circles. Nevertheless, it is one that I commend to the Committee.
It is on that basis that, while supporting economic and monetary union, nevertheless I am prepared to accept the opt-out which was negotiated for this country.
Lord Hamilton of Dalzell: Before the noble Lord sits down, I wonder whether I may ask whether he agrees with my right honourable friend Sir Edward Heath that if one has a single currency one also has to have a single government.
Lord Cockfield: It is not for me to answer for Sir Edward Heath. I do not even know whether the words quoted are entirely accurate. I have no knowledge of that at all and would not pretend to knowledge that I do not possess, in contrast with many other people. So far as I am concerned a single currency does not necessarily lead to a single government. The noble Lord will find the American dollar in use in wide areas of the world where there is no single government and indeed in some places no government at all.
4 p.m.
Lord Harris of High Cross: It is always helpful to have such magisterial pronouncements from the noble Lord, Lord Cockfield, whose experience and knowledge of these matters command attention. However, his words do not carry us much further.
I am interested in Amendment No. 17 which the noble Lord, Lord Tebbit, suggested was a probing amendment. There have been some observations from rival economists and other parties and it is difficult to know where to begin. With regard to the matter which the noble Lord, Lord Cockfield, has just mentioned, with a sleight of hand that reminds me of my early interest in conjuring, he says: "Of course, this is not carrying us any further forward. It is dotting "i"s and crossing "t"s because it is in the Stuttgart agreement that we should work towards monetary and political union. The previous documents have implied continued progress towards that end."
I recall at Second Reading an impressive speech by the noble Lord, Lord Carrington, who took my breath away by commending the treaty on the basis that it probably would not happen; circumstances have
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changed; this is a whole world away from 1989–90, and so we must not worry too much. I believe that this is one of the great difficulties with which we wrestle. It divides good men on opposite sides of the argument. There is a complete evasiveness, slipperiness and I would even say slyness, in some sense, in presenting broad statements to which everyone can agree about political union, incorporating them in declarations and so on, and saying that we have no details; and then coming back later with the details. So we find that we have a fait accompli. We now have a full-blown detailed monetary union proposal.
Despite what the noble Lord, Lord Desai, said, I honestly believe that the monetary union is a spoof. I truly believe that. Moreover, I believe that it is on the same level as the proposition put forward by George Bernard Shaw to invent a new language like Esperanto. One can argue along the lines of "Wouldn't it be nice to have a new language? Let's invent a new language. We can all speak it to one another and it will overcome so many difficulties".
We say here that we need a new currency. If we had one single currency for the area which was a stable currency and everyone joined it, would it not be helpful in promoting trade and maintaining stability? That begs all the questions. You cannot just create a currency in that way. The noble Lord mentioned the gold standard. That emerged. It was part of what Hayek would refer to as "spontaneous evolution". The Tory Party used to believe in spontaneous evolution. It now believes in planning, construction-ism and detailed intervention in the economy—all that in the wake of Citizen Delors. I am being very correct now. We are citizens and, if we are to be citizens of Europe, we are entitled to speak frankly to one another.
We admire the stability of the deutschmark and acknowledge that it is due to the Bundesbank which has a degree of independence, though it is not totally independent, in operating a stable monetary policy. The conundrum with which I am faced is that first of all there is no guarantee whatever that the future ecu will be as stable as the deutschmark has been. Indeed, part of the argument in France and Italy is that the deutschmark has been run too severely and with too little regard to unemployment and other considerations apart from price stability. The implication is that when we all share in running the currency, we shall be able to abate the obsession with price stability. I do not at all accept the blind faith of the noble Lord, Lord Ezra, that if we are to have new money, somehow it will emerge and will produce that stability.
I put this proposition to the Committee. If European countries pursue stable monetary policies on the model of Germany, an ERM or an EMU would not be needed. If stable monetary policies are not pursued, an ERM or an EMU will not work. There is no way round that. To maintain stability you must have regard to monetary and fiscal policy. It could be done outside the ERM.
As many noble Lords were at the uplifting memorial service to the late Lord Ridley, I looked up

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his last words in this House which were in February, on a Motion moved by the noble Lord, Lord Pearson. Those last words, which had a ring of defiance, were:
"Surely it is time to recognise that it is the single market which matters and that the single currency does not".—[Official Report, 17/2/93; col. 177.]
Nick, as we all called him, was not a fool. There is no inconsistency in that proposition. In a single market you can have free trade between areas without any monetary connections whatever. The North Atlantic Free Trade Area has not anticipated changing from floating currencies between America, Canada and Mexico.
I have two main anxieties to which I want the Government to attend. It may be tempting for the noble Lord, Lord Desai, to say that people who oppose monetary union are closet devaluationists; they want to keep taking the soft option and do not want the discipline of fixed exchange rates. I am saying that if you have a monetary policy, you can do it yourself. You do not need a piece of steel inserted into your backbone, which will have other painful consequences.
The point is that economists have been debating for the past 20 or 30 years—we must not enter into an economist's argument—the optimum currency unit. They have been debating what circumstances would enable various countries to join into a single monetary unit. To go back to our own experience, throughout the whole of this century we have had a single currency in the United Kingdom. One result was that monetary policies that were appropriate to the South of England left Scotland, parts of the North-East, the North-West and the Midlands behind and we had to have a development policy. The development policy was in some way to accommodate different regions to the discipline of the single currency that involved them in economic distress.
Areas are dependent upon different sorts of industry. They have different structures and there are immobilities. An alternative to a single money between England., Scotland and Wales would be to have three currencies. We did not have three currencies but we introduced a payroll tax to try to reduce labour costs in some areas because the national wage level bore harshly upon those areas with declining industries.
The 12 economies have wholly different structures with wholly different levels of development. They are progressing, in economic terms, at different rates and are affected quite differently by external shocks—for instance, oil or a new imposition from outside. Several Members of the Committee talked of convergence over two or three years. But over a period of 10 or 20 years, and a cycle or two, one has quite different circumstances. Therefore, to incorporate monetary union into the treaty is bad for Europe. If we believe that it is bad for us, why do we allow it to go forward under the treaty and the institutions of Europe and try to say that we are opting out? That is my question. If it is bad for us, is it good for Europe?
My second question is perhaps more manageable. It arises from a legal document by someone with the same name as the noble Lord, Lord Howe, but who, in my view, holds rather better, more congenial
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opinions. Martin Howe wrote a paper, Monetary policy after Maastricht: How much independence will Britain possess? To sum it up he says that even without our opt-out we are still caught up in Stages 1 and 2. We are caught up by the general expression of support for monetary union, going back to the earlier documents and proclamations. He says that there is a possibility that we will find ourselves brought up before the European Court of Justice.
Martin Howe is a lawyer. He is not as distinguished as the noble Lord, Lord Howe. However, he is a barrister and specialised in this kind of issue. In his paper he said that the European Court could find that we were failing to fulfil our obligations to bring our economy into convergence in readiness to join the ERM, although we are not going on further into the EMU. He said,
"that the ECJ would find that a policy of indefinitely remaining outside the ERM on the part of the UK is a clear breach of the Treaty. First, in such circumstances, the United Kingdom would be avowedly pursuing an exchange rate policy based on its own national interest rather than treating it as a matter of 'common interest' as required by Article 109m. Secondly, the UK would be failing to adopt a 'multiannual programme' intended to ensure 'economic and monetary convergence': moving towards and when possible adopting a fixed ERM parity is one element of 'convergence' since it forms one of the convergence criteria set out in Article 109j(1).
Thirdly, and most fundamentally, the whole structure of Stages 1 and 2 monetary union presupposes that member states are striving towards achievement of the convergence criteria, including more tightly aligned parities. Although the UK has opted out of the prime objective of `irrevocably fixed' parities in Article 3a(2), it has not opted out of the lesser objective of exchange rate convergence. It is an important aspect of the single market as envisaged by the Treaty that there should be currency stability as far as possible across the whole market, and that the UK's conduct would be considered by the ECJ as imperilling the attainment of that central Treaty objective".
Perhaps the Minister could say what view he takes. Was the opt-out to avoid trouble now at the risk of piling it up for the future? Was it to be agreeable, to be communautaire? Was it to obtain the opt-out and then shield behind it? Have we thought out what may lie ahead if we sign the treaty with those clauses included and then find ourselves faced with the European Court of Justice? How seriously does the Minister entertain that possibility?
4.15 p.m.
Lord Eatwell: I should like to sketch out the view from these Benches on the issue of monetary union and particularly to state that the Labour Party sees considerable advantages in moving towards it. That does not mean that we consider that all the elements of the treaty are perfect. Indeed, we have considerable reservations in regard to some of the institutional and transitional proposals which are present. While we do not say that they are perfect, on balance we believe that they are in the interests of this country.
Given that we do not believe the proposals to be perfect, we will be developing other proposals to be considered at the revising conference scheduled for 1996. It would be enormously helpful to the Committee if the Minister could say what revisions the

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Government are proposing in 1996 or at least on what principles they will be suggesting revisions. Or do they believe that the treaty before us is perfect?
I should like to refer in particular to the convergence criteria for economic and monetary union which are set out in the treaty. There is a certain peculiarity about the convergence criteria; that is, they are all monetary. They relate to inflation rates, deficits as a share of national product and the national debt as a share of national product. They do not refer to either the growth, employment or productivity records of individual countries.
That is striking. One can imagine a situation in which one country—let us say Britain—has an inflation rate of 2 per cent. and 3 million unemployed, and another country has inflation also at 2 per cent. but with employment much lower and growth proceeding rapidly. In those circumstances the disjuncture of the real performance of the economies creates considerable difficulties in the operation of the monetary union and measures should be taken to alleviate them. However, they are not addressed in the treaty.
The question that the issue of real convergence raises is whether it will be possible to achieve real convergence in the Community—better growth and higher levels of employment. If so, will that possibility be enhanced by the monetary stability which monetary union brings? In other words, will monetary union make the circumstances for convergence better? Or will monetary union only be conceivable once real convergence has been attained? In other words, in what order do monetary union and real convergence come?[
I suggest that monetary union would create a framework in which real convergence was easier to attain and, indeed, the absence of it would make real convergence and sustained growth in Europe extremely difficult to attain. My confidence in putting forward that proposition derives from the fact that, since the collapse of the Bretton Woods system in 1973 and its replacement by an essentially fluctuating exchange rate system, the growth rate of the OECD countries and their employment records have been dismal compared to the achievements under the old fixed rate system. Very roughly, if one looks at growth, productivity, inflation and so on, your Lordships can be assured that all the good things have been halved and all the bad things have been doubled.
One of the virtues of the creation of a monetary union is that it would remove the key factor which lies, I believe, behind the dismal performance in the 1970s and 1980s of the OECD as a whole. It would remove the enormous growth of speculative pressure on the design and performance of national economic policies. As your Lordships will be aware, the level of speculation in currencies has increased dramatically since 1973. In 1973, roughly 10 per cent. of all foreign exchange transactions were speculative. Now, roughly 95 per cent. of all foreign exchange transactions are speculative. The number has increased enormously. This speculative pressure is particularly strong in a region in which there is free capital movements, as
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there is within the single market. Having free capital movements and different currencies, Europe suffers very considerably from the strong deflationary bias which a fluctuating exchange rate system imposes upon the economy of the system as a whole. That is the first advantage we see in a monetary union.
The second advantage of a monetary union is that monetary policy would be determined on a European basis, not simply in the interests of one particular region of Europe. As we know, monetary policy has been predominantly determined over the past 10 years or so within the European Community on the basis of what monetary policy best suits the German economy. Indeed, the German monetary institutions are by their very constitutional structure not allowed to take into account the effects of their policies on countries other than Germany. It is true that this very narrow and blinkered position of the Bundesbank has been eroded considerably in the relationship which has developed between the Bundesbank and the Banque de France since the defence of the French franc last September. Nonetheless, monetary policy is still dominated by a monetary policy designed for a region of Europe and not for Europe as a whole.
I would suggest to the noble Lord, Lord Tebbit, who made this point very clearly, that the development of regional growth and regional policies would be more effective within the stable monetary framework provided by a monetary policy set in the best interests of Europe as a whole than it would be within a fluctuating exchange rate system bedevilled by speculation and which would still be dominated by the monetary policies of the Bundesbank. Let us not fool ourselves. We do not achieve any significant monetary independence in a system in which there is free capital movements, even if we decouple our exchange rate from European exchange rates, except, and only, if we are willing to allow our exchange rate to fluctuate vigorously creating such a degree of uncertainty on the foreign exchange markets that any inter-relationship between national interest rates is broken down. In other words, we can have independence only if we also have instability.
The third advantage of a monetary union is that a co-ordinated fiscal policy in Europe, a co-ordinated strategy which has been called for at the Copenhagen Summit, would be possible, and is only possible, effectively within a monetary union. If you have fluctuating exchange rates and you devalue your currency, you are essentially attracting jobs from your partners. The notion of a co-ordinated fiscal policy, a co-ordinated agreement, to expand and create the jobs which Europe so desperately needs in circumstances where one country or another will willy-nilly devalue its currency and steal jobs from its partners is just inconceivable. Therefore a monetary union is the key foundation to achieving the co-ordination which is so necessary to attack that awful figure of 17 million unemployed within the European Community.
The fourth advantage that we can identify in a monetary union is the contribution which the development of a single currency in Europe would make to international monetary stability. There would be a single currency for Europe within the G7

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structure, creating a tripartite division of world currencies between the yen zone, the dollar zone and the ecu zone—I nearly said "the D-mark zone" because that is what we have without monetary union—which would be able to create a more stable framework, or at least have the potential for creating a more stable framework, than is possible under the current confused European scene.
I would, however, in supporting monetary union and the idea of monetary union, like to address a number of questions to the Minister. I feel, with the noble Lord, Lord Tebbit, that this entire debate is considerably confused by the Government not telling us what their policy is. It would be enormously helpful if the Minister would tell us whether the Government are in favour of monetary union in principle—yes or no. It really is a very simple question. I can, however, help the noble Lord, Lord Tebbit, as to the Government's policy with respect to Stage 2, to which he referred.
If we examine the conclusions of the European Summit in Copenhagen, we find a discussion of Stage 2 which for some extraordinary reason the Prime Minister omits from his Statement in another place. In the Conclusions of the Presidency we see that the European Council,
"invited the Commission to present proposals on all the necessary implementing measures related to the second stage of economic and monetary union so that they can be adopted by the Council as soon as possible after entry into force of the treaty and before 1st January 1994".
As the Prime Minister was a signatory to the document, will the Minister confirm that the Government intend to implement the proposals of Stage 2, as the document which the Prime Minister has signed states, by 1st January 1994?
Will the Minister also enlighten us a little about the criteria which the Government would use in deciding on whether or not to implement this opt-out? Let us consider the conditions of Article 109j of the treaty. The article states that the member states will proceed towards monetary union if convergence has been achieved. Here we have the situation: convergence has been achieved and the other member states are deciding to proceed towards monetary union. As part of that convergence, the UK has achieved convergence under the terms of the treaty. If that is the case, what principles would the Government apply, in addition to convergence and in addition to the others going ahead, in recommending that Parliament exercise its opt-out? What extra principles are involved, because monetary union will go ahead only if convergence is attained? So convergence has been attained. What other principles do the Government have in mind?
In conclusion, the Labour Party sees considerable advantages in moving towards monetary union. It does not believe that the treaty is perfect. It feels that the process of transition in particular has significant flaws which should be corrected at the revising conference in 1996; but I believe that acceptance of this amendment would be severely damaging to the economic future of the country.
4.30 p.m.
Lord Harmar-Nicholls: I find my noble friend Lord Cockfield one of the most effective and plausible debaters that I have heard for a long time and certainly on these matters. He debates with such smooth assurance. If you are not careful he can convince you that he has to be right from the way he says it and not particularly from what he is saying. I hear my noble and learned friend intervening again. I shall be most grateful if I can make my point. We have listened to a number of economists and people who have not got a skin quite as thick as mine, sit and nod out of vanity, I suppose, and pretend to know what is being said and what it is all about. I suggest that very few of us do really know, but we are the jurymen and we have to make an effort to try to find out what it is all about so that it can be of some help in coming to a decision.
For me, where my noble friend was very helpful is that he explained very effectively the machinery of how we arrive at decisions. He judges what flows from it as a civil servant. I can understand him being absolutely satisfied that if he is pleased with the machine what comes out of it at the end has to be right. I have to approach these matters as an ordinary, rather small, businessman who has had to build things up to a point where one is—I do wish that my noble and learned friend would contain himself sometimes; just for two minutes.
Lord Hailsham of Saint Marylebone: I have done so for 50 minutes and an hour and 20 minutes.
Lord Harmar-Nicholls: I give my noble and learned friend permission to leave the room. When it comes to really understanding these matters, the fact that the machine is right is no guarantee that what comes out at the end is necessarily right. I found very helpful the way in which my noble friend Lord Cock field explained about Stuttgart and other places; about the Council of Ministers, which truly represents various places. They had come to a general conclusion and had said what it was what they wanted to try to achieve. That is good. Nobody can complain about that. Every nation has its representatives and they are doing their work.
He said that the decisions were passed down to the Commission or to the equivalent of our Civil Service, whose job it was to put flesh on the bones of what they thought they had generally agreed. We have to do that in business all the time. We are responsible for the overdraft at the bank. We have a better understanding of what the customer is likely to want and to achieve and of the general atmosphere surrounding our business. We come to a general conclusion. Then we call in the lawyers and the accountants to put into some form what we have decided in a general way. As my noble friend said, that is how it is done and there is nothing wrong with that.
What we find in business—I suspect that there is a great deal of similarity as regards these matters, too—is that, although we may be happy that the words that the professionals have used are the right ones, continuing with one's business one discovers to one's

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horror when going to court to meet a claim two or three years later that the words that one had thought at the outset carried out the general view are not there at all. One is left with damages and a few problems which had not been anticipated.
I believe that my noble friend Lord Tebbit is entitled to an answer to his very thoughtful speech. As I understand it, he is asking the Government to tell us: are the words which we should approve or disapprove in the treaty truly reflective of what we thought we were agreeing to at the first meeting at Stuttgart or anywhere else? My noble friend gave me the impression—he has clearly done his homework on these matters—that the actual words we are being asked to approve not only do not necessarily fit in with what we were told had been agreed at Stuttgart but also are not in accordance with what the Government have said on various occasions about their meaning.
While it is very enjoyable to listen to this battle of the economists—I confess that I wish I understood a little more of what they are saying than I do—I would like to feel that, as regards the general commonsense, feet-on-the-ground approach, the actual words which have been questioned by my noble friend Lord Tebbit are the ones which we thought carried out the general agreement arrived at at Stuttgart. If we can achieve that, then we shall know in which direction we are travelling expressed in a language which we truly understand.
Lord Stoddart of Swindon: We should be grateful to the noble Lord, Lord Cockfield, for what he said, although not necessarily agreeing with the manner in which he said it. He told the Committee: "What you see is what you get". That is most important—"What you see is what you get". There is no doubt about that in the noble Lord's mind and he is an expert in these matters. So all noble Lords who said at Second Reading and at other times: "It does not matter if we agree to it, it is not going to happen", must heed the words of the noble Lord, Lord Cockfield, because it is going to happen because it is in the treaty; that is what it says and that is what you will get.
There has been no indication from him yet, but I hope that soon the noble Earl, Lord Caithness, who I understand is to reply to this debate, will deal with the noble Lord, Lord Cockfield, and what he very fairly said—namely, "What you see is what you get".
I could go on and discuss all these matters of what we see and what we get in great detail. Some of my noble friends and others mentioned two or three of the amendments which we are discussing and other noble Lords queried the number of amendments which have been tabled. When 420 amendments were tabled, all of them were thought relevant. If noble Lords examine the amendments they will see that each is relevant in its own right and could be discussed on its own. Of course that would not have been acceptable to the Committee. I believe that we should have spent many long clays and nights discussing individual amendments. Members have been civilised and discussed among themselves the best way to proceed. Therefore, these groupings have been made to the best of our ability and in a manner which we hope will give rise to
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a reasoned discussion about the most important parts of the treaty and the Bill. That is why these matters are being dealt with in this way.
I emphasise the point to my noble friend who mentioned Amendments Nos. 43, 44 and 45. As I have said, each of those amendments stands in its own right. Amendment No. 43 deals with the introduction of a single currency. That is a debate in its own right. The Government do not agree to it, but some people on this side of the Committee do agree. Therefore, that involves a discussion in its own right. That could go on for a very long time. Amendment No. 44 includes the words:
"… conduct of a single monetary policy and exchange rate policy".
If that is not a matter for long discussion in its own right what is?
Finally, Amendment No. 45 seeks to insert the following words in Article 3a:
"the primary objective of both of which shall be to maintain price stability".
Many of us do not believe that the only criterion and the only objective of monetary policy is to maintain stable prices. We believe that at a particular time, for example, we might let prices rise a little to reduce unemployment. Again that is a discussion in its own right and I hope that I have explained to your Lordships that there has been the desire in all parts to have a proper and reasonable discussion and the amendments have been grouped in this way to try to achieve that. In case anybody did not realise that was happening, I hope that I have been able to put the matter right.
Before I sit down, I should just like to take up one or two points which were raised by my noble friend Lord Eatwell from the Front Bench. He mentioned monetary union in connection with convergence, and of course he said that monetary union will make convergence more easy to attain. That may or may not be so. He is an economist and I am not, so I am not going to argue that with him. But what must be understood, and very fully understood, by noble Lords in all parts is that convergence means an outflow of resources from the richer countries to the poorer countries. I am glad that my noble friend agrees with me and I thank him very much.
Do not imagine that those resources will be only small resources. They will be very large resources and will make the £2.5 billion which we at present contribute in net terms to the Community look like a mere flea bite. Therefore when we talk about "convergence" let us understand what it means. It means that British taxpayers will have to pay more in order that Greece, Portugal, Spain, Ireland and even Denmark shall have more money so that they will be able to "converge". Make no mistake: that means a lot of resources from the British people. So when we are discussing this let us understand the truth of the matter and do not let us use words like "convergence", believing that it will be easy.
There is an example: we have before us the example of the unification of East and West Germany. That was an issue of convergence, and we have seen what has happened to the plans for the reunification of Germany. They have run into the sands; they have

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caused great difficulties in Western Germany, where people are resentful at having to pay more taxes and having a lower standard of living. They have also caused a great deal of resentment in East Germany, because people there have been made unemployed. So when we are talking about convergence, please let us understand what it means. It is not just some little word to slip neatly off the tongue: it is a commitment and it is a commitment that will cost this country and other countries a lot of money. I do hope that this is one of the matters which the noble Earl will deal with when he speaks.
Noble Lords: Order!
4.45 p.m.
Lord Bonham-Carter: Would the noble Lord he so good, if that is his view as to how convergence occurs, as to let us know what outflow was necessary from this country to allow Italy. for example, to catch us up economically? Who had to sacrifice money in order that Italy should be enabled to catch up with us economically?
Lord Stoddart of Swindon: If I am not mistaken, Italy was once, though it is not now, a net recipient of funds from the European Community. So certainly in part it was able to catch up at the expense of other countries in the Community. But what is absolutely certain is that as regards Ireland—I was not going to mention this. but as the noble Lord has mentioned Italy let me mention Ireland and, presumably, we want it to catch up —the net contribution from the Community funds to Ireland every year is £1.5 billion. That amounts to £35 per week for every Irish family. Therefore, although Italy has not had quite so much because it did not have so much catching up to do, Ireland is receiving a huge amount of money in personal terms amounting to £35 per week for each Irish family. We will find that if we want countries and—
Baroness Seear: Would the noble Lord give way?
Lord Stoddart of Swindon: I am sorry if I am causing such a lot of dismay on the Liberal Benches.
Baroness Seear: I find it extraordinary that a good Socialist, such as I understand the noble Lord to be, should be so upset at the idea of raising the standard of living of the poor at the expense of the rich. Can he explain that in terms of his ideology?
Lord Stoddart of Swindon: The noble Baroness has not been listening. I have not given a personal opinion. It does pay to listen to what is said. It is not what I believe, in the last analysis: it is what the noble Lords over there believe. Do they believe in convergence? Are they happy that the British taxpayer, and indeed business, should have imposed upon them more taxes and more costs in order that countries not up to our standard of living may catch up to that standard of living? That is a question that has to he answered, and it has to be answered by the Government most of all. That is the question I am asking and I am surprised that anybody should be concerned that I am asking these questions. I thought that that was what a
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Committee stage debate was all about. These are just some of the questions to he answered, and all of us could go—certainly I will give way if you want to keep it going.
Lord Aldington: I should like to get my poor confused mind into slightly better order. It seems to me that the noble Lord is asking questions about convergence when he really means to ask questions about cohesion, which is what we come to later in the evening. "Convergence" is well defined in this treaty. The noble Lord, Lord Stoddart. accused some noble Lords of not having read the treaty but it seems to me that he has not read it either.
Lord Stoddart of Swindon: Yes, I have indeed. The objective is to get the economies to converge in certain ways and the cohesion funds, which we shall be discussing later, are a means of obtaining that as well as by monetary means. So I am perfectly well aware of what it means: but we could discuss every single issue under this particular heading. I do not want to do that—
Lord Hailsham of Saint Marylebone: Hear. hear!
Lord Stoddart of Swindon: But I hope that we shall have answers soon to the many questions that have been asked of the Government Front Bench, and then we can go on with the debate.
Lord Simon of Glaisdale: This has been a wide-ranging debate and a valuable debate, even though it is extraneous and irrelevant at this stage of the Bill. It is irrelevant because the signing of a treaty is a prerogative power and the Government, having signed, are bound to try to bring United. Kingdom law into line so that the treaty can he ratified. As to that, approval was given on Second Reading in this place. In accordance with the practice of this place. the Committee stage is limited to implementing what was decided on Second Reading. We can by all means improve on the detail but we cannot go counter to the decision that was made.
As I said, it has been a valuable debate, because it goes behind the treaty. It starts by asking the question: do we want stability in exchange rates? If we do, is the EMU a suitable organisation for bringing about exchange rate stability? Is there any other in sight? Finally, there is the question that has been posed: does a single currency necessarily involve single government? As to exchange rate stability, there can be no doubt. No trader can trade properly unless he knows the value of what his money on account will be at the end. If he is trading in marks, dollars or sterling he wants to know, within a small range, what is to be the value of what he has to deliver.
The question then arises: is the EMU a suitable vehicle for exchange rate stability? The noble Lord, Lord Desai, mentioned the gold standard. That was a semi-automatic instrument of exchange rate stability, but no one suggests that it can be revived. So the question is: is there any other vehicle apart from the EMU? I do not intend to go into the details of our

