HL Deb 08 March 1995 vol 562 cc272-356

3.8 p.m.

Lord Jenkins of Hillhead rose to call attention to the need for the United Kingdom to play a positive role in the Inter-Governmental Conference of 1996; and to move for Papers.

The noble Lord said: My Lords, I do not wish this to be a politically partisan debate. I have at least two substantial reasons for that. The first is the appalling effect which excessive attention to party politics has had, under different governments and over several decades, on Britain's ability to deploy an effective and consistent European policy. The second is that in my view there is an urgent need to revive the cross-party pro-European alliance which provided the Heath Government with its 1971 majority for taking us into Europe and which overwhelmingly won the 1975 referendum, despite indications six or nine months beforehand that public opinion was just about as unfavourable as it looks today. That same cross-party alliance, in a brief revival in your Lordships' House, secured a massive majority for the Maastricht ratification nearly two years ago.

However, there is no denying that the superficial mood in the country has become much less favourable than it was at the time of those several past events. But, as Sir Edward Heath himself pointed out in last week's debate in the other place—a debate which I found singularly instructive in a number of ways, to which I shall refer—if year after year a government do practically nothing to counter the drip, drip, drip of denigratory news about Brussels and everything to do with the Community and if they allow that to be almost the only European diet of the British people, enthusiastically magnified by a press which is now overwhelmingly owned by those who have very little stake in the future of this country, one should not be surprised at the result. If one goes for a ride on a tiger, one may end up, if not in Riga, at least somewhere fairly unpleasant. This, M. Balladur has rather vividly been discovering in relation to his excursion on the back of M. Pasqua.

It is also undeniably the fact that 20 years of vacillation have reduced British influence in Europe to its lowest point since we joined in 1973. That political history was encapsulated by Mr. Blair, again in that instructive debate, when he said that he would prefer to be leading a party which had been anti-European and is now pro-European than leading a party which was pro-European and is now becoming anti-European. That fair, if damaging, summary was not very flattering to either party but tells us a lot about what has bedevilled British policy towards Europe. I do not want to be self-righteous about this—

Noble Lords

Hear, hear!

Lord Jenkins of Hillhead

My own party has never had the temptation of behaving weakly in government. I should like to believe it would not, but it has never been put to quite the temptations which other parties have had. But let there be no doubt that this sort of weather-house attitude towards Europe, in which one figure representing the Conservative Party comes out and the other figure representing the Labour Party goes in, and vice versa, has steadily pushed us away from the centre of influence and decision-making. There have been few greater illusions than the view sedulously propagated that everything in Europe has recently been going our way.

Its only rival for illusion is the belief, a constant triumph of hope over reality, that the Franco-German partnership is always on the point of breaking up and that either country would much rather be allied with us than with the other. I have heard that not merely recently but going back to the Schmidt/Giscard partnership, and going back even before that to the Adenauer/de Gaulle partnership. On the contrary, in my view, despite certain natural strains, it is a relationship which has steadily deepened and in which there are now such vested interests involved on both sides that it transcends changes of personnel at the top. The tragedy of our British position is that we have allowed ourselves to become a rather sour observer of this remarkable partnership, which is Europe's greatest gain compared with the 75 years from 1870 to 1945, and that subconsciously we are always hoping, generally vainly, that it will fray.

The peripheral position to which we have reduced ourselves is plain for all to see. It showed itself, for instance, in the fact that Sir Leon Brittan, much the ablest available candidate, was not seriously considered for the Presidency of the Commission because of his nationality.

Noble Lords: Oh,

Lord Jenkins of Hillhead

My Lords, it was totally understandable. Why should a group of countries have someone from a country which they feel has a half commitment—half in, half out—and might be off at any possible moment? It was totally and wholly understandable. All that we could do was to play a charade between M. Dehaene and M. Santer, whose moment of glory in Mr. Major's eyes—the right man in the right place at the right time—was somewhat shortlived. As I have reason to know more directly than anyone else, Britishness was in no way a similar disqualification 18 years ago.

Then we had the Prime Minister's speech last week. That, also, I found yet another instructive aspect of last week's debate in another place. I thought he engaged with the subject more seriously and reflectively than perhaps has been his habit. He did indeed say some favourable things, and said them forcefully, about the Community, which made it a very exceptional speech. One could feel him almost arguing with himself in the course of the speech. And, on the whole, a politician arguing with himself is a more edifying spectacle than one arguing with his opponents. But when that has been said, I was struck and depressed by the totally reactive, as opposed to proactive role, which he assumed for this country, particularly in relation to the single currency, which was the subject to which he principally addressed himself: we will wait and we will see what Germany and France, attended by Benelux, decide to do and then we will react to that according to what at the time we judge to be in the best interests of the country.

This "attentiste" attitude has some advantages. It does not slam a door. It does not repeat the Prime Minister's unwise assumption of a short time ago that a single currency is a chimera. And it does not mount a ridiculous horse of monetary sovereignty, in a week when the activities of Mr. Leeson, following the somewhat different ones of Mr. Soros a couple of years ago, demonstrated the hollowness of a tight little island money entirely under its own control.

But this waiting attitude—see what France and Germany do—is totally incompatible with the view that Britain has a leadership role anywhere near the heart of Europe. It also shows an imperviousness to every lesson we ought to have learnt from our past experience. It was precisely this attitude which got us the worst of all worlds in our approach to the exchange rate mechanism. One of the recent weaknesses of the pro-Europeans is that we—and I deliberately say "we"—damn everything with faint praise and stress how moderate and reasonable and even half-hearted we are. As a result, increasingly, the best lack all conviction and the worst are full of passionate intensity. A ratchet effect goes on and the position of the Government, responding to the passionate intensity, becomes more and more hostile. Therefore, eschewing half-heartedness and looking at our ERM experience, I do not hesitate to say that our major mistake was being the only one of the nine members of the Community at that time which did not fully participate from the beginning.

That was a decision which cannot be laid at the door of the present Government. It was taken by the previous government a few months before Mrs. Thatcher came to office. And vividly do I recall my sense of disappointment—perhaps more sadness than surprise—when I realised that the European monetary system, inaugurated under a British President of the Commission, was to be without a full British participant. Thus was an important step taken on our journey to the periphery of Europe.

But the benefits of initial adhesion would not merely have been political and symbolic, important though those considerations can be. The object of foreign policy, after all, is to keep friends and win influence for British interests. The initial adherence would also have meant that we could have homed in on a correct and sustainable rate of exchange, rather like an artillery barrage ranging onto a target—an enterprise in which I have not engaged for approximately 50 years now.

In the early days of the European monetary system there were a great many fairly small adjustments of central rate which were all done without humiliation or upheaval. Eleven-and-a-half years later the position had become much less fluid and we lurched into the trauma of Black Wednesday without being able to get the rate right by trial and error. Moreover, from the beginning we would have avoided the wild exchange rate fluctuations of sterling of the early and mid- 1980s when we varied for no rational cause between 1.07 dollars to the pound, and approximately 2.40 dollars to the pound, the plunges producing interest rate panics and the surges adding to the destruction of too much of British manufacturing industry. We would have had the ERM stability from the 1980s enjoyed by all the others under our belt before we came to face the much more turbulent climate of the early 1990s. As it was, we just joined for the crash.

It is not a bad idea to try to see things partly through other people's eyes as well as through our own. Furthermore, we gave a great deal of fuel to the thought that everything went well in Europe with the ERM until we came in and mucked it up not only for ourselves but for others as well. That history does not provide much encouragement for our applying the same recipe in the future.

The single currency apart, what are the other issues which will confront us at the IGC? Frankly, I would not expect the Inter-Governmental Conference to attempt a great leap forward: it is doubtfully well-timed for that. But there are certain clear British interests which we should have in mind and which, properly handled, would not only serve those British interests but could put us much nearer to the mainstream and not skulking in an isolated corner.

On the assumption that at any rate part of the Government really want us to stay in Europe and see "an ever closer union", to which we have committed ourselves over and over again, functioning efficiently and constructively, although certainly without seeking in any way to obliterate different national characteristics and certainly without seeking to obliterate equally a strong continuing role for national governments—in my view those fears have always been a complete illusion—on that assumption of wanting things to work well and constructively, two British policy objectives would probably command the nearest approach to widespread agreement in this country. The first is reform of the common agricultural policy and the second is further enlargement, particularly to the east, so as to fulfil Europe's duty to the lands and cities indisputably European which, as it were, emerged with their eyes blinking from 40 years of Iron Curtain oppression and which are now desperately short of security anchors, political support and a sense of international direction. Those two objectives are in fact clearly linked with each other, for without CAP reform, major enlargement is not possible. The Community simply could not afford to extend the CAP to the countrysides of Poland and Hungary in its present form.

But there is also a third, lurking British Government objective which is also a part of the nexus with the other two, but this time in a perverse way. That third objective at the back of the British Government's mind is to retain for each and every member a liberum veto and restrain or even eliminate qualified majority voting where it exists, to make qualification as high and as difficult to attain as possible.

Apart from the basic fact that a union of between 20 and 30 members will be frozen into immobility by such an approach, by a liberum veto, it is more specifically incompatible with the other two objectives. One will never reform the CAP under a unanimity rule, and without CAP reform we are blocked to the east. If the Government would face up to that dilemma, and also to the fact that it is no use complaining that Brussels is a remote bureaucracy unless you are prepared to bring it more under the control of the European Parliament and strengthen its links with national parliaments too, then Britain could have a constructive approach to the IGC which would win it more allies than it has seen for a very long time.

But that depends on the genuine desire to get the most out of British membership and to make things work. Alas, however, a note is increasingly struck not only on the Back Benches but to some extent in the Government itself, to which the only logical conclusion is that Britain should seek its destiny outside the Europe of the Community. If that is so, then for God's sake let it be clearly said. That would produce a cleaner and more honest argument. Nothing is worse than the desire to undermine and denigrate in every possible way without the courage of openly going to the conclusion. The core of the Government is in increasing danger of being pushed in that way, which is a recipe not only for minimising British influence but for making us disliked and distrusted as well as disregarded. Half in and half out is hopeless. But such is our store of old capital—moral and political capital—that with courage and commitment this country could still play a great role in Europe. My Lords, I beg to move for Papers.

3.29 p.m.

Lord Howe of Aberavon

My Lords, the noble Lord, Lord Jenkins of Hillhead, will not be surprised to learn that I find it difficult to follow him in the more partisan parts of his analysis, so I am glad to be able to congratulate him on his insight that his present party has never needed to abandon its self-righteousness on this issue. I am glad to be able to agree with him when he stresses the need for Britain to play a positive role at the IGC. I hope that the House will forgive me if an earlier commitment to give a lecture on this topic this evening prevents me from being here for the winding up of the debate today.

It is all too easy on this topic in this kind of debate to find ourselves not merely repeating each other, but repeating ourselves. Perhaps the House will therefore forgive me if I start with two texts from statesmen outside this House whom I have had the good fortune to meet in the past few weeks. The first is Kurt Biedenkopf, the Minister-President of Saxony, whom I met at a ceremony in Chemnitz last week. He said: Before we give consideration to further institutional development, the tasks facing Europe need to be properly understood and clearly defined". I think that that is a fundamental proposition. I do not mean to imply by that quotation that there is no need for the IGC to consider such questions as the mechanics of qualified majority voting or the size of the Commission, but those should, in my view, be subordinate to consideration of the basic strategic questions.

On that, I turn to my second witness, President Eduard Shevardnadze, whom I chaired when he spoke at Chatham House recently. He asked this telling question: Why were the world community and Western nations in particular caught unprepared on the very threshold of this swift and consequently unmanageable transformation of the world"? He spoke of having experienced for himself, all the horrors and nightmares of enraged, aggressive separatism. No less ghastly than the brutalities of Hider", which pose a serious and continuing threat to the stability of our continent. That is why I agree with the noble Lord, Lord Jenkins, that the main task facing our European partners ahead of and beyond the IGC must surely he the evolution and implementation of a clear strategy for the rehabilitation of post-communist Europe.

I say that it is a task "for Europe" because we cannot necessarily expect American help or American leadership. Of course, we want that help—and I am sure that it will be forthcoming—but I do not believe that we can, or even need to, look to the United States to play the leading role in that task. I fancy—indeed, I fear—that the manifest reduction in the threat from the east may have done more than we know to weaken the magnetism that has drawn America towards Europe throughout the past half-century. We should not underestimate the gap that exists between Secretary of State Marshall and Speaker Gingrich, between President Truman and would-be president Dole. The United States was indeed the sponsor of the Marshall Plan for the rehabilitation of western Europe, and we should be eternally grateful for that leadership and generosity. That plan underlined our intercontinental interest in each other's security. That strategic truth has not altered.

But is it not now the time for Europe to take the lead? Is it not now the time for western Europe to take the lead in sponsoring the rehabilitation of eastern Europe—with, I emphasise, the help of the Americans—to ensure a much more closely co-ordinated economic and political strategy? Thus far, neither through the international financial institutions nor in any other partnership have we given sufficient effective, balanced guidance and support to the emerging countries of the east. In my judgment, our economic approach towards eastern Europe should, as former Prime Minister Carl Bildt recently suggested, take a much more positive view of the scope for active market building between both halves of the continent. If we are able to remove the rigidities which hamper our own development—I agree with the noble Lord that they include the common agricultural policy—even cautious estimates suggest that enlargement could bring substantial long-term advantages for the whole of Europe—east and west alike.

The first Cecchini Report gave political momentum to the freeing of markets in western Europe with the benefit of qualified majority voting. A second similar analysis, pursued with vigour, could spread that benign liberalising process across the entire continent.

I should like to say just a few words about the single currency. The Prime Minister was right to make plain in the debate last week that the options are, and must remain, open for us on that issue. Whatever view we take upon the outcome of that debate, it would surely be wrong for us to play no part in shaping the development of the argument. In my judgment, a single currency should remain a long-term goal. As even George Soros has acknowledged, this week's turbulence underlines the desirability of that objective—but it also underlines the difficulties. The case needs to be discussed in relation to what we are trying to achieve and not by reference to a rigid timetable. That was one point on which my noble friend Lady Thatcher and I were glad to find common ground in our reaction to the rigidities of the original Delors Report.

I repeat that EMU should be discussed in relation to what it is supposed to achieve and whether the conditions, especially on unemployment and structural change, yet make it achievable. The process should not be hastened at the risk of mistakes which could entail great political cost. It is in that context that I hope profoundly that our country will play at the IGC a role not of reluctance but of commitment.

Our future is not to be found by turning our backs upon our European partners or by seeking to promote some nationalistic resurrection of the past. A Norwegian journalist wrote recently: Unlike the rest of Europe the British did not emerge humiliated from the War, but could—rightly—look back on 'their finest hour'. They have, strangely enough, kept a deeper dislike for their fanner German enemies than have the other West Europeans who experienced German soldiers on their soil". I ask myself continuously: why should we alone be so reluctant to abandon the enmities and hostilities of the past? Has Europhobia in some form made us fearful even of the friendships of a wider world which all our partners are willing to embrace?

I return to Eduard Shevardnadze in London who asked: Could it be that in the year of the 50th anniversary of victory over the greatest evil of the century, we would fall short of victory over the multiple new evils threatening us, with the restoration of walls which divide the world"? Is it not ironic that it should have been a former member of the Soviet Politburo who spoke thus in London of the need today for something like Churchill's vision of a world community as a force for action?

With Kurt Biedenkopf in Chemnitz, Saxony, last Sunday, I listened to a deeply moving performance by Saxony's Robert Schumann Philharmonie and Manchester's Hallé Chorus and Boys' Choir of Benjamin Britten's "War Requiem". The stunned silence at the end of the performance suddenly exploded into a spontaneous standing ovation—far longer and far more spontaneous than any that has ever been achieved by any of my noble friends. If our peoples are capable of and, indeed, anxious for reconciliation and partnership of that quality, I pray with all my heart that our leaders can find the confidence and courage to achieve the same.

3.37 p.m.

Lord Richard

My Lords, I begin by expressing my gratitude to the noble Lord, Lord Jenkins of Hillhead, for initiating this debate. I cannot compete with the noble Lord when it comes to his magisterial and judgmental attitude towards the history of the past 30 or 40 years. I shall approach the debate with certain basic propositions which I should like to put before the House, some of which were considered by the noble Lord, Lord Jenkins, and at some of which the noble and learned Lord, Lord Howe. hinted.

However, before I do so, I should like to make one other comment by way of introduction. It is unfortunate that we are not being given a statement of government policy at the beginning of the debate. It would have been helpful if the Government had exposed some of their thinking early on in the debate so that the rest of us know the way in which their minds are supposed to work.

I should like to enumerate one or two basic propositions. Some are truisms, but the thing about truisms is that they are very frequently true. First, membership of the European Union is good for Britain. It is good for trade, good for investment and good for jobs—certainly when compared with any practical alternatives that may be on offer.

Secondly, the possibility of withdrawal from the Union is just not practical politics—leaving aside the question of the legalities. The issue of membership is settled and should be regarded as settled; it was settled in 1975 and British policy should be based upon that fact. Our future lies with our European partners. It is perhaps time that we started treating them as partners instead of regarding them with all the warmth and eager anticipation with which the east coast counties of this country regarded the approach of the Vikings.

Thirdly, in the future and particularly at the 1996 conference we must avoid the errors of the past in allowing Europe to develop in ways that we do not support and which are not in Britain's interest because we failed to play an active part in the negotiations. As a corollary, the other countries of the Union could well decide to move to greater unity without us. What of our opt-out then? In those circumstances it would not be an opt-out, but more of a lock-out.

We should also bear in mind that political union, federalism, or however one wishes to describe it, is not a practical proposition at the moment. As a country we should neither rule out the possibility of greater political integration, nor should we insist on it. That follows from what the noble Lord, Lord Jenkins, and the noble and teamed Lord, Lord Howe of Aberavon, said. As to the supremacy of national sovereignty, let us meet that argument head on. The supremacy of national sovereignty as the guiding principle of political action is becoming increasingly difficult to sustain on the part of individual nations, as more and more issues come to be decided on an international rather than a national basis. Frankly the world is becoming too small to permit us to indulge too closely in that sort of luxury.