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entry into the EMU because the Committee is privileged to have among its Members the principal agents of our entry into the EMU.
I come to the final question that has been posed: can one have a single currency without a single government? That is answered confidently, "No". It is answered thus by those who optimistically hope to have a single government, and pessimistically by those who will not have that at any price. But in fact the question can be answered categorically, "Yes", because it has occurred in the past. It has occurred in a wide range of states in the Latin monetary union of the middle of the last century. That started, I believe, with France—the noble Lord, Lord Peston, will correct me if I am wrong—Belgium, Switzerland and Italy. It was so successful that other states joined in; for example, the Papal States and Romania. That is one example.
Another example closely concerns us. In 1826, the pound in this country and the Irish currency were put in a position of parity. Of course at that time there was a single, common government, but that parity continued after the establishment of the Irish Free State in 1922; and, indeed, it continued after the establishment of the Irish Republic during the war. It continued in fact until both countries entered the EMU. So that question can be answered categorically: a single currency does not necessarily involve a single government.
Lord Rippon of Hexham: I should like, if I may, to follow what the noble and learned Lord, Lord Simon, has just said. He described clearly the processes by which we are bound to seek to ratify the treaty that we are now considering. I express my gratitude to the noble Lord, Lord Stoddart, for what he had to say about the large number of amendments put down and the way in which an effort has been made to group them to ensure that we have a more orderly discussion than perhaps took place elsewhere. As he said, all the amendments could give rise to an interesting discussion. The one that we are having now is interesting. It is one that will in fact be repeated in many forms over many years.
What we must do here and now is to focus upon the issues which are directly relevant to the Bill and the ratification of the treaty. We shall have to return at the end of the day to the fact that we can only accept or reject the treaty; we cannot amend it. If we accept it, we will strengthen the objectives of the Single European Act, as promoted by my noble friend Lady Thatcher. It is one, I believe, of her greatest achievements. If we reject it, we shall of course become remote from the central decisions in Europe. We shall not have these interesting discussions about the contribution that we can make to the future.
So far as concerns the issues directly related to the Bill, particularly the EMU, we have the opt out. As regards the timing, I do not know. We can all hope for paradise on earth, but as for the timing, I do not know. My recollections go back; a little further even than those of my noble friend Lord Cockfield. I can remember spending a great deal of time in 1972 assuring the other place that we were not committed
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to the third stage of the Werner plan in which the Community proposed economic and monetary union by 1980. It is an objective. One may think it is a good objective or a bad objective, but we have the opt out in the treaty. We shall have the opportunity to reconsider that issue.
On the common currency, perhaps we should have a referendum. We should ask the question as to whether we should have a referendum when the time comes. It may or may not happen. We shall have another opportunity to say whether or not we want it. I believe that it is a good idea if it can be realised. After all, if I may follow up some of the examples given by the noble and learned Lord, Lord Simon of Glaisdale, we invented travellers' cheques so that our travellers could move about Italy when it was difficult to do so with 16 different currencies to carry in one's pockets.
We have more recent examples of a common currency leading to political union. There is a common currency in Belgium and Luxembourg. There is a common currency in Switzerland and Liechtenstein. There is nothing to stop a whole range of countries in Europe, if they so wish, deciding to have a common currency but still not have a political union.
Yesterday, the noble Viscount, Lord Tonypandy, to whom we always listen with affectionate regard, spoke of a sense of impatience. I should not like to think that I have been misunderstood when I said that I believe that we should get on as fast as we can. I would never have suggested that we deal with the Bill, relatively simple though it is, on one Friday, as we did with the Single European Act which had far more, far-reaching consequences than the Bill. The noble Viscount said that we should have patience—I believe that we have shown a great deal so far—and we must have responsibility, but our responsibility, above all, I would suggest to some Members of the Committee is not to mislead the British public with Euromyths and the projection of false fears which do no good to British interests.
The noble Lord, Lord Harmar-Nicholls, said that he spoke as a businessman. I should like to conclude my remarks by referring to a speech made by Sir Michael Angus at this year's CBI dinner. He said:
"It is clearly in the interests of British business that the Maastricht Treaty is ratified. We need our Government to be at the heart of negotiations, ensuring that our concerns are taken into consideration, constantly improving and updating the Single Market and making it work fairly for us. And—I would add—curbing the power of Brussels".
None of us disagrees with that. He continued:
"The progress of the Maastricht Treaty through Parliament has really been a sorry spectacle".
He was of course referring to the other place and I hope that we shall not repeat that. He then said:
"A clear majority of the House of Commons wish to ratify the Treaty. Yet we seem to have been on a knife-edge for months as a small body of people, through a mixture of contrived parliamentary procedures and convoluted logic, seek to sabotage the Bill. This unwelcome and distracting side-show must come to an end—and quickly. All credit to the Prime Minister for steadfastly sticking to his principles".
I wish that some others whom I shall not name would stick to the principles to which they subscribed in the days when they were in office.
5 p.m.
The Earl of Onslow: It is interesting to comment on what was said by the noble Lord, Lord Eatwell. When I was eight and recovering from mumps I bought a small metal submarine. I was desperately sorry because my parents said, "Oh, there has been a disaster! Stafford Cripps has had to devalue the pound". I could see the noble Lord, Lord Eatwell, in his advocacy of the Bretton Woods fixed exchange rate mechanism, as Sir Stafford Cripps incarnate or possibly even the Norman of the 1929 Government. We know perfectly well that fixed exchange rates with modern computer technology do not work. We should by now have learnt not to use them.
We have only to see the strain on the European monetary system. If the French were not in the exchange rate mechanism they could have interest rates of 5 per cent. or 6 per cent. lower and the franc would possibly be higher against the deutschmark. The noble Lord, Lord Stoddart, said that one of the causes of trouble in Germany was the reunification of the ostmark and the deutschmark. He was right but I believe that his analysis was wrong. On the free market the ostmark was worth one-sixth of one mark. Then some fool came along and gave the East Germans six times the value. In one fell swoop all East German labour and industry was bankrupt because the prices were too high. Money is only a store of value; it serves no other purpose except as a means of exchange.
There is possibly an argument for a single currency. I am not an economist but I enjoy historical things, as Members of the Committee may realise. The other day I walked down Beauchamp Place and saw in the window of the Map House a bond to the Chinese Government. It was at 3.5 per cent. for 25 years, £5 million in gold sovereigns. All the amounts were exact in imperial German marks, gold roubles, Japanese yen and the French and Belgian francs. There was no parity of 2 per cent. either way; it was rock solid. I believe that it would be possible to have a single universal store of currency throughout the world, as we did from 1815 to 1914.
However, it seems that it is impossible to get there. We cannot do so, even if we want to, except by self-control. We can get there only by putting our own houses in order. We cannot get there by having it imposed upon as by a treaty from outside. If the Italians do not want to run a sensible monetary system, or if we are silly enough to stay in an exchange rate mechanism at the wrong rate, and the wrong this, that and the other, it will end in disaster. If we can get our act together and do it voluntarily it will happen. It will not happen if it is imposed from outside.
If we produce children's clothes, for example, the French will come pottering across on the ferry and buy their children's romper suits in Dover. If we are silly enough to put a large amount of tax on French wine those of us who like French wine will go across the Channel, load up our Discoveries and there will be a dearth of wine merchants in Kent. If we run sensible financial policies which run sensible and proper monetary policies, and if we make sure that our money holds its value, things will come together. The
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difference in richness between Greece and Dusseldorf will not matter. The Greek currency can hold the same value but the bloke in Greece can be paid rather less because he is worth less than the skilled man in Dusseldorf. But the currency can be worth the same. That is what I mean by convergence. In my view it cannot be imposed from outside; it can be imposed only by self-discipline and self-control.
Lord Monson: I was interested in particular in the contribution of the noble Lord, Lord Desai. Even more than his Front Bench colleague, he clearly believes sincerely and passionately in the virtues of a single currency. Therefore, presumably the noble Lord believes that considerable sacrifices should be made in order to attain that extremely desirable objective. What would those sacrifices consist of? I suggest that the chief sacrifice would be a loss of national independence far greater than has yet been dreamed of.
The noble Lord, Lord Tebbit, reminded the Committee of Chancellor Kohl's firmly expressed opinion which is shared by many distinguished political figures on the Continent of Europe: notably those in Germany, Italy and the Benelux countries. It is that, in order for monetary union to be in any way effective, it will require positive steps, often giant steps, towards political union. They are opposed in that view by the noble Lords, Lord Cockfield and Lord Rippon, and my noble and learned friend Lord Simon of Glaisdale. Clearly, both groups of distinguished individuals cannot be right, but I should hate to judge which will be right in the end.
However, there are other distinguished political figures in this country who believe that political union will automatically result from monetary union without the need for any conscious steps to be taken in that direction. Perhaps I may give the Committee a short quotation:
"There is nothing which comes nearer to sovereignty, self-government or what politics is about than control of money. From the beginning of time it has been the attribute of sovereigns that they made or declared money. Their image and superscription was found upon it. That is what made it money. In our day, supremely the subject in politics about which we dispute, debate and vote … is about how the control of money shall he exercised … If there is to he monetary union the decision"—
—about how the British state ought to use its moneymaking power—
"is to be taken away from the British people. It is no longer to be a subject of politics in this country. It is a subject which will be decided by the general and common authorities of a monetary union. Consequently, there is nothing more directly and clearly inimical to the political process in this country than the professed intention to enter into a monetary union".—[Official Report, Commons, cols. 526–527; 10/7/86.]
Those were the words of Mr. Enoch Powell speaking almost seven years ago.
I ask the noble Earl who is to reply whether it can be seriously denied that monetary union would result in a massive transfer of power away from the elected House of Commons to an unelected body over which we should have minimal control and influence.
Lord Boardman: I oppose the amendment. I shall try to do so briefly because I believe that much of our discussion is premature. So far there has been no

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mention of how much the Prime Minister secured in the form of opt-outs with regard to the single currency in the Maastricht Treaty. As my noble friend Lord Rippon said earlier, I believe that the merits and demerits of a single currency will be the subject of much debate over the months and years ahead. I have significant reservations about some aspects of a single currency but I hope that I shall have an opportunity to raise those in the future. I suggest that, today, that issue is irrelevant. We have secured an opt-out. That is a credit to the Prime Minister and one which encourages me to oppose the amendment.
Lord Morris: At this stage I believe that it would be useful if the Minister would respond to some of the highly cogent questions that have been put to him by Members of the Committee. It would aid the debate considerably because those who will speak later can then marshal their speeches in accordance with the Minister's response.
Lord Peston: There are several of us who still wish to speak. I do not mind when the noble Earl speaks so long as it is not assumed that he is to be the last speaker.
Baroness Trumpington: I believe that yesterday there was some confusion in which I was involved. Perhaps I may clarify the matter. Anybody can speak at any time in Committee. The only point is that we must finish an amendment before we break for pleasure of any kind.
The Minister of State, Department of Transport (The Earl of Caithness): It may be helpful to the Committee if I set out the position. I welcome this opportunity to consider Stage 2 of EMU and the transition to Stage 3.
As we debate this issue, we are only a few months away from 1st January 1994, which the treaty sets as the beginning of Stage 2. In spite of the delays in ratification, not in this country alone, the Community remains committed to beginning Stage 2 on that date.
Before commenting in detail on some of the issues already raised, I should like to remind the Committee of two fundamental points. First, as my noble friend Lord Boardman said—and I emphasise in particular to the noble Lord, Lord Monson—we are not deciding in this Bill whether or not the United Kingdom should participate in a single currency or join the third stage of economic and monetary union. Both the treaty and the Bill provide watertight legal protection for that decision to be taken nearer the time and for Parliament to be fully involved.
Secondly, the principle of economic and monetary union is nothing new. It has been on the Community's agenda since before we joined it. In October 1972 the Government, under my right honourable friend Sir Edward Heath, associated themselves with a resolution of heads of state and government of existing and future member states calling for progressive realisation of economic and monetary union by 1980. While, clearly, the timetable was not followed, the commitment to the principle was picked up in the Single European Act signed by my noble
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friend Lady Thatcher in 1986. There is also a history of secondary Community legislation going back to the early 1970s building up the present level of economic and monetary co-ordination in the Community.
Some Members of the Committee have quite rightly concentrated on the transition to Stage 3. However, as I have already said, Stage 2 is much more immediate. Under Article 109e, once the treaty is ratified by all member states, it will begin on 1st January next year. Perhaps I may remind the Committee what Stage 2 entails. First, I must make clear that during Stage 2 economic and monetary policy remains firmly in national hands. The obligations to co-ordinate economic policy, contained in particular in Article 3, do not conflict with that principle and Article 3 of the European monetary institute—the EMI—protocol makes absolutely clear that the EMI must carry out its tasks:
"without prejudice to the responsibility of the competent authorities for the conduct of the monetary policy within the respective Member States".
The role of the EMI is consistent with the retention of monetary policy in national hands. That new institution will carry on the work of the present Committee of Central Bank Governors, including its role in strengthening the co-ordination of monetary policies. However, it will only have a consultative role. Governments will be interested in its views but those views will not be binding and can be made public only after a unanimous vote of the EMI's council.
The EMI will also oversee the development of the ecu and make preparations for the establishment of a single central bank and for the conduct of a single monetary policy in the third stage of EMU. The decision will be for the ECB to take when it is established.
I should say to the noble Lord, Lord Eatwell, as regards Stage 2 that of course the Government accept the European Council conclusions. My right honourable friend the Prime Minister signed them. As the noble Lord will realise, there are various articles—for example Article 104a—which call for detailed definitions to be put in place by secondary legislation and that is all that the Council's conclusions are calling for.
The provisions in the treaty concerning capital liberalisation in Stage 2 largely reflect the principles that the Government have long espoused. I hope that those will be widely welcomed throughout the Committee, because this Government have been implementing those proposals since 1979. I believe that the Committee will welcome the fact that everybody in Europe is now following the strong lead that we have given.
In Stage 2 there is also an end to the privileged access of public bodies to financial institutions but as no Member of the Committee has mentioned that, I shall not dwell on it.
I wish to take up a point made by my noble friend Lord Tebbit with regard to the ERM and the question of whether the ratification of Maastricht will require sterling to rejoin the ERM.
As we have repeatedly made clear, the treaty does not contain any such obligation. During Stage 2, and Stage 3 if we stay out, the United Kingdom will retain

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full competence for monetary policy. Nothing in the treaty takes it away from us. In fact, Article 3.1 of the Protocol contains the statutes of the European Monetary Institute, which expressly recognise that member states retain responsibility for national monetary policy in Stage 2, as I have just described.
If we decide not to participate in Stage 3, the UK protocol expressly states that:
"The United Kingdom shall retain its powers in the field of monetary policy according to national law".
Article 109m merely obliges us to treat our exchange rate policy "as a matter of common interest". But those are almost exactly the same words as in Article 107 of the Treaty of Rome, which for decades has required us to treat exchange rate policy as a matter of common concern.
My noble friend Lord Tebbit referred also to the provision in Article 103 to regard economic policies as a matter of common concern. There again, the provision follows closely a similar "common concern" provision in Article 104 of the Treaty of Rome. Therefore, I repeat to the Committee that there is nothing new here compared with the Treaty of Rome, which, as my noble friend Lord Tebbit will recall, he voted for in 1972.
My noble friend went on to questions about the independence of the Bank of England in Stage 2. Article 108 requires each member state to ensure that at the latest by the date of the establishment of the European system of central banks, its national legislation is compatible with the treaty and the statute of the ESCB. But paragraph 5 of our Protocol makes clear that. Article 108 will not apply to the UK if we choose not to move to Stage 3. Although Article 109e5 requires member states to "start the process" towards independence in Stage 2, that provision is qualified by the words "as appropriate" and "in accordance with Article 108".
Perhaps I may clarify the position. Unless we decide that we want to move to Stage 3, we shall be under no obligation to make the Bank independent. Therefore, we welcome Stage 2 of the economic and monetary union as a means of building on the present co-operation between member states in economic and monetary policy, while leaving the responsibility for setting those policies firmly in national hands.
Stage 2 of EMU is very much a transitional stage for those who wish to progress to a single monetary policy and a single currency. Therefore, perhaps I should say a few words about how the transition to Stage 3 is designed to work. Article 109j of the treaty sets out the well-known convergence conditions relating to low inflation, the avoidance of excessive budget deficits, membership of the ERM and comparable long-term interest rate levels. The criteria are explained further in a protocol to the treaty. But it is important to emphasise that they are not the only factors that the Commission and the EMI will consider when making their report to the Council on the progress towards convergence.
On the basis of those reports, the ECOFIN Council will assess whether each member state fulfils the conditions for a move to Stage 3 and then consider whether a majority of member states do so. ECOFIN
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will then recommend its findings to the European Council. On the basis of that recommendation, it is the European Council that will decide whether a majority of member states do fulfil the necessary conditions for the adoption of a single currency. It will then be decided whether it is appropriate for the Community to enter into the third stage. If it is so decided, a date will then be set for the beginning of Stage 3.
The treaty makes clear that the first consideration of the reports from the Commission arid the EMI by the Council must be no later than 31st December 1996. If no date for the beginning of Stage 3 has been set by the end of 1997, the treaty provides that the third stage should start on 1st January 1999. At that time, all member states which fulfil the convergence conditions may move to the third stage but no majority is required.
My right honourable friend the Prime Minister has made it clear that he does not believe that the economies of Europe are remotely ready for a single currency and that the idea of a monetary union in 1997—ambitious at Maastricht—is wholly unrealistic. However, others in the Community are increasingly recognising that reality. Therefore, the timing of decisions about moving to Stage 3 is very unclear. I should tell the noble Lord, Lord Harris of High Cross, that it was precisely for those reasons that the United Kingdom negotiated a protocol to the treaty to ensure that, unlike most other states, we would not be compelled to move to Stage 3 if we were held to meet the convergence conditions at the time.
I turn now to the UK protocol. Again. this was a matter raised by my noble friend Lord Tebbit. The protocol explicitly confirms:
"That the United Kingdom shall not be obliged or committed to move to the third stage or economic and monetary union without a separate decision to do so by its Government and Parliament".
We have made it absolutely clear in the Bill now before the Committee that any such decision will be taken by means of a full Act of Parliament. Therefore, if we choose to meet the convergence conditions in Article 109j and to move to Stage 3, the treaty ensures that we can do so on exactly the same conditions as any other member state. I should point out to the noble Lord, Lord Eatwell, that there will be many considerations to be taken into account at the time. No doubt the noble Lord will have questions of his own to ask on the matter. However, I cannot read his mind. Indeed, my noble friend Lord Boardman said only a moment ago that he had various concerns on his mind and questions to ask. But, as he rightly said, they are matters for another day when that Bill, if it is ever presented, comes before this place.
If we choose not to move towards a single currency, the relevant articles in the treaty and in the ESCB protocol which define Stage 3, in particular with reference to the adoption of a single currency, will not apply to us. We shall not be subject to binding limits or sanctions on the size of our budget deficits, the monetary policy of the European Central Bank, the external exchange rate policy for the single currency or the obligations to make our own central bank independent.

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In negotiating the treaty, we wanted the option to join a single currency, but we wanted to ensure that the United Kingdom will continue to have a strong influence on the development of monetary policy in the Community. The treaty does just that. We participated fully in the negotiations defining Stage 3, seeking to ensure, as the treaty now does, that the monetary union will he based on firm economic foundations through the fulfilment of the convergence criteria. It sets out sound and practical arrangements for a single monetary policy and a single currency. Similarly, we shall play a full role in the discussions on economic and monetary policy both in the Council and in the EMI.
If we were to fail to ratify Maastricht, we would have absolutely no influence on the development of monetary union among other member states, and Members of the Committee should be under no illusions that those member states will simply abandon their aspirations. On the other hand, I also reject the claim that the United Kingdom will be forced to join a move to Stage 3 if it goes ahead. There could be benefits in a successful move to Stage 3, and hence costs in staying outside, but, equally, there would be costs involved in moving prematurely or unsuccessfully to Stage 3. Britain's ability to stand aside from such a move could confer great benefits on the UK. We therefore remain in the enviable position of being party to the preparations for Stage 3 and able to influence it so that it is established in a sound and sensible way, while retaining our freedom of action.
I shall deal now with the claim that Article 5 of the existing Treaty of Rome and the protocol on the transition to Stage 3 commits the UK to working for Stage 3 Article 5 is a general requirement that member states should assist in the meeting of Community objectives and not frustrate them. Of course, Britain does not sign treaties whose objectives it intends to frustrate. The protocol on the transition makes it clear that no member states will seek to stop the Community from moving to Stage 3; nor would we. Again, that is an answer to a point made by my noble friend Lord Tebbit. I believe that that is perhaps the third or fourth time that I have answered him. I see that my noble friend wishes to intervene. I give way.
Lord Tebbit: I did not ask whether Her Majesty's Government would seek to frustrate the operation of Stage 3; indeed, that thought never came into my mind. The question I asked, and which my noble friend has not yet answered, was whether it is the policy of Her Majesty's Government that we wish to see Stage 3 in operation. Do we, or do we not?
The Earl of Caithness: I have answered that question. It is a matter to be decided at a later date with a full Act of Parliament. I hope that my noble friend will take a full and active part in those discussions.
Lord Tebbit: All my noble friend has to do is to answer either yes or no. It is simply no good trying to escape by talking about the treaty's provisions. Is it the policy of Her Majesty's Government that we
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should encourage the operation of Stage 3? Are we in favour of a single currency among the other member states? Please, I beg my noble friend to give me the answer, which can only be "yes" or "no".
The Earl of Caithness: We have taken a most active part in producing a treaty which has workable and practical conditions for a Stage 3 of economic and monetary union. The decision as to whether we go to Stage 3 is not a decision that we have to take now; it is a decision for another day. Much will depend on what the position is at that time. We are in the process of going through Stage 1 at present, but we shall have to go through Stage 2. The situation in Europe has changed quite dramatically over the past 18 months. We will need to take account of any developments within Europe before the government of the day, of whichever party, decides whether or not to put forward a proposition.
I should point out to my noble friend that it is possible that we may meet the convergence conditions and the requirements for Stage 3, but that for various reasons pertaining at the time we do not wish to elect to move to Stage 3. That is the advantage of the opt-out. That is the difference between the situation in which we find ourselves and which applies to every other country other than Denmark. If they meet the conditions of Stage 3 under the treaty, they will have to go to Stage 3. We have the benefit, because of the opt-out, of not taking that decision because we have to have an Act of Parliament. We can opt out of it.
The Earl of Onslow: My noble friend Lord Caithness has answered a question which my noble friend Lord Tebbit did not ask. Are Her Majesty's Government in favour of the French, the Belgians, the Germans, the Dutch, the Spaniards, the Portuguese, Uncle Tom Cobbleigh and all having one currency or not? That is the simple question. My noble friend can only answer "yes" or "no".
5.30 p.m.
The Earl of Caithness: I would say with respect to my noble friend that I have answered that question. I hope that my noble friend Lord Onslow will have read the treaty by now and I hope that he will read what I have said about it in the Official Report. I have set out at some length the details of the transitional period and what happens during the transition to Stage 3. There are two different stages at which Stage 3 can start. The first requires a majority of member states, the second does not. That is a decision that will be taken at the time as regards whether they meet the convergence conditions. The matter is up to those countries. What we have secured is the opt out for the benefit of Britain.
I now turn to a point raised by several Members of the Committee, including the noble and learned Lord, Lord Simon of Glaisdale. The question was: can we have economic and monetary union without political union? We do not accept that the form of economic and monetary union prescribed in the treaty requires political union. As regards monetary union, it is perfectly possible for different countries to lock their exchange rates or have a single currency without

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linking their political systems. I shall give the Committee an example of that. Germany and Austria have for some years had something very close to a common monetary policy while their political systems are clearly distinct.
The economic arrangements in the treaty fall a long way short of full economic union. They do not provide for anything like common fiscal and borrowing policies. It will be for each country to decide what its public spending priorities are and what tax levels it wishes to set, just as they do now. The excessive deficits procedures do not alter that, nor do the provisions for broad economic guidelines which have no legal force. Therefore I put it to the Committee that none of these arrangements remotely resembles a prescription for political union.
I have endeavoured to answer a great many of the points that have been made. I have taken great care to explain what happens in Stage 2 and how the transition to Stage 3 will work. I shall be happy to provide further clarification if that is needed.
Lord Monson: Before the noble Earl sits down—I apologise if he gave an answer that I missed—can he assure the Committee that there is no question of our being forced to rejoin the ERM as a condition of'Stage 2?
The Earl of Caithness: I certainly dealt with that point. Of course there is no requirement during Stage 2 for us to rejoin the ERM. I know that the noble Lord will have read the treaty. If he can find anything in it that commits us to do so, he is a better man than I.
Lord Stoddart of Swindon: Before the noble Earl sits down, there is just one little point that worries and puzzles me. The noble Earl said that we must enter Stage 2 to be able to influence what happens within Stage 2, but that we have a protocol to protect us against going into Stage 3. When Stage 2 is completed, will the Government then use the same argument; namely, that we must go into Stage 3 to be able to influence the events in Stage 3? I should like an answer to that question.
The Earl of Caithness: That will not be a matter just for the Government. It will be a matter for both Houses of Parliament because it would require a full Act of Parliament to implement. I know that the noble Lord, Lord Stoddart of Swindon, will make his views perfectly clear then.
Lord Stoddart of Swindon: That is a significant reply. For Parliament to make a decision is one matter but to have a treaty brought before us which we cannot amend is another thing. That is what we have before us today. Indeed, the noble Lord, Lord Rippon, told us that that is what we have and therefore it was not worth discussing it. If this kind of treaty is brought before us again, Parliament will not have the opportunity to agree to it without, apparently, undermining the Government's position vis-à-vis other countries because such a course would undermine their honour in making treaties.
The Earl of Caithness: I must confess that I did not follow the noble Lord completely. I shall try to put my
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reply in words that he will understand. There will be an Act of Parliament. It will be for the government of the day to decide, even if we meet the criteria for moving on to Stage 3, whether it is in the interests of the United Kingdom so to do. Even if we meet those criteria, such a move might not be in the interests of the United Kingdom and we do not have to move that way. However, if the government of the day believe that it will be in the United Kingdom's interest, they will bring a Bill before Parliament to be discussed in the usual way.
Lord Bruce of Donington: The noble Earl made some interesting observations on the eflects of the opt out. As I understand it, the opt out is, in the Government's view, a perfectly viable alternative for them to adopt and it would be a deliberate decision that would not of necessity depend on whether or not we met the convergence conditions. When the time came the Government, as a deliberate act of policy, might decide to opt out altogether from that aspect of the treaty.
If I interpreted him correctly, the noble Earl said that the Government would not have considered the opt-out provision unless they were convinced that they could opt out successfully. That seems to me to be a perfectly viable situation. The Government were really telling us that in retaining the option as a constructive and deliberate act of policy, it would not follow that we would take the slow lane; be excluded from the councils of Europe and face all kinds of political catastrophes, either real or imagined, at the hands of the remaining 11 member states.
One could, in fact, not have the treaty at all and one would still not be out of step with everyone. That is an extraordinary situation. The Government are putting forward a deliberate opt out, or exclusion, as being a viable alternative which can in their view be accomplished without all the horrific consequences with which we have been regaled over the past few days.
I would be delighted if at a later stage in the proceedings the noble Lord, Lord Cockfield, with his characteristic modesty, would pass on his expert observations as regards this constructive, deliberate act of policy of opting out. I must refer to the noble Lord, Lord Cockfield, because he let the cat out of the bag completely, as he sometimes does. He told the Committee in the course of his authoritative speech—he never speaks with anything less than absolute assurance and authority—that all Maastricht really amounted to was a continuation of matters that are already contained within the Single European Act. We in this Chamber were not acquainted with that fact at that time by Ministers on the Government Front Benches who were busily assuring us how completely innocuous it was.
The noble Lord, Lord Cockfield, set out the alternatives. He said that if we had not had the Maastricht Treaty we would have needed a whole series of regulations and legislation at European level covering individual unfinished points in the Single European Act. He said that all that we were being presented with in the treaty was a substitute for

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legislation that could have been passed under the Single European Act piecemeal over a protracted period of time.
I can understand why the other member states therefore wanted the Maastricht Treaty. If regulation after regulation was required in order to achieve the consummation of the Single European Act that would have ensured detailed parliamentary scrutiny, not only in our own country but in the other member states. The individual items required to complete the Single European Act to the satisfaction of the noble Lord, Lord Cockfield, would have been subjected to considerable scrutiny and argument. Wisely the other European states bent upon the creation of a federal Europe decided that they would short circuit the regulations and have all those matters compiled in a treaty which could then be put through all parliaments without very much trouble.
A remarkable feature of the debates, not only in the other place but also in this Chamber, is the impatience of Euro-fanatics to get the matter through without any real discussion.
Noble Lords: Oh!
Lord Bruce of Donington: There are 14 separate aspects of the treaty to be considered and that is in the interests of some people who are impatient of having any treaty at all. Had the Maastricht Treaty been a sack of potatoes with "Maastricht" written on the label the Liberal Party would have voted for it en bloc without any further discussion. No wonder they have not taken a very active part in this particular debate.
Lord Thomson of Monifieth: I am grateful to the noble Lord for allowing me to intervene. Surely the Maastricht Treaty has been before Parliament for rather more than a year since the general election. At the moment we are all listening patiently—and I hope reasonably tolerantly—to 10 days of Second Reading debates on various aspects of that treaty.
Noble Lords: Hear, hear!
Lord Bruce of Donington: I note that the noble Lord also has the support of the noble and learned Lord, Lord Hailsham.
It is not for a simple Back-Bencher to determine the timetable by which the Government put their legislation through either another place or this Chamber. That is all under the control of the Government. The Committee knows quite well why the progress of the Maastricht Treaty through the Houses of Parliament has been delayed. It has been in order to accommodate the convenience of the Prime Minister, upon which—in the interests of unity in some parts of the Chamber—I shall pass no further comment. It is certainly nothing to do with me.
The same point was made by the noble Lord, Lord Ezra. He said that if we wanted the advantages of the single market or if the single market were to come to fruition we had to have price stability. That is another condition. The single market is not even complete yet. It is only 80 per cent. complete. Here new conditions are being imposed on it. That is quite ridiculous.
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When I listened to the observations of my young noble friend on the Front Bench on the EMU argument generally and on convergence, for once I found myself, astonishingly, in agreement with my own Front Bench. Of course the conditions of convergence are unsatisfactory. Of course they may be negotiated in the 1996 conference, unless the Belgians take the bull by the horns in the meantime, over the next week or so, and try to force through a further advance under the auspices of the remaining 11 members. One does not know about that.
If my noble friend has reservations about convergence and wants to raise the matter again in 1996, surely he has a perfect opportunity to do so now. Why not amend the Bill now? Why not try to alter the Bill here and now instead of postponing it until 1996, when my noble friend knows perfectly well that we shall all be told that we agreed the whole matter in 1993 and therefore there is no further argument about it?
The frightening aspect of the matter is the way in which assessments are arrived at. My noble friend Lord Desai was kind enough to indicate his agreement with me that we entered the ERM at too high a rate. The Committee will recall that at that time I objected strongly to a rate of 2.95 deutschmarks.
My noble friend seemed to think that everything would depend on Article 104 of the treaty, which lays down the responsibilities of the Commission. I shall not weary the Committee long—
Lord Hailsham of Saint Marylebone: Hear, hear!
Lord Bruce of Donington: The noble and learned Lord will have to hear me a little longer, unless he invokes Standing Order 74. However, I remind him that it is debatable and that he would be more likely to postpone the proceedings rather than curtailing them.
Let us read Article 104c again, or some of it. It is very important. because we are going to act on the basis of Article 104c. We shall be influenced by the judgments which are arrived at under Article 104c. I refer the Committee to what that article says.
Lord Hailsham of Saint Marylebone: Sing it!
Lord Bruce of Donington: Ha, ha. Article 104c states that:
"Member States shall avoid excessive government deficits".
Tut, tut. We do not want any more anti-avoidance procedures, do we?
Paragraph 2 reads:
"The Commission shall monitor the development of the budgetary situation and of the stock of government debt in the Member States with a view to identifying gross errors. In particular it shall examine compliance with budgetary discipline on the basis of the following two criteria:
(a) whether the ratio of the planned or actual government deficit to gross domestic product exceeds a reference value, unless either the ratio has declined substantially and continuously and reached a level that comes close to the reference value; or, alternatively, the excess over the reference value is only exceptional and temporary and the ratio remains close to the reference value".
Then, Paragraph 3 states:
"If a Member State does not fulfil the requirements under one or both of these criteria, the Commission shall prepare a

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report. The report of the Commission shall also take into account whether the government deficit exceeds government investment expenditure and take into account all other relevant factors, including the medium term economic and budgetary position of the Member State".
The Commission is then required to form an opinion.
We are living in a fragile world in which human beings have as the essence of their being all the virtues and vices of being human. That is a truism which I am sure is fully appreciated. Has it ever occurred to anyone on the Government Benches—I do not know about the Liberal Benches but I shall bring them in as well—or to my own Front Bench to form any opinion as to the competence of members of the Commission to make such judgments? Is there any judgment which they are required to make that cannot be made, for example, in your Lordships' House with its variety of wisdom? We have hankers, captains of industry, barristers and other learned professions. What qualities are we vesting the Commission with?
I trust that I do not offend anyone by saying this. It is common knowledge that some—I would not dream of saying all—members of the Commission have gone to the Commission on the basis of rather less than successful political careers in their own country. Some have regarded being a member of the Commission as a demotion, and very justly so. I do not, of course, refer to any commissioners present in the Chamber who, as we put it, are all honourable men. Arc we prepared in a treaty to give a collection of people—they ought not to be entirely unskilled in the political arts, whatever their other defects may be—in a commission composed to some degree of second raters, the power to make judgments that will influence other slovernments and our affairs in this country? We are harking up the wrong tree. We are endowing people with capabilities which we should like them to have and which it may suit our political views to pretend they have. But surely when all is considered we may come to the conclusion, as in one of the Hans Andersen fairy tales, that the emperor really had no clothes.
Lord Desai: I am grateful to my noble friend for referring to my speech. Before he sits down, perhaps he will clarify this. Had he listened with the attention that he normally gives to my speeches, he would have noticed that I drew attention to paragraph 3 of Article 104c. My one purpose in drawing attention to the paragraph was to point out that, in calculating excess deficit, government investment expenditure is taken out. That is not the current practice of the UK Government. If it were so, even the present deficit would not count as excessive under the rules of the Community.
Lord Hailsham of Saint Marylebone: Now give the noble Lord another chance to make another speech.
Lord Bruce of Donington: if the noble and learned Lord would move a little closer to the microphone he would get the intervention down in Hansard tomorrow.
Lord Stoddart of Swindon: The noble and learned Lord has made enough speeches in intervention.
Lord Bruce of Donington: In reply to my noble friend Lord Desai, knowing him well, and knowing his views well, I would sooner trust his interpretation of Article 104 than I would trust the Commission to interpret it.
Lord Tebbit: As ever in these issues, we have had a most interesting afternoon. However, there are one or two matters which, as I see it, might usefully be tidied up at this stage. First, perhaps I may say to the noble Lord, Lord Ezra—
Lord Peston: Perhaps I may intervene. It is the noble Lord's amendment to which we speak. I take it that he is not about to close the debate. He will have a chance to reply.
Lord Tebbit: I was intending broadly to reply although not formally to close the debate because I know the noble Lord wishes to speak after me. Therefore let me give him the assurance that I shall not cut him off.
Lord McIntosh of Haringey: If the noble Lord will forgive my saying so, he introduced his remarks in such a tone as to imply that he is bringing his remarks to a close. It would be better if he made those remarks after other people have spoken.
Lord Tebbit: If it is for the convenience of the Committee, I am happy to listen first to what the noble Lord says and come to my conclusion after that.
Lord Monson: Will the Committee not agree with that? There are 50 more amendments in this grouping which have not yet been spoken to. There is no question of closing the debate.
Lord Peston: One of my difficulties is that I find this material so fascinating that I have no interest in bringing the debate to a close. On the other hand, there is other work we wish to do. That is why I thought it might be helpful to make a few remarks.
Perhaps I may say to the noble Lord, Lord Tebbit. that I very much agree with the way in which he set out our debate today. Perhaps I may refer to what he stated as being the rules of engagement. It seemed to me that he put the right points and asked the right questions. I must also say to the noble Earl, Lord Caithness—I hold him in the highest esteem—that I must be one of the stupid boys in class. I know that he intended to be helpful but he left me more bewildered at the end of his remarks than before he started. I realise that he or another noble Lord on the Front Bench will speak again.
I agree with the noble Lord, Lord Tebbit, that the Maastricht Treaty in this area in particular is a significant step forward. The noble Earl, Lord Caithness, is right: we have talked about monetary union for a long time but we are now at the point of action. That is why the matter is worth going into. All the other material led up to that point. Monetary union may have been referred to but this is the point of action and that is why it is important that we do not brush the issue on one side or say that we have no time

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for it. I state that from a different standpoint from that of the noble Lord, Lord Tebbit, but I am convinced that monetary union is the important issue.
With reference to the noble Earl's intervention, a straightforward set of positions can be held. There are those who are against economic and monetary union. We have heard from a number of them. The noble Lord, Lord Tebbit, and a number of my noble friends are against economic and monetary union. When asked the question, "What do you think?", they say, "no". I, my noble friend Lord Eatwell, and indeed the party from whose Front Bench I speak, answer the question, "yes". There is no doubt that one group says "no" and another group says "yes". The noble Lord, Lord Tebbit, made the point which has been made several times. My noble friend Lady Blackstone raised the issue at Second Reading; and I have raised it. The simple question is, "Do the Government believe in economic and monetary union—yes or no?". We have had the answer from the noble Lord, Lord Tebbit. The answer from the noble Earl, Lord Caithness, was, "Don't know". That was one of the possible boxes to tick. His answer was, "Don't know": he willmake up his mind one day but at present he does not know.
I reflected on that answer. The reason that he does not know is because the Prime Minister does not know; I do not blame the noble Earl. The previous Prime Minister, the noble Baroness, Lady Thatcher, who now sits with us made it abundantly clear what she thought. It was my lifetime's regret that she never seemed to say anything with which I could agree, but at least I knew with what I was disagreeing. That is her great merit. My problem with the present Prime Minister and therefore the present Government is that they will not tell me what they think. The problem is twofold: do they actually not know; or will they not say? Either way we cannot pursue the matter any further. So far as concerns ticking boxes, the Government ticked the "don't know" box.
In terms of policy that is a difficulty. I am puzzled by the noble Earl's answer. If one reads the relevant part of the treaty, one sees that Stage 2 is of enormous importance. Stage 2 is not a trivial move. Consider what will happen during Stage 2. So far as I understand, we shall take part in Stage 2 in a totally bona fide way. However, Stage 2 involves many policy interventions and movements. That is why I argue that the opt out is not worth the paper it is printed on. If the Community moves forward there would be no possibility that we could ever opt out. I say that in terms to the noble Earl. He may be horrified, but the opt-out is not there so long as the Community decides that it is going ahead.
The noble Earl states that on Stage 2 economic and monetary policy remains firmly in national hands. Economic and monetary policy at the moment is not firmly in national hands. The reason for that is the work of the noble and learned Lord, Lord Howe, when he was Chancellor of the Exchequer. He introduced free movement of capital and the moment that is introduced, monetary policy ceases to be in national hands. We saw a marvellous example of that. The moment that the new Chancellor of the
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Exchequer took his place, exchange rates started to weaken. He had done nothing but it was thought that he might not be strong about interest rates and the market immediately went into action. The notion that it is the Chancellor of the Exchequer who determines these matters is ridiculous; the free capital market determines them. What is termed economic and monetary policy remaining in our hands is again a charade.
As regards the exchange rate mechanism, the treaty says, "If you wish to go into Stage 3, you must be in the exchange rate mechanism beforehand for two years, within narrow bands". Therefore, either the Government are saying, "We are not going into the ERM", in which case they are announcing that we shall not go into Stage 3—in that case, I say, "Why bother with Stage 2?"—or the Government will, in the end, go into the ERM within narrow bands, etc. That is one of the reasons why I find it difficult to follow what the Government's position is or will be after 1st January.
I repeat that I am not saying that in order to get the noble Earl to agree with his noble friend. I want him to agree with me and to support the treaty in a forthright fashion so that we can go ahead. At least, I should like him to say something positive or negative. I do not wish to undermine it. I have two views: first, I should like to feel that the Government will go ahead; secondly, I have a sneaking suspicion that I do not want to go out on a limb and then find the Government cutting me off because they suddenly turn tail and run out on this.
I do not wish to make a long speech, although there are many economic points which we ought to discuss. I entirely agree with the noble Lord, Lord Monson. I prepared material on every one of the amendments and I shall be perfectly happy if your Lordships insist that we go through them one by one. However, I know that there are difficulties about time.
I wish to make one other point to the noble Lord, Lord Tebbit. I was taken aback with the suggestion that he would not divide the Committee on the amendment. I regard it as disappointing that I shall not have a chance to vote for economic and monetary union, but I do not seek to influence him beyond that. Although some of us have taken clear positions on this, what really matters is that the Government take a clear position.
6 p.m.
Lord Tebbit: I find myself very much in agreement with the noble Lord in all that he said in terms of understanding clearly the difference between us over whether or not we regard economic and monetary union as desirable. I know where he stands, he knows where I stand, but the leading party in the debate—and I shall come back to this in a moment—seems to be unable to tell us where it stands.
I should like to say to the noble Lord, Lord Ezra, that there are considerable difficulties in the way that the debates on the matter are constructed. That may help him to understand why my name is attached to some amendments which superficially would seem to lend my support to policies with which I do not agree.

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The amendment Bill before the House is just a tiny sliver of ice, visible above the water. It is towing behind it the enormous iceberg of the treaty. We are not allowed directly to debate the treaty on a Motion or amendment that Clause 103 or some other number stand part. That is not possible. So we have to go through the slightly artificial device of seeking to amend the Bill in a way which would remove a section of the treaty—the section that we wish to discuss. I believe that that may help the noble Lord, Lord Ezra, to understand a little the way in which we are going.
I found the remarks of the noble Lord, Lord Desai, interesting. They had a touch of Second Reading about them and I noticed that he seemed to feel that the problems of the ERM stem from joining at the wrong parity. I understand that, but it is not the problem. The problem is that if we discovered the right parity today, it would inevitably be the wrong parity tomorrow because the economies of the world are not all converging. They do not stay in step, they diverge all over the place. So inevitably, the exchange rates will pull apart. That may have at its root the difference between those who, like myself, feel that the exchange rate is the residual of economic policies and those who believe that it is the driver of economic policies.
In general, those who believe that it is the driver of economic policy want a fixed exchange rate in order to drive the economy the way they want it to go. Those of us who take a more market view of the economy believe that the economic policy should be set for other purposes. At the end of the day, the exchange rate comes out as a residual.
Lord Desai: I am grateful to the noble Lord for giving way. Will he comment on the fact that except for Italy and the UK, most other countries which have joined the ERM have stayed in it and have been able to realign?
Lord Tebbit: Yes, indeed. The noble Lord makes an enormously important point. In its original purpose, the ERM was a system rather like a mini Bretton Woods: a fixed exchange rate but one which could be adjusted periodically in response to the divergence in the economies. However, once it became used as a bridge to the single currency, that flexibility decreased more and more. In the end, as the noble Lord said, those who wished to go into the single currency must, for two years before, exist in a totally fixed exchange rate system of the ERM. Now is not perhaps the time in the evening to go deeply into those matters, but one of the principal causes of the problems of the exchange rate mechanism has been that it is being used for a purpose for which it was not originally designed. However, those are deep matters on which I know many Members of the Committee will wish to reflect at greater length at some other time, possibly when we find ourselves in Stage 2 later.
I also felt that the noble Lord, Lord Desai, neglected the experience of some of the tiger economies of the Pacific where there is no exchange rate mechanism between countries such as Thailand, Indonesia, Hong Kong and the Koreas. Yet somehow or other, there is an effective market and things seem
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to work well. No doubt it comes as a great surprise to those whose experience is solely in Europe to find that if one buys a toaster in Hong Kong, one can plug it into the wall in Indonesia. There has nor, been a single directive to achieve that, but again it is a wider matter to which we shall no doubt return at some other time.
I found the speech of my noble friend Lord Cockfield as interesting as ever. I found his speeches in the Cabinet in the old days extraordinarily interesting too, particularly on the matter of the European Community and our policies towards it. But his speech was not entirely relevant to the question of government policy which I asked and to which I still fear I have not received an adequate answer. At times. it seems to me that my noble friend Lord Cockfield takes the view that if a lady should declare herself in favour of motherhood, it is a notification of her intent and willingness to become pregnant. I do not think that that is necessarily the way in which we should interpret matters.
I thought that the speech of the noble Lord, Lord Eatwell, was also extremely interesting. There was a moment when I was not sure what the Labour Party policy was; I thought he was saying that the party was in favour of moving towards the single currency purposefully and singlemindedly but never actually getting there. However, the matter has now been cleared up and I acquit him of that equivocation.
The noble Lord also raised the most interesting questions about convergence. He may be surprised to know that I have a good deal of sympathy with what he said. The convergence which is listed in the treaty is what I might call, even more harshly perhaps than he would do, bankers' or economists' convergence. It is not about people's convergence. This adventure into a single currency will not be successful until there is reasonable convergence, not only about debt. inflation or all those "economists"' things, but in the standards of living of the people of Europe. I do not believe that in small villages in Greece they will get up and shout excitedly: "Oh, what a wonderful Community it is. We have now achieved convergence with Germany. Our public sector deficit is within the same range". No, that is not what they are concerned with—any more so than people are, if I may say so, in Chingford. They are concerned with their standards of living. Convergence has to be achieved in that area to make it economically possible to operate with a single currency. The cohesion fund is the substitute for success in convergence.
In this country, in our economic and monetary union, we have sought to contain the divergence in the living standards of those in various parts of our kingdom (our little EMU). We have done so by such means as regional policy, whether or not they have been totally successful. That is the purpose of the cohesion fund too.
My noble friend Lord Harmar-Nicholls made an entertaining speech and indeed came to the point concerning my noble friend Lord Cockfield saying, that he was attacking this problem from the position of the civil servant. I think my noble friend Lord Cockfield had some experience in the tax gathering department at one stage of his life.

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The noble Lord, Lord Stoddart, raised, interestingly, the costs of convergence in East and West Germany. But I turn to what was said by the noble and learned Lord, Lord Simon of Glaisdale. He gave some excellent examples of the operation of single currencies without single governments. They are all extinct. There, there may be a lesson for us.
My noble friend Lord Rippon confused me (I do not know whether he was confused) over travellers' cheques and currencies. I am sure that he is aware—although one could have construed that he was not—that a travellers' cheque is not a currency. It is a bill of exchange. He was quite wrong to say that a majority of the House of Commons voted for the treaty on Third Reading. It did not. It was a minority of the House of Commons that voted for the treaty—most notably because on Third Reading the Labour Party did not vote for it.
I come finally to my noble friend Lord Onslow. I find myself in some difficulties. I think that we would all agree that he is one of the most popular, well-liked and indeed, if I may say so, one of the most competent Ministers in this House—
Noble Lords: The noble Earl, Lord Caithness!
6.15 p.m.
Lord Tebbit: I am terribly sorry. My noble friend might be so described, if he ever were made a Minister—but I rather doubt it. He would have given me a direct answer to my questions.
My noble friend Lord Caithness had the great difficulty that he was speaking to a brief. It is a difficulty which I have had in my time. We all understand that. Sometimes the brief is extraordinarily unsatisfactory and one does not like it. But there it is, one has to bear it. I hope that the noble Earl will not feel that my remarks are in any way personal.
However, there is one point which the noble Earl did omit, and it is one which a number of speakers have omitted today. He failed to recollect that this country and Denmark are not the only ones with opt-outs from Stage 3. We are the only ones with opt-outs in the treaty. But the Bundestag, in the process of its consideration of the treaty, put into German law the requirement that there should be a vote before that country goes into Stage 3. It seems that there is a tendency developing in Germany to have some rather liberal interpretations of their rights under the Treaty of Rome, but there it is.
I find it difficult to believe that during Stage 2 all economic and monetary policy remains firmly in our national hands. If it does, there is no point in Articles 104c and 109m. It would appear that they are in effect but making no difference. I believe that one has to look again at the immunities in paragraphs 3 to 9 of the protocol. I refer to the question of moves towards the independence of the Bank of England.
There is no protection in the protocol against the requirement of Article 109e.5 that:
"During the second stage each Member State shall … start the process leading to the independence of its central bank".
There is no protection against that in the protocol until we have given notice that we do not intend to go
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ahead and enter Stage 3. Until we have given that notification, it seems extraordinarily clear to me that we are duty bound at some stage during Stage 2, if not on 2nd January, to do that —although, as we know the conclusion of the Copenhagen presidency, as the noble Lord, Lord Eatwell, pointed out, is that the Stage 2 provision should be adopted as soon as possible after the entry into force of the treaty, and before January 1994 I have to say that there is no provision there. I do not say that we would have to start on 2nd January, but it is quite clear that at some time before very long, unless we have an indemnity, an immunity from Article 109e.5, we must start our progress towards that end. Again, I do not say whether that is a desirable end or not. That is a subject for another debate. But I fear that my noble friend left us all rather more confused when he had finished than we were when he started.
The Deputy Chairman of Committees (Lord Alport): Is the noble Lord withdrawing his amendment?
Lord Monson: This is a Committee stage. I am sure that the noble Lord, Lord Tebbit, will wish to indicate to the Committee that he has no intention of dividing on Amendment No. 17, so that those noble Lords who are here mainly for the purposes of going into the Division Lobbies can relax and leave if they so wish. There are some 51 amendments grouped with Amendment No. 17, none of which has been spoken to and a few of which are important and require answers from the noble Earl, Lord Caithness. Perhaps if the noble Lord were to make it clear that he has no intention of dividing on Amendment No. 17, we could fairly briefly discuss one or two of the other amendments which are grouped with it.
Lord Tebbit: I am sorry I was distracted for a moment. Will the noble Lord repeat what he said?
Lord Monson: I suggested to the noble Lord that he might like to indicate to the Committee that he has no intention of dividing on Amendment No. 17 so that we could discuss briefly some of the technical amendments with which it is grouped. If he begs leave to withdraw it now, we shall have no opportunity whatever of doing that.
Lord Tebbit: Indeed, the noble Lord is quite right. It would be for the convenience of many that they could commence their pleasure and leave us to our task. I have no intention of calling a Division on this amendment.
Lord Monson: Perhaps I may explain that we cannot discuss any of the other amendments with which Amendment No. 17 is grouped if this amendment is withdrawn.
The Deputy Chairman of Committees: Is it the Committee's pleasure that this amendment be withdrawn?
Noble Lords: No!
The Deputy Chairman of Committees: The question is that this amendment be agreed to.
On Question, amendment negatived.
Lord Jay Lord Jay moved Amendment No. 18:
Page 1, line 9, after ("II") insert ("except the following words in Article 2: "and 3a"").
The noble Lord said: This amendment is grouped with Amendments Nos. 19, 42, 46, 51 and the rest of the amendments on the list. Those amendments come under the heading of Economic Policy and Deficits: Central Banks and National Banking. They lay down a number of dogmatic principles of economic policy. Amendment No. 18 seeks to omit Article 3a and Amendment No. 51 seeks to remove Article 4a. Article 3a commits members of the Community to the statement that the principle of an open market economy with free competition should be the guide to economic policy; and secondly, that it should be based on stable prices, sound public finances and monetary conditions.
There is no mention whatever in the guidelines on economic policy of either employment, output or growth. I speak now within the framework created by the speech of the noble Earl, Lord Caithness, on the previous amendment. The Committee will understand that the system of groupings inevitably means that my remarks will overlap with what has been said before.
I understand that the Government have opted out of the single currency and presumably the "irrevocably fixed exchange rates"—I quote from Article 3a. If I have correctly understood the noble Earl, over and above that. in Stage 2 the Government are committed virtually to nothing except membership of the EMI (European Monetary Institute) and I presume, though I am not absolutely certain, to the European System of Central Banking (ESCB) which is the forerunner of the European Central Bank and is due to come into operation in January 1994. I assume that we shall be members of those two organisations. I take it that we are not committed to joining the European Central Bank at that stage and we are not committed to fixed exchange rates in Stage 2. I also assume, although the noble Earl did not mention it, that we are not committed to handing over our currency reserves to any kind of central bank during that period.
My worry is that all the provisions of the treaty with regard to economic policy are based on what one might call narrow monetarist assumptions and false economic assumptions. Having been put into action, the results are now becoming clear over western Europe. At this stage of the day it might be worth taking our eyes off the maze of papers and having a look at the real world.
When we look at the real world we might remember that we were promised that 1993 would see all the joys of expanding prosperity under the single market. Indeed, there emanated from Brussels—even the noble Lord, Lord Cockfield, will agree that this is correct—the so-called Cecchini Report which predicted that an extra 5 million people would become employed as a result of the paradise of the great single market in 1993. The reality is that unemployment is now increasing rapidly throughout western Europe. It is over 3 million in this country and the total is now very near 20 million in the Community as a whole.
During our short period in the ERM this country suffered a rise of over 1 million in the unemployed. My
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noble friend Lord Desai, who admitted that our brief 24 months in the ERM was not a very happy experience, said that it was because we joined at the wrong exchange rate. I wholly agree with the noble Lord, Lord Tebbit. The trouble with exchange rates is that the right exchange rate at one point in time will almost certainly be the wrong rate two years hence. Therefore we should ask ourselves why the single market, based on those principles, has produced the present deplorable situation which every day has more unpleasant resemblances to the early 1930s when we were going steadily downhill.
The first mistake at the root of those arguments or false assumptions is the belief that runs through all the documents; namely, that if one reduces barriers to trade and at the same time abandons all control or management of demand, all will be well and prosperity will spread. I am afraid that that is not true. If one indulges, through the exchange rate, the budget and banking policy, in deflationary policies, then free trade may simply spread the unemployment. If there is full employment, free trade will lead to a higher standard of living. If there are deflationary policies, they will spread unemployment. That is what is now happening. At the next stage protectionism begins to raise its head because everyone starts to complain—as they are now doing even in Germany—that it is imports which are causing the unemployment. That is a depressing sign.
Another false assumption which runs through the treaty is what has become in recent times an obsession with inflation. Indeed, there is gross misuse of the word "inflation" which spreads confusion on all sides. Roughly, the assumption is that the value of money should be the sole object of economic policy and that employment and growth do not matter. But if one works on that assumption, one is in difficulty from the beginning.
Perhaps I may be allowed to propound the proposition that it is a simple truth that if pay rates are rising faster than production in the economy, one is in the inescapable dilemma of choosing between either higher unemployment or rising prices; that is to say, there is a choice in those circumstances—the noble Lord, Lord Eatwell, may agree with me—between policies which will lead to unemployment and policies which will lead to higher prices. Therefore, if one pursues as the sole criterion of economic policy the prevention of what is roughly (but in my opinion wrongly) called inflation, one inevitably gets unemployment. That is what is happening at the present time.
It is true also that if one goes to the other extreme and makes full employment one's sole economic policy, before long one will be left with rising price levels. The right balance must be found between those two objectives. Unfortunately, it is an extreme view which has been taken as the basis of all the policies laid down in this part of the treaty.
The other problem is that bankers, naturally and understandably, always give the highest priority to avoiding what they call inflation and imply, more or less, that growth and employment do not matter. I do not blame them for that; they are as worthy or

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unworthy as the rest of us. But their professional position inevitably leads them to believe that somehow or other, if the price level gets out of hand, they are to blame. Therefore, they will always give priority to hard money, higher interest rates and low inflation; employment must look after itself.
That is particularly true of central bankers who have been allowed to believe that somehow their absence of control has some effect on the economy and therefore they feel guilty when they see price levels rising. That is true, most of all, of German central bankers because they have never overcome their obsession with the 1920s when there really was inflation which got entirely out of hand.
The whole body of guidelines in these sections of the treaty are a specific threat to this country if we are going to be subjected to anything like full control of economic policy decisions by a central bank laying down those principles and with hard and fast rules from which we are not allowed to escape. Exactly where we shall stand in Stage 2, in the twilight between control by the British Government and control by central bankers, I do not know. But it is significant that as soon as we were released from the ERM, as soon as the exchange rate was adjusted last year to a competitive level, within three months the economy turned round. That was not due to some mysterious natural process which people are now beginning to believe in, as they did 50 years ago by which automatically after a recession one has recovery; it turned round because we were released from the ERM and the exchange rate found its level at a reasonable, economic and competitive point.
My quarrel with those sections of the treaty embodied in the amendments under discussion is that if we pursue those principles of economic policy and allow there to be high interest rates and excessively high fixed exchange rates, it will be dangerous for the UK economy. For reasons we cannot discuss at this time, it is a weak economy and there will be a danger of stagnation with high unemployment and a balance of payments deficit.
In all the actions we take between now and Stage 2, it should be an essential policy objective that we do not hand over control of interest and exchange rates to largely unaccountable central bankers, either at home or abroad. I agree with the noble Lord, Lord Peston, that we cannot wholly control all those things in the world as it is now, but we must have some measure of control, either more or less. It is wholly in the interests of the United Kingdom and, above all, the now 3 million unemployed in this country and their families that we keep the greatest extent of control that we possibly can in the hands of a government which at least at present is still accountable to Parliament. I beg to move.
6.30 p.m.
Lord Monson: I want to say a few words in regard to convergence. Convergence is not something which can or should be fostered by state activity—state activity being implicit in the article. Convergence is best fostered by state inactivity; in other words,
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steering clear of burdensome regulation; interfering as little as possible and allowing hitherto less successful countries and regions to pull themselves up by their own bootstraps.
I should like if I may, and if the noble Earl, Lord Caithness, will agree, to say something in regard to Amendment No. 191. I wanted to do so when speaking to the last amendment but was frustrated from doing so by the fact that unfortunately the Division was called. The noble Earl has no obligation to answer me today. I can raise the matter next week, but as he no doubt already has his brief it may be more convenient for him to reply now. If he does not wish to, I shall fully understand.
Amendment No. 191 refers to Article 109g, relating to the ecu. It reads,
"The currency composition of the ecu basket shall not be changed. From the start of the third stage, the value of the ecu shall be irrevocably fixed".
Surely history has taught us that attempts to fix currency parities "irrevocably" are doomed to failure.
Lord Elton: I wonder whether the noble Lord can help the Committee. Is he speaking to Amendment No. 191, which I thought was spoken to with Amendment No. 11 yesterday? In which case, its turn comes up when we reach it. Or is he speaking to an amendment that was grouped with those that we disposed of half an hour ago? In that case, again we reach it when we come to it on the Marshalled List. Or is he speaking to something in vacuo? In that case, it has to wait until we have spoken to the group under discussion.
Lord Monson: I beg the pardon of the noble Lord, Lord Elton, and indeed of the noble Earl. One has so many notes and briefings that it is difficult sometimes to follow. I am speaking to Amendment No. 128, which was grouped with Amendment No. 17 and to which I have been trying to speak for some time. As I rightly said, it refers to Article 109g. Amendment No. 128 carries the names of four noble Lords, including that of the noble Lords, Lord Bruce, Lord Vinson and Lord Hamilton of Dalzell, as well as myself. It is therefore thought to be quite an important one. Once again, I apologise to the noble Earl for having got it wrong, though the reference is perfectly correct.
Lord Elton: My objection is not resolved by what the noble Lord said. I understood that his amendment was grouped with one we dealt with some time ago. We are now speaking to a different group. If the noble Lord wishes to speak to it, the natural process is either to obtain a new grouping for it tomorrow or to speak to it when we reach it on the Marshalled List. Otherwise the whole system of grouping falls apart.
Lord Monson: I am not sure whether or not the noble Lord was present a few minutes ago. I tried to speak to it and the noble Lord, Lord Tebbit, paved the way for it to be spoken to. Unfortunately, a Division was called which should not have been called.
Baroness Trumpington: I support what my noble friend Lord Elton said. Technically, it would be better if the noble Lord, Lord Monson, waited for the amendment to be called.
Lord Monson: That is perfectly acceptable to me. I thought it would be easier for the noble Earl to respond now rather than at some unforeseen time next week. The brief is bound to be in his possession at this moment. However, if that is the wish of the noble Earl and the Committee I shall gladly defer to it and say no more.
Lord Peston: I am probably more lost than anybody. This is a large group of amendments that covers a good deal of ground. Am I to understand that none of the noble Lords whose names have been put to the subsequent amendments will speak to any of them? I would like some enlightenment on that, and then I will say what I intend to do.
Lord Hamilton of Dalzell: I will speak to the amendments in my name on the Marshalled List. I put down amendments to abolish or make impossible the development of ilhe European central bank. I found it satisfactory that it was at least in the power of the British Government to opt out of that particular phase of the treaty. In relation to subsequent amendments to which I have put my name, I am much relieved by what my noble friend Lord Caithness has said.
Baroness Trumpington: It would be helpful if my noble friend could indicate the amendments to which he has put his name.
Lord Hamilton of Dalzell: I apologise. I have put my name to Amendments Nos. 111 to 121. They refer collectively to all the articles that set up the European central bank in the ESCB. I was relieved to hear my noble friend say that he felt the opt-out would survive and we would not be forced back into the ERM. My reading of the other parts of the treaty was that we might be. If the European central bank existed, it would impose a fearful tyranny on the people of Europe. If one reflects on what has happened under the single market Act, the whole idea of a single market in Europe and a level playing field has set off in the wrong direction. As witnessed by many of the noble Lords who speak on this subject, the origins of the single market and the direction in which Europe is going are 50 years old. It is debatable whether the originator of the whole thing was Jean Monnet or Albert Speer who put together the coal and steel industry in Germany in order to help the war effort. I believe that that type of market has now reached its "sell-by" date.
I agree with one element of the treaty: the free movement of capital. The Japanese do not make goods in Japan and ship them here. It is sensible to move capital around Europe and set up industries in countries near the place of consumption. If noble Lords have tried to go anywhere in this country during the deepest recession that it has experienced, they will have found it practically impossible to do so. The idea of generating a level playing field in which prices go round and round may not even work, as the noble
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Lord, Lord Jay, said. I agree that it may not. However, if it did, one would rapidly reach the stage where one would not be able to go anywhere in this country and communications would become completely tied up.
We live in a modern world where money flies into space and goes into a bank at the push of a button. The sensible way to get Europe going is to free its money so that one can open factories in Greece or Southern Italy where labour is cheaper and sell things that people want near the place where they will be consumed. The current philosophy of how to run the vast industrial complex of Europe in my view is doomed to failure. Therefore, if one can see the hack of the central bank it would remove one of the main pillars that keeps Europe driving on like a massive steam engine invented 50 years ago. The allusion of the train is something we always have to put up with. In my view, the train one is trying to catch is pulled by an ancient steam engine whose boilers are about to burst under the electoral pressures exerted on the peoples of those countries who do not like its consequences.
If we pursue the undemocratic nature of the European central bank—that Europe at any rate will have to suffer from—very soon we will see further evidence of the kind that we saw in France in relation to the dismissal of governments. It was said by a French reporter on the wireless at the time of the French elections that nobody wished to take power. It was known that nothing much could be done about their affairs because the country was being run by the Bundesbank. One dismisses one government and then one has another that does no good. In the typical tradition of our European neighbours, before long they will all be on the streets. I believe that Europe is adopting an extremely dangerous philosophy. I hope that when it comes to the point of making a choice we do not adopt it in this country.
6.45 p.m.
Lord Stoddart of Swindon: In supporting this group of amendments, and in particular Amendment No. 19 concerning convergence (about which I spoke earlier), the idea of working towards a high degree of econornic convergence worries me considerably. My responsibility as a Member of this House—and the Government's responsibility—is to ensure the highest possible standard of living and the most secure economy for this country, not 11 other countries. That may sound narrow and nationalistic.
Lord Harris of Greenwich: Yes!
Lord Stoddart of Swindon: I would expect heckling from the Liberal Benches before they had heard what I had to say. The fact is that one cannot export one's views and policies to other countries unless one first has views and policies worth exporting. What concerns me about convergence is that decisions have to be reached among 11 different countries, all with differing kinds of political composition, constitution, background, cultural heritage and attitude to work, the settlement of disputes in industry and collective bargaining. That is a wide range of items of difference.