It follows that our political institutions are neither sacrosanct nor untouchable. It follows as well that the European institutions are not set in concrete either. Their powers, their composition and their relationship with each other are clearly flexible and are going to change: some indeed have changed already, witness, for example, the powers and the position of the Parliament. I am sure that as the Union gets larger and more countries become members, the institutions will have to be looked at afresh. I share the view of the noble and learned Lord, Lord Howe of Aberavon, on that point.

I think it is worth looking just for a moment at what the Maastricht Treaty says about this Inter-Governmental Conference in 1996. The treaty actually says that: a conference of representatives of the governments of the Member States shall be convened in 1996 to examine those provisions of this Treaty for which revision is provided, in accordance with the objectives set out in Articles A and B. If in turn we then look at Articles A and B, they set out the objectives of the Union itself. I concede that the wording may be somewhat sonorous, but the objectives are fairly clear. Article A establishes the Union itself and Article B sets out its objectives. So the aim of this conference is clear, at least on paper. It is to consider how much progress has been made in the areas covered in the treaty towards the fulfilment of the objectives of the European Union. So far, so clear; and that includes some pretty fundamental areas. These areas include monetary union and a single currency, a common foreign and security policy, let alone citizenship and subsidiarity. The potential agenda for the conference is vast.

I suspect, though, that when the conference actually takes place other things are bound to be talked about, particularly enlargement. Again, I share the view of the noble and learned Lord, Lord Howe, that if the 1996 conference can produce a concerted European strategy for expansion—by the inclusion of the east European countries—then it will be a success.

How are we to approach this conference? The question for Britain in many ways is not one of detail but one of attitude. Since the Government negotiated the treaty and accepted it in its present form, I assume that they agree with it. That may be naive, but it is an assumption I am prepared to make. In particular I assume that they are in favour of what the treaty refers to as an ever-closer union among the peoples of Europe". If they are in favour of that, I do wish that from time to time they might appear a little more enthusiastic about the process. The continual denigration in this country of Europe and all its works, sometimes even by Cabinet Ministers, is losing us status and influence in Europe. Our friends just do not know what to make of the current British position. Those who want to be kind to us assume that the Government's heart is broadly in the right place, as they would see it, but that for internal political reasons they have to behave as they do. Those who are less well disposed towards us take advantage of the present situation to foster mistrust of Britain's intentions. Frankly, it is a mess, and I have to say that it is a mess of the Government's own making.

The trouble is that one just does not know where the Government, and particularly the Prime Minister, actually stand. As I intimated at Question Time this afternoon, constructive ambiguity is one thing, but this continual balancing act is really quite another. Our policy towards Europe, whatever it may be, now looks as if it has been designed not with an eye to British interests but rather by what is thought to be in the interests of Conservative Party unity. I do not see how this can go on very much longer. Either the Government must be seen to be negotiating seriously in the direction that the Maastricht Treaty indicates, or they will have to make it clear that they are not prepared to see Europe move any further in that direction. What they cannot do is to say one thing and in fact mean another. What they cannot prevent is other countries moving in the very direction we have decided to avoid.

In so far as the 1996 conference will be concerned with EMU and a single currency, it would be absurd to rule out the possibility of a single currency now, as some would have us do. Does anybody seriously believe that, if conditions were right and there was the serious possibility of a single currency in 1999, the United Kingdom would be best advised to exercise its frankly meaningless opt-out and remain outside? I can imagine nothing more likely to put sterling under the most intense pressure than a decision by Britain to remain aloof. As for the effect on inward investment and jobs, I think it would be little short of catastrophic.

I have two brief pleas to make to the Government about the 1996 conference. First, we should go to the conference to try and make it a success; in other words, we should recognise that agreement is on the whole more desirable than failure, even if confrontation might help the internal politics of the Conservative Party. This time opt-outs will not do, and a statement in advance that we will veto any constitutional changes coming from the conference is frankly absurd.

Secondly, we should concentrate our efforts at the conference on two main objectives. One, which I share with the noble and learned Lord, Lord Howe, is enlargement, which I mentioned earlier. Next, we have to consider the way in which Europe is groping towards the establishment of a common foreign and security policy. We have never had one in Europe and we have never succeeded in speaking with one voice. At lunchtime today I reread the debates in another place on the Russian invasion of Czechoslovakia in 1968. I well remember it. The House was recalled and the then Mr. George Brown spoke from the Labour Back Benches and made one firm point. He said, "Europe has not been heard. Why? It has not been heard because it cannot speak with one voice". Until it can speak with one voice, we cannot expect to play the part in world affairs that, frankly, I am confident this country deserves.

3.48 p.m.

The Lord Bishop of Sheffield

My Lords, I speak very much in this debate as the man in the street and as a layman. Not only am I perhaps the only Bishop in the country, or perhaps in the world, who has no passport, but I remain a fairly unreconstructed English nationalist who occasionally murmurs to himself the scurrilous Flanders and Swann couplet: The English, the English, the English are best! I wouldn't give tuppence for all of the rest!". But worse than all that, I am a Northumbrian nationalist and it took me a long time to believe that there was life south of the Tyne; and I still doubt whether there is civilised life south of the Trent. Nonetheless, I grieve to see our reluctance to play a positive and active part in the life of Europe.

There are three things that I really should like to say to the politicians, to the Government and to those, whoever they may be, who will be taking part in the Inter-Governmental Conference. The first is to remember that we are Europeans in a Europe that goes beyond a European Union but has a common faith, a common history and a common background. That continuity with a remembered past, which will bind us together if we let it, is of vital importance.

I should like to give as mascots, as patrons, to our politicians two famous Englishmen—Alcuin and Boniface: Alcuin a Yorkshireman—a Yorkshireman through and through—born near Spurn Head, Helen Waddell tells us, although I am not sure that she is right, but near York certainly: springing from the fields and rocks above Spurn Head, like a true Yorkshireman he could boldly withstand even an emperor". He had a European mind, but knew his own as well and never lost his national identity.

To the great schoolmaster of York, the request to be the schoolmaster of Europe, made of him by Charlemagne, produced a positive response. So he left his native land, but never forgot it. The letters he wrote to his friends among the English remain significant, important and deeply moving. There was a loyalty to England that in no way weakened his loyalty to Europe. Again, Helen Waddell tells us: They were men of vision, great statesmen, soldiers and scholars, often of approved sanctity like Alcuin and Paulinus, who spent their lives striving to build on the rubble of a shattered Roman Empire, the ideal commonwealth of the City of God on earth". It is not an unworthy ambition to follow in those footsteps.

Similarly, Boniface—I cannot claim him as a Yorkshireman, he was a Devonian—had a total commitment to his brothers and sisters (his Saxon brothers and sisters in Europe) to share with them what he had come to learn not just of Christianity but of European civilisation. We do well to remember that the word "Anglo-Saxon" did not originally set us who spoke English against the rest of the world, but was to remind us of our bonds with the other Saxons—the German Saxons. We were the English Saxons, with a common race, a common inheritance, and, thanks to Boniface, and Willibald and others, soon to have a common faith.

That we remember those things is of great importance. Although we looked back at the troubled history of Europe with sadness, we rejoice to see within the European Union that what again Helen Waddell calls, "the undying quarrel for the Rhine", at least seems to have ended. I long for us to take up again our role as Europeans in Europe, remembering those great men and women from the past; remembering our history; and recognising that it is ultimately a European history, and not merely an English history.

Secondly, I want us to beware of the wrong sort of nationalism. I am a nationalist. I do not apologise for being a nationalist, but we do not have to go outside the British Isles to see the perils of a nationalism that is unable to, see good in anyone but one's self. One does not need to go further than recent history in the Balkans, in the former Soviet Union, to see the terrible perils of a nationalism that says, "My country right or wrong". When I listened to our football supporters in Bruges, or Dublin, and just occasionally read the newspaper headlines—and, sadly, occasionally listen to our politicians—I believe that we are in terrible danger from the wrong sort of nationalism.

I want us to take into Europe our own nationalism—a consciousness of our individuality, and a consciousness of our individuality that makes us warm to the individuality of others, and, particularly at this time, warm to the individuality of those nations which have been put to the outskirts of Europe, and which it must be our calling—we who are a little bit on the outskirts of Europe ourselves—to remind them of our common concerns and our common interests. There is a concern for the east, for the Mediterranean, for which we in Britain should have a special calling. We should be ashamed of that yobbish nationalism which sometimes it is tempting to people, for their own purposes, to build upon. There is too much of it around. We want to fight against it. We raise it up at our peril.

Thirdly and lastly, we need to grasp the significance, or perhaps the lack of significance, of that philosophical fiction which we have come to call sovereignty. I know, of course, as a bishop, the 39 Articles. There we read: The Kings Majesty hath the chief power in this Realm of England, and other his Dominions…and is not, nor ought to be, subject to any foreign Jurisdiction". King Canute was the first to discover the folly of that type of definition of "sovereignty". We now know that it cannot be like that. We have, for better or worse, taken the decisions that recognise that there is a variety of sovereignties. Somehow or other we hide from ourselves that that is so. We need to recognise the changed situation in which we find ourselves.

In my diocese of Sheffield there is the Dore Stone which recognises the moment when the Kingdom of Northumbria acknowledged that it was part of England—a decision that I do not believe it has ever regretted. It was not a humiliation for Northumberland to acknowledge the greater sovereignty of the Kings of Wessex. We have taken the same step already in our decisions on Europe, and yet somehow or other we pretend that we have not. We need to recognise the integrity and the importance of European institutions, European customs. Somehow, the claim to righteousness on our part—that no one is ever dishonest in England, but always dishonest in Europe; that our Parliament is always wise and the European Parliament always foolish; that our governments never do anything wrong, but the European governments are always doing things wrong—is not borne out by the facts. It does not help us to "make the best" of the profitable situation in which we find ourselves as part of a greater unit than we were before—a unit to which we come naturally by geography and history, and, I dare to say, by religion.

I long for us to be less afraid of Europe and more ready to give ourselves, as English or British nationalists, wholly to a way of living with our neighbours that recognises their distinctiveness and their individuality, but recognises too that we have a common inheritance and a common calling, and that we can do things so much better together than apart.

3.58 p.m.

Lord Elis-Thomas

My Lords, it is a particular pleasure for a mere Welsh nationalist to follow a Northumbrian English nationalist with whom I share a religious affiliation, and to follow three noble Lords with whom I also share a cultural nationality. I use those terms deliberately because those noble Lords have set to the debate a strong moral and practical tone. I welcome that warmly, because the debates that we have had in the United Kingdom on our relations with the mainland—that is how I choose to call it and will call it throughout my speech; indeed, as the people of Anglesey call the rest of Wales the mainland—have been bedevilled by a lack of conceptual understanding and the use of a completely inadequate, negative vocabulary.

Here I beg to switch the tone, perhaps, from what we have heard already about nationalism. We are now entering into a century—the 21st century—which it is hoped will be a century of post-nationalism; by which I mean that the ideology which combines the notion of identity with a notion of fictional political power has to be undermined. Because we have in the concept of the nation state mixed up the notions of political power with the notions of citizenship and identity, we have created for ourselves in the 20th century a monstrous century with over 100 million deaths, induced by the notion of nationality, nationalism and differences of identity. That relates to the whole issue of citizenship, federalism and subsidiarity.

In the remaining seven minutes I shall dwell only on the notion of subsidiarity. In the context of this debate that is the most misunderstood term in the United Kingdom. As the right reverend Prelate will know, subsidiarity derives from early 20th century Catholic moral and social theology. It is about powers not relating to particular classes or states but about powers being shared in relationships. That is where the concept arises. It was reinvented by the Christian Democrats and the Social Democrats, who were also within a similar Catholic moral milieu on mainland Europe. It was reinvented as a European concept precisely relating to the notion of shared levels of power.

In the United Kingdom it is assumed that subsidiarity stops at Dover. Subsidiarity is assumed to be about the relationship between the European Parliament, the Commission, the Union, this House and another place. Subsidiarity is not only about that; it is about all levels of governmental relationships and all levels of political powers. Within the discourse of the Community and the Union, that is how it is used. There is subsidiarity in the relationship between the Union and the member states but there is also subsidiarity between member states and nations and regions within member states.

That is where the United Kingdom debate appears to be entirely predicated upon the notion of maintaining the idea of the United Kingdom as a unitary state. The attitude of the Conservative Government—and, indeed, the attitude of some noble Lords on the Labour Benches—towards the European Union is based upon their British state nationalism. I distinguish between that and our British nationality, European passports and the notion of a Welsh, Scottish and English cultural nationality.

It is important-to make those distinctions because on mainland Europe the idea of affiliation simultaneously to different places and spaces and levels of government is not a problem. As the right reverend Prelate so clearly said, the affiliation of Northumberland to England meant that one could maintain both a Northumbrian and an English identity. Similarly, we in the United Kingdom need to construct the notion of a positive English nationality which does not become the English nationalism of our football hooligans. We need to construct a notion of English nationality that is not racist. We need to construct a notion of English nationality that is not nationalistic.

Some of us have laboured in different ways to construct the notion of a Welsh or a Scottish nationality that is not nationalistic. The whole issue on the island of Ireland is to do with the construction of a European notion of Irish co-operation that is not rooted in nationalistic traditions. The problem that we have is that England, because of its assimilation into the British state for which the Welsh Tudor dynasty must bear some responsibility, created a British form of nationalism which then became imperial. There was never an opportunity for a healthy English nation with its regions to develop.

The English are a supremely European nation. They could be nothing else in terms of their extraction, their relationship with the mainland and their culture. That is where in the past we in the United Kingdom have failed to understand our origins. Obviously, I speak as a Celt and in that sense the Celtic people are a submerged level of European identity and unity; pre-Roman and pre-Greek and everywhere dispersed. Those who are aware of the history will understand that the notion of being part of an identity that is not necessarily rooted in a single space or power is an important concept for our European future. After all, we were the people who believed in circles rather than straight lines. That kind of culture which believes in an encompassing circle is the one with which we must work within the emerging Europe.

I leave that Celtic whimsy and return to the IGC. Development in the context of the IGC will be incremental. It will be incremental for our other partners in the rest of Europe. But, within the United Kingdom, the time is approaching when we must face a crisis of identity; when we must reunderstand our national pasts. What is happening now on the island of Ireland may help us to do that. A government who can respond clearly to the feelings of Scotland, Wales and the English regions must be able to understand that the relationship between regions and nations within the UK is intimately linked with what is happening on mainland Europe, where a Europe of the regions is an emerging reality whether we like it or not. Jordi Pujol and other colleagues on mainland Europe will not go away. The Europe of the regions is the Europe of subsidiarity and the federalised future.

The problem that the United Kingdom has is that because it has developed as a unitary state it is unable to relate to those developments. The sooner that we are able within this House and another place to reject the discourse of British nationalism and to adopt a way of speaking about our identity which does not relate to the notion of one centre of political power or one form of identity, the sooner we shall be able to participate more positively in the construction of the European Union.

4.6 p.m.

Lord Cockfield

My Lords, I too am most grateful to the noble Lord, Lord Jenkins of Hillhead, for giving us the opportunity of debating these matters. I never thought that it would enable us also to debate Welsh nationalism. I have always taken the view that it is suicidal for an Englishman to become involved in matters affecting either the Welsh or the Scots. Therefore, I shall confine myself to the speech made by the noble Lord, Lord Jenkins, in introducing the subject. If the noble Lord really hopes that the Government will take what he described as a constructive approach to the Inter-Governmental Conference of 1996 he is an incurable optimist. But, of course, to be a member of the Liberal Democratic Party one needs to be an incurable optimist.

The problem with the debate in the form that it takes is that we shall have no government statement until the end of the debate when there is no opportunity for anyone to comment upon it. Whether that is because the Government have no policy, or that, if they have a policy, they are not prepared to reveal it, I am unable to say. However, the exchanges that took place today at Question Time suggested that the absence of a policy justifies the order that the debate is to take. So, as regards the Government's future intentions, we must proceed in darkness but we shall do our best.

I propose to speak only about one overarching issue. I do not propose to touch on any of the detailed matters which will go to the 1996 Inter-Governmental Conference. The issue about which I propose to speak briefly will ultimately determine the attitude that is taken on every single issue that comes before the conference. It is whether we are going forward or whether we wish to go back. Will there be further steps in the direction of European integration or are we to try to resile on the steps that have already been taken and go backwards?

I shall illustrate that point in two particular ways. There are some Ministers in the Government, and certainly many Members of another place on both sides of the Chamber, who believe that we ought to turn the European Union into some form of glorified free-trade area. That is complete and absolute nonsense and that is demonstrated conclusively if one looks at every single enlargement that has taken place in the Community since it was first established. When we first refused to join the Community—and we refused to join because at that time, no one was trying to keep us out—our reaction was to set up a rival organisation; that is, the European Free Trade Area. Within almost a matter of months, we scuppered our own creation and applied for membership of the European Community as it then was.

I shall not go through every single enlargement that has taken place since then, but the underlying trend is exactly the same. I shall take the latest enlargement which involved Finland, Sweden and Austria. They did not join the European Union in order to join a free trade area, glorified or not. They already had a free trade area and they had had that for many, many years in the form of EFTA—the European Free Trade Association. They had gone further than that. They had the European Economic Area which expanded the free trade relationship in a further direction. But that was not the limit of their ambitions. They felt that they had to join the European Union, and that they have done.

Let us look at the countries of central and eastern Europe which now wish to join the European Union. Why do they wish to join? Is it just to join a glorified free trade area? They could have had that anyway. They already have the European agreements and they could progress from those to the European Economic Area which still exists. But no, their ambition was to join the European Union. In other words, no country, including ourselves, which has joined the Community since it started ever set out to join what was merely a free trade area. The attempts to regress and turn the Union into a free trade area will not stand up to a moment's examination.