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How on earth within a reasonable period of time and without severe difficulties we will embark upon and reach economic convergence under those circumstances I do not know. What worries me is that in seeking to obtain economic convergence we may very well injure our economy. That is the feeling behind many of the amendments. It is not that we do not wish to co-operate. Co-operation is quite different from convergence. One may co-operate over a wide range of issues without having to converge economically or set up a central bank, to which eventually one gives complete power over monetary policy, including interest rates and reserves. One does not have to have convergence to have proper co-operation. It is in co-operation that I prefer to put my trust.
Earlier we debated the issue of exchange rates and whether we should have remained in the ERM, whether we should have gone into it, whether we went into it at the right rate and whether it was necessary to come out of it. All those questions arose because we were trying to converge as ERM was part of convergence. Therefore, almost the first significant part of convergence came apart. That is why I think we should go very carefully indeed when we are talking about economic convergence.
Let us have a look at a common economic policy, a common economic policy which involves being in a new kind of ERM. My noble friends believe that we should he in such a system of fixed exchanges. They believe that that would he good for Europe and that it would help to stave off money speculation across the exchanges. But speculation will not cease. We may very well have a single currency between the 12 but that does not mean to say that currency speculation will not go on. Of course currency speculation will go on. It will go on and at times it will go on in favour of the new European currency but perhaps at times against the new European currency. That is where the danger arises. It may very well be that Europe as a whole—the Europe of the 12 —is not in good odour with the international financial community and that it will speculate against that particular currency. But at the same time the economy of the United Kingdom may he exceptionally good and very acceptable to the international financial community. Therefore we will have the international community speculating against the United Kingdom. because it can do nothing else, even though it believes that the United Kingdom economy is sound and good. That is one of the arguments—I am sure my noble friend will accept that that is one of the arguments—against having a single economy in Europe and indeed a single currency.
I do not want to keep the Committee for very much longer but I want to say a few words about the proposal for a European central bank which will have powers of its own, which will not be subject to this Parliament and which could not he interfered with by the Government. That may be acceptable to many people. I have to say that it is not acceptable to me. I did not join the Labour Party to agree to a country which was going to be run by bankers. I believe that
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one of the reasons why the Bank of England was nationalised by the Labour Government in. I think, 1949—
Lord Jay: It was 1946.
Lord Stoddart of Swindon: —is that they believed the same. The activities of the Bank of England in the inter-war period had brought about the unemployment which was so unacceptable to the Labour Party and to a Labour Government. I have not changed my mind. I simply do not believe that it would he good for the economy or for the people of this country to have policies decided willy-nilly not by their elected representatives but by unelected central hankers from 12 countries—not from just one country but from 12. Just think of the chaos that that could cause.
I am not in favour of central bankers running the economy. Bankers, whether they he central bankers or ordinary hankers, like Barclays, have not had a very good record in running their own affairs. Look at what they have done over the past few years; look at the huge losses that they have incurred; look at the bad investments that they have made. Are we really to trust the bankers with our economic policy? I think not.
Those are some of the points which worry me about economic and monetary union, and in particular, the establishment of a European central hank outside political control. I hope that the noble Earl will be able to answer some of these questions and discuss the problems and perhaps give me some reassurance that, first, the Government have no intention of re-entering the ERM—we did not get such a reassurance in the previous debate—and, secondly, that they are not in favour of an independent central hank without proper political control.
Lord Aldington: The noble Lord, in supporting these amendments, referred several times in the debate to convergence, which he seems to dislike. I think he dislikes it because he dislikes the whole concept of the Treaty of Rome and the Common Market. The aim of convergence has been there right from the start. It has been considered as an essential to a single market. I simply do not understand how we can prosper or how anyone can prosper in a single market unless jointly together we try to converge our economic policies. That is what we have been trying to do. That is what has been laid down. It was reiterated in the Single European Act and it was in the Treaty of Rome before. It has been there all along. There is nothing new about that in the Maastricht Treaty. That which is new we discussed earlier on with regard to a single currency. We disposed of that altogether because the treaty, as we have it, does not oblige us tonight to decide about a single currency.
What perplexes me is that, as part of an attack upon the Maastricht Treaty, we constantly listen to very attractively stated and articulately pronounced attacks upon the whole concept of Britain being in the Common Market. That cannot be true of my noble friend Lord Tebbit because he has said that he is in favour of that. But what I think some others forget—in the earlier debate the noble Lord, Lord Harris of

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High Cross, obviously neglected this matter as unimportant—is that the single market is not a free trade area. It is not like the North Atlantic free trade area. It is not like EFTA, which the members wish to disband and wish to turn into the single market with their full membership. If we are to have a single market it has always been necessary to have co-ordination of economic policies. I cannot understand the force of that part of this set of amendments to exclude that from the treaty.
Then we come to the central bank. The provisions of the central bark are covered by and subject to our option. But surely if the option means anything it is desirable that we should be involved in setting up and devising the rules for and the structure of the central hank. So I should have thought that followed from the debate that we have had.
I listened with interest to what my noble friend Lord Hamilton had to say earlier. He was greatly in favour of the free movement of capital throughout Europe. Therefore, he must have been against the large batch of amendments moved by some who are supporting him on this amendment and discussed—or rather did not discuss, but included in the groups of the first amendment this afternoon—proposals to abandon the free movement of capital throughout the Community. There is something very illogical about the arguments which we are having put to us during this debate.
I strongly believe in the treaty, which came from very careful negotiation over very many months—indeed, over a year and a half—and in moving the federalists away from Federalism and the conceptionists into a pragmatic approach. I believe in every word of this treaty as being helpful to Britain.
7 p.m.
Lord Desai: We are dealing here with several amendments. I shall address myself to two batches of those amendments. Amendments Nos. 87 to 118 basically relate to economic and monetary policy. Amendments Nos. 347 to 375 mainly want to modify the provisions concerning the central bank. Since this is Committee stage I shall be fearfully detailed about it this time.
What strikes me as puzzling about the objections to the economic and monetary policy is, as I have said before, that people who do not like the provisions about excess deficits in Article 104 have not read carefully the whole of the article. As I have pointed out, paragraph 3 of Article 104c allows the deduction of government capital formation, and the protocol actually confirms that. Therefore, deficits are not deficits as we have understood them so far in the United Kingdom.
When one considers paragraphs 4 to 14 of that article, it cannot be imagined that there is going to be a strict and fast rule that as soon as one moves away from 3 per cent. to 3.01 per cent., horrible things are going to happen. The article lays down the procedure in which the Commission reports to the Council, the Council takes matters into account and the Government can argue the particular circumstances and what can he taken into account. One has only to
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read paragraphs 4, 5 and 6 and thereafter. It is not as though there is a hard rule or guillotine with 3 per cent. and nothing else. There is enough in that provision to give the impression that the measure will be interpreted as 3 per cent. over a period or through a cycle rather than for each year concerned.
As regards the central bank. I agree with my noble friend Lord Eatwell who said that basically there are certain things about it that neither he nor I fully like. In the revision of the treaty in 1996 let us address those questions, particularly how much power ECOFIN is going to have vis-à-vis the central bank. There are two matters I wish to point out which are germane to the details of the treaty. The first is in Article 105 paragraph 6. That makes quite clear that:
"The Council may, acting unanimously on a proposal from the Commission and after consulting the ECB and after receiving the assent of the European Parliament, confer upon the ECB specific tasks".
Therefore, it is not that the central bank will never take any orders from the Council. That is not being said. It is quite clearly stated that the Council can do so on advice from the Commission and also after consulting Parliament. That is a very important provision because that provides the one entry for Parliament in influencing the central bank. I hope that that will be viable in future.
Similarly, in the protocol as regards the central bank (page 92 of the document) Article 11 sets out who will appoint the president and members of the executive board of the Council. Again, it would be the heads of state and government. The Council will be appointing the board of directors of the European central bank. So it is not as though having set up an independent central bank all communications between the elected and appointed parts are completely broken off. I would like more accountability, but I am quite happy to go on to the 1996 revision and argue the case and modify the provisions. Once the treaty has been passed I do not consider that it will not be subject to change. The amendments which have been put forward can only be discussed broadly. They exaggerate the adverse aspects of the treaty and underplay the positive aspects of co-operation.
Lord Eatwell: As regards these amendments I wish to present the position of the Labour Party particularly concerning the independent central bank. I also wish to refer to some of the other items raised in the very large number of amendments which we have before us. In introducing the discussion my noble friend Lord Jay argued that creating the single market and a system with free trade and free capital movements was damaging to the pursuit of national economic policies.
I accept that argument. I believe that he is quite right. But then he has to consider the case that he is making to its full extent. I suggest to him that it can be logically argued that if capital movements were prevented—and perhaps also the movement of labour—and trade controls were introduced, then we would regain control of our national economy. But without moving towards that sort of siege economy for which, as I say, there is a coherent case to be made, I suggest to my noble friend that the prospects offered by the

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creation of the single market and of economic and monetary union are more attractive. That is the real alternative with which we are faced. In between, there exists only the instability and low growth which we have experienced for the past 20 years.
Lord Jay: I do not believe that I made myself altogether clear to my noble friend. I said that in establishing free trade and free movement, if demand is managed successfully at the same time the result will be higher employment and a higher standard of living all round. But if one establishes the free movement of goods and capital and deflates demand, which is what has happened in the past two years, then there will be no advantage and unemployment simply spreads from one country to another. I was not advocating anything like a siege economy, but giving priority to the proper management of demand.
Lord Eatwell: I am grateful to my noble friend. I believe he reinforces the case that I made earlier for the creation of a single currency because, as I argued at that time, the management of a co-ordinated policy to reflate demand throughout the Community—a policy which is desperately needed today—would only be really effective within the context of a single currency.
My noble friend Lord Jay also argued quite reasonably that the details of monetary and economic policy in general, as at present set out within the treaty, are infected with monetarist ideas. We have to accept that those outdated and erroneous doctrines were generally accepted a couple of years ago. However, to use the rather hackneyed expression, they have passed their sell-by date. People are looking at the structure of the Community's institutions through very different theoretical and policy eyes. I suggest that the proposed structures do provide a framework within which the sort of Keynesian policies to which my noble friend referred would provide a greater opportunity of having the effect that we all desire.
I should like to refer the noble Lord, Lord Jay, and other Members of your Lordships' House to Article 2 of the Treaty, which I think has been neglected in our discussion of policy in general. Article 2 states that the objective of this treaty is—and I quote—
"to promote throughout the Community a harmonious and balanced development of economic activities, sustainable and non-inflationary growth respecting the environment, a high degree of convergence of economic performance, a high level of employment and of social protection, the raising of the standard of living and quality of life. and economic and social cohesion and solidarity among Member States.
I would submit that those are exactly the objectives which the noble Lord, Lord Jay, suggested in his introduction of these amendments were his goals in the formulation of economic policy. I think that he should take account of the objectives stated in Article 2.
However, I wish to address my remarks primarily this evening to the question of the European central bank and I should like to emphasise, as I did in my earlier intervention, that the Labour Party does not consider the formulations or structures put forward in the treaty at the moment as being perfect by any
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means. That does not mean that we oppose the treaty: we do not. But we certainly think that there is a case for considerable revision at the proposed intergovernmental conference in 1996.
We regard the idea of an entirely independent central bank as a foolish idea. It is foolish for the following reasons. First, if monetary policy had no effect on any economic variables other than the price level it might be possible to suggest that an institution which is charged with the conduct of monetary policy alone would be a sensible structure. But nobody can believe after the experiences of the last 10 years—the roller-coaster—that the monetary policy to which this Government have subjected the British economy does not affect other variables in the economy. Of course it does. In those circumstances, if monetary policy affects the impact of fiscal policy, if it affects housing and aspects of social policy, it is a nonsense to charge the institution which has the responsibility for conducting monetary policy to look only towards monetary policy and not to take any other elements into account.
Secondly—and this is the general form of the point that I have just made—what we have learned over the past 10 years or so is that monetary policy and fiscal policy are interdependent. They cannot be considered separately. Therefore it is sensible that in deciding upon the structure of policy appropriate to any given country, or in this case to the European Community, at any one time that monetary policy and fiscal policy should be considered together and not treated separately.
In this respect there is an interesting contradiction in the treaty in Article 109. That article provides that responsibility for the exchange rate policy of the Community will be vested in the council. In effect it means it will be the responsibility of ECOFIN, the Committee of Economic and Finance Ministers. This treaty says that the external monetary policy of the Community will be the responsibility of ECOFIN and the internal monetary policy of the Community will he the responsibility of the central bank. This is a nonsense, because external and internal monetary policy cannot be separated. They have to be considered together and so the treaty creates a political responsibility, perhaps unwittingly, for ECOFIN with respect to monetary policy.
I would suggest that in the revision of 1996 we should build on this political responsibility and build the role of ECOFIN into the general political counterpart of the central bank, with the responsibility for joint and coherent decisions with respect to monetary policy and to fiscal policy. This was exactly the proposal which the Labour Party advanced in its discussion papers on the Maastricht Treaty, both before and after the treaty. ECOFIN, as the Committee of Finance Ministers, is the body which could most effectively decide upon in a collaborative manner the co-ordination of fiscal policies throughout the Community and then, in joint operation with the central bank, it could decide upon the appropriate balance of monetary and fiscal policy throughout the Community. I have always been particularly surprised that the Liberal Democrats, the party of Lord Keynes,

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would accept such a foolish idea as an independent central bank. Surely, if Lord Keynes taught us anything he taught us that monetary and fiscal policy have to be considered together and not separately.
To conclude on this issue of co-operation and co-ordination, I was very surprised that Amendment No. 91 seeks to withdraw Article 103 from the treaty, and particularly Clause 1 of that article. That clause states that member states shall regard their economic policies as a matter for common concern and that they shall co-ordinate them within the Council. I am amazed that, with the high levels of unemployment that we suffer in the European Community today, anyone should propose that the member states should not attempt to co-ordinate their policies, because it is exactly co-ordinated reflation that we so desperately need.
With respect to the position of the Bank of England, we have of course detected in the past few weeks a new form of Conservative Party policy towards the Bank of England. That policy is that any Chancellor of the Exchequer who is sacked will stand up in another place and declare that he is in favour of an independent central bank and that only the Prime Minister with whom he has worked has prevented him from bringing in this necessary reform. This was the case with the noble Lord, Lord Lawson, and it was the case with Mr. Norman Lamont. After Mr. Lamont made his statement a couple of weeks ago, the Prime Minster expressed some interest in an independent Bank of England and said that the only problem he saw was that there had to be a way in which the independent Bank would be accountable to Parliament.
When the Minister replies, could he give us some insight into the Government's thinking on the process of accountability? Are the Government planning to separate the Bank of England from the immediate control of the Treasury, which was embodied in the 1946 nationalisation Act? Are they perhaps going to move to some structure similar to that of the New Zealand Central Bank which simply has to make a report to the New Zealand Parliament every year, and that is defined as "accountability"? What do the Government mean and what did the Prime Minister mean by "accountability" of the Bank of England to the Government and how is that accountability to be related to the pleas which every Chancellor of the Exchequer apparently makes to his Prime Minister to create an independent central bank?
Finally, when the Minister replies could he provide his assessment of the possibility of the European Central Bank being located in London? Would he agree that this possibility, which would have brought enormous advantages to the City of London and to the British economy in general, has been effectively destroyed by the meaningless and empty opt-out clause?
Lord Bruce of Donington: Before my noble friend sits down, he will of course agree that, speaking from that. Dispatch Box, he is speaking not just for the Opposition here but for the Labour Party. Will he give an assurance—
The Earl of Selkirk: I wonder whether I may take up the point—
Noble Lords: Order, order!
Lord Bruce of Donington: Will my noble friend give an assurance that he will not accept the proposition that there should be an independent central bank which is completely independent and accountable to no one? As I have understood it, that has been my party's position so far. If that position is persisted in and the member states of the Community insist that the central bank should be completely independent and not accountable to anyone, will he give an assurance that he and our party will oppose that proposition?
Lord Eatwell: As I pointed out with respect to the interaction of external and internal monetary policy, that is not the position in the treaty. There is a direct role there for ECOFIN in determining the monetary policy pursued by the central bank. In considering the treaty as a whole, and the development of monetary policy within it, it will be clear that the central bank established in Europe must be independent of the political authorities of any one state. It cannot kowtow to the political authorities of any one state. That is why it is necessary to develop a collective political authority to act as a counterpart to the European central bank. That is the role which under the treaty ECOFIN partially plays and could, and should, substantially play. However, my noble friend asked me to say whether I accept the treaty as a whole. That has to be decided upon the balance of advantage and disadvantage with respect to the treaty as a whole, of which we are in favour.
The Earl of Selkirk: I find myself in agreement with much of what the noble Lord, Lord Eatwell, has said. We have discussed mostly politics and economics today, but we cannot win a war with economics or politics. We have come to a period in our history which we should all recognise compares with that of Cromwell. It is a big moment. Things cannot be small. They are big. On those occasions, personality is of tremendous importance. Perhaps I can give the example of the visit to Paris in 1903 or 1904 of Edward VII, when the entente cordiale was set going. Those were steps of considerable and lasting significance.
Perhaps I may go to the other extreme and talk about the treaty agreed in Paris in 1920. Of all the bases upon which Hitler conducted his affairs, nothing was stronger than that treaty. That treaty was brought to the attention of all Germany. It was upon the basis of that treaty that the German people supported Hitler. Many of the problems of the Second World War can be put down, in part, to the clumsiness of the peace negotiated in 1919–20. We bear our responsibility for that, as do the French.
Where do we stand now? We are joining an organisation which sets up many positions of power. It has been claimed that we have had no dictatorship. Most of us recognise that there was and is a dictatorship which to many of us has been extremely unpopular. It is important that those who fulfil their economic duties should fulfil them properly. We have

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given power to many people. That power can be used violently if it is misused. The EC is big. People who have the top positions have a great deal of power. If they misuse that power, it may bring all sorts of people into conflict. Positions of power should be examined with the utmost care. There must be a realisation that it is not just economics which are at stake: there might be other factors of far greater significance.
The Earl of Caithness: This has been a useful and interesting debate, because it has gone right to the heart of the EMU provisions of the treaty. I am delighted that we have had the time to air the issues so fully. It may help the Committee if I concentrate upon two broad themes in my reply. One is economic policy co-operation. I was going to mention the new excessive deficit procedure, but that has not been mentioned, and so I shall not do so. The second theme will be the European system of central banks, including the European central bank.
Let me start with the point raised about the convergence conditions. The convergence conditions for an eventual move to Stage 3 are set out in Article 109j. Perhaps I may just remind the Committee of those conditions. They are, essentially, low inflation, avoiding an excessive budget deficit, exchange rate stability and comparable long-term interest rate levels. The Government believe firmly that those are the right criteria for the establishment of a single monetary policy and a single currency in a sustainable economic and monetary union.
The noble Lord, Lord Jay, argued that those criteria would be deflationary. We do not share that view. Sound public finances and price stability are the vital preconditions for the development of sustainable growth. In the short term, all member states are committed to reducing inflation to promote growth. Those who argue that the treaty's provisions for economic and monetary union will damage the Community's prospects for growth seem to overlook the fact that the achievement of sustainable and non-inflationary growth is one of the central objectives of the Community, as set out in Article 2 of the Maastricht Treaty.
Let me move on therefore to the European system of central banks, about which most Members of the Committee had something to say. In the previous group of amendments, we discussed the role of the European monetary institute, which is primarily a consultative and advisory body that has been given the task of overseeing the transition to Stage 3. It will be set up in Stage 2 and the statute makes it clear that, during that stage, national authorities remain in control of the conduct of monetary policy. So, whether we choose to participate in Stage 3 or not, in Stage 2 the UK will not cede any authority over monetary policy to Europe. However, the European system of central banks, made up of one European central bank and the national central banks, is different. The ESCB and the ECB will be mandated to conduct monetary policy on behalf of those member states which fulfil the conditions for participation in Stage 3 of the EMU. The only exceptions will be
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Denmark, which has already decided not to participate, and the United Kingdom, if we decide not to move to Stage 3.
The treaty provides for the independence of those institutions. That arrangement is the best, given the circumstances. I say to my noble friend Lord Hamilton that it would be impractical for a single monetary policy to be operated by the 12 Finance Ministers of the member states with the many other pressures on them. I must stress that those provisions concerning a single monetary policy will apply to the UK only if we participate in Stage 3. The UK protocol provides for continuing UK involvement in the preparations for Stage 3, but does not commit the UK to participation.
The noble Lord, Lord Eatwell, naturally and understandably, raised the question of accountability, a matter which is of concern to him. In negotiations during the drafting of a treaty, the Government pressed hard for adequate accountability to be built into the statutes for the ECB and the ESCB, consistent with ECB independence. The provisions for ex post accountability of the ECB represent the best balance we were able to establish between the demand for accountability and the need for the bank to operate effectively. The procedure for accountability mainly involve ex post scrutiny. The ECB must submit reports to the European Council, the Council of Ministers, the European Parliament and the Commission. The Council can question the ECB president. Furthermore, the president of ECOFIN can put motions to the ECB meetings.
I turn to the fixing of the exchange rates and to a single currency, raised by the noble Lord, Lord Jay. It is an essential feature of Stage 3 that there should be a single monetary policy for those member states participating in it. It follows from this that the exchange rates of participating currencies should be irrevocably fixed. Those countries would be surrendering the right to alter the exchange rates between their currencies, and committing themselves to replace their currencies with a single currency; the ecu.
As I said in respect of the previous group of amendments, we cannot prevent them from doing so and nor can they force us to join them. Above all, the merit of the Maastricht Treaty is that it gives us the right to participate in shaping EMU while leaving wholly open our right to decide whether we should join. So in the amendments which we have discussed and which refer to Stage 3 we were discussing provisions which would apply to the United Kingdom only after a further Act of Parliament. Should we not participate in Stage 3 the United Kingdom would effectively remain in Stage 2.
In that event the situation will be that the governor of the bank will be a member of the general council of the ECB, though not on its governing council, and will participate in all decision-making processes to the degree appropriate to non-participants. I hope that I have made that clear to the noble Lord, Lord Jay. Participation in the ESCB would not be a compromise of our monetary independence. The general council would discuss and co-ordinate policy in much the same way as the Committee of Central Bank

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Governors does now and the EMI will do in Stage 2, but the competence for the exercise of policy would remain in national hands. In order that there is no scintilla of doubt, perhaps I may point out that that was reaffirmed in the UK Protocol, Article 4, which states that:
"the UK shall retain its powers in the field of monetary policy according to national law".
The noble Lord, Lord Jay, also raised the issue of employment. As he. probably knows already, that was discussed at the European Council on 21st and 22nd June. My right honourable friend the Prime Minister argued that the Community had to keep down the cost of jobs so as to help those without jobs, and that was widely supported. It was recognised that the Community members had to face the problem of the rising cost of social provisions and that in doing so it was essential to protect the elderly and the vulnerable in our countries. It has been agreed that the European Commission will be invited to present for discussion at the European Council in December a White Paper on the medium-term strategy for growth, competitiveness and employment. Member states will be submitting proposals for the White Paper. My right honourable friend the Prime Minister believes that this will enable the Community to build on the European Council's new emphasis on competitiveness. During the next six months we shall be pressing forreforms to increase flexibility in labour markets and so reduce unemployment. Therefore, action is being taken on one of the concerns of the noble Lord, Lord Jay.
I turn to an amendment on which the noble Lord, Lord Stoddart of Swindon, spoke. The point was well made by my noble friend Lord Aldington. The noble Lord, Lord Stoddart, was concerned about convergence and the fact that it might be detrimental to the United Kingdom. He preferred co-operation. As my noble friend Lord Aldington reminded us, there is nothing new about economic policy co-ordination in Europe. We already have a considerable body of Community law covering economic policy coordination both in the existing treaty—I refer Members of the Committee to Articles 102a, 103 and 105—and to the 1990 Council decision on economic convergence. The idea is nothing new. Indeed, Article 102a of the existing treaty refers to:
"convergence of economic and monetary policies which is necessary for the further development of the Community".
The noble Lord, Lord Stoddart, is being entirely consistent. He is not only against the treaty of Maastricht, he is against the Treaty of Rome as amended by the &Ingle European Act—
Lord Stoddart of Swindon: I thank the Minister for giving way. I understand perfectly that we have had convergence in many fields, including agriculture and trade. But has that really brought us the benefits which we were promised as a result of such convergence? Is further convergence likely to bring the same kind of det riments?
The Earl of Caithness: I remember telling the Chamber on Second Reading that when in 1972 I sat on the Cross Benches and listened to the debate I was convinced that the future of Britain lay in being part of the European Community because that would be of
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benefit to us. Yes, I believe that what has happened in Europe has been to the benefit of this country and that it would be wrong to go in another direction. It would be difficult to quantify that precise benefit. Equally, it is difficult to quantify the disbenefit had we not joined. The noble Lord is entitled to his opinion. The great. majority of those in industry in this country have fell. the enormous benefit as the result of being part of the European Community.
I return to the point that I was making. In Stages 2 and 3 prime responsibility for economic policy remains in national hands. The same is true of monetary policy unless we decide to participate in Stage 3. Unless we notify the Council that we wish to join a single currency no obligation is on us to join the ERM. I am sorry that the noble Lord, Lord Monson. is not in his place—
Noble Lords: He is!
The Earl of Caithness: The noble Lord has moved. I am glad to see him back in the Committee and apologise for not noticing him. Equally, there will be no legally binding budget deficit ceilings, no obligation to participate in the European Central Bank and no obligation to change the status of the Bank of England. The treaty provides for the formalisation and extension of process of multilateral surveillance and national economic policies. That is already part of Community law under the convergence decision unanimously agreed in March 1990. The noble Lord, Lord Stoddart of Swindon, advised the Government to go carefully. We have gone very carefully and that is why we have the benefit of the opt out to take into account all the future possibilities.
I wish to deal quickly with two points that were raised by the noble Lord, Lord Eatwell. He asked how ECOFIN can be responsible for external monetary policy and the ECB for internal monetary policy. I ask the noble Lord to look again carefully at Article 109. He will find that there is not the contradiction which he anticipated. Article 109 clearly and repeatedly emphasises the importance of the Council acting in consultation with the ECB in an endeavour to reach a consensus. The noble Lord inevitably asked me about our assessment of the EMI and the ECB being sited in London. I can assure the Committee that the Government will continue to argue that the UK has a good market case for being the seat of the EMI and the ECB. We do not believe that our opt-out need affect our chances since it is not possible at this stage to be sure that any single country will be in Stage 3 at a particular time.
This has been a helpful and useful debate because it goes to the heart of the EMU. On great consideration I believe that the treaty and the articles within it provide a sensible and practical framework in which Stage 3 can operate. Of course, we have the benefit of choosing whether we want to go to Stage 3 at a later date.
Lord Jay: We have had a rather calmer debate this evening which has generated more light, than heat.

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Therefore, I thank all those members of the Committee who are responsible for that by speaking and, indeed, listening.
A great deal has been said about convergence and central banks. Perhaps I may add a few words on that. I agree with my noble friend Lord Eatwell that the word "employment" occurs only once in this treaty of 150 or so pages. It appears nowhere in all the other parts of the treaty, which exhort us towards stable prices, exchange rates and so on.
I am also glad that employment was at least talked about at Copenhagen yesterday, although I am afraid that the noble Earl, Lord Caithness, will find that the measures which he detailed, which are apparently to be considered, will have only a negligible effect on the present rise of unemployment in western Europe. However, I agree that that is a matter of opinion.
On convergence, the noble Lord, Lord Aldington, said that surely convergence is desirable. I believe that there is some confusion between convergence of policies and convergence of economies. We are all in favour of convergence of policies provided that they are voluntary and not dictated to us. But convergence of economies is what the treaty and its various criteria require. Convergence of economies seldom happens. Different economies diverge more often than they converge, and they always will. They diverge for all sorts of reasons: differences in skills, changes in pay rates, changes in world demand or the discovery of oil in one's country, which has considerable effects on divergence. The idea that we can somehow converge and stay there permanently is historically largely an illusion.
A great deal has been said about central banks. In considering the possibility of having an independent or, as I should call it, an accountable central bank, people are forgetting that central banks not only take decisions on financial and economic policy but are forced to take part in and make decisions on foreign policy. One could give so many examples. There is the classic case of March 1939 when Hitler invaded Prague. He put in a requisition to the BIS at Basle for £12 million gold which was the property of the Bank of Prague. The BIS held a board meeting which was attended by Mr. Montagu Norman as governor of the Bank of England and it was decided that the gold legally belonged to Hitler. It was physically in Switzerland and it was handed over to him. I am not saying that that was right or wrong, although I have an opinion about that. I simply say that to remind members of the Committee that when the then Foreign Secretary was asked about it in Parliament two days later, he had to admit that he knew nothing about it and had to check with the Bank of England as to what was happening.
Therefore, when we talk about independent central banks, we should remember that in the nature of things they are not concerned wholly with finance. After all, the decision to join the ERM and subsequently to leave it was a question of high policy—employment, external policy and so on.
Indeed, if we look at the record of central banks on economic policy, even the Bank of England is not
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brilliant. I do not say that to attack central bankers. I say it merely to show that they are human and are fallible like the rest of us. After all, in 1925 the Bank of England took us back, on its own recommendations, to a false value of sterling which as we know caused untold disadvantages and hardships. It was only when, in 1932, it was forced by the then government to lower the bank rate to 2 per cent., which it had no intention of doing, that recovery began in this country.
Even in the post-War era, although the Bank of England had become accountable, it was not brilliantly successful. In 1946 it advised that the American loan would last for several years when in fact it lasted for only a few months. Of course in recent times it pressed for the ERM.
Some people say that the American Federal Reserve banking system is an example of a great success for a largely unaccountable bank. However, it has not been so brilliant. It was largely because the Federal Reserve failed to reduce interest rates for several months in 1929 after the original crash that that collapse turned into the greatest depression to emerge. Therefore, all those matters should be borne in mind when we are deciding whether or not to agree to an independent central bank, either at home or abroad.
Since the amendments are somewhat complicated owing to the grouping system, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Trumpington: I beg to move that the House do now resume. I suggest that the Committee stage begin again at 8.45 p.m.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Young People: Severe Hardship Payments
7.47 p.m.
Lord Henderson of Brompton Lord Henderson of Brompton rose to ask Her Majesty's Government what is their view of the report entitled Four Years' Severe Hardship published by Barnardos and Youthaid, and what is their estimate of the number of young people aged 16 or 17 who are not in full-time education, employment or training.
The noble Lord said: My Lords, this Unstarred Question brings us home from Europe and I believe that it is quite right that time should be found, if only for an hour, for the House to concentrate on the hardship endured by young people aged 16 and 17 who are not in full-time education, employment or training.
The number of such people has risen steadily in recent years and has risen all the time since the Government, in 1988, denied welfare benefits by and large to that category of unfortunate young people. I shall not detail the scheme which the Government put in place in 1988 because it is familiar to most of your Lordships. I shall only state at the outset that the new figures in this report show that their scheme, put into place in 1988, has failed and is badly in need of repair.
The report Four Years' Severe Hardship is published by Barnardos and Youthaid on behalf of the Coalition on Young People and Social Security in M arch 1993. Therefore, it is bang up to date. It is the first document on this subject which has detailed figures of severe hardship claims, especially from the severe hardship claims unit. It is packed with facts and figures and I congratulate all those responsible on the production of the report and in particular the author lanthe Maclagan.
The main findings of the report are as follows. The number of applications for severe hardship payments has increased in the first four years of the scheme's operation from only 500 to nearly 10,000 a month. It probably means that there are over 100,000 claimants in any one year. The number of successful applications has increased seven times during that period. I am afraid that means that there is a vast increase in the number of young people suffering from severe hardship and claiming the payment, despite—and I say this advisedly—only limited information as to the availability of the SHP and, when one hears about it, the complexity and length of time involved in the procedure.
The proportion of successful applicants rose from 62 per cent. in 1988 to 83 per cent. in 1992. Surely that suggests an increased acceptance by the Government of severe hardship among young people. Indeed, their ovvn department is providing that support which can only be given when evidence has been supplied of severe hardship. It means that the Government are taking note—in fact, they must take note—because their department has shown that the incidence of severe hardship among young people in this country has dramatically increased.
Another statistic in the report shows that the average length of awards has doubled from three-and-a-half weeks to seven weeks and that nearly two-thirds of the applications are from young people who have received previous awards. It also shows the increasing difficulty experienced in obtaining suitable youth training placements and the failure of the youth training guarantee in many, if not most, parts of the country. That is a severe indictment of the scheme. The youth training guarantee was central to it, and it has clearly failed with the result that applicants for severe hardship payments have dramatically increased in number. That should not be so because, as I said, the guarantee was central to the scheme. It should not have happened because the severe hardship payment was supposed to be a fall-back and not a central pillar of the scheme. However, it has now, unfortunately, become an essential part of the scheme.
The recommendations show that a number of young people who are without employment and without a training scheme do not know how to apply for severe hardship payments; indeed, they do not even know of their existence. Therefore, it is absolutely imperative that the Government institute a scheme for publicising the existence of severe hardship payments so that young people really know what they can receive when they have no guarantee of a youth placement, no income support and no employment.
The report also illustrates the complexity of the
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scheme. That aspect was pointed out in previous debates most notably by the noble Baroness, Lady Seear. The Government have made one or two improvements, but not nearly enough. The report quite clearly shows that the slight improvements need bolstering by further improvements, if the take-up of hardship payments is to he increased.
It is true, I am afraid, that there are many young people who cannot be identified and who are not, therefore, being supported. It is important that the Government should institute proceedings to find out who those young people are who are not recorded as being in employment, in receipt of hardship payments or in a youth training placement.
The report argues that there is no justification for the low benefits paid to 16 and 17 year-olds compared with older claimants. The noble Earl, Lord Russell, has made that subject his own. As I am sure that he will return to it, I shall not dwell upon it. Youth training allowances are currently quite low and have been frozen for several years. Can the noble Viscount who is to reply tell me why they have been frozen and why their value has decreased when other important payments have increased in accordance with inflation? It seems quite unjustified that they should remain behind in that respect.
I turn now to the subject of numbers. The increasing number of severe hardship applications which now run at approximately 100,000 a year shows that, although the scheme was originally intended as a back-up, it is now absolutely fundamental and that without it a large number of young people who are unable to find youth training places would, quite literally, starve. The system is simply not able to cope with becoming a mainstream provision. The situation will become even more severe as more young people learn of the scheme and how to apply.
In conclusion, will the Government agree that young people who are not in full-time education should be provided with a choice of suitable youth training or be entitled to receive income support if they are actively seeking either such work or a suitable training place. At present, the risk of severe starvation or the invitation to work illegally or immorally is, I am afraid, the only choice open to far too many young people who cannot find anything other than the severe hardship payment and, indeed, are lucky if they can find that.
7.58 p.m.
The Earl of Longford: My Lords, I rise to express strong support for the noble Lord, Lord Henderson of Brompton. I have mentioned this before, but, after the famous orator Edmund Burke had made a speech, someone got up and said, "I say ditto to Mr. Burke". In a sense, I shall save time by saying, "ditto" to the noble Lord, Lord Henderson, who is so well qualified to speak about the problems of the homeless and of young offenders. The subjects are undoubtedly linked; indeed, they overlap. I support what the noble Lord said, the contents of the report and what may be said by other speakers.
The noble Lord, Lord Henderson. referred to the large increase in the suffering of young people as a

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result of government policy. By my standards, I include in "young people" the noble Viscount who is to reply. I was about to point out that he had been left alone on the burning deck, but I see that someone has now come to his succour. Nevertheless, it is a pretty painful experience for him with all the barren Benches behind him. I can only hope that it is brief. There is really nothing he can say. He cannot suddenly announce a great improvement in government policy; he just has a rotten story to tell. However, no doubt he will deliver it most charmingly.
I had not realised that one has only six minutes in which to speak. To cover all those years of working for the homeless and the penal reforms for young offenders, and so on, that I have been involved in would take many hours. However, I shall concentrate upon one aspect of the subject and leave other speakers to make what I am sure are the more outstanding points.
As I have mentioned on previous occasions I, with others. founded the New Horizon Youth Centre which now receives some 3.000 young homeless people a year. I looked in the other day. Undoubtedly the position of the homeless there is worse than it was 12 years ago when the senior social worker joined the centre, or two years ago when someone else, who gave me information, joined the centre. The situation is getting worse the whole time. The noble Viscount may say that that is not a universal experience but that is an example of practical experience. Things are becoming consistently worse under the beneficent, or should I say, maleficent—I have to call them that—arrangements of the Government that the Minister is sworn to defend.
I shall mention just one example of homelessness in the time that is available. I asked one young man at the centre what his position was. He is not 16 or 17 and therefore he is not a member of the group that we shall deal with tonight and about whom we have heard such shocking stories. The young man in question is about 22. He has been sleeping rough for three and a half years.
When one meets someone in the streets who says he is sleeping rough and has nowhere to go, one is sometimes. if not suspicious. at least critical of such a person. One may feel he is sleeping rough because of some weakness on his part. I tell such a person that I can put him in touch with a relevant organisation. However, the young man I am talking about is right in the middle of a centre for the homeless. He is a good-looking young man and is perfectly ready to work.
One may ask why he cannot obtain any work. That is a big issue in itself. One may ask why he cannot receive income support. However, that is extremely difficult to obtain if one has no place where one is understood to be living. One may ask why he has nowhere to live. He cannot find a place to live. I shall therefore concentrate on the housing question.
The Government's housing policy has produced a situation where a young man who is assisted by the organisation I have mentioned cannot obtain income support. This young man is not someone on the streets
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whose character one might call in question; he is a respectable young man, but the centre for the homeless cannot find him a job. He cannot obtain income support and he is shunned by the Government's policy.
Never let us forget that, if people cannot find a place to live, they cannot obtain income support and they are driven in the direction of crime. I consider that the Government have betrayed the young people of this country. For the Government to talk about law and order and then produce this situation is pure humbug.
8.3 p.m.
Baroness Seear: My Lords, I want, in the six minutes that we are allowed, to concentrate entirely on the education and training aspect of this issue. Other speakers have mentioned housing and allowances. In a report of the Adult Literacy and Basic Skills Unit which was reviewed in the Financial Times on Saturday, the statement was made that 23 per cent. of 21 year-olds were unable to work out what 10 per cent. of 4,900 was. This is an extremely serious finding and it confirms what too many of us know already; namely, that education has passed by a considerable number of these youngsters.
The life chances of someone who cannot work out what 10 per cent. of 4,900 is are dim and they are becoming dimmer as the unskilled work in this country disappears. That work is now being done overseas in countries which have lower pay levels. The work is done much more cheaply in those countries. We all know that is happening and that it will continue. The life chances of the youngsters I have referred to are dim in the extreme.
I wish to strike a note of real urgency. As regards patching things up with allowances, it is better that they should receive allowances than that they should not, but we need a much more fundamental solution to the problem than that. We must think about what we can do for these people —there are far too many of them—who simply do not have the equipment to face the kind of life they must lead if they are to have any kind of life chances at all in this country.
That is one aspect of the matter. However, the burden they impose on the economy is quite another aspect which justifies putting money into dealing with the problem. The same report as I have mentioned also states that, as a result of an inquiry among 400 firms, it was estimated that the basic lack of educational skills—numeracy and literacy—is costing industry £4.83 billion a year. One can organise an awful lot of training with that money.
I urge the Minister to take my following point seriously. I have raised this suggestion before and I have tried it out on industrialists who are not averse to the idea. My suggestion is based on my own experience of many years ago in manufacturing industry. I believe companies should be persuaded to take on two school leavers for each job. In the scheme in which I was involved each youngster worked half of each day with the firm and spent the other half of the day in school receiving either training, education or a suitable blend of both.

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The scheme worked extremely well. I administered it myself and it was not difficult to administer. The scheme suited the organisations concerned because there was always someone on the job. There was one youngster on the job in the morning and another in the afternoon. The foreman did not mind whether Tim or Tom was on the job so long as someone was there.
The school where the youngsters spent half of the day was able to provide the kind of training and education which was relevant to the youngsters concerned. I cannot over-emphasise the importance of providing relevant education or training. Many of these youngsters we are discussing are perfectly capable of learning but somehow or other they did not catch onto the idea while they were at school. If the Germans have been able to train 91 per cent. of their youngsters, I absolutely refuse to believe that we should be failing our young people to the extent demonstrated in the report we are discussing.
I ask the Government seriously to consider this scheme and to ask some of the more interested TECs to think about trying out a programme of this kind. Of course it would cost money but I do not believe that it would necessarily cost a great deal of money as companies who take on these youngsters will obviously pay wages for the time they work. The Government have mentioned vouchers for training. As regards training for youngsters who are to work in the employers' organisations, it is reasonable that employers should pay for that. But under this scheme employers would be dealing with a number of people whom they would not ultimately employ. There is no reason why they should train other people's employees. However, the Government could perfectly well work out a voucher scheme and an agreed scheme as regards the cost of providing the training and the cost of running the school or tertiary college where training or education can be given. The Government could easily negotiate such arrangements if they wished to do so.
In this way the Government would double the number of youngsters being taken on in employment and thereby reduce the number in unemployment. The Government would also begin to fill that appalling gap in the youngsters' education and training which, if not filled, will land them with a most miserable and unsatisfying life. Society will also be landed with hideous problems. I have mentioned this matter previously and it has been waved aside as an airy-fairy idea. I beg the Government to understand that it is not an airy-fairy idea. It has worked and it can work. So far I have not heard anyone produce any better idea to make up for the failure of the educational system in this regard, irrespective of the reasons for that. I have not heard of any better way to remove the threat posed by so many young people who are incapable of taking the kind of jobs which will be the only jobs available in the future.
8.9 p.m.
Lord Northbourne: My Lords, I put my name down to speak this evening in the confident, but in the event foolish, belief that this debate would take place between 7.30 and 8.30 p.m. I apologise to the House
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for the fact that I must leave at 8.30 p.m. I hope that the noble Viscount who is to reply to the debate will forgive me.
I wish to congratulate the noble Lord, Lord Henderson, on raising this issue, and indeed the various bodies involved in the Coalition on Young People and Social Security for forcing on the public's attention an issue which is of the very first importance. However, I disagree with them in their proposed solution. I do not believe that this problem can he solved simply by throwing more money at it or by indifferently giving income support to all young people who wish to live away from home and who want income support.
I believe that what is needed is a coherent government policy on young people, particularly those aged 16 to 17. I want to concentrate my remarks on young people in that age group.
By way of example, as I understand it the present position is that if young people are in education they can only receive any form of support if they are estranged from their home. In that case they receive £26.45 a week. However, if they are in a Youth Training place they can receive £29 a week whether or not they are estranged from home. If they are waiting for a Youth Training place they can get only £I5 a week, whether or not they are estranged from home. What is the logic of that? I ask the Government what on earth those payments are meant to be. Are they meant to be pocket money, in which case, arguably, they are excessive? Or are they meant to be a living allowance, in which case they are patently inadequate?
I should like to refer, first, to the question of living costs. There seem to be two simple alternatives. Either the Government must be prepared to fund what is effectively a living allowance for all 16 and 17 year-olds who choose to live away from home—I believe that that is the position taken by the organisations which prepared the report—or, alternatively, there should be some form of targeting. The problem is that the present targeting is not. satisfactory. Compared with the Government's present targeting a scatter-gun would be a precision instrument. It is essential that clear criteria should be established for what constitutes a young person who is unable as opposed to unwilling to live at home. More adequate support should be targeted on those young people and little or none on the others.
At this point I should like to argue that support. given to 16 and 17 year-olds for board and lodging should be in the form of a voucher rather than in cash. The pressures of the consumer society are enormous. I know many young people who, if they have cash in their hand, would prefer to spend it on designer clothes, new trainers or boots, or whatever is fashionable, and sleep under a friend's table rather than spending it on board and lodging. Therefore, I suggest that some form of voucher encashable at foyers, hostels and other similar places would be worth consideration when the Government are examining the proper targeting of living expenses for young people of that age.
I should like now to turn briefly to training. I should like to endorse every word said by the noble

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Baroness, Lady Seear. I am sure that she is right. I draw her attention to the education in business scheme which is growing up in some areas and which I believe to be an enormously important initiative.
I believe that the problem of the TECs is not underfunding. Certainly in my county of Kent the problem is not underfunding but mismatch. I have spoken to the Kent TEC today. The problem is that in order to produce workplaces in the TEC two things have to happen. First, there has to be a young person who wants a workplace of a particular kind. Secondly, there has to be an employer who is prepared to provide a job opportunity of that kind. In a certain part of Kent there are job opportunities which require young people with a reasonable degree of numeracy and literacy, while in that particular part of Kent there are insufficient people with the requisite numeracy and literacy to take up those vacancies, and vice versa at the other end of Kent.
I do not know how that problem can be solved, but I suggest one solution. We are all being told that in the future if young people want to be employed on a lifetime basis they will need flexible skills. They will have to be retrained several times during their lifetime. I suggest that the Government and the TECs should concentrate more on offering young people flexible skills and on providing introductory courses which will give them the core skills that they will require for training and retraining during their lifetime.
I should particularly like to draw the attention of the House to the General National Vocational Qualifications (GNVQs) which have recently been introduced. Tomorrow I am going to open a function at a school which has been immensely successful with GNVQs. It has a long waiting list and the young people who have come out of the first year's training of that kind have acquired enormous self-confidence by finding that they can achieve a qualification. Therefore, I urge the Government to extend GNVQs and enhance the ability of TECs to provide that type of education.
8.15 p.m.
Baroness Jay of Paddington: My Lords, I should like to join other noble Lords in thanking the noble Lord, Lord Henderson of Brompton, for raising this extremely important issue.
I should like to refer to what the noble Lord, Lord Northbourne, said about young people who choose to live away from home. It is clear from the report which we are discussing this evening that the proportion of those who do not choose to live away from home but who have to do so is high. The report states that one third of severe hardship claimants in that age group had either been thrown out of the family home or had been living with friends who could no longer support them. It also found—and this is a significant figure—that 22 per cent. had been physically or sexually abused, either by someone in the family home or by staff at a children's home. I merely refer to that point simply to emphasise that it is an important number.
Lord Northbourne: My Lords, I certainly take that point.
Baroness Jay of Paddington: My Lords, I should also like to join other noble Lords in congratulating the authors of the report. I want to speak briefly to two underlying social issues which are referred to in the report but not given great prominence. Interestingly, those issues emerged at a meeting which I attended in another place to launch the report in March. One of those points relates to the particular problems of ethnic minority young people. That is a question which I raised with the authors of the report, who have been kind enough to supply me with further information.
Apparently one in three non-white 16 and 17 year-olds is unemployed compared with one in five white young people. The same disproportion is apparent among Youth Training leavers. The survey found that black young people were over-represented on YT waiting lists and that the YT guarantee is more likely to fail black young people than white young people. Also, rather depressingly, career service heads in schools found that black young people are more likely to stay on in education than whites but those who leave are less likely to find work or training.
That is a significant part of the report which should be given prominence when considering any action which should be taken on it, particularly in view of the potential for ethnic divisions and unrest among people who feel that they have been particularly discriminated against. I have seen that very much in my part of London.
I also want briefly to draw attention to the health problems of those 16 and 17 year-olds who are dealt with in the report. As the report mentions, 45 per cent. of people claiming severe hardship payments had slept rough. As we all know, that brings a particular vulnerability to ill health. Recently we have seen in this country a disturbing increase in what used to be called poverty diseases—TB, rickets and other such conditions. We are seeing those particularly among this group of very vulnerable young people.
There is also the question referred to by the noble Lord, Lord Henderson of Brompton, of how those young people make any kind of living at all and the way in which they are often involved in illegal activities, particularly in the area of drug peddling. I am afraid to say that there is also a growing rate of casual prostitution among those young people. That is another sad way of making a little money on the side, but it has the consequent problem of more ill health, particularly in the area of HIV and AIDS. Again one is looking at a potential problem resulting from the homelessness and poverty among this particular group of young people.
That is a problem in which Barnardos, in another of its fields of work, has been particularly involved. Through its Streets of London project, it has been trying to work with young people who are potentially at risk in that way.
Another group that I have spoken with recently—the Streetwise Youth project in Earls Court—finds

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that the vulnerability of those 16 and 17 year-olds, who are without any legal form of income support, to those health problems is very high indeed.
We now know that 20 per cent. of people in this country who are infected with HIV and AIDS are in the 15 to 25 age group and nearly half are below 29. Therefore, I am afraid that as a side issue of this significant report we are seeing anxiety about the underlying public health issues relating to this vulnerable group of young people.
I was sorry not to be here earlier this afternoon when the noble Earl. Lord Russell, asked his Question about the possibility of public expenditure cuts in social security having an impact on other public spending Ministries. I believe that that is particularly relevant to the debate. What we lose by failing to invest in income support for our young people we shall reap in public expenditure in other areas. If no other argument appeals to the Government, I hope that that one will.
Lord Butterfield: My Lords, I make one brief intervention. Perhaps I may say to the noble Baroness, Lady Jay of Paddington, that much of the tuberculosis is found among young people who have immunodeficient diseases such as AIDS. The awful thing about it is that they have tuberculosis and walk about with an unthought of and unrecognised diagnosis, giving that disease to other young people. That seems to be a point that we might build into this very sad story.
8.21 p.m.
Earl Russell: M y Lords, before turning to gloomy matters, I wish to say what a great pleasure it is to follow the speech of the noble Baroness, Lady Jay of Paddington. When the noble Baroness and I were undergraduates and attending the Oxford Union I never had that pleasure. Being a woman, the noble Baroness was barbarously confined to the gallery. It is now clear that the Oxford Union's loss was as great as I always believed it to be. In these times when everything seems to be getting worse, it is very nice to be able to spot one aspect that is getting better.
I do not merely say that I am grateful to the noble Lord, Lord Henderson of Brompton, for introducing the Question; I am very grateful to him. As noble Lords know, I am pledged to introduce this topic every year until the Government change their policy. However, I had already had my go this Session. Therefore, when the report was published I was extremely glad that the noble Lord, Lord Henderson, took it up. Our plea for reintroducing the topic is because of important fresh evidence. It seems to me that we may have to plead important fresh evidence as many times as it was necessary to do for the Birmingham Six or the Guildford Four; and the injustice is, I think, even greater.
The number of reports which have condemned the Government's policy is now getting more like the score of an Australian batsman than that of an English batsman. I have given notice to the noble Viscount who is to reply. I wish to ask whether there are any independent reports that have upheld the
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Government. I am not aware of any. In the absence of such reports it is sounding perilously as though it is a major item of Government policy that, "They are all out of step but our Johnny".
The hub of the subject was stated in the eighth report of the Social Security Advisory Committee. The YT guarantee is not being delivered in full and without such a guarantee the absence of a right to continuing entitlement to income support can leave very vulnerable young people with no visible, legal means of support. I do not believe that the use of starvation as an instrument of policy is acceptable. Still less do I believe it acceptable in the case of people who have registered for YT and have done everything which can legally be required of them.
The key important fresh evidence that we have is on the failure of the YT guarantee. We have the reports from the chairmen of the TECs in November 1991. Out of 60 TECs, 32 said that they were unable to meet the guarantee. We have the evidence of the Careers Service on which the noble Viscount, Lord Ullswater, relied as his main information on meeting the guarantee when he replied to me on 20th April. It finds that education, employment and youth training together only account for 85 per cent. of 16 and 17 year-olds. Five per cent. of them simply cannot be found.
In a Written Answer on 1st June 1992 the noble Viscount, Lord Ullswater, gave me a list of numbers involved in education, employment, youth training and so forth which fell 135,000 short of the number of 16 and 17 year-olds in the country. The noble Viscount put a health warning on those figures. I accept that he was quite right to do so. The noble Viscount's figure was actually higher than the 124,700 without visible means of support referred to in the Youthaid report. It is interesting that those figures are so close. However, I believe that, of the two, the Youthaid figure is nearer the truth.
We have had a flood of evidence of individual cases of people without visible, legal means of support. The evidence comes from such places as the citizens advice bureaux or Centrepoint. Those are reputable organisations. Such people are not figments of their imagination. When we consider the figures, the Government are simply unable to collect figures which can demonstrate that that evidence is not the case.
The guarantee is supposed to last two years. According to MORI, the average length of a youth training place is about three months. On 22nd March of this year, the noble Viscount stated that he had no precise figures for mean length and no estimate for medium length training. Therefore, how can the Government know whether they are meeting the guarantee? The have no evidence on waiting lists. They have no estimate of the waiting time. The Government state that they have no information on people with no access to training. There is no correlation of the youth training records in the Department of Employment with severe hardship records in the Department of Social Security. Therefore, we cannot tell from government records whether those who do not obtain a youth training place are receiving hardship payments. Since we

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cannot find the truth from the Government's figures, I do not understand how they can contradict the overwhelming evidence from every other source that the Government have got it wrong.
8.27 p.m.
Baroness Turner of Camden: My Lords, I too am grateful to the noble Lord, Lord Henderson, for raising yet again the problems faced by young people from disadvantaged backgrounds—problems that are highlighted so well in the report to which his Question refers. It is, of course, not the first time that we have raised the issues on this side of the House. The noble Earl, Lord Russell, has already eloquently referred to the number of times that he has pressed the Government on these questions.
I was a member of the European Communities Select Committee, which in 1991 reported on young people in the European Community. At that time we received evidence from a number of experts—including the director of Youthaid—which has been concerned in the production of the present report. We were told then that the problems of young people are interconnected and form a vicious circle. Everyone we saw stressed the importance of training but we were also told about the difficulties of sustaining a training place while looking for a home. The National Childrens' Home told us:
"It is important not to lose sight of the massive impact that economic, social and demographic changes have had on the lives of young people over the last two decades in particular".
We were told that there was a real danger that groups of young people would become trapped at or below the base of the labour market. NACRO in particular told us that those factors often resulted in young people living a nomadic, unsettled existence and sometimes becoming involved in crime. There was, it told us, what it calls a revolving door syndrome: no home; no job; no money; crime; increased isolation and alienation from society; imprisonment; no home on release; and so it goes on. That was in June 1991.
The report that we now discuss is dated March 1993. As the noble Lord, Lord Henderson, said, it is about as up to date as one can possibly get. Again, the problems not only exist but seem to have become a great deal worse. As we have heard, we were promised that there would be a guarantee of youth training places, but there has been a failure of that so-called guarantee. It was envisaged originally that only in the most exceptional cases would a 16 or 17 year-old not have access to income. In these exceptional cases, we were told when we raised the issue, severe hardship payments would be available. It has been made clear, however, and it is clear in the report that not all the young people who should have had severe hardship payments have been able to obtain them. NACAB and other organisations have reported cases where young people who were quite destitute have been deterred by the form filling and the procedures involved.
The Government appear to have made some limited improvements and to have listened to some of the criticisms. They have improved some of the administrative arrangements so that more young people are receiving SHP than formerly. However, I
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believe we were promised a total review of the system back in January. That does not seem to have happened. Perhaps the Minister will tell us this evening what is happening about the review of SHP.
As we have heard, the training provision has also contracted, as TECs have made clear to us. TECs say that they are having great difficulty in delivering the YT guarantee. In some areas, TECs have had as many as between 500 and 700 young people waiting for YT places and that was according to a survey published in 1992. If young people cannot get a YT place, they have no other source of employment, training or income.
As I said earlier, in 1991 the Select Committee had evidence of social changes which have resulted in a much higher divorce rate than ever before. One in three marriages now ends in divorce; one of the causes sometimes given for young people wanting to leave home is that they cannot get on with step-parents. Sometimes there is child abuse. For all those reasons, it is often not possible for young people to remain at home, even though so far as the Government are concerned it may be desirable for them to do so.
We have already heard in the debate of instances of homelessness among young people. One of the organisations with which I am in touch telephoned me today to say that in its area, in leafy St. Albans, 25 young people were registered as homeless and sleeping on the streets. So even in salubrious suburban areas there are young people who have no means of support and are reduced to a situation of homelessness and destitution.
We come now to the conclusions of the report. Unlike the noble Lord, Lord Northbourne, I must say that I fully support them. I believe that there must be good quality vocational training available to all young people leaving full-time education. There has to be support for young people who are waiting for a training place or a job. Income support must be restored to all unemployed young people and at a level which is adequate for them to live independently of families, since, as we have seen, it is simply not possible to assume that parents will be either willing or able to provide continuing support.
We have said all this many times before. The excellent report to which the noble Lord, Lord Henderson, has referred adds point and back-up to the case we have been making. I hope that the Minister will this evening be able to tell us that the Government are listening and will take seriously what has been said and not only listen but take action on the lines that have been recommended and supported by so much evidence.
8.33 p.m.
Viscount Goschen: My Lords, this evening we have had a debate on Her Majesty's Government's policy towards the training and economic support of 16 and 17 year-olds. I should like to reassure the House that this is a subject which has received a great deal of detailed attention and consideration from Ministers.
I should like to thank the noble Lord, Lord Henderson, of Brompton, for raising this important issue for debate. However, it is a shame that the