Then there is endless talk about a multi-speed Europe, a multi-tier Europe, about variable geometry and eccentric circles, about a Europe à la carte. That is all absolute nonsense and none of those will work. Of course you can have derogations. There have been derogations ever since the Community was founded, but the whole point of a derogation is that it is merely a breathing space that is given to people in order to enable them to catch up. All those other ideas are the creation of massive institutional arrangements in order to accommodate varying, disparate and conflicting views. As institutional creations, none of them will work.

However, something that will work is something like the relationship which existed between the European Union and the EFTA countries and then the European Economic Area. But the point to remember about that is that they are not differing degrees of membership of the Union. In fact, they are a relationship between two entirely different bodies.

The fact that has to be faced—we need to face it and it is no good pretending that it does not exist—is that there is a core of countries in the Union which are determined to go ahead in the direction of greater integration. They comprise at least Germany, France, Belgium, Holland and Luxembourg and they will no doubt be joined by others. There is no way at all that we shall be able to stop those countries going ahead in the direction of greater integration. It is no good talking about vetoes or blocking majorities or anything of that sort. The determination is there and it will be achieved.

We have to decide whether we are going to go along in the direction of greater integration, with all the opportunity of influencing that process and ensuring that our anxieties are taken fully into account and, in the end, being members of a cohesive whole, or whether we are going to marginalise ourselves and stand on one side. In that event, our influence, which is already gravely diminished, will be diminished even further.

From the point of view of the economic and political future and its future in terms of security and defence, I have no doubt whatever where the true judgment lies. I hope that the time will come when the Government in turn realise that that is the position.

4.15 p.m.

Lord Callaghan of Cardiff

My Lords, there has been a remarkable harmony of view in the speeches that we have heard so far and I agree with much that has been said by all noble Lords. But the time has surely come to disturb a little that harmony by asking where the biggest obstacle lies to the achievement of the sentiments that have been uttered on all sides of the House this afternoon. It lies fairly and squarely with the Cabinet and with the Conservative Party. Therefore, I intend to discuss one or two matters about the Conservative Party, and I hope that I shall not offend too much any tender consciences which there may be opposite.

The peseta and providence have jointly saved the Prime Minister for the time being from the critics who have been snapping at his heels for so long. But I forecast that the lull will not last. They will be at him again before long. The irreconcilables among them will not let go so long as he fails to meet their fundamental challenge as to where he stands on the issue of sovereignty.

The argument in the Conservative Party—and it is in the Conservative Party—is taking place on two different levels. First, the questions which the men of business, the trade unionists, the economists and the financiers ask are will monetary union and a single currency keep down inflation? Will they or will they not lower interest rates? Will they stimulate growth? Will they reduce unemployment? And, generally, will they assist their businesses? Those are the practical concerns of practical people who ask whether it will work.

The second argument is basically the position of so many members of the Cabinet—people like Mr. Aitken and Mr. Portillo, who is a young man in too much of a hurry—and Mr. Lamont, who is outside the Cabinet, supported by their Whip-less sceptics. They would hesitate for an eternity before they would surrender—I had better not say a gram—an ounce of British sovereignty. Where have they been all these years? Since World War II Britain has been giving up bits of sovereignty through trade agreements and in our defence arrangements and so on whenever we thought that it was in the interests of our people to do so; and so obviously have our partners who have entered into agreements with us. They too have given up bits of their sovereignty because it seemed to be in our joint interests to do so.

Frenchmen and Germans have not found it difficult to combine a pride in their countries and different cultures with a strong sense of being European. In this country also I take the view that the growing experience of working with mainland European business men, with others in the professions and with skilled work people travelling in and out of Europe and working side by side has resulted in a growing understanding among the people of this country that we are no less English, Welsh or Scottish because we are also Europeans and that our national identity is no less strong because of that.

I wish that the Prime Minister would recognise that. I wish that he would say it clearly and take less notice of the sceptics. He would not ease his path with them, but he will not do that in any event. But he might be surprised by the strong favourable response which he would receive by giving a lead to our fellow countrymen. That would evoke support from a great many of us. I agree with the noble Lord, Lord Jenkins, that we should be reviving a positive approach among all of us who take that point of view.

Sooner or later; the Prime Minister will have to face the issue of sovereignty. The sooner he does so and says what I believe he really feels but is frightened to say at the moment, the sooner we can move ahead in that field.

The Conservative and Labour Parties are in agreement that Brussels should not become a superstate—nor that every form of economic and monetary union would lead to that. The Prime Minister is quite unconvincing when he pretends that a Labour Government would give everything away to Brussels. That certainly was not what we did. Giving an imitation of John Bull does not really suit his style; indeed, it is not in his character. It would be far better if he were to give that up.

A week ago I wrote some early notes for today's debate about monetary union. I included a paragraph that I should like to read to your Lordships. I wrote: The real test is not whether some member states can fulfil the required criteria for monetary union at certain favourable moments in the ups and downs of the economic cycle, but whether they can sustain those conditions over a long period. That is when the test will come". When I wrote that I did not know that Spain would illustrate my point so quickly by devaluing its currency only a few days later. I speak as one who came to the conclusion some years ago that a form of monetary and economic union would be beneficial to Europe's position in the world of the 21st century. But I make that assertion subject to two conditions: first, that the system is so well adjusted, and the exchange rates are properly fixed, that it is capable of being sustained for an indefinite period; and, secondly, that its terms will not inflict the hardship and social evil of large-scale continuing unemployment on any of the member states which join.

In a number of member states at this moment their high levels of unemployment are not due solely to the ups and downs of the economic cycle but to long-term and permanent changes in patterns of trade and production caused by differential wage costs and productivity levels and, to some extent, by the effects of removing barriers to trade. In other words, as the economists say—so I am told—it is structural and not cyclical unemployment. Those changes will lead to semi-permanent high levels of unemployment, with their social costs and consequences, in some of the member states unless mitigating action is taken to enable the displaced workforce to be re-employed. The first essential is a high level of education, with the flexibility which comes from that, and the retraining of those displaced, as well as sufficient capital investment in new industries and services to replace the old ones.

If that were to come about, Britain would need to be particularly careful not to repeat the error made when we entered the exchange rate mechanism a few years ago at the unrealistically high rate of 2.95 deutschmarks to the pound. Today's rate of 2.25 or 2.30 deutschmarks, or round about there, is more than 20 per cent. lower than the rate at which we entered. Owing to the vagaries of the market, I believe that it is a little too low at present. However, that emphasises both the fact that there are such vagaries in the market and the benefits that a fixed exchange rate would bring; but it must be at the right rate if and when such rates are fixed.

That will not happen in 1997. So let us put that to one side. An economic and monetary union will not take place at that time. It is difficult to forecast the future, but it may be—indeed, I think it will be—that in 1998 or 1999 (and we shall discuss such matters in 1998) that the economic skies will not be very much clearer than they are today. That is to say, there will continue to be high structural unemployment with member states at different stages in the economic cycle but with a nucleus of countries, with Germany as the anchor, whose economies will be durably convergent and capable of forming an economic and monetary union.

If that turns out to be so, the decision about the Union will then turn on the political will of the member states concerned and particularly on the political situation in Germany. Britain will have an option—thank goodness the Prime Minister negotiated that! I hope that we shall be able to exercise it in favour of joining if and when the time comes. But those who take my view must not allow the sceptics to make all the running in favour of a referendum. If there is at the time of decision a great difference of opinion in the country, we should be ready to put the issue to the people and fight it. I believe that we would win.

If we are to get the best result for Britain, we must apply our great technical skills to constructing a practical scheme that will not rely upon unrealistic assumptions and hopes. We are more likely to achieve that aim if our negotiators are believed by the other member states to be playing a constructive role in the discussions that take place at the IGC in 1996 with the intention of achieving a positive result.

That is not the position today. Instead, we have a paralysis at the centre of government on the matter—deciding only to be undecided, irresolute rather than resolute and positive only for inaction—deeply harmful to Britain's influence in the negotiations that lie ahead. The verdict that I have reached is that if we are to exercise the influence in Europe that our technical knowledge, our economic size, our history and our experience ought to command, it will require a different government than the present one.

4.25 p.m.

Lord Ezra

My Lords, it is a great honour to succeed the noble Lord, Lord Callaghan, in today's debate. The noble Lord always speak wisely and with great and eminent experience. We are debating a major issue introduced so effectively by my noble friend Lord Jenkins of Hillhead. It is both important and timely. I believe that the issue is a very simple one: would it be more in our national interest to take up a positive attitude at the Inter-Governmental Conference in 1996 or a negative attitude?

All those who have spoken so far have been in favour of a positive attitude. I share that view. I believe that that can be demonstrated by analysing the issues which are likely to be raised on that occasion. My noble friend and the noble and learned Lord, Lord Howe, referred to the importance that enlargement will take in those debates. I believe that that is likely to be almost the dominant subject. Enlargement, which has been supported continuously by all British Governments, will be one of the most important political and economic developments of our time, arising out of the removal of the Berlin Wall. We shall be responding to that issue. I very much hope that British contributions to that debate will be positive.

As my noble friend pointed out, it is quite clear that, if we are to achieve enlargement of possibly another 12 countries from central and eastern Europe (thus making the total membership of the Community 27) with the total population rising from 345 million to 480 million, there are many things in the existing Community that started with six members some 40 years ago which will have to be renegotiated and rediscussed.

As has already been mentioned, the prime issue in that respect is the common agricultural policy with which we were landed as a country because we were so unwise as to walk out of the Messina negotiations in 1955. Had we stayed there, we would have negotiated something quite different. As it was, when we subsequently joined the European Community in 1973 we were confronted with that policy. Now, 40 years later, we have a unique opportunity to get that situation corrected. I very much hope that we will receive confirmation from the Minister when she responds that the Government have worked out what they want to say on that very important issue. The European Union could not afford to apply the same system with agricultural policy if it were enlarged to the degree envisaged. I look forward to hearing the Minister's reply in that respect.

Apart from that, we have to complete the single market to ensure that new members come into a market which is highly developed. We have already made substantial moves in that direction. Indeed, the noble Lord, Lord Cockfield, whom we had the benefit of hearing a short while ago, played a crucial part in that process. However, there is more work to be done. There are some sectors, such as energy, transport and telecommunications, where access is still restricted. Here, also, I believe that Britain can play a positive role. I say that because we have moved forward in those areas in our own country and can offer to our friends in the Union ways in which this could be achieved. That is the second area in which I believe we can be positive.

As regards competition policy, it is in our interest that we have a fair, effective competition policy and that policy must have a Community imprint. There is no point in our working out our own competition policy for our own enterprises if every other country within the single market works out its own policy. There is a need for a common approach. One of the weaknesses in the European competition policy at the moment is the subsidies and state aids which some countries still provide to their enterprises. We have eliminated that in Britain; they have not. Here we can show the way. That is therefore a third way in which Britain can be positive to serve our interests and those of the Community.

As regards financial responsibility, we are continually urging the more effective use of the resources of the Community. We are also raising the question of the elimination of fraud. I do not think we can entirely blame the Commission for that. All member countries in one degree or another are responsible for some of the fraud that goes on. However, the Inter-Governmental Conference will be an opportunity for readdressing that question. I think that here, too, we can be positive.

I wish to touch next on social policy. This is rather more controversial. I feel that we made a mistake to opt out. The social chapter is a list of aspirations. So far, very little of those aspirations has been translated into practice. By opting out we have lost the opportunity of influencing the conversion of the aspirations into reality. I believe that there is an increasing recognition among our partners in the European Community that social charges have got out of hand and have to be reduced. In my opinion, we could have played a much more effective part in that debate had we not opted out. Nonetheless, I hope we can play some part in that issue.

Environmental policy is another major issue which arises, particularly when we are talking about bringing in the countries of central and eastern Europe where, for all sorts of reasons, their environmental policies have been lacking. We must work out ways in which European Union policies can be adapted to apply to countries which, for reasons they are probably not responsible for, have been unable to come up to our standards. That is another area in which we, with our notable achievements in environmental matters, can take a lead.

There will obviously have to be institutional changes as a result of the enlargement of the Community. The question of the Parliament has often been mentioned. I happen to believe that the role of the European Parliament should, if anything, be increased but there is a case for creating a second Chamber which could consist of, as has been suggested, people nominated from the existing parliaments in the member countries. In my opinion, the relationship between the national parliaments and the European Parliament is important. We must work closely together. I hope that some thought has been given to that.

Finally, I turn to the question of the single currency. I regret that this issue has been politicised at such an early stage. What we ought to be doing is seriously considering —as the noble Lord, Lord Callaghan, mentioned in the final part of his speech—the economic pros and cons. There is not the slightest doubt that we have already lost much control over monetary policy. In fact, in my opinion we lost most control over that on a precise day, 24th October 1979, when the noble Lord, Lord Howe, was Chancellor of the Exchequer, and exchange controls were abolished. I fully accept that that should have been done, but we have to recognise that as a result of that abolition, and with the free movement of currencies throughout the world which has multiplied since, any individual government's control of its currency is limited. The only way to cope with that massive surge of currency movements—we have seen that in recent days—is to form a larger group. The big advantage of a single currency would be in that connection. The disadvantage could be that we could lose control in changing our rates of interest. Those are the issues we should be addressing. To sum up: I believe we could play a positive role in this negotiation on all the issues that I have mentioned.

4.35 p.m.

Lord Barnett

My Lords, I am sorry that the noble Lord, Lord Tebbit, will not be speaking. I assume that I shall not now have 18 minutes rather than nine in which to speak! On the other hand, I am particularly sorry because I would have wanted to disagree with the noble Lord and at the same time say how nice a fellow he is even though he tries so hard to be so nasty at times.

In the short time at my disposal I propose to concentrate on EMIJ and the single currency. I make it clear that I am in favour of Britain being a part of economic and monetary union in principle. I shall make clear why I say "in principle". The argument about the loss of sovereignty, as my noble friend Lord Callaghan pointed out, is of course something of a nonsense. We are talking about pooling sovereignty with other sovereign states, not about the loss of sovereignty in that sense. I believe, with my noble friend Lord Richard, that it is absolutely vital that we are inside the Community, playing a large part at the core of the Community. If we are not, we will be outside and that would he a disaster for our industry and for investment in this country.

Unlike my noble friend Lord Callaghan, I regret the opt-out that the Government took on the Maastricht Treaty for three reasons. First, I believe it was unnecessary for few will be ready to do what we are discussing—as everyone has said—in the timescale envisaged. Secondly, we shall be excluded because of that—and have been already—from crucial decisions on EMI and the Central Bank. Thirdly, we shall be left on the sidelines if we are not careful rather than being at the heart of Europe where I wish to see us.

My criteria for joining EMU were set out clearly in the Maastricht Treaty. They were, first, a high degree of price stability and inflation close to the three best performers. This the Government claim to have achieved. Secondly, sustainability of the financial position which we have without an excessive deficit. Again, the Government claim to have achieved this. Thirdly, observance of normal fluctuation margins inside the exchange rate mechanism and two years without a devaluation. Again, the Government claim to have achieved that. I am happy to congratulate the Government on having achieved that. How long it will last is another matter, because the question really concerns the durability and sustainability of convergence. Those are the crucial issues and they are mentioned in paragraph 1 of Article 109J of the treaty.

That achievement of a high degree of sustainable convergence, to which my noble friend Lord Callaghan quite rightly referred, is vital because if we join in an economic and monetary union and do not have that sustainable convergence we are in serious trouble. However, I have other reservations beyond those which the Chancellor of the Exchequer set out. First of all, I have reservations as regards a high degree of sustainable convergence. Secondly, who on earth will assess that we and other member states have achieved that high degree of sustainable convergence? Apparently it is not to be the UK Treasury, which is perhaps as well. It will be the Council acting on reports by the Commission and the EMI not only on the criteria I have referred to but also taking account of the development of the ecu, the results of the integration of markets, the balance of payments on current account, unit labour costs and other price indicators. That is a somewhat difficult task for one country; for 15 or more, to put it mildly, it is even more difficult.

I turn next to the European Central Bank. As at present proposed, it is to be a wholly independent central bank. I know that some can see the advantage of that. But it takes out of the hands of mere politicians the idea of controlling inflation: that it should be in the hands of central bankers who know more about these things. With great respect to central bankers, I prefer some control by politicians, who at least have to be elected on a reasonably regular basis in a democracy, even though they may get it wrong from time to time. But we in this country have already sold the pass on an independent central bank. Our Chancellor has given the Governor of the Bank of England that power. There are monthly meetings and the minutes are published later. Being a naive sort of fellow, I assume that the Governor and the Chancellor do not severely massage the minutes. We therefore have, effectively, an independent UK central bank.

That brings me directly to the question of a single currency and my third reservation. It is not as to whether we should join. I believe that we must. It is as to how and when. The single currency issue has caused the greatest anger and emotion among those on what is called the Eurosceptic side. I cannot understand why that should be because it is not going to happen now; it is not even round the corner. I believe that we can ignore the present panic in relation to the deutschmark; that is a quite separate issue. I think that it was the noble Lord, Lord Cockfield, who asked why a Minister was not opening the debate. On this crucial issue at the centre of the arguments, a Minister can only say that the policy is to decide not to decide. I have a great affection, as she knows, for the noble Baroness, Lady Chalker. But she cannot say anything else on that aspect of the problem. She can only say that the Government's policy is to decide not to decide.

The single currency needs all those criteria to be met. Then by 1st July 1998—that is only three years away—by a qualified majority vote and taking account of the opinion of the European Parliament, the Council will decide which member states fulfil the necessary conditions. With great respect to the European Parliament and the Council, they, no more than any UK chancellor, in July 1998 will he in a position to decide on sustainability and durability of exchange rates and other factors. They will not be able to. It will not be possible in three years' time. It may be for Germany but not for many others. That argument certainly applies to the exchange rate problem. I agree with my noble friend Lord Callaghan and the Governor of the Bank of England that to lock into a fixed exchange rate when one does not have that sustainable convergence could be disastrous for any member state which did so. So it will be some time before we are in a position to join.