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vehicle for this was a well-meaning but misconceived and ill-informed report. To give a direct answer to the first half of the noble Lord's Question, we do not think particularly highly of this report. That is not because it is critical of the Government but because it is based on outdated information, wrong assumptions and inadequate analysis, the details of which I shall return to later.
Our policy remains the same as it was when introduced in 1988: to encourage young people to make the most of the positive opportunities provided and to discourage a dependence on benefits—
Earl Russell: My Lords, the noble Viscount has described this as an "ill-informed report". Would he repeat that remark when not covered by parliamentary privilege?
Viscount Goschen: My Lords, I stand by what I said and. if the noble Earl will bear with me, and have a little patience, I shall continue with my analysis in support of my contention.
As I said, our policy remains the same as it was in 1988. We intend to discourage dependence on benefits, which would be in no one's best interests. All young people under 18 who are not in full-time education or employment are guaranteed the offer of a suitable training place. Britain is the only EC country where, through the youth training guarantee, all young people can make the positive choice of employment, full-time education or quality training.
The current framework protects the most vulnerable, including those at risk, who are looking for a youth training place, while ensuring that those who enter training are given suitable opportunities to make the most of' their potential. We are convinced that this is the best approach to equip young people with the relevant type and quality of skills and training that they will need in the future.
We have heard talk here this evening that the Government's guarantee of a youth training place has failed, as mentioned by the noble Baroness, Lady Turner. That is far from the case. In May of this year only 4,004 young people had been awaiting a youth training place for eight weeks or longer in England, and 40 per cent. of them had already received an offer. The Government are fully committed to meeting the guarantee and are placing considerable pressure on training and enterprise councils to reduce further the numbers currently waiting.
I must emphasise in response to the points raised by the noble Baroness, Lady Seear, that our aim is to provide young people with positive opportunities such as youth training, to enable them to make the most of their potential. Perhaps I may assure the noble Baroness that training in numeracy and literacy is an integral and important aspect of youth training for those who need it.
The Secretary of State's strategic priorities emphasised the importance of national education and training targets. The TECs have already been asked to take the lead in setting local baselines for improving levels of training and education. We welcome all suggestions for improving the training provisions.
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We firmly believe that young people should not begin their adult life dependent on benefits—a view which I believe has wide support across the House. That is why, as the noble Lord, Lord Northbourne, mentioned, income support is not generally available to this group and why the Government are absolutely committed to ensuring that the guarantee is met. We recognise that there are some young people who are unable to take part in training and so income support is available to groups such as lone parents or people with disabilities.
Furthermore, the safely net of the severe hardship provision helps to ensure that those looking for work or training and who are at risk from hardship need not be without financial support. Income support is normally payable in these circumstances until a job or youth training place is secured. Our monitoring shows that this provision is working effectively. Over 85 per cent. of those who currently apply receive income support. Success rates for particularly vulnerable groups, such as rough sleepers and pregnant young women, are on average even higher than that. We believe that this reflects the fact that we are meeting our commitment to help those at risk.
I said to the noble Earl, Lord Russell. that I would return in more detail to the allegations made within the report by the Coalition on Young People and Social Security and particularly the errors of analysis which have led to wrong conclusions.
The noble Earl concentrated heavily on statistics. The report quotes the Labour Force Survey—a quarterly investigation into the economic circumstances of some 60,000 households—as recording for summer 1992 that there were 195,000 16 and 17 year-olds unemployed. The report fails to note that this survey makes use of the international definition of unemployment. The figures therefore include young people in full-time education who are looking for work. The summer survey represents the peak of activity for the careers service, where many young people are waiting for examination results and deciding what is best for their future.
The results from the winter labour force survey, published in the Employment Gazette on 17th June reveal a more accurate picture. This shows that of the total number of 1.3 million young people in Great Britain 913,000 were in full-time education; 284,000 were in employment or training; and 28,000 do not want or need employment or training (for whatever reason). So between September and November last year there were about 75,000 young people looking for work or training in Great Britain. Figures from the regular count of careers service registers show that the total number of young people waiting for a place dropped rapidly from this high to 26,000 in May.
This time of year sees the highest rate of entry to youth training. Figures from the regular count of the careers service registers show that the number awaiting a youth training place dropped rapidly from the high in September. In May 1993 only 4,000 young people had been waiting for eight weeks or more. One thousand five hundred of them had already been on youth training but remained within the guarantee and 1,600 had already been offered a place.

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The rest of the authors' conclusions on youth unemployment are based on their own estimated figures; as the report does not contain an explanation of the estimation procedure, I am unable to comment.
The report also criticises policy on various fronts. We have responded quickly and positively and in a number of ways to all these comments. For instance, to combat the issue of a perceived complex claiming process, as mentioned by the noble Lord, Lord Henderson, we have eased access to benefit by establishing a nominated officer in each benefit agency district office who is specifically responsible for 16 and 17 year-olds. We have improved training, making staff more aware of the specific needs of young people and how to deal with them sympathetically. We have also issued a best practice guide to staff in the benefits agency stressing the vulnerability of this group and their sensitivity. We have improved our contacts with voluntary organisations and local groups who deal with young people so that they are aware of the support that is available no matter with whom they first come into contact.
The organisations involved have welcomed the improvements that we have made. With their help there is now a much wider knowledge of the severe hardship provision. This goes some way to explain the increase in the numbers applying under it. Nevertheless, it is important to place this in context: the numbers involved are small—about 10,000 successful claims each month. This is less than 2 per cent. of the total population of 16 and 17 year-olds, the vast majority of whom are either in education, work or training.
Income support levels for young people are based on the fact that most of them live in someone else's household—usually that of their parents—and they have fewer financial responsibilities and lower earnings expectations than those who are older. As there is only a finite amount of money available, this must be targeted to those most in need.
We know, however, that some young people cannot live at home and are not able to grow up in a stable and caring environment. That is why 16 and 17 year-olds forced to live independently qualify for income support at the higher 18–24 year-old rate. Similarly, where they are liable to pay rent, 16 and 17 year-olds are assessed for housing benefit at the same rate as 18–24 year-olds. We have no plans to alter these arrangements.
To answer the direct question of the noble Earl, Lord Russell, so far as I am aware, none of the independent reports to which he refers has made use of the detailed, accurate and comprehensive information which is provided each month by the careers services. I look forward to that information, which has been made available to the House, being incorporated into future reports.
In response to the noble Baroness, Lady Turner, young people aged 16 and 17 who are registered for youth training and whose parents are having difficulty supporting them, whether they are on income support or not, may claim income support under the severe
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hardship provision. This safety net will prevent any young person from being evicted from the family home because of a lack of financial support.
The noble Earl, Lord Longford, and the noble Baronesses, Lady Jay and Lady Turner of Camden, spoke of the difficulties of homelessness. The homeless, like all 16 and 17 year-olds, are covered by the Government's guarantee of the offer of a place on youth training if they want one.
Providing YT places for the homeless means that they will receive the regular income of a training allowance—
The Earl of Longford: Perhaps I may interrupt the noble Viscount—
Viscount St. Davids: My Lords, we have only a few seconds left.
Viscount Goschen: My Lords, I shall try to cover the housing points very quickly. Nevertheless, income support is payable to those most vulnerable young people regardless of whether they have a fixed address.
I offer my apologies to the noble Baroness, Lady Jay. I do not have information available on the question of minorities which she raised but perhaps she will agree to my writing to her on the matter.
The Government's policy for training and supporting young people is working, and it is working well. Since the YTS was introduced in 1983, some 3.5 million young people have benefited from the programme. In March of this year there were 288,000 young people in training in Great Britain. Good as this record is, we are still looking for ways to improve it. To that end we have introduced training credits to put more control in the hands of young people. We have improved the terms of the guarantee to ensure that offers are made within specified timescales. We have instigated detailed monitoring of those waiting for youth training places to ensure that no young person has to waiting longer for a suitable place than is absolutely necessary.
To conclude, we shall continue to look for ways to help all young people to gain the skills, knowledge and experience that they need to enter adult working life. To that end, I thank all noble Lords who took part for their contributions to the debate and in particular the noble Lord, Lord Henderson, for raising this issue this evening.

European Communities (Amendment) Bill
8.46 p.m.
House again in Committee on Clause 1.
[Amendment No. 19 not moved.]
Lord Pearson of Rannoch Lord Pearson of Rannoch moved Amendment No. 20:
Page 1, line 9, after ("II") insert ("except the following words in Article 2: "economic and social cohesion"").
The noble Lord said: The purpose of the amendments which are grouped with Amendment No. 20 is to query the wisdom of our support for the EC's cohesion fund policy, the European Investment Bank, the Economic and Social Committee. and the Committee of the Regions. Of those, I shall leave

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other Members to deal with the Economic and Social Committee, which at the moment seems capable of continuing as a harmless, if expensive, talking shop.
I have to say, however, that the Committee of the Regions may well be one of the pegs to which my noble friend Lord Tebbit has made such perspicacious reference. If so, it is a pretty sinister peg. As always with these pegs, as my noble friend explained, the provisions laid down in Chapter 4, Articles 198a to 198c have been drafted so that they appear relatively innocuous now and are therefore likely to be accepted by the member states without demur. As my noble friend pointed out, that is how the Euro-planners work. They establish the basis for future action in 1996 or earlier by ensuring that their initial proposals cannot be objected to. They rely on the naivety of national legislatures to approve the necessary paving provisions which form the basis of the later policy that they have already conceived.
In the case of the Committee of the Regions the plan, like all good frauds, seems innocent enough. The committee seems designed to satisfy the alleged aspirations of, for instance, the German Länder, the Flemings, the Scots, the Catalans and inhabitants of other regions said to be dissatisfied with their present lot. However, the true purpose of the birth of this institution may well be to facilitate and accelerate the diversion of power over the regions from national parliaments to the European Community centre, thereby undermining the integrity of the existing nation states.
Indeed, the Foreign Office appears either to have been taken in by that strategy or anyway to support it, if its deceitful little publication Britain in Europe is anything to go by. On page 12 the Foreign Office states:
"There will be a new Committee of the Regions which will advise the Commission and the Council of Ministers on issues concerning the European regions. This will help to ensure a stronger voice for th,a regions at European level".
I ask the Committee to concentrate a little on that last sentence. Surely it amounts to a somewhat worrying suggestion that the member states are not adequately conveying the regions' voices to the Community's forums? Surely it subtly hints that the member states are failing the regions? I must ask my noble friend the Minister to give us an assurance that what I suggest is nonsense. I have no doubt that she will do so. I can but remind her that what she says will be on the record when, later this year or at the latest in 1996–97, we come to consider the cloak which will be hung on this particular Tebbit's peg (if such it is and if I may so describe it).
Whatever my noble friend replies, the importance of the Committee of the Regions is obvious from the second paragraph of Article 130a, which reads:
"In particular, the Community shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least-favoured regions, including rural areas".
The Committee of the Regions is therefore to be a key player in converging the economies of the member states so that we may all move towards the glorious goal of monetary and political union. The committee doubtless will have much influence on the distribution of cohesion funds, which are supposed to produce
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level playing fields everywhere, where only steep mountains shoot skywards. Cohesion funds and level playing fields are two essential tools in the fashioning of the great socialist state which we are now contemplating.
Perhaps I may put another very simple question to my noble friend the Minister. Do the political, bureaucratic and legal minds which have dreamt up this monstrous concept understand, or do they not understand, that a level playing field and a market are contradictions in terms? I fear it is obvious that many Members of the Committee do not understand that fundamental conflict either. Perhaps it is only obvious to those of us who have worked most of our lives in commerce and industry, where we have had to earn money in the real world to pay the taxes and salaries of the politicians and bureaucrats who have dreamt up something so far removed from a genuine common market. I hope that my noble friend can answer my question.
That leads me to the cohesion funds themselves. I should have thought that the proposed cohesion funds would be unacceptable to a Conservative Government. The principle on which they operate is essentially socialist in character, being the redistribution of wealth from richer to poorer countries. Most. people do not seem to mind doing that when the money in question consists of charitable foreign aid, but these cohesion funds are different. Under them, British taxpayers' money is going to help other European countries build factories and motorways so that they can better compete with our own industries in the so-called single market and elsewhere. Can my noble friend tell us roughly how much of the money that we could otherwise be spending here is given away in the folly of the cohesion funds?
Baroness Elles: Perhaps my noble friend will give way. Is he aware of how many millions, if not billions, of pounds go to Northern Ireland from European Community funds which have helped the Northern Irish to rebuild their economy? Does his argument totally apply; to say that Conservative Governments do not welcome payments from the Community to parts of the United Kingdom that need financial resources?
Lord Pearson of Rannoch: When my noble friend the Minister comes to reply to the question that I put to her, I feel sure that she will include Northern Ireland in the United Kingdom. Can my noble friend tell us roughly how much of the money that we could otherwise be spending here is given away in that folly? Of course she should include Northern Ireland in that calculation.
I should call it folly even if it worked in the theory in which I have described it. But in practice it is worse. The recipient countries cheat with the money that is given to them and often use it, in effect, for other purposes. For instance, Spanish steelmakers are being given back door subsidies by the Spanish Government by having their social security payments deferred. Indeed, Sub-Committee B of your Lordships' Select Committee on the European Communities is having great difficulty in establishing just how much aid is

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being given by national governments to prop up their own industries to the disadvantage of British industries.
Let me quote from a letter that I have just received from the legal department of your Lordships' Select Committee. It reads:
"Of course, if national aid is lawful. it must he notified to the Commission so that figures are available. Illegal aid, on the other hand, will not he notified to the Commission and delinquent national governments are skilled at carrying out these transactions in ways which make the grant of aid as well as its amount very difficult to detect".
Quite so. I am sure that that comes as no surprise to Members of the Committee who are familiar with the way in Which other member governments, and particularly the recipient governments, flout the Community's rules to their advantage. But why do we go on giving them these absurd cohesion funds, amounting in total to some 12 billion ecus per annum on top of that? Can my noble friend enlighten us?
In view of the hour and the large number of amendments in this group, I shall not further depress the Committee with too much information about the European Investment Bank. So far Britain has contributed a mere £1.5 billion for 19 per cent. of the European Investment Bank's capital. But Italy gets 40 per cent. of its inter-Community lending. France received 62 per cent. of the number of loans that it made to small and medium-sized enterprises in 1991, amounting to 23 per cent. of their total value. In comparison, the UK received 1 per cent. of the loans, amounting to 3 per cent. of their value.
Need one say any more? I think not. But as we are committed to subscribing an extra £7.24 billion capital by 1998 to that bank, I must ask my noble friend the Minister whether she believes that it will be wisely used in the interests of the poor old British taxpayer. I beg to move.
9 p.m.
Lord Bruce of Donington: I listened carefully to the remarks made by the noble Lord, Lord Pearson of Rannoch. Perhaps I may approach the matter from an entirely different angle altogether. It may in part differ from the approach that he saw fit to take.
I speak now as a self-confessed or proud socialist. From our point of view when the terms of the Treaty of Rome were renegotiated in 1975 one of the most desirable outcomes was the establishment of the European Regional Development Fund which provided, among other things, for a redistribution of wealth in the sense then described. It became quite clear that the operation of the free market, as always—an inevitable characteristic of the free market—tended to create pockets of prosperity at one time (the "golden triangle of Europe" was referred to) and at the same time produced the conditions in what were called the "depressed" areas or later the "development" areas which obviously required some social redress. Therefore, I am in complete agreement with the further development of the regional development fund. It serves a useful purpose aside from the aims and objectives of the Maastricht Treaty. It brings a
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greater measure of fairness and justice within our society which, if it is to remain a vibrant and living thing, must have an element of cohesion within it.
Therefore I make no objection to the development of the regional development fund. I was one of those who advocated further consideration being given to the report of the then commission chaired by Sir Robert McDougall. which indicated that, in order to have any effect on the growing polarisation of wealth and poverty, which is the characteristic of free market forces throughout the world. we should have to make substantial increases to the regional development fund. In more recent years, as the Committee is well aware, reforms were made to the structural funds in which they were regrouped, together with the agricultural guarantee and guidance fund in order to produce a greater pot out of which some correction could be made.
Unfortunately, notwithstanding the provision of aid to development areas—which always has to wear the label of the European Commission (quite inaccurately since the funds are provided by the member states)—one of the results of the development of the ordinary operation of a free enterprise society was that, despite those endeavours, year after year ever since 1972, the richer areas of the Community have become richer and the poorer areas poorer.
That brings me to a specific aspect of the Maastricht Treaty. I repeat that I have no objection whatever to the redistribution effects which ultimately, in Keynesian terms, continue to stimulate correctly the ordinary demand. Some people who advocate cuts in public expenditure in the United Kingdom at the present time often forget that the costs of social security come from somebody else's income that contributes to the continuation of the economy. Reduce some of those transferred payments and one precipitates an even greater depression than we have now.
My objection in regard to the Maastricht Treaty stems from its association with economic and monetary union. Once one has a situation in which the economic affairs of the country and of the Community as a whole are in the control of non-elected and non-accountable bankers, no account is taken of the regional disparities about which we know in the United Kingdom and which are still emerging in Europe. There is no control over the consequences upon society. Therefore, in order to remedy those disparities, if indeed they can be remedied within a society operating on completely free market principles, we are dependent not upon the Council of Ministers, not upon an elected government as in our own country, but upon the Commission.
I emphasise to the Committee once again—and I trust that if the penny has not yet dropped, it will do so—that the Council can act only on a proposal from the Commission. The determination of the way in which the European development fund, or rather the cohesion funds, can be distributed lies in the hands of the Commission. The decision is made under the treaty. The apportionment of the funds under the treaty can be determined by majority vote in Council.
Lord McIntosh of Haringey: Perhaps my noble friend will forgive me. He is asserting that the economic and social cohesion policies can be considered by the Council only on a recommendation from the Commission. Perhaps he would be good enough to refer to Article 130b. under economic and social cohesion, to a sentence which he wished to take out by his Amendment No. 161. It states:
"Member states shall conduct their economic policies and shall co-ordinate them in such a way as, in addition, to attain the objectives set out in Article 130a".
Does my noble friend agree that the sentence he wishes to take out makes it clear that the initiative in the first place is that of member states?
Lord Bruce of Donington: The initiative is in the treaty. The Commission is responsible for bringing forward the practical proposals for the implementation of the policy stated in the treaty. It is the Commission that brings forward the proposals and the Council decides whether or not it will adopt them. For that purpose it will adopt majority voting.
I have in mind what has occurred over the past two or three months in regard to the political pressure exerted quite openly by the Commission on member states to ratify the Maastricht Treaty. Expressed in loose terms—I do not mean to be offensive; I am merely giving the shorthand—the fact of the matter is that the Commission has brought pressure to bear on some member states to ratify promptly the Maastricht Treaty by holding out to them the benefits that they will receive from the cohesion fund. Nobody will deny that it applies more particularly to Ireland. I have the suspicion that the speedy ratification by Spain, Greece and other recipients of the funds provided by Germany, ourselves and (to a minor extent) France, has been profoundly influenced by the inducement offered to those other member states by the cohesion fund.
I object to that arm being retained by the Commission. I have no objection if it is taken out of the hands of the Commission altogether. I have no objection if the allocation of the new aids is made by the unanimous decision of the Council of Ministers. But that is not the case under the treaty. In my view, that goes to the very root of the treaty. It makes the ultimate economic climate and economic circumstances within which decisions are made subject to the actions of non-accountable international bankers. It then leaves distribution open to considerations that may rest upon the desirability of obtaining majority votes for this and that policy or as part of a package deal. I believe that the Committee will do well to look askance at the provisions included in the treaty.
Lord Thomson of Monifieth: For once I am moderately happy to follow the noble Lord, Lord Bruce of Donington, but first perhaps I should declare what is no longer an interest but a definite prejudice. I am a former member of the European Commission. It was my duty to set up the first regional development fund. Your Lordships will know of my bias.
When I looked at the amendments I was astonished to find the name of the noble Lord, Lord Bruce of Donington, heading Amendment No. 31 to take out Article 3(j), which concerns the strengthening of
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economic and social cohesion. I was also astonished to find the noble Lord, Lord Stoddart of Swindon, leading Amendment No. 20, which removes the phrase "economic and social cohesion". I believe I am right in saying that in Amendment No. 52 the noble Lord, Lord Stoddart, wants to take out Article 4b, which is concerned with the European Investment Bank. The Committee will be aware that the phrase "economic and social cohesion" is, as I concede to the noble Lord, Lord Bruce of Donington, a term of Brussels bureaucratic art meaning a regional development policy or assistance to poorer areas by the more just distribution of resources. I cannot believe for a moment that the noble Lords sitting just below me in the gangway, but not far away from me in general philosophy, wish to espouse that kind of philosophy. I understand that totally in the case of the noble Lord, Lord Pearson of Rannoch, who has just spoken, or in the case of the noble Lord. Lord Tebbit, who is not now with us. I am bound to say that, as is happening so often in this debate, noble Lords are not protesting about the policy of economic and social cohesion, though I fully concede their concern on these matters. They are opposed in principle to membership of a community, part of whose economic policies is the redistribution of resources to go alongside economic and monetary union and the other processes of integration.
Lord Bruce of Donington: I am most grateful to the noble Lord. He did not fully understand or perhaps was not present at the time. It has already been explained to the Committee that the purpose of putting down these amendments is in part exploratory and that the discussion will take place on groups of amendments rather than upon the merits of individual clauses.
The noble Lord cannot have it both ways. If he and others wish each amendment to be taken separately we can go on for the next month or so. If we are to discuss the amendments as a group—which I understand to be the view of the Committee and which has been agreed by the Opposition and Government—surely the Liberals may accept the same kind of view. We are seeking—it is hoped that we shall have a moderate degree of success—to put forward arguments within a group rather than be tied to an individual amendment. The noble Lord cannot have it both ways. If he wants to discuss individual amendments we can go on for years, but the arrangement that has been agreed through the unofficial usual channels has been to discuss the amendments by subject. The individual amendments are only a vehicle for getting the issue on the Marshalled List.
Lord Thomson of Monifieth: I think that the noble Lord is seeking refuge in a procedural protection. For my part, I think unusually in this debate, I am speaking to particular amendments within this group instead of making a Second Reading speech. I do not wish to delay the Committee but I want no more than to make that point.
9.15 p.m.
Lord Bruce of Donington: In point of fact, for the convenience of the Committee, I was in the process, together with the officials of the House, of removing a whole series of amendments in order to simplify the grouping process to which I have referred and which so far has resulted in a very interesting exchange of views on both sides of the Committee. If the noble Lord wishes to dissuade me from doing that, I shall leave the amendments on the Marshalled List—and, okay, we shall debate the lot.
Lord Thomson of Monifieth: The last thing in my mind is in any way to increase the length of this debate. I appreciate the noble Lord's procedural point but he has accused me of wanting to have it both ways. When the noble Lord, for whose convictions and attitudes I have the greatest respect, including his objection in principle to British membership of the Community, begins to lend his name to amendments that put him against social and economic cohesion, I think that he is trying to have it a little both ways.
I listened to the speech of the noble Lord, Lord Pearson of Rannoch, with close interest. If he is objecting to British membership of the Community, then I understand and respect that position. If in terms of the stage we are now at in British membership of the Community, associated with the treaty which we are now discussing, the noble Lord puts the points of view that he has just put to the Committee, I hope he understands that he is engaging in an exercise in Right-wing revisionism of an extraordinary character. The social and cohesion policies of the European Community, developing from the regional development fund, which I had the very great honour of helping to establish, were, when Britain joined the European Community, a major priority of the then Conservative Government led by the then Conservative Prime Minister, now Sir Edward Heath. They were totally in step with what had been the basic policies of governments of all parties in this country and a part of the temper of the times.
Whatever one's degree of enthusiasm for market economies, there need to be the mitigating forces of a positive policy of social and economic cohesion, generally represented in this country by development area policies and in the European Community by the various structural policies. I hope that the noble Lord, Lord Pearson of Rannoch, knows how deeply out of step he is with the whole tenor of government in this country over the whole of the post-war period. I profoundly hope that when we hear an answer from the Government Front Bench he will have a very thorough repudiation of the philosophy expressed in the amendment he moved a few minutes ago.
Lord Pearson of Rannoch: If I may be allowed the mildest of replies to the noble Lord, Lord Thomson, I think that he has just confirmed precisely what I said about the political and bureaucratic minds which have brought this creature that we are considering into being. I have nothing at all against the—
Lord Tordoff: When the noble Lord refers to "this creature", is he referring to the Treaty of Rome?
Lord Pearson of Rannoch: No, I am referring to what is proposed to become the European Community, that was the European Economic Community, and still is until this treaty is ratified, and before that, the Common Market. I am completely in favour of the Common Market, but as a member of your Lordships' Select Committee on Europe, I have come to see that in many aspects the Single European Act went too far. I am convinced that this Act goes much further than is necessary for the good of the countries involved.
Lord Thomson of Monifieth: If we may just complete these exchanges I shall then shut up. Does he wish to see the end of social and economic cohesion policies within the European Community?
Lord Pearson of Rannoch: The social and economic cohesion policies of the European Community are not working. They contain massive fraud and they are not working in the purposes for which they were intended. They work to the disadvantage of this country and they do not work to the health of the economies of the countries to which they are applied.
Lord Tordoff: Do I take it from that that the noble Lord is saying "Yes" to the question that my noble friend has just asked?
Lord Pearson of Rannoch: No. The noble Lord asked me whether I wished to be out of what I understood to be the Common Market. What I would like to do is to go back to the Common Market and I would like to remove from it all the abuses which have grown up and which we now see from the Single European Act. I do not want the Treaty on European Union signed at Maastricht to come into effect because I believe that it will add to the damage which we have already started with the Single European Act. It is an entirely separate question.
Lord Moran: Perhaps I may change the subject and ask a question of the noble Baroness about the Committee of the Regions which is one of the subjects about which amendments are grouped in this series. As I understand it, it would be a new body to be set up under Articles 198a to 198c of the Maastricht Treaty. It would be a purely advisory and consultative body consisting of 289 members representing the regions and the United Kingdom would furnish 24 of them.
Can the noble Baroness say, first, what the Government envisage that this committee would do? Secondly, can she say how our 24 members will be chosen? In the context of the United Kingdom, I am not sure what a region is. Are the members to be selected on the basis of local authorities or will there be special representation for Wales, Scotland and Northern Ireland? How shall we do it?
As I understand it, this proposal came originally from the German Länder which want to exercise more influence in Brussels and all of which have now established representation in Brussels. In Germany it is quite clear what the regions are. It is equally clear in Spain. But in other countries, including our own, it is less clear. As I understand it, it is left to the

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Government to decide who our representatives will be and presumably what they will do. I imagine that the main role of the committee would be to lobby for funds.
There is one aspect about which I wish to ask. Article 146 of the Maastricht Treaty refers to the meetings of the Council of Ministers being at "ministerial level" which, as has been suggested, could open the way to the participation of regional Ministers at the Council. I shall be interested to know what the noble Baroness can tell us about that because we do not have regional Ministers unless by that it is meant the Secretary of State for Scotland or the Secretary of State for Wales. It seems to me that that provision would discriminate somewhat against countries which do not have regional Ministers as such. Anything which the noble Baroness can tell us about that would be very helpful.
Lord Swinfen: I wish to speak in particular to Amendment No 418 which is one of the group and which stands in my name and that of my noble friend Lord Beloff. Unfortunately, my noble friend is not here, but he would speak far better to it than I would. This amendment would require Her Majesty's Government to,
"report annually to Parliament on the proposal, formulation and implementation of the Community's actions, objectives, aims, policies and decisions on Economic and Social Cohesion under Articles 130a to 130e, together with a statement of the policies of Her Majesty's Government in respect of the matters referred to in that report".
That requirement parallels the requirement of Article 130b for the Commission itself to report to the European Parliament. But my amendment would make that reporting on an annual basis rather than every three years, as proposed under the treaty signed at Maastricht. After all, it is our taxpayers' money which would be a major contribution to the cohesion fund. Article 130d of the Maastricht Treaty makes specific reference to the establishment of a cohesion fund in 1993; that is this year:
"to provide a financial contribution to projects in the fields of environment and trans-European networks in the area of transport infrastructure".
On the assumption that the cohesion fund moneys are spent in the way envisaged by the treaty—I am sure that noble Lords appreciate that there can be no guarantee that such will be the case—the beneficiary countries will simply be able to transfer their own taxpayers' moneys to other areas and to use them for other purposes. According to Aims of Industry, backdoor subsidies to the Basque steel casting firms are already being given by the Spanish Government in the form of the deferral of social security payments, thus enabling such firms to cut their prices. I would strongly suspect that similar things are happening in other parts of the European Community.
One of the defences of the cohesion funds made by advocates of the Maastricht Treaty is that the payments made are supposed to help the poorer countries to meet the economic convergence criteria set up under Article 104c. It is spurious to argue that the receipt of cohesion fund monies will help member states to avoid excessive budget deficits. Without the monies, the factories and motorways in question
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simply would not he built. In any event there is a much wider debate concerning the feasibility of economic convergence within the timescale envisaged by the treaty.
The final act of the Maastricht Treaty contains a protocol on economic and social cohesion. This protocol, inter cilia, refers to the signatories declaring their intention of allowing a greater margin of flexibility in allocating finance from the structural funds to specific needs covered under the present structural funds regulations. In other words, as I understand it, the monies do not have to be spent on motorways, railways, factories and so on. One can only guess at the alternative uses.
In my view, it would be much better if we were to establish our own European development agency on the lines of our excellent Overseas Development Agency so that we could ensure that the money the United Kingdom puts towards the cohesion policy is properly spent and not used to the detriment of British business. It would also mean that we had much greater accountability to Parliament, but this is probably not possible within the European Community, and therefore in my view we do need regular reporting to Parliament.
Lord Eatwell: I should like to answer the question that was posed by the noble Lord, Lord Pearson of Rannoch, in introducing the amendments concerning the social and cohesion funds. He asked in what way were they in this country's best interests. It has been suggested by noble Lords that these funds are in this country's best interests as they are some form of social security—they are a transfer from rich to poor, and this is desirable. I am sure that Members of your Lordships' House would like to see the situation of poorer nations improve and so this social security function might be supported.
I want to suggest that these funds are in this nation's best economic interests, in our self-interest. The reason is that we exist within the European Community in a highly interdependent market. Whether we have monetary union or not, within that interdependent market depression or deflation in part of that market is contagious. Therefore if there are regions which are disadvantaged, either because they are industrial regions now in decline because their industries have become outdated, or whether they are regions which have not managed to develop the momentum of economic growth satisfactorily, their decline and their lack of income exert a depressive force on the overall growth of demand in the system as a whole.
That is why every federation and every nation state has developed mechanisms for transferring income within the country from richer parts to poorer parts of that country or federation, whether it be the Federal German Republic with its elaborate systems for transferring monies from rich to poor Länder, or the United States of America, which actually, through its systems, reduces income differentials between states of the Union by 40 per cent. Alternatively, as is the case primarily in the United Kingdom, the tax and benefits system may automatically transfer resources from the richer parts of the country, lived in by people who pay