If and when we do decide, whether it be in three years, 10 years or whenever, the argument on the other side of the debate is that it is a major constitutional issue. In my view that is a bogus argument because in practice it is a purely economic and financial issue, as the Chancellor of the Exchequer has argued. The bogey put forward by the sceptics is quite wrong and should not be deployed., But if my reservations are met, and sustained and durable convergence can be obtained, then I am very much in favour of joining in a single currency and economic and monetary union. But that would be primarily on economic and financial grounds. At that stage—and it may be a long way ahead—we would no more be giving up our basic constitutional rights than would Germany, France or any other member state.

As I have argued before in your Lordships' House, to talk about a federal Europe is another bogey. The plain fact is that if we had the kind of federal Europe which is spoken of, member states would probably have greater subsidiarity than they now have. So that argument is another bogey which sceptics use against the Community and one with which I totally disagree.

In any event, for the reasons that I have given, the time when we shall be ready to join economic and monetary union and a single currency is way ahead. I doubt—and I regret it—that it can be achieved by 1st January 1999. But I hope that we shall be in a position to join. If we are in such a position, since I wish to play a positive role in the IGC next year—I refer to the terms of the Motion—I hope that we shall make the position crystal clear.

4.45 p.m.

Lord Boardman

My Lords, like other noble Lords, I welcome the opportunity that the noble Lord, Lord Jenkins of Hillhead, has given us to speak on this important subject. In some speeches there has been a suggestion that we have been playing a negative role in Europe to date. I remind noble Lords of the very positive things that have been achieved: the single market, attacks on fraud, and so on. I must confess that I was a little disturbed by what the noble Lord, Lord Callaghan of Cardiff, said, involving criticisms of the Prime Minister and the Conservative Party. It was implicit in his remarks that the Labour Party had been a consistent supporter of Europe. However, as we all know, no party has ever changed sides more on that specific subject than has the Labour Party. The noble Lord also suggested that business was critical of the stand now being taken by the Government. However, all the information that I have—I include information from a luncheon today at the CBI—is that business is strongly supportive of the line taken, and laid out in another place by the Prime Minister recently.

I shall have an opportunity to refer to the comments of the noble Lord, Lord Barnett, in a moment. However, I believe that there are areas in which we should play a positive role, and that we have a major contribution to make before the 1996 conference. We have already done a great deal of work on fraud. The Select Committee of this House has set up some clear guidance on things that should be done. There is some disappointment that they are not being done in the way that we suggested. But I believe that there is a positive role for the Government, and indeed by mechanisms such as the Select Committee of this House in that field during the time ahead.

My second point refers to the CAP. A number of noble Lords have referred to the unsatisfactory nature of the policy and how impossible it is to operate it at the same time as we seek to achieve enlargement. The two do not go together. I doubt whether it is possible to have a common policy which will cover such diverse agricultural regimes as Finland, Greece, Denmark and Portugal, for example. To achieve a common policy which suits all those member states seems extremely difficult. There was some tinkering with the policy in 1992, but it was only tinkering, which I do not believe will survive long, certainly with the growth of Europe which we hope and expect to achieve. Repatriation of the CAP would be a long step backwards. However, that may be the only alternative unless in the meantime we can produce some policy which fits those disparate agricultural regimes.

I turn to a subject which has been predominant in the debate: the single currency. I shall not enter into the arguments relating to why or why not a single currency is desirable. It has been debated fully. I strongly endorse the line that has been taken. It was set out clearly by the Prime Minister in a speech in another place recently. I believe that a single currency, monetary union, must lead to a degree of fiscal union. If one has a fiscal union, I find it difficult to envisage how one can avoid political union.

It may be many years before a decision has to be taken, but I believe that we should consider the alternatives. There is a role for a common or parallel currency which could serve many of the purposes that a single currency would achieve, without bringing with it the complications and downsides of a single currency.

One may well ask why we want a single currency. Some want it because they believe that it produces a certain political control. Putting that on one side, however, the answers given by most people to why we want a single currency are the following. Some people say, "If I am travelling abroad, I take £1,000 in my pocket. I start in London, I cross every frontier in Europe and come hack with no money left, it has all gone on exchange controls". I am sure that noble Lords have heard that many times, but it is nonsense. Anyone going to Europe today need take no cash except perhaps tips for porters; otherwise one takes a credit card and Euro-cheques. Whether or not there is a single currency is therefore immaterial. There are those who want a single currency because it would assist trade. I agree, it would and to that extent it has some plusses. However, if today one accepts an order to supply goods to Hamburg for delivery in three months' time, it is possible and easy for the bank to arrange straight away for the money which will be received in sterling when the goods are delivered in three months' time. Banks now produce low value cross-border payments and I believe that that can be accelerated and made cheaper, and it should be done. It would avoid some of the difficulties which might otherwise exist.

Of course, there would be currency risks. We have seen what happened this week in Spain and Portugal. Thank goodness we are not in a single currency with them at this time. I suggest that in a common or parallel currency we should be able to protect ourselves against that type of risk with the hard ecu that was thought through some years ago. It was, I believe unfortunately, abandoned, but a type of hard ecu should be reconsidered as a common or parallel currency which could be introduced without our being forced into painful decisions, appearing to be reactive to a single currency. We would be proactive in suggesting an alternative which would serve the people of this country and business and industry well.

That course has many advantages. It would overcome the political, economic and practical difficulties of a single currency. It would enable the achievement of a desired objective to have a currency which is weighted so that a sudden change in one of the exchange rates would have a diluted effect on any transaction. It would leave everyone with the option of whether to use it. People could decide whether they want it, whether they prefer to deal in sterling or marks or to use what, for these purposes, I call the "hard ecu".

That policy could evolve into a single currency over time. If it did, it would only be because it was wanted and had been truly product-tested. It would have gone through all the processes and we would see how it operated and whether it worked. It would be a voluntary decision whether to use it. That would be a proactive way—to use the description of the noble Lord, Lord Jenkins of Hillhead—and we would not sit back waiting to say "no" to a single currency, if that were the decision. In the meantime, we would take a positive role in developing an alternative, if we pushed the suggestion forward, examining it to see whether it would serve Europe better than any of the other courses.

4.54 p.m.

Lord Roll of Ipsden

My Lords, I apologise to the House if, as seems likely, I have to absent myself before the end of the debate. I hope that the House will, as usual, be indulgent. With other speakers, I am deeply grateful to the noble Lord, Lord Jenkins of Hillhead, for having initiated the debate on a subject on which he speaks with great experience and authority. It comes soon after the debate in another place which was overshadowed in the public interest and in the effect it had on public opinion by the political arithmetic of the moment.

The House has the opportunity today—which it has already taken—to show once again that it can debate a serious subject seriously. There can be no doubt about the seriousness of the subject. The problem of our relations with our neighbours in Europe, of their aspiration for unity and our reaction to it has been fateful for 50 years. It is a fair guess that it will remain so for many years to come.

Recently, I have indulged in the liberal use of that freely available commodity, hindsight, to review some of our policies over the past 70 years, including our policy towards Europe, based on my experience. I am afraid that the list is pretty lamentable, whatever views one may take as to what should or should not be included. The uncertainties, hesitations, ambiguities and equivocation and often the downright hostility to what was going on on the continent rank high in the list of errors. Perhaps second to none, in view of the amplitude of the concerns it covers for our well being, is our policy towards Europe.

I said that I wanted to draw on my own experience. The Motion refers specifically to the negotiations which are to take place next year in the Inter-Governmental Conference. On that subject I shall say nothing except that I agree largely with what was said by the noble Lords, Lord Callaghan and Lord Barnett. I add one point which is often overlooked on monetary union. It is that closer monetary arrangements have a powerful influence in promoting economic convergence. The emphasis has been almost entirely the other way, yet not only can the opposite be demonstrated in economic theory, but the experience of the countries that belonged to the exchange rate mechanism before we joined it bears out that contention. That is something that should not be forgotten.

I had the privilege for over 20 years after the war of being much involved in European matters, in the inception and development of policy in Whitehall and in its execution by means of international negotiations. When I look back at my own experience, I am struck by two facts. One is that, despite the ravages of war which so impaired our strength, at that time we still had enormous assets at our disposal—military and strategic, diplomatic and political, even economic and financial and certainly intellectual and, above all, moral.

If we leave aside the special position of the two super powers, and if we look particularly at Europe, the sum total was infinitely greater than that of any other country at the time. It would have entitled us, had we so wished, to take the leadership in the European movement. Indeed, at that time, our liberated allies and our former enemies were thirsting for leadership and looked to this country for it. It was an opportunity which I am afraid we threw away.

Another point is that from that time on we carried with us an enormous amount of ideological baggage which prevented us from taking a simple, free and down-to-earth view of our interests in regard to the European movement. The components were many and varied. There were specific ones like a misguided belief s in the durability and significance of the sterling area; a misguided belief in the durability and significance of many economic arrangements with the Commonwealth which proved to be evanescent. Above all, there was the fact that the view across the Atlantic seemed much more seductive than the view across the Channel. That was due to the half real, but also, alas, to the half illusory belief in the special relationship with the United States. We carried that through; in the Marshall Plan already those vociferous tendencies were present. We refused to join the Coal and Steel Community, maybe largely due to the nationalising proclivities of the Labour Government of the time. Certainly, some of us believed that the Treaty of Rome and the European Community were far too liberal. Others believed that they were far too dirigiste. Obviously, they could not be both at the same time

. 'At any rate, when we came to make the first attempt to join the EEC in the early 1960s, despite the vision of Harold Macmillan and the skill and determination of Edward Heath in one and a half years of negotiations, we failed. Of course the proximate cause of that failure was the veto of General de Gaulle. But that veto, in my view, was facilitated very greatly by the uncertainty of our own position at the time, whereby we had to address two very different audiences—our prospective partners in Brussels and public opinion at home—at one and the same time in two different voices. At any rate, in the end the General prevented us from joining.

While I am on the subject of the General, perhaps I may mention one point to which the noble Lord, Lord Callaghan, indirectly referred. I believe that everybody here is aware of the fact that nobody could have been more mindful of the interests of his country than was General de Gaulle. He had a most exalted view of the grandeur of France and of the overriding duty to safeguard her position. But he, too, in the end came to the view that that purpose was best achieved inside the Community rather than outside. It may well be that the prospective entry of a powerful newcomer was not at all welcome to him. I believe that he genuinely had an element in his make-up which convinced him of our "un-Europeanness", perhaps our "anti-Europeanness", at that time. At any rate, it was another 10 years before we joined the Community and started on the laborious way back to retrieve our position.

The next test came in 1979, when the Community instituted the European Monetary System, for which the noble Lord, Lord Jenkins, alongside Helmut Schmidt and Giscard d'Estaing, must take credit. When it came, we joined it—but even then, barely half-heartedly. We did not join its most important operational part, the exchange rate mechanism. Even then I thought that the grounds for that refusal were sophisticated, in the worst sense of that word. It was again over 10 years before we joined the ERM. When we joined, we did so—as the noble Lord, Lord Callaghan, has already pointed out—at far too high an exchange rate to the D-mark; and moreover, by all accounts, without adequate, perhaps without any, consultation with our partners. This was not merely a question of courtesy. In joining the exchange rate mechanism, we put our partners under certain specific financial obligations. That certainly required careful consultation on the terms of our joining.

However, we extolled both the exchange rate mechanism and our membership of it as the finest things that had happened since sliced bread. We maintained that position right up to the moment when we had to abandon the ERM. When we did so, we declared triumphantly the next day that we now had a fiercely competitive exchange rate. I know, as do many noble Lords, that economics is a many splendoured[...]that sort of double talk really will not do.

Now we are faced with the prospect of the negotiations next year on the back of the Maastricht Treaty. All I can say is that there are several broad requirements if we are to make the negotiations successful. My remarks are very much along the lines of what the noble Lord, Lord Cockfield, has already said. We have the opportunity next year to retrieve a part—perhaps a large part—of the position that should rightly have been ours half a century ago. Whether we shall in fact do so, remains to be seen. We shall certainly not do so if we go into the negotiations with that curious inferiority complex that regards Brussels as an overwhelming bureaucracy. Of course it has those tendencies and, like all bureaucracies, it requires constant vigils. But the idea that it is a sort of malevolent monster—as I heard last week, when a Member of another place declared that to work constructively with Brussels means (if I may use her elegant turn of phrase) "rolling over on our backs with our legs in the air"—really is an absurdity. It is an affront to the loyal and capable people who represent us in all the institutions of Brussels. We must get rid of that attitude.

Furthermore, we must at last demonstrate—not on this or that particular issue, but right through the negotiations—that we believe what our neighbours on the Continent have believed for so long; namely, that the unity of Europe is an important objective and one that we hold dear. It had a powerful rebirth after the war, first, because of a determination that the fratricidal conflicts that had disgraced the century should never happen again, and, secondly, because of the belief that the world power map, economic and political, was radically changing and that the unity of Europe was a correct response.

If that was true then, what about the changes that have taken place more recently to which reference has been made? I refer to the collapse of the Soviet Union; the changes in central and eastern Europe; even the changes in that great power across the sea, the one remaining super-power, in its interests, its orientation, its foreign and economic policy and so on? Surely it is more true than ever that we must all hang together. Otherwise, most assuredly, we shall all hang separately. If we enter the negotiations in this way, we may retrieve some of our position. If we do not, I am afraid that, contrary to the wishes of the Prime Minister, who wants this country to be at the heart of Europe, we may well end up in a very different part of the anatomy. Moreover, we shall be making Europe all the poorer and all the less effective.

5.5 p.m.

Lord Gilmour of Craigmillar

My Lords, the noble Lord, Lord Callaghan, referred to the remarkable harmony of this debate and undertook to disrupt it. However, I do not believe that he really tried. I think we were all relying on my noble friend Lord Tebbit to do that without really trying. We certainly regret that he has been unable to do so. I have no such ambition. But I should like to look briefly at the reasons for the increased public hostility to Europe to which my right honourable friend the Prime Minister referred in the debate last week.

My right honourable friend Sir Edward Heath had no doubt at all about the reasons for that. He said flatly that nothing had been said in the past 15 years by the Government in favour of Europe; there had just been unjustified condemnation. I do not believe that my noble and learned friend Lord Howe, who made an admirable speech this afternoon, would quite go along with that; nor would I. But we would perhaps agree that there is a substantial amount of truth in it. Very often, the positive case for Europe has not been put, and that has had a considerably deleterious effect on public opinion.

A much more important influence on public opinion has been that of the British newspapers—if indeed they can properly be called either British or newspapers. We have had an almost continuous barrage of British, or rather English, nationalism. It is not the sort of English nationalism that was referred to so well by the right reverend Prelate, but a nationalism and anti-Europeanism on the part of the owners and editors and of some British politicians. Such people's nationalism is extremely selective. They do not turn a hair when great swathes of British industry are bought up by foreigners and come under foreign control, or when the same thing happens in the City. But they get extremely worked up when there is even a thought that British sovereignty, so-called, may be infringed; and when the European Court of Justice finds for a British subject against the British Government, they whip themselves into a frenzy of nationalist hysteria—always carefully failing to consider either the merits of the case or the fact that the British subject has won his case and has benefited.

As has already been said by the noble Lord, Lord Jenkins of Hillhead, and others, the most virulently nationalist of our newspapers are owned by foreigners. They are multinational corporations. That no doubt explains their benevolent attitude to foreign multinational corporations buying up British industry. So we have a press that is in large part foreign-owned, stoking up resentment against the foreign countries that are closest to us. Oddly enough, the multinational corporations do not seem to have realised that they are sawing off the branch on which they are sitting. If ever Britain does become the sort of stridently nationalist and unpleasantly xenophobic country that they seek to bring about, such a nationalist state would lose very little time in taking over and in seeing that our newspapers and television were owned by English nationalists.

In any case, the nationalism of our Euro-haters in the press, in parts of the Conservative Party, and indeed in the Cabinet, is, as I said, remarkably one-eyed. They are less concerned with real control over our affairs than with the trappings of sovereignty, of which the noble Lord, Lord Callaghan, and many others have spoken. So long as Britain retains its so-called parliamentary sovereignty—whatever that means in 1995—they are happy for everything else to be multinational or foreign controlled. In fact, as noble Lords will agree, no country today can be economically sovereign, not even the United States—certainly not Britain. Furthermore, I do not believe that our Euro-haters in the press and elsewhere are concerned with patriotism in the Burkean sense. As he put it: to make us love our country, our country ought to be lovely". Instead, they concentrate on abusing our foreign neighbours. The English football hooligans to whom the right reverend Prelate referred are a caricature of our Euro-haters; but the caricature is recognisable.

But in reality, the strident English nationalist and anti-European propaganda has much more to do with ideology than with patriotism. Over the past 15 or 16 years, we have become probably the most Right-wing country in western Europe. That is quite new in our history. I do not think that it has ever happened before. In consequence, we are out of step with our European partners who have kept to a sensibly centrist course. So the Far Right English nationalists look to the even more Right-wing United States, although the United States does not look to them or even at them. And they disapprove of our allegedly socialist and bureaucratic partners in Europe.

In consequence, they—and, I am afraid, sometimes even the Government—talk what to me seems an extravagant amount of nonsense about such matters as the social chapter. I hope that when my noble friend the Minister winds up, she will tell us which parts of the social chapter any reasonable, one-nation Tory could or should find objectionable. In any case, if the Government became a good deal less Right-wing, many of their difficulties would disappear and their position would be greatly strengthened both at home and in Europe.

I very much hope that the Government will play a positive role in the Inter-Governmental Conference and that on Europe it will also be more positive both in the country and the party. If they put the positive case for Europe, as my right honourable friends the Chancellor and the Foreign Secretary have recently done, they will soon find that public opinion will spring back to its customary position in the centre and away from where it is now and that British politics will become a great deal more healthy than they recently have been. But the Government must give a lead.

5.14 p.m.

Lord Clinton-Davis

My Lords, it is always refreshing to listen to and to follow the noble Lord, Lord Gilmour. The views that he has just expressed perhaps explain why he had certain difficulties with the former Prime Minister. They were views that I believe were well worth hearing.

I propose to put forward today from the Back Benches views which are personal to me about the Inter-Governmental Conference and certain proposals that I should like to see coming out of that particular deliberation. There is a story, which may be apocryphal—I know not—about Mr. Portillo (or perhaps it was Mr. Lilley). The Minister went to a press conference and a very penetrating journalist asked him, "Minister, why is it that you and so many of your colleagues are so hostile to the European Union? Is it ignorance or apathy?" The response was "I don't know and I don't care".

Unfortunately, it often seems like that. I do not see that that attitude can in the least help Britain to be at the heart of Europe, as so many of your Lordships so obviously wish. It was extraordinary that not so long ago the Prime Minister himself indicated in terms that he wanted to see progress stultified so far as the Inter-Governmental Conference was concerned. That was an extraordinary proposition in the light of the challenges facing the European Union in the years ahead, not least in terms of first deepening and then widening it. It is as though somehow or other the Government have lost confidence in their ability to persuade others in the European Union. I believe that, if we were seen to be more fully involved in the debates as full members of the European Union, our voice would not go unheeded.

There is an emphasis on the negative, the veto, the opposition to any extension of qualified majority voting and curbing the power of the European Court of Justice. Those are matters which arose at Question Time today and about which I sensed a certain degree of ambivalence on the part of the noble Baroness who replied. Nevertheless, Mr. Portillo has supported it. There is the whole question of the opt-outs, to which reference was made by the noble Lord, Lord Gilmour. The opt-outs have already cost us the possibility of siting the Central Bank in this country. That is a rather serious loss. But there is also the meaningless opt-out in relation to the social chapter. The Government's view is simply being ignored by the many conglomerates which have interests in this country and the rest of the European Union; and so social policy is being enacted in practical terms.

I believe that the Government are drowning in a mounting crescendo of contradictions. They welcomed qualified majority voting—quite rightly in my view—to facilitate the extension of the single market. They acquiesced in an extension of qualified majority voting so far as concerned the environmental chapter of the treaty, when they agreed to Maastricht. Now, when they proclaim their determination to secure substantial changes in the common agricultural policy, not least in terms of how that will apply to a widened Europe, they mount an onslaught on qualified majority voting, which is the only practicable means of achieving that and many other objectives. How do they contemplate widening the Community unless many of the institutional situations with which we are faced today are substantially reformed? That will require powerful and positive decisions to be made at the Inter-Governmental Conference.

I want to add some observations to the discussion that we had earlier today about the European Court of Justice. If the Government or any members of the Government are serious about curbing its powers by saying that politicians should be able to review or revoke decisions of the European Court of Justice by qualified majority voting at the Council of Ministers—which, in itself, is a contradiction in that sense, because here they are talking about an extension of qualified majority voting—it would deal a very severe blow to the rule of law on which the European Union has to be founded. It is quite wrong for Ministers even to contemplate that idea. As Dorothy Parker once said, in a totally different context, "I don't think that idea should be lightly tossed aside; it should be hurled aside with great force".

We have to ask how best we can protect British interests. As was said at the very beginning of the debate by the noble Lord, Lord Jenkins, and the Leader of the Opposition, it can only be done by our being a full member of the European Community and by adopting a starkly different position from that which the Government have opted to take on so many issues.

I want to refer next to the whole question of the democratic deficit. Not much has been said about that today but a great deal was said about it at the European summit. Many bold declarations were made about how it was necessary to introduce more transparency, particularly at the level of the Council of Ministers. Unfortunately, very little progress was made, but I noticed some very helpful support from the noble Lord, Lord Inglewood, in a rather different capacity. Not so long ago, in April 1994, he said: The Council of Ministers is probably the only legislature in the free world that meets behind closed doors, and that state of affairs should not continue". That is a pretty authoritative source, sitting where he does today. I hope that he continues to share that point of view and that he has some hope of influencing some of his colleagues in that regard.

What he had to say then is absolutely right. It is clear that decisions which are so central to the interests of the citizens of the Community should be divulged to them in a way that does not happen today. I wonder whether it would not be appropriate to enable the President of the European Parliament, or at a lower level the members of the relevant committees, to be present at meetings of Councils of Ministers. That might be a good way of ensuring that fairness should rule.

I also believe that the powers of the European Parliament need to be enhanced still further beyond the Maastricht Treaty. It is, after all, the only democratically elected institution. It should have the power to initiate legislative proposals where the Commission has failed or refused to do so over a period of years—it does not matter for how long—when the Parliament has requested that a particular proposal should be brought before the Commission. It should have the right to approve the nomination of the President of the European Commission.

Of all the policy areas which are undertaken by the European Union, and in particular the Commission, the environment is by far the most popular. That has been revealed in European poll after European poll. It is perhaps wrongly seen by so many people as a kind of court of appeal against the anti-environmental activities of member states. But, contrary to the view of the Foreign Secretary in his discredited "nooks and crannies" argument, I believe it is essential that when it comes to the question of implementation and enforcement of European Union environmental laws—there are far too many breaches—powers should be provided to the European Commission or the European Environmental Agency to enforce the laws along lines comparable to the enforcement of European Union competition law. There should be a small inspectorate and action against the undertaking and not simply against the member state which is in breach. There should be the imposition of a fine to stop the mischief in its tracks and the right of appeal to the European Court of Justice. I do not believe that the power which has been vested in the court by Maastricht is anything like sufficiently practicable. The taxpayer would pay if fines were levied against member states and certainly not the polluter.

Time demands that I finish and so I shall end on this note. I believe passionately that we have to play a real part in the development of the policies relating to the future of Europe. It has to be a more democratic, vibrant, purposeful and efficient Europe. It is essential that we should exercise our influence. Arguing for Britain and arguing for Europe are absolutely synonymous, That is my profound belief. I hope that it will he reflected in our attitude at the Inter-Governmental Conference.

5.24 p.m.

Lord Thomas of Swynnerton

My Lords, ghosts in this House, of whom there are many—in fact there may well be more than there are Members present —would remind us that Britain spent the last part of the 19th century not making up its mind satisfactorily over Ireland. It looks as if there is a danger that Britain may be condemned by historians for having made the same kind of mistake in relation to the end of the 20th century over Europe; because, as many noble Lords have pointed out, Britain's voyage to the heart of Europe has been one of the most round about journeys ever undertaken since Christian embarked on the Pilgrim's Progress. We now know, at the end of the 20th century, that good novels do not necessarily have to have a happy ending.

The European Union, as it is today, was conceived by Monsieur Monnet largely for three reasons: first, in order to achieve common economic policies which would avoid the catastrophes of 1914 and 1939; secondly, to try to achieve a European economy which would be a satisfactory challenge to any conceivable rival; and thirdly, to try to ensure that Europe's overall political interests were borne in mind in the destiny of the world. The first of those aims has been achieved; the last two, as yet not fully.

Behind all these policies was the sensation that the European nation state in the 1950s—even the largest European nation state—was not large enough to be effective, a point of view which most of our colleagues and partners on the European Continent now accept by second nature but which many members of our own population do not seem to have done. Of course, M. Monnet did conceive with his colleagues that, in the long run, they should try to achieve a United States of Europe—M. Monnet had an action committee for that purpose—but the fact is that neither he nor they ever sought to achieve a federal European state with a federal government, a federal civil service and a federal police.

On the contrary, they always conceived the present situation, which is that the directing body in Europe is the Council of Ministers, a group of individuals who are responsible to the nation states—their own nation states, their own parliaments and their own electorates. The absence of coercive power at the level of the Union, as we now call it, is the most remarkable, interesting and in some ways extraordinary aspect of this great political innovation. The nation states carry out what the Union decides. There are no Community agents to carry out those decisions. So how can there be a serious danger in what has been achieved up until now of a federal state, as so many Euro-sceptic members of the Conservative Party assume?

It is fair to say that this idea of shared sovereignty, so well described by the noble Lord, Lord Barnett, is a new one and something which is a challenge to classical ideas of political philosophy, but there is no reason why such innovations should frighten us.

There is of course the possibility that the functioning of the European institutions may seem not to be able to work in the end without the establishment of a federal state. I have often thought that myself. Certainly it is true that the area of competence between the state and the Community is not clearly defined, even after Maastricht which devoted so much attention to the idea of subsidiarity. Certainly the construction of a federal constitution would resolve more easily than any other solution the question of the democratic deficit, to which the noble Lord, Lord Clinton-Davis, referred. However, the probability is that the existing institutions, basing their legitimacy on the continuation of the nation state collaborating with other nation states as we now have, will be able to work quite satisfactorily for the foreseeable future.

I believe that the test is European Monetary Union. If Europe can achieve a common currency without a federal structure then surely it—we—can do anything. The question of whether to have a full federal structure can be delayed indefinitely and at least until such time as the maximum number of candidate states will have joined in something like the year 2020. That is the year when many of us in this House will look forward to repeating this debate and having a full and final discussion on the matter.

All these innovations have sat ill to some extent with this country. Britain has felt ill at ease with these tremendous innovations. It is perfectly understandable why, in the 1950s, many felt that our nation state still with imperial power was adequate for our foreseeable needs. In 1995, however, it is much more difficult to understand why that attitude should survive. It certainly seems to have survived even though we are, if anything, more ill at ease with the European Community than at any previous time.

This is particularly a matter within the Conservative Party. It is a party where one Conservative hostile to the European Community can accuse another in favour of it of being "a Pétainist" adapting himself to the new European order, as one such person did to me only two nights ago. This mood derives not from national pride or even a memory of past greatness but from a new mood of provincial nationalism which is extremely destructive.

I wish to say two more things. First, I strongly believe that my noble friend Lord Cockfield was correct in saying that it is an illusion to suppose that we can return to something like a common market and a simple customs union between nation states after 40 years of European integration. Anyone who believes that is like someone coming into this House and supposing it to be primarily a cricket club. Anyone who believes that we should try to establish a customs union instead of what we have already should have the courage of his convictions and advocate, like Mr. Norman Lamont, full withdrawal.

Britain outside the European Community is not an impossible concept. Many of us would like to know more about what those who claim that as a possibility believe the outcome would be. At first sight it would appear to be a rather bleak and austere possibility. I wonder whether those who advocate such an eventuality would allow those of us who remain in this country in those circumstances to maintain ecu bank accounts.

5.34 p.m.

Lord Harris of High Cross

My Lords, I fear that I am rather ill-prepared to stem the tide of so far mostly uncritical Euro-enthusiasm. I am bolstered by the fact that further down the list of speakers there will be support coming to my help. We have missed the contribution of the noble Lord, Lord Tebbit.

I say that I am unprepared because I learnt of this debate only this morning. I have just returned from Italy where, some will be shocked to hear, at the invitation of the British Council I have taken part in a debate with an Italian, Professor Comba of Turin, on the issue of free trade and economic co-operation. I hardly dare hope that the remarks I draw from my paper will be as well received here. I was totally astonished. Older people in Italy drawn from the Oxford and Cambridge Society, among other exemplary bodies, acknowledged that Italian enthusiasm for Brussels had hitherto been due to total disillusion with their own political and economic muddles. They said that anything would be better than Rome. Older people in Italy regretted that younger Italians did not share that view. They were much closer to the Thatcher view. They described it as the Berlusconi and Antonio Martino view of the last government.

I was shocked to hear the noble Lord, Lord Thomas, speak about a "simple customs union" as though it were to be despised as a marginal addition to economic policy. On my argument the Treaty of Rome is based on the central idea of promoting the lasting peace of which we have heard, by replacing economic nationalism with a framework for a competitive common market. That was a central notion of the Treaty of Rome. I shall not provoke hostility by developing the theme that follows from that beyond saying that the case to economists was that in place of protectionism and autarky, which caused so much trouble before the war and which Adam Smith had denounced as mercantilism, the founders of the EC principally backed the notion of integration through economic trade and investment by removing tariffs and non-tariff barriers to the free movement of goods, services, capital and people.

When apologetic British spokesmen say that we are isolated or marginalised in Europe and the noble Lord, Lord Ezra, says that if we had been in it earlier we would apparently have refashioned the entire operation to our taste, they ignore the totally different tradition in political economy and economic philosophy on the Continent of Europe from that prevailing in this country. Classical liberalism never won the intellectual ascendancy on the Continent that it achieved in Britain during the 19th century. Apart from a few isolated economists such as Einaudi, Rueff, Erhard, Ropke and a few others, the prevailing philosophy owes much more to the intellectual tradition of Catholic social doctrine. That is closely linked with corporatism, which is a somewhat elusive concept. I argue that corporatism is redolent of the seven Cs, beginning with consensus and conformity, going on to co-operation and centralism, and then collectivism, carve-up and not forgetting corruption, and all the time increasing coercion. That is the corporatist tradition.

The impact of the Catholic social doctrine on the Continent has been reinforced by the way in which proportional representation has led to fragmentation of government support. It has enfeebled governments—and Italy is a classic case—where party apparatchiks become very powerful; there is a premium on coalition, compromise and backstage deals between political elites disregarding entirely public opinion and always favouring a consensus which has little merit necessarily to the balance of argument in the case.

In 1971, before the referendum, the Institute of Economic Affairs, in which I must declare an interest, having run it for some 30 years, produced a classic paper with a most important title, Rome or Brussels? It posed a real choice between the liberalism that was inherent in the Treaty of Rome and the burgeoning bureaucracy that was already visible in 1971 in Brussels. Since the 1980s, it has daily become more clear that the bureaucrats of Brussels have triumphed altogether over the Rome liberalisation.

This week, the same institute (without my wise guidance) produced a further paper, which I am allowed to advertise, called The Centralisation of Western Europe—not by what the noble Lord, Lord Gilmour, would call a "Euro-hater" or a "Euro-hooligan" but by one of the leading German economists, Professor Roland Vaubel. I advise your Lordships to watch Vaubel as a likely entrant in the next 10 or 15 years for a Nobel prize. Vaubel shows that instead of encouraging trade, integration, closer relationships and interrelationships through trade based on mutual recognition, whereby the products and standards that are acceptable within any member country can be exported freely throughout the whole Common Market, the Commission and its apparatchiks have exploited the plausible pretext of "harmonisation" and "level playing field" to set about flattening and homogenising the very differences in costs and qualities on which a large part of free trade fundamentally depends.

Helped by the Single European Act, which had the aim of completing the market by 1992—it is still, alas, incomplete—we had the great development of qualified majority voting which was necessary in place of the old veto. However, as a result—an unintended result—there has been a tidal wave of Brussels legislation. According to Vaubel, at the last count there were 24,000 regulations and 1,700 directives. He argues that despite recent talk of "subsidiarity", they are growing at the rate of 1,500 regulations and 120 directives per year.

What emerges from Vaubel's study, which is a very close and intricate economic analysis of the whole operation, is that there has been a tremendous development of lobbying. He reveals that there are now 3,000 lobby organisations and 10,000 lobbyists in Brussels. He quotes the calculation that 70 per cent. of Community legislation and subsidies is concerned with special interest groups, including the common agricultural policy. He explains that lobbyists find it easier to tackle the bureaucrats who enjoy enlarging their bureaux and who are not subject to the same restraint of democratic control as politicians, who can often tell a lobbyist on the make.

The noble Lord, Lord Gilmour, asked what was objectionable about the Social Charter. I probably have the time to answer that question for him. It is perfectly clear that when you introduce free trade in a Europe that has had a history of Colbert restrictionism over the decades you will have a varying impact on different parts of the market. Some countries will fare worse than others and their interests will be badly affected. The only solution to that is to develop a flexible labour market. That is a phrase that the Liberals find rather distasteful, but a flexible labour market has enabled the great countries of the Far East, such as Hong Kong, to adapt to changing opportunities and to shift resources, such as labour and capital, into industries where the prospects are better. Instead of that, the EEC backs the Social Charter. You even hear nominal Liberals like the noble Lord, Lord Ezra, asking what is wrong with it and saying that we should get in there.

For the information of the noble Lord, Lord Gilmour, among the aims of the Social Charter is the imposition of uniform requirements on all aspects of working conditions, including redundancy, maternity leave, pensions, social benefits, hours of work—and ultimately a European minimum wage. The protectionist intent of all that—not protecting standards, but protecting economies against the impact of change and trade from abroad—became clear in 1993 when M. Jacques Delors—happily departed to, I hope, more agreeable activities—launched the bizarre idea of incorporating into the GATT negotiations a "global Social Charter". The idea was to prevent European standards of living being undermined by what he called "social dumping" from low-wage Asian competitors. He had not looked closely enough to find that the effect of trade is always to tend to equalise standards of wages upwards, so that in Hong Kong we have seen people who were paid a handful of rice in my youth now enjoying wages and benefits that are at least on a par with the English standards.

Since the noble Lord, Lord Tebbit, has allowed us a little extra time, I must, I am afraid, deal with the question of nationalism, which is constantly being put forward. My argument in conclusion is that for Britain to play its most helpful role in Europe, it must stand by its guns and develop its different vision of Europe. That is a perfectly honourable position, as opposed to being in the middle with constant compromises being struck against the development of the free movement of goods and services and all the rest of it. There is nothing despicable about nationalism. It does not mean narrow chauvinism and the "trappings of sovereignty"—

Lord McIntosh of Haringey

My Lords, I hope that the noble Lord will forgive me, but the noble Lord, Lord Tebbit, has not given every other speaker three extra minutes. The noble Lord, Lord Harris, has already been speaking for more than 12 minutes.

Lord Harris of High Cross

My Lords, I apologise to the House, but perhaps I may complete my sentence.

Adam Smith, David Hume and those other great men saw international free trade as a way in which independent nation states could co-operate together, pooling such sovereignty as was necessary to remove barriers, but not getting drawn into deep political involvement and engagement with other countries.

5.47 p.m.

Lord Plumb

My Lords, I too welcome the initiative that was taken by the noble Lord, Lord Jenkins of Hillhead, in calling for this timely debate. Similar debates are taking place throughout the European Union. Indeed, I left such a debate in Brussels only this morning. Your Lordships may be interested to hear that many of the things that were being said in that debate have been said here this afternoon. In other words, there is a similar pattern throughout the whole of the European Union in preparation for the Inter-Governmental Conference.