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higher taxes and receive lower benefits, to the less well off parts, lived in by poorer people who receive more benefits and pay less tax. Whatever system there might be, every nation state and federation that has operated effectively and maintained high rates of economic growth has devised mechanisms for transferring resources around the system to maintain the overall level of demand.
The system we created in Europe before the implementation of this treaty, and the system that will exist after the treaty has been ratified, is peculiar in the sense that we have a single market and close, and perhaps unified, monetary systems, and we shall have virtually hermetically sealed tax and benefit systems. So the automatic processes of transfer, and the maintenance of demand which arises through the tax and benefit system, will not operate within that interdependent market (that free, open market) for which the noble Lord, Lord Pearson, expresses enthusiasm. Because it does not operate, the market will have a tendency to depression: the weaker regions will drag down those regions that have greater potential for prosperity. That is why the social and cohesion funds are so important.
Those funds are not important in taking up the entire slack of the system, so to speak, but they are important in priming the pump of development in the weaker regions or, indeed, in those regions which have been previously prosperous and which, because of the nature of industrial progress, are now suffering from restructuring problems. It is therefore important that we maintain and enhance the structural and social cohesion programme as a means of maintaining the balanced growth of the Community as a whole, because it is the achievement of that balance which will allow the Community as a whole to maintain a higher rate of growth within each member state, including the UK. That is why the development of the social and structural funds as part of the Community's overall growth strategy is in this country's best interests.
In that context, I should like to ask the Minister to tell the Committee when she replies why the British Government have consistently opposed the increase in the overall budget for social cohesion strategies. When it is in this country's best interests, why have they so persistently set their face against the growth of social and structural funds? Secondly, will the Minister say why, when structural funds have been made available to the UK, the British Government have consistently subverted their impact by not allowing EC funds to be additional to government funding, and have, instead, reduced government funding when EC funds have been applied so that there is no general net benefit to the regions of the UK?
Lord Aldington: I venture—
Lord Monson: My name is on the amendment. Noble Lords: Order, order!
Lord Aldington: The noble Lord has spoken so much that he might let me have a go.
Lord Monson: My name is on the amendment.
Lord Aldington: I venture to speak in this debate because I chaired an inquiry into the Community's regional and development policy. The report that the committee agreed received the general acclamation of this place and had the support of my noble friend Lord Pearson of Rannoch. I think that he must have forgotten that. It also attracted the interest of the noble Lord, Lord Bruce of Donington. I am amazed, as the noble Lord, Lord Thomson of Monifieth, was amazed, that Members on that side of the Chamber should lend their names to these amendments.
Lord McIntosh of Haringey: Some.
Lord Aldington: How do they think we can have a single market without having economic and social cohesion? Do they not realise that regions throughout the Community, including backward regions in our country, have gained greatly by this policy?
The noble Lord, Lord McIntosh of Haringey, intervened to remind his noble friend that the member states take the initiative in these affairs. That is so under the treaty. The regional development policy need not result in fraud, as my noble friend appeared to imply. Fraud does not arise from the fact that there is a regional development policy or a cohesion fund. It comes from the fact that some member states do not look after their public funds properly. It comes from the fact that the regulations and the procedures of the Commission are not always as they should be, as the noble Lord, Lord Bruce, and I pointed out in an inquiry. That is the fact; it is not the existence of the policy or the fund that is wrong. Therefore, I do not understand why these amendments have been proposed.
I am amazed that my noble friend Lord Pearson of Rannoch is opposing a new article in the Maastricht Treaty to extend the regional development fund policy to rural areas. That was recommended by my committee and Members of this Chamber, but it is the first time that the proposal has been made to include it in a treaty. That is another reason why I am opposed to these amendments. Frankly, I am stupefied that Members of the Committee should be proposing some of these amendments.
I turn to the point made by my noble friend Lord Swinfen about reporting to Parliament. The regional policy of the Community is reported annually to Parliament and the Select Committee looks at it every three or four years. Members are kept up to date if they read the papers in full. I do not believe that there is further need for statutory requirements.
For all those reasons I strongly recommend the Committee to reject the amendments. On top of that, I see that there is a proposal to negative the new article about the European Investment Bank. That article has been in the Treaty of Rome for some time. I cannot understand why Members of the Committee should lend their name to such a proposal. Therefore, broadly speaking, I am against it.
Lord Monson: Earlier today the noble Baroness, Lady Seear, challenged the noble Lord, Lord Stoddart of Swindon, who, en passant, had criticised the

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cohesion proposals. She asked him whether as a socialist he did not support the principle of rich countries subsidising poor countries. I hope that I have paraphrased the noble Baroness correctly. As one would expect, the noble Lord, Lord Stoddart, replied most effectively. Equally, he might have pointed out that it is one thing to compel taxpayers to give money to genuinely poor countries, whether they be in Eastern Europe, Africa, Asia, the Caribbean or elsewhere, but that it is quite another thing to compel citizens to see their hard-earned taxes diverted to countries which by any objective definition are by no means poor.
All the EC countries, even the poorest, are among the 40 wealthiest countries in the world; they are in the top quartile, as one might put it. Anyone who has recently been stuck in a traffic jam in, let us say, Portugal or the Republic of Ireland will have noticed that it consists not of battered lorries but of shiny, new, expensive cars and will have realised how relatively wealthy those countries have become.
There is another very curious feature of the cohesion proposals, particularly as they affect the United Kingdom, which many people would prefer to keep under wraps but which some of us feel must be brought into the open. One of the main professed objectives of the Maastricht Treaty, as of earlier treaties, is to foster goodwill and friendship among the peoples of Europe. The noble Lord, Lord Cockfield, has reminded us of that on many occasions. Some of us may suspect that in practice the Maastricht Treaty will have the opposite effect, particularly if the subsidiarity proposals turn out to be a damp squib. Nevertheless, the fostering of goodwill and friendship is definitely one of the professed objectives of the Treaty.
How curious it is that two of the countries to which the British taxpayers will have to contribute under the cohesion proposals make territorial claims either upon United Kingdom colonies or upon parts of the United Kingdom itself. That is hardly a sign of friendship and goodwill. I refer of course to Spain which has a claim upon Gibraltar and to the Republic of Ireland with its claim upon Northern Ireland. Notwithstanding the Anglo-Irish Agreement, Articles 2 and 3 of the Irish Constitution still claim jurisdiction over United Kingdom territory. That claim is upheld fully by the Irish courts which have declared that the constitution overrides the Anglo-Irish Treaty in that respect.
The noble Lord, Lord Stoddart of Swindon, told us this afternoon that every family in the Republic of Ireland receives £35 per week from Community funds. My research has established much the same thing, albeit set out in a slightly different way. Every man, woman and child in the Republic of Ireland receives £120 per annum from UK taxpayers. That is set to rise after the cohesion proposals come into effect.
The right way for those countries, which are already fairly well-to-do in global terms, to progress further economically, is by evolution and not convolution (those doing the convoluting being the United Kingdom and Germany, which are the only two net contributors of any significance to Community funds). The best and most honourable
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way for such countries to progress is to pull themselves up by their own unaided efforts of which I am sure, with their undoubted deep pool of talent, they are more than capable. Hong Kong, Singapore and other countries have shown how successful such a self-help policy can be.
Lord Sefton of Garston: I almost hesitate to jump into what seems to be an elite band of people who have set themselves up either as economists or well-knovvn experts on international relations. I speak from a simple point of view.
In 1946 I was engaged in an educational establishment which invited a Frenchman to come to England. The fact that he was on the Left wing of politics makes no difference. He told us about the privations which had been suffered during the war and he said that the French needed the British Labour movement to come in and help because they needed to rebuild a very firm society. That struck me as an extremely worthwhile aim.
I am always mystified by all this talk about how great Great Britain or the United Kingdom is. One would think that it is the best country in the world, that it is well managed and in complete control of its own affairs. The truth is that it is not. It is not even in control of its own energy policy. During the past 10 to 14 years we have given that away to the boardrooms of this country.
How many times have I heard it said in this exclusive Chamber that we are part of a global economy? And yet today we are arguing about whether or not we should be part of that global economy. Whether or not we decide to accept the Maastricht Treaty, we shall be part of the global economy. I have no doubt about that.
I had no hesitation in deciding for myself where our future should be: in the first place, it should be with Europe, with all the fault s that will arise from a merger of common interests; and, ultimately, it should be with the world. Perhaps I may—if I dam—use the words of Thomas Paine who, I believe, said, "I am a citizen of the world; my religion is to do good." There is nothing wrong with that statement.
However, what amazes me is that we see adult politicians on both sides starting to worry about our losing a little economic advantage by going into the Maastricht Treaty and establishing the European Union. Well, what if we do? We just heard a quotation whereby someone seemed to suggest that it was wrong to pay Southern Ireland families £35 a week out of other people's incomes. I do not see anything wrong with that, if it will stabilise the economy and the standard of life between one people and another.
I have with me an amendment that springs from my experience in Liverpool. We heard the noble Lord. Lord Tebbit, in his deliberate way, tell us this afternoon that we had a development programme of regional policy in the country and that it was a success. Well, the Common Market has just decided that the incomes of people in Merseyside are so low that we are now numbered among the worst in the European Community. If that is an example of success, I do not believe that I have ever heard of one.

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I shall return to the question of £35 per week later. But my experience in Liverpool tells me that, through all the ebbs and flows of our wealthy and poorer periods as a nation, one thing has stood out quite clearly over the past 40 to 45 years during which I have been worrying about the problem—namely, that whenever there is a recession or a slump the situation in the South East becomes a little uncomfortable because a few people lose their jobs. Then, when it is over and the economy picks up, London gets overheated and people start complaining about the fact that they cannot get on the trains, or find a bus; or, indeed, about the terrible privations of spending two-and-a-half hours commuting to work.
However, as the economy slowly builds up, what happens in Merseyside or in Northern Ireland? The answer is that the economy stays on the same level. In certain parts of Merseyside we now have 50 per cent. unemployment, while they are grumbling in the South East. I mention that point not because, as some people suggest, I have a grudge against London and the South East; I do so merely to illustrate what are the problems and to emphasise that, at the same time, in London we are starting to develop an economy that is becoming overheated.
I do not know when we shall reach the situation where we need not talk about the transfer of money from the rich to the poor; what we need is a transfer of resources. To me, resources are coupled with jobs. In my view, the sooner the debate is over the better it will be. The sooner we wholeheartedly join with Europe and look for the weaknesses, the sooner this country will be able to give a lead to the rest of the world. As I said, I cannot wait for the debate to be over.
But while we continue to talk about the movement of resources, what are we creating? We are creating a dependency culture in certain parts of the world. We know what has happened in the South East and we know all about the economic resources and what has taken place as regards the provision of jobs inside the Civil Service. No one can tell me that they have moved anything like the number of civil servants out of the South East into the other parts of the country that they claim. They have not done so. A miserable pittance has been moved from the South East; indeed, one has only to look at what is happening now on Vauxhall Bridge.
I conclude on this note because I feel I have a cheek even speaking in this exclusive company of experts who know all about these matters. If development is concentrated in one area—the noble Lord, Lord Bruce, mentioned this—to a greater extent than occurs at the moment, there will be nothing left over for the poorer parts of the Community. Jobs will be created in Brussels, Luxembourg and in the so-called golden triangle. Those jobs will be self-perpetuating for many years to come. Amendment No. 406A, standing in my name, states:
"Her Majesty's Government shall advise any person proposed under subsection (1) above that if appointed he should in exercising his duties as a member of the committee
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give due consideration to the need for the de-centralisation of Community administration as a step towards the 'harmonious and balanced development' of economic activities".
That does not mean the transfer of cash: it means the transfer of jobs created for the European Union.
If we can embark on that course, we may, instead of creating further dependency cultures, start to convince people in Scotland, Wales, Northern Ireland, the south of Italy and other peripheral areas that they are part of the Economic Community. If my little amendment even starts people thinking about that, it will have achieved a benefit for all the Community. Let us stop talking and vote on this matter as quickly as possible. Let us get on with the job of making the Community better.
Lord Sanderson of Bowden: I wish to say a few words about the European Regional Development Fund. The noble Lord, Lord Thomson of Monifieth, mentioned that. Coming from the area of the country that I do, I cannot speak highly enough of the fund. It has achieved a tremendous job of work. When my noble friend the Minister replies to this long debate, I hope she can tell us a little about the cost to Britain of the cohesion funds. As I understand it, the seven-year agreement will hopefully increase public expenditure in the United Kingdom by a very small percentage. However, I would like to have that confirmed.
I was interested to hear the noble Lord, Lord Bruce of Donington, say that commissioners do not always get things right. That is true. They certainly did not get it right when it came to deciding the geographical area for Objective Number One in the Highlands and Islands recently. It is thanks to the European Parliament that the area now may include such places as Rannoch Moor. Perhaps my noble friend Lord Pearson of Rannoch will remember that there are certain parts of this country which benefit from regional funds. I would never like to see that kind of assistance being reduced, as those areas face difficulties as regards development. I hope my noble friend the Minister will also elaborate a little on the Committee of the Regions. I particularly wish to know which people from the UK are eligible to be appointed to that committee.
Lord Jay: Perhaps I can help the Committee in the matter of the cohesion funds, which have re-emerged in the argument. I believe that so far the debate has been the victim of a certain confusion. If we are trying to help regions which are depressed for historical, geographical or demonstrable economic reasons, of course there is an overwhelming case for assisting those regions. I have advocated this policy throughout my life. While doing so I even visited Dundee on one occasion, at the invitation of the noble Lord, Lord Thomson of Monifieth, I believe with favourable results.
In that case there is an overwhelming argument for this activity. However, in the normal course of events, where there is more than one economy, and all have currencies of their own, and some of those economies are weak compared with those of their neighbours, the natural remedy—nature's remedy as Keynes would have called it—is for the exchange rates of the weaker economies to depreciate in relation to the richer

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countries. That produces the least painful solution which is possible in the real economic world since it gives an advantage to their exports and compels them to pay a rather higher price for their imports. That is the effect of their weaker position. There is a natural process by which a weaker economy will correct its difficulties in that way. That has happened with Far Eastern economies.
However, if one declares that over a large area there will be a single currency, for both weak and strong economies, one artificially cuts off the natural remedy from the weaker areas. In doing so one creates a problem which did not exist naturally and would not have existed if one had not acted in that way.
That is what the Commission and the treaty propose with the cohesion funds. Previously there were regional development funds but the cohesion fund was only invented because the EC insisted on imposing a single currency on a very large area, which was bound to tell against the weaker countries. We must recognise that fundamental distinction.
There is every reason for assisting, by such transfers, areas which are depressed for historical, geographical or natural reasons. However, it is absurd o create a new problem by creating an artificial single currency and then having to correct the hardship caused by one's action at very great expense when that would not naturally have been necessary. Those are the basic economics of the problem. I hope that we shall discuss the matter in that way in future.
Lord Willoughby de Broke: I wish to speak to Amendment No. 388 in my name which deals with the protocol on economic and social policy. My noble friend Lord Swinfen touched on that protocol. I should like to enlarge on one or two points before moving on briefly to cohesion.
The protocol covers those areas not covered in Title XIV, which simply states that the cohesion fund makes provision for the British taxpayers' money to be spent on motorways and railway infrastructure in Greece, Spain, Portugal or wherever the Committee of the Regions may decide. One of the statements of the fifteenth protocol—there are 19 protocols but the Cornmittee will be relieved to hear that I wish to touch on only one—mentions that that money is to be spent on various specific needs projects not covered by present regulations. Perhaps my noble friend the Minister will give some indication of what those special needs projects are likely to be, apart from environment and transport infrastructure. Are they perhaps one of the pegs referred to by my noble friend Lord Tebbit which are inserted in this treaty for future reference as unspecified projects?
I should like to make two further points in relation to the amendments concerning cohesion. First, vast sums are considered necessary for the cohesion and structural funds. In a speech in January 1991 my right honourable friend the Prime Minister mentioned a structural policy costing between £11 billion and £12 billion each year from 1993. The Times of Monday this week reported that save for Britain, European economies are shrinking rather than growing. How can a stagnant or retreating economy possibly support such grandiose schemes of economic subsidies? Will
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the Minister give the Committee any information on the current estimated size of the proposed cohesion fund? Is the timetable set out in the treaty still operative—that is, by December 1993? Of course, a further difficulty arises if the Community is due to be enlarged by nations from Eastern Europe, and I am thinking of Poland, Czechoslovakia and Hungary. Will all those countries qualify for cohesion funds? If so, who will pick up the tab? At present there are only three countries which contribute. I imagine that the same three will continue to contribute to a much larger Community with much larger needs than the £11 billion or £12 billion—a figure which is so airily tossed around at present.
I need to ask another question of my Front Bench. Should this Conservative Government consider approving a Bill which commits us to signing the protocol? The fifteenth protocol, with its stated aim of requiring richer countries like Britain to pay subsidies and aid to poorer countries, is discredited doctrine. It is centralised planning which is so beloved by the bureaucrats the world over but which has lamentably failed to pass the test of historical reality.
I find it hard to understand what a Conservative Government are thinking of in putting their name to a protocol which will channel large sums of money to roads, factories and infrastructure in other countries, enabling those countries' products to compete with ours on world markets. That can only have an adverse effect both on export income and on job prospects in this country. Asking the British electorate to support that would be like asking turkeys to vote for Christmas.
I wonder, too, what, let us say, car workers in Rover would think of their taxes being used to support and subsidise other countries' industries in order to enable them to compete with their members for orders and for jobs?
A few days ago my right honourable friend the Prime Minister was interviewed on the "Today" programme on his way to the most recent Euro-summit in Copenhagen. He said unequivocally then that the Community had to become competitive in world markets and he would be putting that message across loud and clear to his fellow heads of state.
But the fifteenth protocol, and with it the whole cohesion fund, runs directly counter to the idea of free trade, the single market and a competitive economy. Our economic policy should be geared towards efficiency and world competitiveness. There are huge export and investment opportunities for British companies in China, Hong Kong and the Pacific Rim, North America, and in the countries of the Commonwealth with whom we already have historic and successful trading links. That is where our economic efforts should be directed, not to supporting rival economies in Europe—economies which, as we know only too well and as we have heard today and in yesterday's debate, hive off enormous sums in Euro-bribes. I believe that the commissioners are unable to decide to the nearest £5,000 million how much fraud is committed. Structural fund moneys will

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only mean that the Mafia will smoke longer cigars, be driven around in bigger cars and have fatter bank accounts.
The whole concept of paying large sums into an outdated programme of economic and social cohesion is philosophically misguided and financially impractical. I hope that the Government will accept the amendment in the constructive spirit in which it is offered.
Lord Clinton-Davis: I wish to intervene briefly from the Front Bench although my noble friend Lord McIntosh will seek to deal with the question affecting the Committee of the Regions.
I wish to state at the outset that we are wholly in support of the concept of economic and social cohesion. I believe that the arguments were well encapsulated by my noble friend Lord Eatwell earlier in the debate. In that contribution he specifically rebutted the arguments, although he could not have anticipated the speech from the noble Lord, Lord Willoughby. There is an element of self-interest in this issue. There is an interdependency in our economies. That is an issue which the noble Lord, Lord Willoughby, failed to recognise. He would do well to read the Protocol on Economic and Social Cohesion and I shall read two declarations from it. The member states:
"DECLARE their willingness to modulate the levels of Community participation in the context of programmes and projects of the Structural Funds, with a view to avoiding excessive increases in budgetary expenditure in the less prosperous Member States:"
The further declaration states:
"their intention of taking greater account of the contributive capacity of individual Member States in the system of own resources, and examining means of correcting, for the less prosperous Member States, regressive elements existing in the present own resources system".
I do not wish to deal further with that, I was prompted to intervene largely because of two comments that were made from a different spectrum in the debate. One was at the beginning from the noble Lord, Lord Pearson, who said that member states were significantly failing their regions in relation to structural funds and that the funds worked to the disadvantage of the United Kingdom. Then the noble Lord, Lord Aldington, said that the United Kingdom had gained greatly from the structural funds. I agree with that.
However, the case I wish to develop briefly is that we could have gained far more and could in future gain far more than is the case at present. The United Kingdom is about to lose £520 million-worth of funding from the European Community which could go unclaimed in 1993 simply because the Government disregard obligations which were fulfilled in the other member states. For years, the Government have failed to recognise the principle of additionality. It is that European grants to local authorities should be available to be spent in their own areas, but government rules prevent local authorities from borrowing to match those grants and prevent them being spent.
Just before the general election, after indulging in a considerable volume of personal attack on
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Commissioner Millan, the commissioner responsible for regional policy, a number of government Ministers, and in particular Mr. Lilley, who, I think, was responsible at the time, seemed to shift their stance. However, that has been illusory. Although it was promised that Eurofunds would be treated separately from local authority spending and full additionality would operate from April this year, problems still abound. I shall just mention two: total credit approvals to councils have been reduced by 25 per cent., so matching funding cannot be found. The second is that there is a wide variation of practice between government departments so there is a great deal of confusion as to how the system should operate. What is happening is that the Treasury wishes to maintain complete control over United Kingdom spending rather than allow initiatives to assist regional development, even from some of its own departments. By their refusal to allow Community money to be spent in our regions on the scale that is possible, the Government undermine the value which the United Kingdom receives from her Community budget contributions. What the Government are about is short-changing the country. This absurd departure from common sense should stop immediately. That is a point which the Government need to take into account at once.
Lord Mackay of Ardbrecknish: I wish to look at two aspects of the group of amendments: the amendments and the debate on Clause 6 stand part, which is down in this group, on the Committee of the Regions, which is covered by Article 198. The other place inserted into the Bill Clause 6, through which the 24 members appointed by the United Kingdom to the Committee of the Regions are all to be councillors. I think I am right in that and perhaps my noble friend will confirm it when she winds up.
My understanding is that those councillors will be appointed by Her Majesty's Government and I presume that they will be selected in some balanced way—as I hope my noble friend will confirm—not only to achieve a balance politically, which would be only right and proper, but also to achieve a balance geographically. I think I am right in saying that the objective of the committee, as the British Government see it, is to concentrate on those regions which are at either a distance disadvantage or an economic disadvantage within the United Kingdom and within the Community.
I can see, because the Government have no amendments down, that the new Clause 6, put into the Bill in the other place, will stay in the Bill. I can understand that. My concern, which I hope my noble friend will take on board, is that it will mean that the 24 Members from the United Kingdom will be drawn from rather a narrow base. Councillors are perhaps no longer as good a cross-section of the community as they once were. When the Government look at the 24 councillors whom they will put on to the Committee, they will have to attempt to ensure that they represent a reasonable cross-section of the community, from the wealth creators upwards or downwards (or however one wants to describe it).

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The main points that I wish to cover are those referred to in the amendments which deal with economic and social cohesion (Articles, 130a etc.). I have been staggered almost beyond belief at some of the remarks I have heard during the last hour and 20 minutes. I must say that the idea that social cohesion is something reprehensible which ought not to be in the Treaty of Maastricht or anywhere else is a most amazing proposition. Is the proposition that there should be social disintegration? We see social disintegration on the far side of the European Community in Yugoslavia. Surely the one thing that we want, both inside our own country and inside the Community, is social and economic cohesion.
I am amazed that there are amendments down to remove this part of this particular treaty. I can understand people who are opposed to the European Community, but I would have thought that especially people like the noble Lord, Lord Bruce of Donington, would have taken the view that if we have to have a European Community, then surely to goodness it should do something about economic and social cohesion. I would even have hoped that my noble friend Lord Pearson of Rannoch—as his title tells you, he comes from a pretty disadvantaged part of these islands—would want to see some economic and social cohesion. I must tell the noble Lord, Lord Willoughby, if I heard him correctly (I shall read what he said carefully tomorrow) that he seemed to dismiss all thoughts of economic and social cohesion. If that were really the policy implemented by Her Majesty's Government, very few people would live in the peripheral areas of this country.
The Highlands and Islands, for example, where my previous constituency was situated, have much to thank the social and economic cohesion of this country's policy for, and that of the European Community. It has added to the wealth of that part of the country and has allowed it to contribute to the wealth of the whole country. I assure noble Lords who have any doubts about that that if they go to Shetland, or Orkney, or the Western Isles, they will see that over the past 20 years, thanks to the policies of United Kingdom governments and those of the economic Community, through the ERDF and FEOGA, that considerable advances in the economy of those particular parts of the country have taken place, thanks totally to the cohesion funds of the United Kingdom and the European Community. If the noble Lord doubts me:, I suggest that perhaps he should take a week off and go and have a look at those areas; he will see exactly what I mean.
But it is not only a question of the rural areas. It is a question of declining industrial areas. We have such areas in all parts of the United Kingdom. I certainly know that those parts of Scotland where we have seen industrial decline—for example, my noble friend Lord Hamilton of Dalzell takes his title from an area which was once economically very prosperous and is now, because of the decline in steel and coal, in considerable difficulty economically—look not only to the social cohesion fund of the United Kingdom Government but also to the social and economic cohesion funds of the Community for help in trying to restore their
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fragile economy. If that is not a sensible and positive thing to do, then I do not understand how we expect our country to be one nation and one country, with all parts and all people pulling together.
It is the same with the Community. It is a totally false argument that if we help the southern Irish economy, the southern Portuguese economy, the Spanish economy or the Italian economy, it will be entirely negative. Perhaps I dare say to the noble Lord—possibly in terms of an economics lecturer, putting it more bluntly in a way that I certainly understand—that if we can improve those countries' wealth and standard of living, they will want to buy goods and services. We are in the business of selling them such goods and services. Therefore it is in our economic self-interest that those parts of the Community should be encouraged to be more prosperous by funds such as the ERDF.
I do not wish to take up any more time. In conclusion, we have had a debate lasting one hour and 25 minutes. I hope that those who have spoken have the courage to put their words to the test of the Division Lobbies so that we will see on the record those who are opposed to the concept of social cohesion.
10.15 p.m.
Lord Stoddart of Swindon: I ask the noble Lord to come and join us. After that speech, come and join us! I had not intended to speak very much in this debate.
Lord Hailsham of Saint Marylebone: Yeah, yeah!
Lord Stoddart of Swindon: I can understand people saying "Yeah, yeah", particularly those who have resisted any debate on the matter at all—the people who wanted to silence debate on the matter. I am talking about the people opposite who have sat down and made jibes at other people who wish to take part in the debate. I can understand them wanting to silence debate. But I was provoked first by the noble Lord, Lord Thomson of Monifieth. and then by other noble Lords into answering some of their questions. Why, they asked, do I support some of the amendments on the Marshalled List? Why am I against the cohesion funds?
I shall tell the Committee why I am against them. It is because I simply do not believe that the Europe which is being constructed by the Maastricht Treaty, and undoubtedly by subsequent treaties, is the right way forward. I simply do not believe that the kind of Europe which is being built up will become the economic wonderworld that some people believe it will be. That is why I do not believe in cohesion funds.
Indeed, I tell the Committee once again that I believe that the best way to govern is not through supranational organisations but through national organisations. If we are to retain democracy, we need to be governed at the lowest possible level, a level which people accept and a level at which people understand and will obey. Therefore I am opposed to the use of cohesion funds for setting up a supranational organisation to which I have always been opposed. I hope that the Committee will not ask