Many people fear that that conference will take a leap towards a centralised, high-spend and interventionist Europe —a Europe dominated from Brussels; a Europe run by bureaucrats and a Europe that weakens our sovereignty. Sadly, much of that fear has been generated by Euro-sceptism at a time when we ought to be working for what is best in Britain, for what is best for Britain in Europe and when we should be shaping events rather than continually reacting to them. My noble friend Lord Boardman made that position quite clear when he referred to the many issues in which Britain has led the field and from which we are now benefiting.

So, a flexible decentralised European Union is the way forward, as we see it, to allow the growing diversity of the Union politically and economically to develop. That enables sovereignty to be shared in areas of common concern which require obligations and legal action in those areas to which we are now accustomed, such as the single market, external trade, the environment and many other issues of which we are all aware. It allows for more flexible arrangements, based on inter-governmental co-operation in areas such as foreign policy and internal affairs. I believe that that will be central to the debate in the IGC. As many have recognised, it also provides the forum for enlargement which is fraught with dangers and yet which is full of opportunities. If we are to press ahead with enlargement, as I am sure that we are, we have to face up to and deal with the huge repercussions that that will have in every area of the European Union and then determine how that fits into the liberalisation of trade under GATT.

That means finding practical solutions to so many issues like the cost of the common agricultural policy and its structure—the cohesion and structural funds and institutional reforms. I share the view of many that the common agricultural policy cannot operate in an expanded Europe in its present form. Your Lordships will be aware that the Ministry of Agriculture has called a few of us together to consider the future of the common agricultural policy, and I look forward to being able to present my own views on that later this year. Detailed proposals can be expected to cover areas for inter-governmental co-operation in the fields of foreign policy and defence, as well as in interior and justice matters.

Many of your Lordships have mentioned the importance of subsidiarity. That obviously needs to be entrenched further into the workings of the Community and the influence of larger states needs to be strengthened. The European Parliament will need to focus more on scrutinising and holding Commission activities and spending to account. The recent hearings which we held for the new Commissioners were a good example that the European Parliament is taking its new responsibilities very seriously indeed. Nor should the legislative role of the European Parliament be forgotten. This role was, rightly in my view, enhanced by the Maastricht Treaty and no doubt the 1996 conference will need to build on what was agreed in 1991.

I do not think it can be said too often that the Parliament complements; it does not contradict competences exercised by Members in the other place. The so-called co-decision procedure, for instance, which was introduced by the Maastricht Treaty, gives in certain areas a right of veto to the European Parliament. That veto is in no sense a right taken away from national parliaments, which have no right of veto over European legislation. Parliamentary scrutiny is not a zero sum game. But the democratic legitimacy of decision-making needs the scrutiny and involvement of national parliaments.

In his opening speech as President of the European Commission, Jacques Santer said: the Commission should do less, but what it does it should do better". I am sure that my noble friend Lady Chalker will say, "Hear, hear" to that, particularly in the context of Lomé and overseas aid.

Baroness Chalker of Wallasey

Hear, hear!

Lord Plumb

My Lords, another issue which has been raised is fraud. Fraud has to be tackled and we must make sure that there are tough controls over spending. These issues and the many other voting changes will require proper debate, and I know that our own Government would want some convincing that we need to go further on qualified majority voting and on any extension of Community competence. I am sure that any move towards a more centralised or more intrusive Community—a move to abolish the veto or to aim for a centralised European super-state—will be vehemently opposed, but I do not expect the Inter-Governmental Conference to make proposals which would significantly change the constitutional position of the United Kingdom.

However, I suppose that the main fear concerning many people is what they see as a threat that we may be dragged into the EMU and a single currency. The principle of a multi-speed Europe, even a measure of variable geometry, is already central to the EMU provisions of the Maastricht Treaty. So before a member state proceeds to the third stage of EMU it is required to meet the convergence criteria, covering inflation budget deficits, exchange rate stability and long-term interest rates. If a majority of member states meet these conditions, then a single currency may come into being in 1997—if so decided by Heads of Government acting by a qualified majority. Of course it is likely that those conditions for EMU will not be met: there would need to be proper convergence on economies coming together right across Europe. For sterling to join EMU would have meant that we would have needed to be in the ERM for two years and that there would need to be an independent Bank of England. The economic realities in March 1995 indicate that economic and monetary union is unlikely to happen in the next 18 months, and perhaps in the 18 months beyond that.

Whatever the outcome of this conference, Members in another place and Members of your Lordships' House will have the opportunity to take the decisions they want, when they want, knowing that our Prime Minister's ability and success in negotiating Britain's opt-out give us time for full parliamentary debate before agreeing to any timescale for a single currency.

Let me conclude by saying that compromise is necessary for reaching an agreement. I do not see the changes in 1996 as a gigantic upheaval, but at the same time I do not believe in the status quo being an option either. Change is manageable, but only on the basis of flexibility and compromise.

5.56 p.m.

Lord Stoddart of Swindon

My Lords, I too would like to congratulate the noble Lord, Lord Jenkins, on bringing forward this debate today. I am particularly grateful to him for telling us that he was in fact part—indeed the leader, I think—of the cross-party pro-European Alliance. This is part of the fight back, a fight back which I suppose started when, from 1970 onwards, he and his fellows drove us into the EEC by securing 69 votes from the Labour Party on a three-line Whip; so we have been warned, and some of us will take that warning.

It is gratifying that so many of your Lordships are speaking at this stage of the debate, which is likely to be a long one. But of course this must not be the only debate, and certainly it is not the most important debate. I think it should be seen rather as the aperitif rather than the main course, or even the hors d'oeuvres.

I, with other people, shall expect the Government to come forward with their own proposals for discussion not only in Parliament but throughout the country as well. It is no use, on this occasion, hiding behind some absurd posture of protecting their negotiating position, because everybody in the country is now interested in this subject. They want a wide-ranging discussion upon it. It is up to the Government to set the agenda for that discussion and to listen to what this House and the other place have to say and to what the people of this country have to say. Indeed the people are increasingly sceptical, not only about the benefits of further integration but also about the supposed benefits Britain has so far secured. My own position about the European Union and our membership has always been clear. I find myself in all sorts of strange positions. In the 1970s I was accused of being an extreme Left-winger, because I was then what is termed a Euro-sceptic. I now find that I have been pushed right to the other side of the political spectrum and have become suddenly a political Right-winger, although I have stood still. The argument has in fact moved from side to side.

However, many people, hitherto content with the prevailing fashion, are now using arguments about the European Union that I and others have been using 'over a very long period of time. Let me quote from last Wednesday's Daily Mail— not a Socialist newspaper by any means, nor a Euro-sceptical newspaper. What does it say? It says: A non-sceptic former Minister attacks the claim that the EU is this country's only life-line. The main headline of the article is "The Great Euro Myth". It goes on to say: Today, pro-EU MPs will argue that Britain's trading future depends on the Common Market. The truth is that we're dealing ever more with the rest of the world. That was last Wednesday, 1st March. Who said that? Mr. David Howell MP, former Transport Secretary and now chairman of the Parliamentary Foreign Affairs Committee.

So the argument is indeed moving on, and people who hitherto have been very much in favour of Europe are now saying that there is indeed life outside the European Community or Union —call it what you will. The noble Lord, Lord Jenkins, moved for Papers. Unfortunately, he did not mention what Papers he wanted. I shall mention what Papers I and many other people want.

Lord Hooson

The Daily Mail!

Lord Stoddart of Swindon

My Lords, I quoted from that, so I shall pass on if you do not mind. It was a good quote, if I might say so. I want a cost benefit analysis. I want to know, on the basis of a cost benefit analysis, whether we have done better on trade; what have been our monetary contributions; what has been our loss of resources—the common fisheries, for example; the additional costs of food; the cost to industry, private individuals, and the public purse of implementing Euro-decisions such as transport decisions and decisions on water quality and the quality of our beaches. Without such an analysis, we cannot decide where we want to go.

In the Motion we are asked: To call attention to the need for the United Kingdom to play a positive role". I want us to play a positive role. I have always wanted us to play a positive role in Europe, but on my terms, not on the terms that have been forced upon the country by so many people, including the noble Lord, Lord Jenkins of Hillhead.

What do I think the Government should be saying at the IGC? First, they should be saying that the constant attempt by the European Union to grab ever more power is disruptive of our national life, our political system, and our economic performance, and will not help Europe in the long term. Secondly, the conference should be told that the British people believe in a Europe of co-operating nation states, not a centralised, corporatist, bureaucratic superstate, because that is what some people want. Let us make no mistake about it. So the British Government should make clear their position on that.

Thirdly, the Government should say that the existing institutions are expensive, unwieldy, bureaucratic, and not suitable for the sort of Europe Britain has in mind. Fourthly, they should therefore propose that the European Council become the policy initiator, and that the Commission be reduced to the role of a Civil Service with the task of implementing Council decisions—no more, and no less.

The European Parliament, which costs us some £600 million a year at present, should be disbanded. It should revert to an assembly to which national parliaments would send representatives. In that way we should indeed be helping with the democratic deficit. The European Court must cease to be the engine of further legislation, and must be a law court rather than a political court. It must be made crystal clear that the United Kingdom will decide who may and may not cross its borders. I hope that the Minister will give us that assurance tonight.

On qualified majority voting, that must not be extended under any circumstances. The existing system must more accurately reflect the population strengths of member states, and, where expenditure is involved, it should reflect the amount of money that is contributed to or taken from the budget. Economic and monetary union, complete with a European currency—that is, over the next 10 years—is an unattainable and dangerous dream that could have nightmarish consequences for this country and for Europe itself. We should say now that Britain rejects the EMU and a single currency, and will not contribute any further to the work that is now going towards achieving that end.

Finally, on foreign affairs and defence, it should be made absolutely clear that Britain will have nothing to do with a European army, and that our foreign policy will always give priority to the national interest. The Motion called for a contribution to the debate. I hope that I have made some contribution.

6.6 p.m.

Lord Blaker

My Lords, the noble Lord, Lord Jenkins of Hillhead, whom I too congratulate on initiating the debate, said that it would be better for those who wished the United Kingdom to pull out of the European Union to say so openly. I should not be speaking on this' matter unless some important people had not been saying so openly. I regard the proposal as so astonishing and unrealistic that something should be said about it,

We have to look at the history, and the noble Lord, Lord Roll of Ipsden, did that to great effect. But there was one historical event that he did not mention with which I had a connection at the time. That was the French proposal in 1953 for a European defence community. That proposal was put forward by the French in response to American pressure for German rearmament and as a means of integrating the armed forces of the six to control or contain German rearmament.

The six, especially France, were desperate that Britain should, if not join it, at least associate itself with it. But Anthony Eden would have none of that, and partly for that reason the proposal collapsed.

The next step was to create the Western European Union, which was based, of course, on inter-governmental co-operation. It still exists, and not on the integrated model, but those in the six who believed in European unity were not content with that and the next step was the Messina Conference which prepared the European Economic Community.

The desire among the six for British participation in that conference was every bit as intense as the desire had been over the European defence community. If we had gone in at that time, as the noble Lord, Lord Ezra, said, we could have shaped the European Economic Community very much to suit ourselves, so great was the desire of the other members to have us in. But, again, we refused to take part. We sent an observer for six months, and then withdrew even the observer. Sir Anthony Eden possibly expected that that conference would collapse, as had the proposal for the defence community.

As we all know, that led on to the Treaty of Rome, and a scheme for a European Economic Community, designed by the six, for the six, with features highly inconvenient to the UK. As the French would say, "The absent are always wrong". Within a very short time we made our application for membership, but, of course, by that time de Gaulle had come to power in France. He did not want us in, for reasons which the noble Lord, Lord Roll, mentioned. So we were rebuffed in 1962; we were rebuffed again under a Labour Government in 1966; and we eventually got in in 1972–15 years after the creation of the Community. We had to accept the Community largely as it was, and not as we would have designed it.

Given that background, I regard it as astonishing that any responsible politician can suggest that we should now leave the Community. It makes no sense economically when over half our visible exports go to the Union and when we get much more inward investment than any other member country.

Politically it makes no sense when the world looks increasingly to the European Union in foreign policy and not to its individual member countries. The mere talk of withdrawal does no good for our influence in day-to-day negotiations inside the Union. I do not believe that the British people want to pull out. They may be maddened by some of the Commission's sillier schemes—when it involves itself in what the Foreign Secretary has called the nooks and crannies of our national life—but the British people believe that we should stay in and use our influence to secure change.

We should play an active role in every aspect of the preparations for the conference, including preparations for a possible common currency. When considering where to put our main emphasise in the conference, a relevant factor is the likely growth in the number of members of the Community. We are told that within a few years there may be as many as 27 members. We must ask ourselves whether such a large Community is to develop by Community action, Commission initiative and majority voting, or is it to put the future emphasise on inter-governmental negotiations.

I have difficulty with the idea of a Community of 27 members operating in an integrated manner across the board, as my noble friend Lord Cockfield appeared to suggest. I recognise that a looser form of approach may slow down the momentum. I am not calling for the return to a free-trade area, but I believe that, in the long run, a looser approach with such a large number of members will take us further.

At any rate, the looser concept lies behind the second and third pillars of the Maastricht agreement. I hope that at the conference we shall put great emphasise on developing co-operation in foreign policy and security and in Home Office issues such as anti-terrorism steps.

I put in the same category the Prime Minister's welcome proposals for the development of the role of the Western European Union, without infringing NATO's role but drawing on its capabilities and working on an inter-governmental basis. I hope also that we shall put great emphasise on pushing forward the doctrine of subsidiarity.

I also warmly support the Prime Minister's view that we should decide not to take a decision now on membership of a single currency. That view was strongly reinforced by the currency turbulence of the past week. In particular, it is unnecessary for us to take a view now because we have the privilege of the opt-out obtained at the Maastricht conference. The question does not now arise and it is nowhere near right for a decision to be made. Other countries are not deciding and every day makes it more likely that a decision must be postponed for a considerable length of time. There are many uncertainties; we do not know the necessary terms and conditions nor how many countries and which countries will join. If the Spaniards, Portuguese, Greeks and Italians were members—and some of them have expressed an interest—it would be a different kind of single currency than if they were not. We do not know the implications for the pound sterling of staying out.

I believe that the words of the Governor of the Bank of England, in a speech on 21st February, are extremely relevant. When commenting on monetary union he said: It is not a decision that can or should be taken now. We all have our work cut out to achieve economic and monetary stability... And we have a great deal still to do in continuing to explore both the economic and technical conditions that would need to be met before any decision could be made. The important thing at this point is that we all carry forward, this work patiently and with an open mind". I believe that those are wise words.

6.14 p.m.

Lord Hooson

My Lords, there is a great danger of our country giving the impression to its mainland partners that we are becoming the Don Quixote of Europe—that is, tilting at windmills, seeing grave dangers where none exists, and seeing friends and recognising them as enemies. Where we see opportunities, we concentrate on the problems attendant upon them and not on the opportunities themselves.

As was said by the noble Lord, Lord Gilmour, the reason for that is the control of the media, the prominence given to the Euro-sceptic view of the media and its resorting to a nationalistic line. I come from Wales and am a Welsh cultural nationalist, but I have always hated political nationalism. I know that the easiest thing to promote in this world in order to stir up people's subconscious anxieties is nationalism. The press have done that, and it is a dangerous trend.

We should look at the reality of Europe. When we consider the state of Europe in 1945 and its state today, 50 years later, we see that the progress has been enormous. The greatest instrument in achieving that progress has been the Treaty of Rome. There is no doubt about that. Even the countries outside are pressing to come in. Sweden, Finland, Austria and our own country having spurned the original offer, wanted to come in.

Surely, at the present time Europe needs sustained, confident progress towards the goal of some future form—probably in the distant future—of a united Europe. This country needs to find its own role within Europe and to be confident and constructive in ensuring that we are fulfilling our role as one of the leaders—not the leader but one of the leaders—of Europe.

I wish to suggest three requirements that should be operating on the minds of our leaders for the 1996 conference. The first requirement is to reassure our fellow Europeans that we are intent on making a success of the European concept. Today that reassurance is necessary. A few years ago I would not have thought it necessary but now it is the No. 1 requirement. Furthermore, we should not be about employing tactics to try to defeat the firm objectives of the Treaty of Rome or to try to enlarge the Community in such a way as to change its essential nature and reduce it to a mere free-trade area of disparate development.

Our history on the subject is not reassuring to our European partners. Already we have had a list of the opportunities that have arisen. We as a country have never been at the heart of Europe; we have had opportunities to be so, but we have nearly always rejected them. There was, in particular, the invitation to the Messina Conference. We were so disdainful, patronising and dismissive of the original European Community concept. We set up EFTA as an inadequate and ill-fated rival. We must be aware of the fact that throughout we have seen steady and determined progress towards the goal of an integrated European Community but the leadership and the confidence has not come from us.

Despite our history and our claimed present economic success, we give the impression that we are a country completely uncertain of its future role or of its ability to hold its own in such a role. We have in Europe many friends waiting for a sign of positive leadership and a real and constructive contribution towards progress to a successful European Community. We need friends, and we have them; but we need to reassure them above all that we are not up to the old game of attempting to divide and rule.

The second issue that is important to recognise is the single European currency. It is my belief that those who are really shaping the future of Europe will, unless something totally unforeseen happens, have forged a single European currency by the end of this century—and that is only five years away. The potential political, economic and sociological benefits are obvious; but they are largely long-term benefits. The dangers are also fairly obvious; but they are very much in the shorter term. By and large, the politicians can see the longer-term advantages and the bankers see the shorter-term difficulties.

But surely a European currency will be in the premier league of currencies. We shall be competing with the dollar and the yen on an equal basis. Those countries whose economies and performance enable them to accept the single currency will be in the first division of Europe. That is inevitable. Those countries which are unable to achieve the criteria will he in the second division until they are able to do that. The pace setters of Europe will have achieved what they intend to achieve. If one looks at the history of the common market, they have achieved very much what they set out to achieve. If there is to be considerable enlargement, there will be a third division, too. That is a problem to which I shall turn in a moment. All will benefit, although a very strong compensatory regional policy will be necessary, as the noble Lord, Lord Callaghan, indicated, to have an ameliorating effect on the developments which will inevitably take place if there is a single currency. Whatever scepticism is stated by the Government at present, as a country, we can never afford not to be in the first division. We should make every effort to be there by the turn of the century. In passing, perhaps I may mention that I agree totally with Sir Edward Heath's demolition of the argument for a referendum on a single currency. One can imagine the enormous benefits for the speculators and those who are able to manipulate the media if there were a sustained campaign as to whether we should have a single European currency within this country. As Sir Edward said: Barings would be child's play compared with what the speculators would do then".—[Official Report, Commons, 1/3/95; col. 1079.] The third matter that I wish to mention is the common agricultural policy. On that, I disagree to a degree with what my noble friend Lord Jenkins said earlier. It has few friends in this country but it has many in Europe. I remember many years ago an extremely distinguished German politician explaining to me that in his view, parts of Europe have been saved from becoming Communist by the agricultural policy of the common market. One can imagine the depopulation that there would have been without that protection in Europe. People would have flooded into the industrial cities, and industrial and agrarian unrest would have resulted from that. He was giving his opinion to me well over 25 years ago but his opinion was that in France and Italy, there would have been Communist Governments.

I believe that we underestimate the support that there is for the common agricultural policy in Europe. I say that as a warning because whereas it will be possible to modify that policy, it will not be possible to change it basically within the foreseeable future—and I see the noble Lord, Lord Plumb, nodding in agreement. We should be warned that if there is to be a choice between expanding the Community and scrapping the agricultural policy, the majority of opinion within Europe will be for retaining the CAP and not expanding. It may be that that will lead to a discussion at the next summit as to whether associate membership as opposed to full membership of the common market is an appropriate step for the eastern European countries. I say that only in passing.

It is extremely important to recognise that if we are to be at the heart of Europe, what is needed in this country is a change of attitude: to see the enormous opportunities which exist, and not be put off by the problems which undoubtedly arise on the way to realising those opportunities.

6.25 p.m.

The Viscount of Oxfuird

My Lords, I have listened with care to some noble Lords who are normally labelled by the press as "Euro-sceptics" and to others who are labelled as "Euro-enthusiasts", including the noble Lord, Lord Jenkins, himself—and I, too, am grateful to him for giving us an opportunity to debate this important subject.

I have to say that I agree with a lot of what has been said by both camps. So what does that make me? Well, I am certainly not a Euro-agnostic, and for the reasons that I shall try to explain.

Back in 1975, when we had the referendum, I voted to stay in Europe, and I do not regret that because I think that membership of the European Community has yielded great benefits for the United Kingdom. Walls have come down. There is no doubt, however, that some aspects of the Community's affairs have not been handled well since the noble Lord, Lord Jenkins, stepped down as president in 1981. Under Jacques Delors, the European Commission seems to have created the impression of a sort of unaccountable hydra-headed monster wallowing in its own waste and profligacy and causing deep disquiet among the peoples of the member states.

It seems to me, therefore, that the Government have got it about right with their policy which was so well enunciated by my right honourable friend the Prime Minister in another place last week. Indeed, I would argue that the leadership shown by the British Government within the European corridors of power has lit a slow fuse of awareness of the frailties of some European Union institutions throughout the peoples of the nations of Europe.

It is acknowledged that we are much better off in Europe than out, but the Government are right to have set for themselves an agenda which will attack some of the structural nonsenses that are limiting the benefits that we and the other members are reaping from the Union and which are beginning to cause natural concern not just in this country but in other member states.

There are some who would argue that we should join Switzerland, Norway and Iceland in an EFTA-type free trade affiliation with the main Union as part of a trading block only. I reject that argument. We must remain an integral and dynamic part of the Union if we are to maintain any influence over its affairs. We must retain our positive place at the main negotiating table in order to reject federalism, to reject a system that appears to tolerate fraud and corruption, to fight waste and to keep up the pressure on the nonsenses promulgated by the common agricultural policy.

The Government emerged very well indeed from the last Inter-Governmental Conference in Maastricht with firm opt-outs from the Social Chapter and the monetary union timetable. Speaking in another place only last week, my right honourable friend the Prime Minister made it clear that, in his view, this 1996 Inter-Governmental Conference has followed on too quickly after Maastricht. I think that we would be wrong to regard the 1996 conference as some great momentous milestone event. It is merely part of an ongoing process in which we should play a constructive role.

The Prime Minister summed up the position very well in his speech at Leiden University in September 1994, to which some other noble Lords have referred already. He said: I see two pre-eminent tasks for the period ahead: within the Union, to build a cohesion and confidence which has diminished in the past few years: in external policy, to extend security and prosperity to the countries to our East. My own view is that the Union will certainly not be ready for any new initiatives by 1996, but should be looking forward to a period of consolidation—a period of bringing into effect some of the things that we are trying to do already.

It is vital that we do not add to the already overburdened Brussels machinery by initiating at the 1996 Inter-Governmental Conference any more new initiatives before those already on the agenda have been adequately tackled.

Let me say in conclusion how very important I believe it is that we should support the Prime Minister and the Government in the difficult task that lies ahead as they prepare for the next Inter-Governmental Conference. Speaking in 1888 in Caernarvon, the late kinsman of my noble friend the Leader of the House, the Marquess of Salisbury said: We are part of the community of Europe and we must do our duty as such". That is as true today as it was then, but we must work to build a sensible Europe, a Europe that recognises the importance of Vive la difference!—in short, a Europe that will retain the support of the European people as a whole by encouraging and enjoying the richness of the individual and unique cultures of our continent.

I believe that Her Majesty's Government have their feet very firmly on the ground on the European issue and they have my very strong support in the difficult, but extremely worthwhile task that lies ahead.

6.31 p.m.

Lord Bruce of Donington

My Lords, the response to the demand from the Leader of the Liberal Democrat Party asking for a positive response from the Government and for a positive attitude to be put forward has generally—to me at any rate—been a little disappointing. We have heard a number of statements like, "We must go forward and we must not go back"; "We must not be at the sidelines: we must be at the heart of something or other"; or, "We must avoid variable geometry, going round in concentric circles or adopting triangular attitudes". On the whole, they do not seem to be a frightfully satisfactory contribution to the demand for some positive information as to which way the Government intend to go.

I trust that there will be other occasions upon which I can inflict my more detailed eccentricities in the matter on your Lordships' House. However, I venture to suggest—without, I hope, causing undue alarm—that we are not talking about abstract things, or we ought not be: we should be vitally concerned about people, not concepts or institutions.

Unfortunately, on the Continent of Europe there are vast numbers of our people, millions in fact—and I am talking about our people in the European sense—who are living under disgraceful conditions. Indeed, them are millions of people who are unemployed and that situation shows no sign of abatement. Moreover, within member states themselves, apart from Luxembourg which can be roughly equated with the City of Bristol, there are considerable disparities of income and wealth. Housing conditions vary throughout the Community and are certainly very bad in this country. There is a whole series of matters to which responsible politicians ought to be addressing themselves. In view of the uncertainty of the political situation in the United Kingdom, I speak to both the Conservative Party and to my own party because there may be an abrupt transition, without notice, at any time. Therefore, my advice is quite impartial on such matters.

We must decide how we can get the close co-operation which we all want. I speak, unashamedly, as a socialist and have been one since November 1935. It has always been my concept of my party that there should be as much internationalism and far less jingo nationalism than there is. I also extend that to Europe. I am all for the utmost co-operation not only between the peoples of Europe but also between the politicians, whether they be in opposition or government, who represent the people.

How do we reach that stage? I suggest that the role of the Commission as a dynamic force in the European Community passed roughly at the same time as the noble Lord, Lord Cockfield, finished his mission, or almost finished it, on the completion of the single market. Even though it has not yet been quite completed, that essentially marked the end of an era. It marked the end of an era to which limits were originally set by Mr. Edward Heath when he took us into the Common Market. I am all in favour of any measure that enhances the single market throughout Europe.

However, what we have begun to experience is something totally different. We have had a situation where the Commission has been flooding the Council of Ministers with our proposals, with which it is ill equipped to deal by virtue of the time available to individual Ministers. There has been a continuous flow of proposals which has not abated, as I shall show, to a hapless Council of Ministers for which we provide 29 Ministers in accordance with Article 146 of the treaty. They assemble every few weeks or every month to have laid in front of them a draft presidential communiqué prepared for them in advance by the insistence of the Commission and thereafter debate how it should be amended and how much of it should be agreed. Anyone who has attended those conferences will know that I speak the truth; that is exactly what happens.

Surely the time has come, especially in view of Ministers' positions at home in their own countries, for such a situation to be changed. When there is large-scale unemployment and distress, it is the duty of Ministers to think and act constructively in their own countries. When extensions are required in order to promote co-operation in Europe among member states, members of the Council and Ministers should be the initiators of when they want to meet and what they want to discuss with the aim of obtaining the maximum possible agreement. Consequently, it follows from that that the Commission, which under M. Delors boasted that within a number of years 80 per cent. of the legislation of member states would be supplied from the centre, should cease to be and that it should lose its exclusive right to make proposals.

The Commission can make such proposals when it likes, but the Council should be able to look at them and say, "No, we don't want to look at that just now, thank you". The Commission itself should be unbundled and divided into three parts, with the status of very highly paid and respected civil servants. The first would be a commission of the single market; the second would be the treasury board composed of the nine spending directorates in the Community, plus half of two others; and the third would be the overseas trade commission. But the Treasury section should be made directly responsible to the Council. By these means the Council could then obtain much more effective control of its own space, much more control of its own time and be much more responsible to its own nationals and to its own parliaments.

Those are just a few of the proposals which in due course I hope to elaborate upon to your Lordships in future debates of this kind. But one thing is quite certain, unless integration—by that I mean the utmost co-operation—is accomplished upwards through member states, ,the idea disappears that it can be inflicted from on top by the Commission itself and can he imposed upon the Council, with the option of the Council to have a debate on it, probably postpone it, and possibly read newspapers while it is being read out to it.

If we are to have a Europe which means anything at all and which may ultimately, and one hopes, culminate in the ultimate world government that will be required to deal with global warming and things of that kind, we have to liberate our own politicians from the virtual dictatorship exercised by pressure which has been enshrined in treaty, and pressure which should be removed. If that is done, perhaps we can find a greater degree of agreement within the House. No one is opposed to greater co-operation among member states. What one must always be opposed to is the endeavour by a bureaucracy to dictate and to bring continuous pressure to bear. We want a free democracy and we want the politicians to be closer to their people.

6.42 p.m.

Lord Shaw of Northstead

My Lords, I, as others, welcome the opportunity of debating the part that we should play in the Inter-Governmental Conference of 1996. The basis on which we must start all such discussions—this was mentioned by the noble Lord, Lord Richard, earlier—is to remind ourselves that we are firmly committed to being in the European Union; and that being in the European Union, our whole history—both political and economic—demands that we make a substantial contribution to its development and success.

I hope that, after the speech of my right honourable friend the Prime Minister last week in particular, we have had an end to manoeuvres that, at best, would blur our position or, at worst, hint at our possible withdrawal. I have always felt that one of the differences that exist between the various members of the Community is that while in the case of most countries the approach to a proposal is too general, with often too great a reluctance to face up to the practical difficulties involved, our approach to any proposal tends to start at the other end. It is not that we do not understand the idea; but what we are concerned with is what will be the practical steps that will be involved; and what will be the practical results?

The two approaches to these problems must often lead to disagreements. Probably there are often faults on both sides. But patience, discussion and a steady willingness to negotiate will make sure that the reality of the problem is unavoidably revealed, which then greatly increases the chance of agreement. Being in the European Union was never going to be easy. The original concept of a Community of Six has completely changed with the dramatic increases in numbers that have taken and will take place. The changes inherent in the development and expansion of the Union themselves demand constant scrutiny and, from time to time, changes in the structure and practices of the institutions themselves.

To this end, I welcome the significance of the establishment of the Reflection Group. I am amazed that I am the first speaker this afternoon to have mentioned the existence of the Reflection Group. That has inspired a number of studies that are now being undertaken within the member states—and not least of course here at Westminster. These studies will form an important basis for the recommendations that the Reflection Group will be making to the IGC when it meets next year. In that regard I am grateful—indeed, I think we all should be grateful—to the House of Commons research department for its paper No. 95/27. That paper shows that already certain views are becoming clear in the studies that have already been announced in the various states in Europe. Already it can be seen that now that practical details are having to be discussed rather than general aspirations the UK is in no way isolated in its views. I give three examples. I hope that this is congenial to the noble Lord, Lord Bruce of Donington, and coincides with some of the remarks that he made.

First, the relationship of the Council and the Commission must be examined. I think that the noble Lord was quite right to spend much of his speech dealing with that important matter. I do not blame the Commission. If the Council does not do its job, the Commission has to. If one has a weak board of directors, the management tends to take over and that is not good for the running of a company or indeed of any authority. The Council, in summary, in the past has been too weak, and means have to be found to strengthen it in possibly the way the noble Lord wishes, or certainly in some other way. In my view, that must be a matter for consideration at the conference.

The second point is the increase in the numbers in the European Union. The structure of all the institutions must be examined. As the numbers go up, we cannot continually automatically keep on increasing the numbers working in the institutions because that will blur the effectiveness of the actions that are necessary within those institutions. I am glad that the matter of national parliaments has been raised by several speakers. National parliaments must in some way be more greatly involved. It has always seemed to me, as one who is a nominated Member of the European Parliament, that the connection that we then had with our national parliaments is now missing. If that relationship can be restored, I believe that that would be to the benefit of the Community.

Having studied the House of Commons research paper and the helpful information it contains, I am struck by the almost complete absence of one vital ingredient—and that is the need to establish financial discipline. The Reflection Group, when it meets in June, has a mandate to draw up an inventory of what have been called "real problems" as opposed to imaginary problems to be tackled by the IGC next year. But let there be no mistake: whatever size and shape is designed for the European Union; whatever powers and rights it takes to itself; whatever influence it hopes to create within itself, or with the world outside, there has to be established within the European Union the firm basis of a sound and respected financial discipline. There must be established not only financial regularity and value for money systems; there has also to be developed audit controls that are capable of checking the workings of such systems. Above all, there has to be established the acceptance that where wrongdoing is discovered, proper discipline and punishment will follow. When our Minister, Mr. David Davis, goes to the Reflection Group meeting in June, I hope that all aspects of financial control will feature at the top of his list of matters to be discussed.

Finally, I have already said that being in the Union was never going to be easy; and certainly steps taken in the past seem not to have produced the result for which we had hoped. All that we did in 1977—the establishment of the European Court of Auditors, the Budgetary Control Committee in the Parliament, and revision of financial regulations—have not worked in the sense that they have not produced the results for which we had hoped. For me the lesson of where we went wrong in 1977 is now clear. The truth is that we only half did the job. I must admit (I suppose naively) that I had assumed that once the fraud and shortcomings were discovered, something would be done about them. But in fact that was not so.

What should we do to put that matter right? It means that thanks to the Maastricht Treaty, the Court of Auditors now has greater powers to insist on such action. But that alone is not enough. If the economic union is to develop, as it must, high on the inventory of the "real problems" (as the chairman of the Reflection Group calls them) must be the commitment of all the member states to the establishment of successful financial controls.

6.52 p.m.

Viscount Waverley

My Lords, Britain must enter the Inter-Governmental Conference with both a flexible and open mind, reflecting the diversity and complexities of issues relating to Europe. A clarified strategy, however, needs developing from what has been a fractious and hitherto counter-productive debate.

In shaping a constructive IGC we must pay heed to two important factors: first, the need for an informed debate involving the British people, thereby encouraging a clearer understanding of key issues; and, secondly, the development of a fixed IGC agenda as agreed by member states.

The quality of debate is hampered by the self-serving interests of party politics. Divisions of opinion over Britain's destiny in Europe will inevitably transcend party allegiances. Main opposition parties serve no practical purpose by feigning unity in the vain pursuit of political point scoring. Arguments appear static because there exist strong tendencies towards over-simplification. Britain's future stand cannot be neatly confined by a commitment either to opting in or opting out.

The Europe of tomorrow should not be seen as a straight choice between federalism and free trade. We must avoid blanket policy making. Every issue must be considered and evaluated according to its individual merits and drawbacks. Choices will have to be made, but the Prime Minister is right to suspend judgment until the appropriate time. Caution, as opposed to haste, should be our guiding watchword.

There is concern over the scale of change that the IGC might bring. The conference cannot satisfy British expectations unless it follows an enlightened national debate encompassing our long-term vision of Europe.

We can exert a strong influence provided that we are not hindered by the federal fear factor. Britain can be at the heart of Europe, shaping policy, without being chained to it.

The IGC should address the institutional challenges posed by enlargement. There must be in place a plurality of streamlined institutions and effective mechanisms ready to deal with problems posed by expansion into eastern Europe. We must steer away, however, from over-centralised bureaucracies. Institutional reforms are necessary in the drive for increased transparency and accountability. The relationship between various existing bodies such as the Council of Ministers and the European Parliament should undergo review as well as the CAP and the current system of qualified majority voting.

Certain institutions can be made to work to the benefit of both the EU and individual nations. The European Parliament can provide a democratic legitimacy to newly developed international political structures that will arise from the pressures of enlargement. Their creation should not be seen as a direct threat to the independent powers of nation states. Britain must view the IGC as a forum for positive debate. There are encouraging signs that she will do so.

A common European defence policy incorporated within the Western European Union has its merits, provided that its objectives are clearly defined and do not duplicate those of NATO.

In justice and home affairs the IGC should encourage inter-governmental co-operation. No single nation appears immune to the spread of internationally organised crime and worldwide drug trafficking.

Monetary union is not scheduled for discussion in 1996, and rightly so. Britain's future is not exclusively linked to prospects for a common currency. Britain's opt-out clause is pragmatic rather than anti-European— a point not lost on our stand with the Social Chapter. In years to come we must fashion an economic policy best suited to the interests of our people. The IGC' s success, however, not only depends on our own attitude, but also on the attitude of all participating countries. The pre-conference hype must be facilitated by European dialogue examining those issues in need of debate.