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me to change a point of view which I have sincerely held over a very long period of time and which I believe has had some substance.
In 1972 we were told that we were joining a common market. There was an absolute denial that we were going into a European union. Time and again we were told that that was not intended. Those people who now criticise us for wanting to discuss this treaty are the very same people who told us then that we were out of our mind to be talking about a European union. But we were not out of our mind. The treaty proves that. The Treaty of European Union sets up new institutions which we shall all have to follow; new methods of redistributing wealth to which we shall all have to adhere. That is the reason I lent my name to the amendments—because I wished to be consistent. I believed that I was right in 1972 and in 1986, and I believe that I am right today. Would any Member of the Committee have me do less? Would any Member himself do less? I sincerely hope not.
I believe in what I am saying because I have seen the operation of the European Community so far. I have not yet seen any benefit to our people from our membership of it. I have seen two common policies, one on agriculture. Can any Member stand and defend the common agricultural policy, which has put thousands of our farmers out of work and which costs every single family in this country £18 extra a week? Will Her Majesty's Government defend that policy? Of course not; they oppose it—or at least that is what they tell us. The other policy is the common fisheries policy. Does anyone believe that our fishermen are happy with that? Of course not. When I say that I am opposed to the concept of European union, it is on good grounds.
That is the reason I lent my name to the amendments and why I believe that the cohesion funds should not be paid. They will not be under proper democratic control; they are needed in this country and the £2.5 billion which we pay across the exchanges in net contributions could be better used in this country—in Scotland, Liverpool and elsewhere. Perhaps I may say to my noble friend that one of the reasons why Liverpool has declined in importance is because the balance of our trade moved from the Atlantic to the Continent of Europe. That is perhaps one reason why Liverpool declined. There may be others and of course he is an expert on the matter.
Lord Sefton of Garston: I am not an expert. The real facts are that Liverpool depended for its existence upon the trade between the two greatest continents in the world, and that disappeared. My plea is that Liverpool and Merseyside be treated as an area in this country needing assistance. But I do not plead for money. I plead that the resources that are over-supplied in the South East should be moved to Liverpool. The plea in my amendment is that that same principle should be applied in Europe. It has nothing to do with the balance of trade. The balance of trade would have moved to Europe in any case. The point that my noble friend is missing is that it does not matter what we say; if we had stayed out of Europe we would have stayed out of the world economy.
Lord Stoddart of Swindon: My noble friend is not correct. I should be happy for more resources to be transferred from the South East to Liverpool and there would be more resources available if, as I have already said, we were not spending £2.5 billion every year in subsidising affairs in the European Community. But the balance of trade has certainly shifted to Europe. Whether or not that is a good thing I do not know. As we have heard, we have a £95 million trade deficit and perhaps it would have been better if our balance of trade had been more worldwide rather than being concentrated on a small section of the world.
There is much more I could say about cohesion funds but I shall not do so because time is getting on. I sincerely hope that in future when people criticise me for putting my name to amendments they will understand that I do so because I believe in what I am doing and that those amendments are necessary.
Before I sit down, I should like to refer to Amendment No. 406 which seeks to insert at page 2, line 24, at end, the words,
"and has been nominated by the appropriate local authority association and can be expected to remain such an elected member for a term of not less than three years".
That refers to the local authority members who will be appointed to the Committee of the Regions. That is a serious point. I hope that the noble Baroness will be able to give an assurance that the people to be appointed will be likely to remain members of the local authority for most if not all of the four-year period of office, and that the local authority associations will at least be consulted. If she can give me an assurance on those matters, it may well be that I can withdraw at least this amendment.
Lord Peyton of Yeovil: I should like to spend a few moments congratulating your Lordships on the part you have been privileged to play in these enthralling debates. In particular, I pay a glowing tribute to the noble Lord, Lord Stoddart of Swindon, who surely deserves to be dubbed the star performer. He has no doubt helped us to understand the issues and has done so totally without prejudice or any tendency to yield to the tiresome vice of repetition. I am sure your Lordships will be willing to echo my most earnest hope that the speeches that the noble Lord has made during the course of these debates will be the monuments by which he will be most remembered. I cannot recall that in the annals of this Chamber he has ever reached such high peaks of oratory, perception and intelligence as he has today. I hope that the noble Lord will be content with that record and will not endeavour to surpass it in subsequent proceedings.
In all the happiness and joy that the noble Lord has engendered in my heart and mind in what he has said I have one dreadful fear; that is, that my noble friend on the Front Bench—whose patience and intelligence I greatly admire—may be induced to attempt to answer it. I hope that she will resist that temptation because she may alienate some of the loyal support that she may otherwise find behind her.
I am distressed to see that the noble Lord, Lord Jay, has departed. He made a very interesting contribution. We always expect from the noble Lord great

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intelligence and perception, but this evening he delivered himself of the verdict that so far the debate had been the victim of a certain confusion. I do not believe that any of us would be so presumptuous as to seek to rival or compete with such an accurate description as that to which the noble Lord, Lord Jay, treated us. I am so deeply sorry and aggrieved that he is not here to receive my congratulations and those of other Members of the Committee.
The other star, so far as I am concerned, was the noble Lord, Lord Sefton, who sought to interrupt me just now. I am so sorry that I did not give way. He delivered in the force of his comments "the sooner this debate is over, the better". I cannot think of a sentiment more generally shared by most members of the Committee. I do not wish to delay its total fulfilment longer than I need except just to wonder what on earth is the destination that my noble friend Lord Willoughby de Broke wished to conduct us to. So far as I could understand, we were sailing off to the Pacific rim with no thought of whether we had any duties, obligations or possible gains in Europe. He dismissed it with the splendid words that we were philosophically misguided.
Perhaps I may conclude on this, I know, possibly vain hope —that those who do not find themselves in total agreement with the Maastricht Treaty, those who may have some serious misgivings about it, will not allow those misgivings to take them so far along the road of prejudice as to do serious damage to our parliamentary institutions.
10.30 p.m.
Lord McIntosh of Haringey: It is possible that I may find myself in the same Lobby as the noble Lord, Lord Peyton, as he and agree on a number of the matters that we have been discussing, so I think I ought to take the opportunity of dissociating myself from what he has just said. First, I think that he is unwise at any time of night or day to indulge in prolonged sarcasm in the way that he did. I think that it is unfair to himself more than it is unfair to my noble friend Lord Stoddart, whose patent sincerity the Committee will recognise.
I think also that the noble Lord is wrong to resent and express resentment of the time that is being taken to debate these matters in Committee. I know that the time that has been allocated for these debates has been a matter of agreement between those who are opposed to the passage of the Bill as it stands and the Government. Indeed, we on our side have been party to those agreements. And having been party to those agreements, it is right that we should give everyone who has a point of view the opportunity to express it. We ought not to interrupt any more than we have to. I gladly give way.
Lord Peyton of Yeovil: Perhaps I may say that I am deeply obliged to the noble Lord for his advice without necessarily feeling obliged to take it.
Lord McIntosh of Haringey: I cannot tell whether or not that was sarcastic so I am not sure in what sense I ought to take that intervention. It is important that Members of the Committee should have an opportunity to express themselves and it is important
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that we should not denigrate those who. out of a deep sense of concern, feel it necessary to attack various elements of the Bill and of these treaties. At the same time I do not agree with my noble friend Lord Bruce when he criticised the noble Lord, Lord Thomson of Monifieth, for referring to particular amendments. We have agreed to debate these amendments together and we are grateful to all of t hose who have taken part in that agreement. We still have the responsibility, since we will be asked to take a decision on the amendments, of looking at the amendments and looking at their implications. I propose to take a minute or two to do just that.
I must say at the beginning that, although I am temperamentally inclined to a conspiratorial view of history —I like to think that there are evil forces around which make it more difficult for those of us who are clearly in the right to achieve our objectives—some of the things that have been said this afternoon and this evening have surprised even me. I thought that the assertion of the noble Lord, Lord Hamilton of Dalzell, that the European Coal and Steel Community arose not from Jean Monnet but from the needs of Albert Speer to bolster up the German war effort, was a particularly choice example of the conspiratorial view of history.
In introducing this group of amendments I believe that the noble Lord, Lord Pearson, went a little far from time to time. He described the Committee of the Regions as being "particularly sinister". He described it as a "fraud". He described the government publication on the subject as "a deceitful little publication". He described it as "a monstrous concept". We can take different views without indulging in that kind of language. If the noble Lord is disposed to make comments of that kind he could have made a better job of showing in what way the committee was particularly sinister.
If we take the trouble to look at the clauses which are the subjects of these amendments, it is very difficult to find the sinister interpretation which a number of noble Lords have placed on them. Amendments Nos. 20 and 31 seek to take out early references in Articles 2 and 3j to economic and social cohesion. They are clearly legitimate paving amendments. Amendment No. 52 has not been debated at all. It seeks to take out references to the European Investment Bank, which is referred to in Amendments Nos. 237 and 238, which, again, have not been debated at all.
I have to say immediately that there are two amendments in the names of noble friends on the Front Bench; namely, Amendment No. 167 and the Motion that Clause 6 shall not stand part of the Bill. Both those amendments were put down before other amendments were available. The intention of those amendments was simply to see that the matters were discussed. We certainly do not think that Title XIV or Clause 6 should be taken out of the Bill.
Then we come to Amendment No. 160, etc., concerning the economic and social cohesion and the structural funds. Noble Lords who tabled these amendments seek to take out virtually all—although, interestingly, not all—the elements of the economic

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and social cohesion provision. I shall come back to that issue again because I believe that it is critical to our attitude towards that part of the treaties.
In Amendments Nos. 234 to 236, my noble friend Lord Bruce and the noble Lord, Lord Tebbit, seek to remove the provision for the Committee of the Regions. I found that very strange and I also found the argument of my noble friend Lord Jay very strange. He sought in terms of which I believe Milton Friedman would have approved to say that the geographical and economic difficulties should be dealt with by the exchange rate. I am not quite sure whether he meant that Catania and Strathclyde should devalue whereas Brabant and London should revalue. I do not think that he quite realised that the regions which are helped are not exactly the same as those which have separate currencies. The Committee of the Regions is there in an advisory capacity —I emphasise that fact—to the Council of Ministers, the European Parliament and the Commission in order to ensure that the structural funds are actually used to good effect. It has been a triumph for my right honourable and honourable friends in another place to ensure that we have in the Bill Clause 6 which secures that the membership of the Committee of the Regions from this country shall be themselves members of local authorities and shall genuinely represent those regions rather than simply being appointed by Whitehall or Westminster.
The view of the local authority associations, after considering the amendments agreed to in another place, is that no further amendment to Clause 6 is required. That is relevant to the point made with the best of intentions by my noble friend Lord Stoddart when he sought to make a further amendment to it.
Then we have the amendment of the noble Lord, Lord Willoughby, to the protocol on economic and social cohesion. My noble friend Lord Clinton-Davis has made clear what was not perhaps evident: that the protocol is an attempt to ensure that economic and social cohesion is very much more at the initiative of member states rather than being centrally directed by Brussels. If he looks again at the protocol and compares it with the text of the treaties, he will see that it has the very opposite effect to that which he was alleging.
One could speak for ever on this complicated group of amendments, but I think I have said enough. However, I should like to respond to the statement by the noble Lord, Lord Pearson, that economic and social cohesion is essentially socialist in character. For those of us to whom socialism is not a dirty word, that is something with which we agree. But of course it is broader than that. From what my noble friends Lord Eatwell and Lord Sefton and the noble Lords, Lord Aldington and Lord Mackay, have said, it is not possible to distinguish between our economic benefits, as citizens of the United Kingdom, and the social justice element of economic and social cohesion which is put forward, in comparison with British legislation, with commendable clarity and simplicity in the articles of these treaties. Economic and social cohesion is proposed because it is right in itself and because it is
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good for us as well as good for the rest of Europe. I hope that the Committee will not see fit to agree to these amendments, which would take out these valuable parts of the treaties of the European Community.
Baroness Chalker of Wallasey: This has been an interesting debate. There have been nearly 20 speakers and we have discussed the three main areas. A number of questions have been raised and I will now seek to respond to them as well as commenting on the amendment that was moved.
First, I think it behoves us all to realise that the Community's commitment to assist the less well developed regions dates back to 1975, when the European Regional Development Fund began. I want to pay tribute to the noble Lord, Lord Thomson of Monifieth, for what he did as a Commissioner. I remember going to see him as a constituency MP, and he really did seek to help the regions in a way that was most commendable. We may not always have agreed with what he said, but he certainly made regional development a reality for those who came from the less well-off regions of the country.
Economic and social cohesion has the specific objective of reducing economic disparities between the regions of the Community. That first appeared in the treaty with the 1986 Single European Act, which added the five new Articles 130a to 130e, which have been the subject of a number of debates in this group.
These specified that the main instruments of cohesion would be the structural funds, including the European Social Fund, the ERDF and of course the European Investment Bank, about which several of your Lordships have commented tonight. The new provisions in the Maastricht Treaty are the attempt to build on those articles by stating that the EC policies and actions must take cohesion into account, although this is not a sweeping provision designed to ensure that all EC actions are subordinated to the objective of cohesion because other treaty provisions must be taken in their context. I think that this is important to remember.
The second way in which the treaty seeks to build with the five new articles is by providing for the establishment by the end of this year by unanimity in the Council, by the cohesion fund for projects in the fields of the environment and trans-European networks which will benefit the Community as a whole.
The interim arrangements are already in place. There is little doubt that by the end of this year, with the ratification of the Maastricht Treaty—I hope by all 12 nations—we shall be able to proceed to help those regions of the Community that need the assistance. I shall return to the arguments put by my noble friend Lord Pearson of Rannoch and others about what they believe this is all about.
We build also upon those articles by providing the cohesion protocol which is annexed to the treaty. That assistance from the cohesion fund will be made available only to those member states which have a per capita GNP of less than 90 per cent. of the Community average and which have implemented sound macro-economic policies designed to attain

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their targets agreed in their convergence programmes with the Community. I believe that the Maastricht Treaty improves upon the existing cohesion articles in the treaty by targeting the Community's cohesion effort where it is most needed.
Some Members of the Committee have noted that the Maastricht Treaty says nothing about the level of cohesion spending. The reason is that the Edinburgh Summit took the necessary decisions to finance the economic and social cohesion objectives, as reaffirmed in the Maastricht Treaty. Although the settlement was generous, it was rather less than the Commission was demanding. For the period 1992–97, the Commission sought over £90 billion for structural actions. The final agreement was £5.7 billion less than that.
I was asked about the structural funds in the UK. One-seventh of the UK's structural funds allocations have been spent, as my noble friend Lady Elles said, in Northern Ireland. Nearly half has been spent in regions affected by industrial decline under Objective 2. More than a quarter has been spent on training for the long-term unemployed and young people. Rural areas also benefit from development grants and agricultural restructuring to the tune of about £640 million. I was asked about projects in the UK. Let me give some examples because we truly benefit: Sheffield and the lower Don Valley have benefited from an ERDF grant of £11.3 million, with a supertram project; the Belfast cross harbour rail bridge received an ERDF grant of £5 million; the Vatarsay causeway linking the Isle of Barra and the Isle of Vatarsay in Scotland has received a grant of £1.7 million from the ERDF; in Strathclyde there is the Stepps bypass; at Swansea there are the Carnathen Road improvements; and there are many other examples. This country benefits as well as other countries in the Community from the structural funds.
In moving Amendment No. 20 my noble friend Lord Pearson of Rannoch spoke in a rather strange way, I felt, about the contradiction that he perceived between an open market system and a level playing field. What he may not understand is that when countries have been so far behind they need some help to give them even a starting chance to compete in that market. That is the philosophy. It is not to prop up uneconomic areas; it is to give them a chance to earn their own living. That philosophy is one which in my lifetime the Conservative Party has always supported.
I believe too that we have to ensure that we fulfil the philosophy which is included, clearly, in Article 13Oa that
"In order to promote its overall harmonious development, the Community shall develop and pursue its actions leading to the strengthening of its economic and social cohesion".
I should have loved the word "growth" to have been included, because that is what we are after, but the word "cohesion" is the word that seems to work in other parts of Europe, so we have the word "cohesion".
I was asked why we need the cohesion fund in addition to the ERDF and other funds. It is, as I said, because of its specific aim; to aim at those problems where the four poorest member states need extra flexibility in financing the projects in the fields. That is
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because we considered that the arrangements under the existing structural funds were not adequate in that respect.
The kind of projects to be financed are expected to be of broader benefit to the Community as a whole. There is no doubt that the cohesion protocol adds an important element of conditionality into the cohesion fund which requires the recipients of the fund to follow sound economic policies as specified in Article 104c of the Maastricht Treaty. That would have been impossible, certainly difficult, to achieve in the existing, well-established funds because they would not have borne that particular amendment.
Perhaps I may move on to the issue of taking up structural funds from the Community. That was mentioned by the noble Lords, Lord Clinton-Davis and Lord Eatwell. I fully accept that there have been problems in the past with taking up structural funds entitlements. Noble Lords may recall the blocking by the Commission of EC structural funds to help the coalfields. Agreement was reached with the Commission to unblock the funds. But having worked closely with the Commission to prevent such problems recurring it seems that sensible dialogue with the Commission is the best way of solving these difficult problems.
It is not unreasonable, on the face of it, for the Commission to insist that EC structural funds do not displace equivalent national spending. It is important that the Commission is made to understand that UK arrangements demonstrate additionality. But much rests on finding an answer to the hypothetical question of whether this spending would have taken place without the EC funding. I believe that it is important that our local authorities and other bodies are left to decide for themselves whether they wish to support the projects which could receive Community funding. Every effort is being made to ensure that the UK structural fund allocation is fully taken up.
I have spoken of cohesion and the structural funds in those general terms. I turn to the points that were raised about the Committee of the Regions. The noble Lord, Lord Pearson, and others mentioned the Committee of the Regions. The noble Lord, Lord Moran, asked a number of questions. The Government welcome the establishment of this committee. A wide range of EC policies affect regional and local interests either directly or indirectly. We therefore believe that it is right that they should have the opportunity to make an input into the Community's decision-making process.
The Maastricht Treaty establishes that the committee will have advisory status, which was one of the questions I was asked. But the committee must be consulted (Article 198c) on new proposals in a number of areas such as education, vocational training, culture, public health, cohesion and trans-European networks, which are covered by separate articles. The Committee of the Regions may also be consulted in any other instance which is considered appropriate or issue an opinion on its own authority where regional interests are clearly involved.
The treaty provides that the committee will be made up of representatives of regional and local

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bodies appointed to serve for four years. The treaty makes it clear that it is for the governments of member states to nominate their national candidates to the committee, but it is left up to the member states themselves to decide how their seats should be allocated among their regions and what kind of representatives should be nominated. In the United Kingdom the Secretary of State for the Environment will take the lead in the selection of representatives in England and the Secretaries of State for Scotland, Wales and Northern Ireland will do the same for their parts of the kingdom.
Perhaps I may say to the noble Lord, Lord Stoddart, who asked about this matter towards the end of the debate, that of course Ministers will take into account the views of the local authority associations. We hope to announce the allocation of seats among the four parts of the Kingdom during the summer.
I understood the noble Lord, Lord Moran, to ask whether regional Ministers could be on the Committee of the Regions.
Lord Stoddart of Swindon: I am sorry to interrupt the noble Baroness, but I asked her about the continuation of the person as a local authority member. Will she deal with that?
Baroness Chalker of Wallasey: I hope that Members of the Committee will possess their souls in patience. An enormous number of questions were asked and I was just about to turn to that matter.
Lord Hailsham of Saint Marylebone: Hear, hear! You are doing your best.
Baroness Chalker of Wallasey: I will answer the noble Lord, Lord Stoddart, right away so that he does not lose his track, even if I then lose mine. Under Clause 6, those who are elected will remain on the Committee of the Regions for the period for which they are appointed. I hope that those nominated will not only serve in the future but will be those who have experience of the region in the past because I believe that that is important. The noble Lord asked me whether those people would be able to serve for their full period. I believe that they will serve for the period for which they are appointed under the Act.
Perhaps I may return to the question that I was seeking to answer. The noble Lord, Lord Moran, asked about regional Ministers. I give an example. My honourable friend the Minister of State for Scotland, Lord James Douglas-Hamilton, has gone to an education council as the education Minister for Scotland with the agreement of Ministers in this country. But to serve on the Committee of the Regions, any such Minister would need to be a local councillor as well and that is unlikely to be the case. I hope that that clears up that point.
Ministers who sit on the committee to advise or answer questions of the committee, which seems to be a possibility, just as Ministers have gone before the economic and social committee in the past, would have to he completely independent in the performance of their duties. In other words, they will go to give
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general information and not to lobby in the way that the noble Lord, Lord Moran, suggested. Article 198A covers that.
I believe that I have covered how members will be selected, with the help of the local authority associations, by the Secretary of State for the Environment and the Secretaries of State for Wales, Scotland and Northern Ireland.
The committee will use the common organisational structure which is provided for the Economic and Social Committee, which is a sensible, cost-reducing measure. To those who have intimated that it is yet another part of the bureaucracy, I can say that we have sought specifically to avoid a separate secretariat and to make sure that members are there not only in the way that Article 198C describes it but in order to be consulted wherever it is considered appropriate.
I was asked also about the European Investment Bank. That bank has an important role to play and this country has also benefited from it. My noble friend Lord Pearson of Rannoch asked about Italy taking 40 per cent. of EIB lending in the Community. If one looks at many of the areas of Italy, it is perhaps not surprising, having been there from the beginning, that it has benefited in such a way. Perhaps I may point out a matter which my noble friend Lord Pearson did not seem to appreciate; namely, that the United Kingdom is currently the third largest borrower from the EIB, taking last year £1,823 million of the total lending within the Community. That was some 15 per cent. We were only exceeded in borrowings by Spain which took about 19 per cent. and Italy which took some 24 per cent. The EIB has, indeed, benefited us all over the country. I am quite clear that we shall continue to benefit from this part of the support for the regions of our country.
The noble. Lord, Lord Bruce of Donington, asked about the Commission being responsible for the apportionment of the funds. Of course, the Commission is involved; but so are the member states. Because of the additionality, which some of the noble Lord's noble friends do not like very much, there is very close control on the bids for resources of a regional development nature.
I feel that the contribution of my noble friend Lord Mackay answered the comments made by my noble friend Lord Willoughby de Broke. I was deeply concerned when he described his concept of aid and regional policy as having been put to your Lordships in a constructive spirit. He suggested that there should be, as he called it, a regional development agency somewhat similar to the Overseas Development Administration. I must say that I do not believe that the role in regional development which is needed throughout the Community could be carried out by this country alone, or by those countries concerned as regards their poorer regions. In my experience, there is much to be gained from co-operation between the partners and also from the sharing of many of the development ideas, even within the Community. Therefore, I do not believe that my noble friend's concept was one that we could follow.
My noble friend Lord Willoughby de Broke asked me several further questions. He asked about the

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timetable for the fund. I can tell him that it is unchanged. He then asked about the size of the fund. The answer is £12 billion for the cohesion fund over seven years. He also asked about enlargement and made comments about the way in which central and eastern European countries would take a large proportion of the money. The only enlargement before the Community at present is that to Austria, Sweden, Finland and Norway. Each of those four countries would be new contributors to the development efforts of the Community. Certainly the central and eastern European countries will not join until their economies are much more robust.
In talking about Amendment No. 418, my noble friend Lord Swinfen asked about regular reporting to Parliament. I can tell him that there is regular reporting. I shall look into the question of time intervals, but it is nearly always carried out on an annual basis because that is the way we run our business in the country. There is no reason why it cannot be undertaken on an annual basis. I do not believe that it needs to be written into the Bill or, indeed, into the treaty.
The noble Lord, Lord Eatwell, talked of priming the pump in the weaker regions. I thought that that was a very good expression for describing what we are trying to do to encourage the weaker regions to stand on their own feet. That is the philosophy. My noble friend Lord Aldington gave some expert advice and reminded us of what some of his colleagues on the Select Committees have said and done in the past. I must say that I found myself much in agreement with him.
I understand the contributions made by other Members of the Committee. I found the comments of my noble friend Lord Sanderson of Bowden very persuasive. He has direct experience of what has taken place. Those with direct experience are those who can show that this is not a crazy policy, as some have tried to describe it. It is a policy for the growth which we wish to engender in these poorer parts of our Community.
There is one final comment that I want to make about fraud as this was mentioned a number of times. There were a number of wild comments about fraud. However, the problem with fraud is always, as my noble friend Lord Aldington said, in the member states. The big question—this is a paradox really—is: how can one bear down on member states who one believes to be acting fraudulently without increasing the Commission's powers to investigate? In this Bill and through this treaty we are increasing the powers of the Court of Auditors. We are seeking to make sure that we can bring before the court a country that does not comply with a regulation.
We are reviewing the structural funds at present and I can assure the Committee that coping with the problems of fraud is uppermost in our minds. It will be a key subject for resolution and I believe it is clear that we are intent on ensuring that all the resources are used for positive outcomes and are not used fraudulently.
The noble Lord, Lord Bruce, said that the Commission might use the funds to buy support in
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other contexts. I believe he is wrong. Article 130d makes the matter quite clear. It states that the Council will set up a cohesion fund,
"to provide a financial contribution to projects in the fields of environment and trans-European networks in the area of transport infrastructure".
That could not be clearer.
Many questions have been asked tonight that reflect real concerns. However, more than half of the speakers tonight have expressed the view that the best way for the poorer regions of the Community to catch up with the richer ones, and to increase trade as a whole—if we can strengthen the poorer regions of the Community then we can strengthen trade overall—will be to pursue sound economic policies and encourage enterprise.
Article 3a of the Maastricht Treaty reiterates the principle of an open market economy with free competition. The Community's cohesion effort has a role to play in supporting such policies because they are of benefit to the whole Community. I know that many of the amendments moved tonight were moved to probe the Government's position. I hope that my noble friend Lord Pearson of Rannoch will realise that we are intent on making cohesion, and indeed development, work in a proper way. I hope that he may see fit to withdraw his amendment. Should he not do so, I must advise the Committee to vote against Amendment No. 20.
11 p.m.
The Earl of Dudley: I hope that I may quickly ask the noble Baroness whether she can give a specific answer to the charge of the noble Lord, Lord Peston, which I found disturbing; namely, that over £500 million was available for local authorities from the Commission but was being blocked by the Treasury. I hope that that charge is untrue, but it deserves an answer.
Baroness Chalker of Wallasey: It was the noble Lord, Lord Clinton-Davis, who asked about that. When I was speaking about additionality it was that very point that I was answering.
Lord Pearson of Rannoch: In trying to sum up this debate I shall mention one or two of the points that have been put to my noble friend the Minister which I am afraid she has not answered. I know that there is an agreement that we should try to finish by 11 o'clock but I have to put it to the Committee that the 12 minutes taken by my noble friend Lord Peyton did not exactly earn the sympathy of the Committee or contribute much to the debate.
Noble Lords: Oh!
Lord Pearson of Rannoch: Could I help my noble friend by saying that in the matter of fraud in the Community there is one way of course of reducing the amount of such fraud and that is by not increasing the powers of the Commission and by not giving so much money to the people who are taking it?
I am afraid that one or two questions were asked., and, as this is the Committee stage, I have to press my noble friend for an answer, though perhaps not now,

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if that is the sense of the Committee. One point I put to her was whether she could assure us that the Committee of the Regions would not become what I and others have come to describe as a "Tebbit's peg" which will undermine and replace the authority of the national parliaments in due course. I do not think that I received an answer to that question.
In answer to my question as to whether the political, bureaucratic and legal minds which have created the proposed European Community understand that a level playing field and a market are a contradiction in terms, I understood my noble friend to say that we had to give the poor countries the chance to earn their living. Other noble Lords took that line as well. She also said that this country benefits as well as other countries. But I am not sure whether I heard her give a precise answer as to what is our net contribution to the cohesion fund. Of course this country benefits, but what is the net balance? Are we, in fact, net payers in this matter?
I have to say that I asked my noble friend whether she believed that the £7.24 billion which we are committed to subscribing to the capital for the European Investment Bank will be wisely invested in the interests of the British taxpayer. I also have to tell the Committee that the noble Lord, Lord Eatwell, who I am sure is not going to press my noble friend the Minister on this question, asked her very clearly why the United Kingdom has set its face against growth in these cohesion funds if our Government believe that they are so helpful.
One other question put to my noble friend by my noble friend Lord Willoughby de Broke concerned Protocol 15 and the money to be spent on specific needs projects which are not environment, transport or the other matters. These are very substantial figures and I hope that in due course we shall get an answer to that question.
Those are the questions on which I should like to press my noble friend the Minister. I also think it would be appropriate for me to answer some of the points which were put against our position on these amendments by other noble Lords.
My noble friend Lord Aldington mentioned your Lordships' report on regional development policy. He said that the policy need not result in as much fraud as occurs. I do not believe that anyone denies the figure of at least £5,000 million a year annually, or perhaps more, in that regard. My noble friend Lord
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Aldington went on to say that some member states do not look after their funds. Our point in this matter is that we do not really mind if they do not look after their funds: what we object to is when they steal ours.
My noble friends Lord Aldington, Lord Sanderson, Lord Mackay and others went on to praise the benefits of these funds when they reach the rural grass roots. Rannoch Moor, with which, obviously, I am associated, was mentioned as a grass root in question. I have to say two things to them. First, would we not perhaps have had more money of our own for the grass roots of Rannoch Moor and elsewhere if we were not wasting so much money in other directions and on other less honourable grass roots? I must also say that they have picked an extremely good example of the way in which the bureaucratic mind wastes these funds, when they reach the people they are supposed to help, in the sheep grant, where £30 is given per ewe annually at the moment which results in huge numbers of sheep being on the ground to the detriment of the ground. I think that they do very considerable damage in the world where I live.
I shall draw to a close, the Committee will be pleased to hear, by saying that I enjoyed very much the speeches of the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Stoddart of Swindon, from the Benches opposite. I think that they made entirely clear from those Benches—and I may say that their views are shared by others on those Benches who did not speak tonight—that they are not in the least bit against redistributing wealth. They merely wish to point out, as we have wished to point out, that the cohesion funds and the economic and social policies of the Community do not work, do not achieve the purposes for which they are spent, and are very unlikely to do so under the structure envisaged by the Treaty on European Union.
Having said that, and having gone three minutes beyond the time which my noble friend Lord Peyton so generously gave me, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Trumpington: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.
House adjourned at quarter past eleven o'clock.