The French and Germans have already hinted at pushing for far-reaching constitutional changes while Britain prefers deferment on such questions. The European debate is too often marked by a heightened sense of fear through ignorance. The world's rapid socio-economic transformation warrants increased European adaptability and harmonisation. We should not fear change, provided that it is diligently undertaken within an acceptable timetable.

6.57 p.m.

Lord Beloff

My Lords, debates on Europe in this House are always decorated by the contributions of former commissioners, and this afternoon has been no exception. The one thing that they all have in common is what I can only call a degree of retardation in their understanding of what has happened since they occupied those important posts. Perhaps it is the chocolate that they eat in Brussels which gives them that feeling—it is the only good thing that ever came out of Brussels.

The noble Lord, Lord Cockfield, spoke of a great, powerful core block of European states, with France and Germany to the fore, striving to create a more integrated Europe. That was true; but is he certain that it is true today? It seems to me that there is some unwillingness to look outside this country and therefore too great a willingness to regard the scepticism in this country as unique to Britain.

On French television yesterday evening, M. Giscard d'Estaing said that he did not propose to stand for the French presidency because he found that his accent on Europe as a cause raised no echo in the French electorate. That is a very considerable admission by someone who, as the noble Lord, Lord Cockfield, and others know—indeed, it was mentioned in the course of the debate—played a major part in the development of some of the Community's policies and institutions.

However, even if we say, "All right, we cannot know what goes on abroad, let us concentrate on what goes on in this country", the debate has been heavily weighted on the side of Europhilia—if that is the right word—but I have found no one who has even recognised the main reason, that there is a strong movement of opinion away from the notion of European integration. Even the noble Lord, Lord Gilmour, agreed with that. It is a simple fact that people believe that the laws under which they live should be made by people elected by themselves and interpreted by judges in whose impartiality they have confidence. The feeling is that laws are made externally. I am no animal lover—I prefer the cause of the Welsh farmers to that of animals—but it is striking to me, as it has been striking to people throughout the country, that the Minister of Agriculture could say, "Whatever I should like to do, I cannot do it because I would be breaking European law".

We are assured that it is a new legal order. All the jurisprudence of the court is based on that. The trouble is that we have got into a legal system in which our own traditional inclination to obey the law, which is not universally accepted in other member states, may conflict with our national interest.

I should like the Minister to comment on this example. Let us take the matter of borders. Is it or is it not the case that Brussels can insist that in future we demand visas from members of friendly Commonwealth countries who fought with us, when the European countries did not? The Australians, the Canadians may all happily obtain visas and no doubt we shall make it easier for them. However, it seems to me that that fact strikes the ordinary citizens of this country as unacceptable. They believe that in many ways, through family ties, language and past history, they are closer to members of the Commonwealth than to people across the Channel.

Lord McIntosh of Haringey

My Lords, I know that this is a timed debate, but has the noble Lord never had to obtain a visa to go to Australia?

Lord Beloff

My Lords, I have not been to Australia since visas were brought in there, but it does not alter my case. I believe that there should be no visas either way within the Commonwealth.

There are many such instances which explain why there is a universal complaint—I know that the Labour Party is riding high at the moment, but even members of that party have complained—that the younger generation do not regard party politics as an interesting way of spending their time. The youngsters prefer single issue causes, whether it be animals, women or other issues. The reason is that political parties exist in order to man (or woman) our Parliament. If Parliament becomes a second-rate assembly merely registering what is done elsewhere, why should people take party politics seriously?

All noble Lords are agreed that we live in extremely difficult times. We have world challenges to face which are greater than those within the European Community. But if we are to face them, it is essential that we do not build up legends about ourselves or Europe. The noble Lord, Lord Hooson, said, on the basis of a conversation with a German informant a quarter of a century ago, that the common agricultural policy saved France and Italy from going communist. France and Italy were saved from going communist by the infusion of American financial aid long before the common agricultural policy was even dreamt of. In so far as it is desirable always to cushion the movement of people away from the land and into the cities—which is a world problem—that can be achieved, as it was in this country before we entered the Community, by the country's own financial compensatory mechanisms. The noble Lord, Lord Hooson, says that the common agricultural policy helps to put money—and I have seen them on the ground—in the pockets of part-time Bavarian farmers or the barons of the wheatlands of northern France. To put that against the absolute necessity of giving some feeling of confidence in Europe to our neighbours to the east seems to me one example —and I could give many others if this were not a timed debate—of where we are mythologising the Community. It is not the Community which has brought about peace in Western Europe. Peace in Western Europe came as a result of the experiences of war. That could have been done without M. Delors, without the European Court and without the Commission. It would have happened anyhow. The United States and Canada do not go to war or threaten to do so. They have no common political institutions. Let us look at things as they are and cease to build up myths about them.

7.6 p.m.

Baroness Rawlings

My Lords, your Lordships have so far had a comprehensive debate today with diverse contributions from several experts and a most moving speech from the right reverend Prelate the Bishop of Sheffield. It is a great honour to follow the noble Lord, Lord Beloff, who is always most entertaining and I should like to add my thanks to the noble Lord, Lord Jenkins of Hillhead, for initiating the debate.

The lack of serious debate before the previous Inter-Governmental Conference in Maastricht resulted in a great many misunderstandings and problems. I hope that this will not be the case with the 1996 Inter-Governmental Conference. We should not lose sight of the significance of the IGC and therefore not get sidetracked into other areas that are not and will not be on the agenda such as, in particular, economic and monetary union, as the noble Viscount, Lord Waverley, rightly said.

I wish to touch on just a few points without delving into too much detail. My aim today is simply to emphasise three areas which I hope will be seriously addressed in the months to come. I shall not venture into the sea of acronyms, of QMV, CFSP and WEU. These issues will all be discussed in great detail with our European Union partners, but this is neither the place nor the time for me to go into them.

The Inter-Governmental Conference will rightly consider the defence and security pillar of the treaty. The Cold War may be over. Nevertheless, we still live in a very fragile world. We cannot overlook the fact that Russia is still heavily armed and not perhaps the most stable of nations as it slowly moves from a command economy to the free market. The United States is ambivalent towards European defence. For several years now senators like Sam Nunn have lobbied for burden sharing. As we are aware, it is for Europe to take on more defence responsibilities herself. This pillar will be of paramount importance to preserve peace. We have now had 50 years of peace in western Europe, a longer period of peace than at any time in the past 120 years. Furthermore, the justice and home affairs pillar offers possibilities which will be developed and will be discussed at the Inter-Governmental Conference.

I shall just mention one of the worst scourges in today's world: drug abuse, responsible for so much crime in our society. This is a growing cancer which has always existed but never on such a horrific scale. It is a problem which, I am sure all noble Lords will agree, is impossible to solve in Britain alone. It can only be done in co-operation with other nations, working closely together. I urge the Minister, the noble Baroness, Lady Chalker, to keep this in mind. It is one of our greatest evils today.

In this connection I should like to raise a few fundamental questions with your Lordships. Where should the balance of power lie? Is the balance of power between governments and the European Union institutions satisfactory? Is the balance of power between governments and national parliaments satisfactory? I am certain though that closer co-operation between national parliaments and the European Parliament is essential. But how should it be structured?

As the discussion develops, it is vital that this time the general public should be accurately informed so that everybody can understand what is at stake. I have full confidence that our Government are putting together a robust set of practical proposals, in particular in these areas, and that they will play a positive role in the Inter-Governmental Conference. These proposals will be thoroughly thought through, the paramount concern being how to make the European Union function better, to the benefit of its citizens.

Let us not forget that Britain was the driving force behind the enlargement of the European Union to the east. With the fall of the Berlin Wall, the political agenda of Europe changed. Even though it will take time for the countries of central and eastern Europe to comply with the European Union's requirements, ultimately membership is their aim, and also ours.

The first step has been taken by members of these countries by means of the Europe agreements. For enlargement to succeed it will be necessary for the European Union itself to adapt its policies and institutions to accommodate the new members. That has been the case in the past. These changes will have to be carried through, and any arrangements decided in the Inter-Governmental Conference will have to work for a European Union of possibly more than 20 members.

Perhaps we should not lose sight of the original aims of the Community of peace and prosperity for all its citizens. Let us hope that these noble aims will be bolstered by the outcome of the 1996 Inter-Governmental Conference.

7.12 p.m.

Lord Desai

My Lords, there is a basic misunderstanding of the nature of the European Community. It is, of course, a customs union, a free trade area in one sense. It started as a customs union. It also started from the Coal and Steel Community, which is a dirigiste organisation. These two axes jointly constitute the basis of the European Union. Many people like one but not the other. For a long time the Labour Party did not like the customs union free trade aspect of the market, and M. Jacques Delors sold us the dirigiste angle, saying, "Come with us and we will give you good social and labour conditions".

The problem is that those two aspects come in a package. On the mainland of Europe, as the noble Lord, Lord Elis-Thomas, called it, there is no problem about this. But in Britain we have a problem, in that we like either one or the other. That will remain a problem. What it points to is a kind of dirigiste logic that was accepted—and not just in Europe. In the post-war period, that sort of logic was accepted here as well. It no longer is. People want much more democratic control over bureaucratic decisions. Therefore the democratic deficit in the European Community has to be addressed. First, as my noble friend Lord Bruce of Donington said, the European Commission has to be made properly subservient to the elected members, and be seen to be so. And secondly, as the noble Lord, Lord Ezra, said, a second (if I may use the word) federal chamber has to be added, where national parliaments are represented on a permanent basis, so that they know what the European Union is up to.

I believe that we are also all agreed that the common agricultural policy has to be reformed. If it is not reformed, the logic of expansion will become so expensive that it will not be possible let other countries into Europe. Even if the Community were not expanding eastwards, the common agricultural policy is an affront, not only to common sense but to good economic theory, and therefore it should go.

In the few minutes that I have, I want to concentrate on the question of monetary union and a single currency. I agree with the remarks of the noble Lord, Lord Roll. It is a mistake to think that convergence should come first and a single currency later. I have always held that this will be an extremely costly cart-and-horse idea.

Let me give an example. Within the UK there is a single currency, but there is no convergence. That is why we have inequalities in regional unemployment. If convergence did exist, the unemployment statistics would be uniform across the country. Most national economies have a single currency but they do not have convergence. We tackle the problem by other policies, such as regional policies. Therefore it must not be thought that convergence is required before a single currency is established. Indeed, a single currency may hasten convergence.

What will, however, happen, is that, because of the way in which conditions for convergence have been laid down, many countries will undergo an especially deflationary experience in order to get convergence. When convergence comes about and we have a single currency, a second dose of adjustment will have to be made as a result of the single currency. Therefore, the deflationary logic of a single currency will stay.

A single currency has the advantage that expansionary policy could be pursued. But that requires not just a single currency but a powerful single fiscal authority. Whether it follows logically or not, I do not care. But if you want to pursue Euro-Keynesian policies, you require a European-level state authority which can pursue Euro-Keynesian policies. Such policies do not come from scattered states which have sovereignty. I always thought, therefore, that the single currency experience was delayed far too long. I would have preferred a single currency now, and convergence later. I have said this before—but that is surely pure madness and we will not pursue it any further.

Many noble Lords, and others outside this House, have tried to argue that there is something called real convergence that we ought to worry about, not just nominal convergence, and that we ought perhaps to wait until our productivity and unemployment are in line and all sorts of other indicators are in line. That is Utopia. As I said, there is no national economy which satisfies those conditions, and no European economy ever will.

However, it is possible to say that the nominal conditions that have been laid down are not appropriate. They do not make much economic sense. They are easier to check for. It is easier to satisfy yourself that the deficit is less than 3 per cent., that the debt/GDP ratio is whatever it is, or that the exchange rate has stayed in a certain band. But all these are nominal magnitudes which do not have any economic logic to them.

Let us take, for example, the deficit. We ought to have a clear interpretation that a deficit is a deficit only on revenue account and not on capital account in the budget. That has to be perfectly satisfied. It has to be said that this deficit should be over the cycle. These matters should be properly defined, perhaps at the IGC. Secondly, looking at the debt/GDP ratio, the debt should be net; it should be only that debt which has been incurred for revenue purposes and not for capital purposes. If there are assets to be offset against the debt, those assets should be netted out, and the debt/GDP ratio should be calculated net of the assets that a national economy possesses. Thirdly, in referring to exchange rate conversions, we ought to worry about real exchange rates and not nominal exchange rates. As it is, we have realised that nominal exchange rates can move in and out of the stable band before you know it. It is very easy to destabilise. I predict that if we said that we would have a single monetary authority on 1st January 1999, starting on 15th December 1998 the markets would go haywire and all conditions would be violated. That is exactly what will happen.

I think therefore that we ought to concentrate on real exchange rate movements. We should ask ourselves whether or not the real exchange rates of countries are reasonable. If real exchange rates are not in line, it is no use having nominal exchange rates in line, because they do not have much influence on the real economy. They only influence the speculators who are moving their money around.

If those three things are added, as it were as addenda or notes to the Maastricht Treaty—not as revisions of the treaty but interpretations of the treaty—then I believe that we can talk much more seriously about whether or not there is convergence. What has already happened, as some noble Lords have pointed out, is that the Netherlands, Germany, perhaps Belgium and Austria (certainly the Netherlands and Austria) are already in a de facto single currency regime. There is no doubt about that. Austria has been shadowing the deutschmark for many years, as has the Netherlands. Whether France and Belgium can get up to that level—Ireland as well—we do not know.

In a sense, everyone is becoming too excited about a single currency. The Maastricht Treaty states that if a country is not ready, it will not be allowed to join anyway. There is no problem of being forced to join if one is not eligible to join. If a country is eligible to join, I do not understand why it would not join. The only freedom that one has outside the single currency is the freedom to devalue. Over the past 50 years the British data show that depreciation of the pound, internally and against the deutschmark, has been horrendous. Nobody can tell me that the past 50 years of monetary sovereignty have been a great success in our economic life. We have wasted monetary sovereignty and it is about time that we had some sensible policies.

7.22 p.m.

Lord Harmar-Nicholls

My Lords, with tonight's list of speakers as long as it is, I know, coming in the last quarter of it, that all the technical details that could be said on this subject have already been said. I shall not attempt to add to that long list of advice about the technical side of the issue. I want to talk about tactics. My points, for what they are worth, are addressed to my own Front Bench. It is, of course, just my luck, that at the time when these pearls are to drop, the Minister is no longer in her seat. However, I have every confidence that my noble friend will pass on faithfully the points that I make. Still, that will be hearsay rather than direct evidence from the person presenting it.

Starting with the opening speech, most of the speeches that I heard were sermons. I have a high regard for the noble Lord, Lord Jenkins of Hillhead. He is one of the most experienced and knowledgeable Members in this House. I remember that he and Tony Crosland were the leading intellectuals who were so excellent at keeping the debates alive in the other place in 1948 to 1950. So I am speaking of an experienced operator. But tonight his contribution was something of a sermon rather than a speech. My noble friend, when she reads it, will see that that is what it is. There was not much content in it. Indeed, funnily enough, most of the other speeches were what I call sermons. In fact, the paradox is that the one speech that was not a sermon came from a professional sermoniser—the right reverend Prelate. He had his feet on the ground. It was a real speech and a genuine contribution. He matched my noble friend Lord Cockfield, who also always speaks in language that one can understand; the message that he puts over is always quite clear.

The tactics about which I shall speak have the following basis: whether we remain as the Government or some other party succeeds us in government—whatever will come after next year's conference—unless that party carries the nation with it, it will make no success of anything. The nation has to be behind the Government. It is clear to me that we have come so far in the progress toward a federal Europe mainly as a result of tactics which I personally have witnessed and in which, unfortunately, I have had to take part.

I remember the debate which decided the matter in October 1971. The Motion before the House was: That this House approves Her Majesty's Government's decision of principle to join the European Communities on the basis of the arrangements which have been negotiated". On that Motion the vote was 356 in favour and 244 against. The 244 votes comprised mainly the socialist vote. In those days, their doubts about the absolute inviolability of the rightness of merging into Europe along those lines was not so keen as it seems to be today.

I wonder what caused that change. I am glad that the noble Lord, Lord Desai, reminded me of the occasion when Jacques Delors came to this country. The noble Lord said that M. Delors had pointed to all the advantages of the social sections and the improvements that they would bring. That was not my recollection of what happened. The Trades Union Congress invited Jacques Delors to speak at their annual conference but it was not on that kind of level. The information that I gathered at that time was that Jacques Delors, the French socialist, came to the annual meeting of the Trades Union Congress and made his view perfectly clear to his colleagues in the British socialist parties. He said, "You will never get your socialism in England through Westminster. There is a good chance of getting it through Europe". It was rather a coincidence that almost overnight, on the strength of that argument, the 244 socialist vote (which was on the record at the time that we agreed to go into Europe) was switched around. So I am not at all impressed with talk about the sudden belief that the change on the other side of the House has come as a result of all the wonderful things that would happen as a consequence of joining the EEC.

They want their socialism and I understand that. I want my capitalism because I believe that it is better for the people and the country if we follow what is known as capitalism. The other side think differently. That is what the great argument will be about for a long time to come.

The talk is that we ought to give more powers to the European Parliament. I am rather inclined to agree with the noble Lord, Lord Stoddart, that, if we really want this Union to work, it would be better if that were a nominated parliament rather than an elected one. My noble friend Lord Plumb and my noble friend Lady Hooper, who sat with me when I was elected to the European Parliament—I went there to try to find out what it was all about—will remember that the time I spent there trying to make a contribution was spent in attempting to persuade my Conservative colleagues in the European Parliament that their duty was to be there as British representatives in order to put the British point of view on the issues. However, a number of them had gone native—I suppose that that is the term to use. One was not communautaire if one did not think in those terms. I did not succeed with many of them.

How did the Members of Parliament, with all the dangers that showed themselves, allow that situation to come about in October 1971? I was an active member and think I understand who at that time was ambitious in politics. Within five years of being elected I had been made a Minister. I was a Minister for eight years. But I resigned as a Minister in 1961 when this move towards Europe came up again. I instinctively felt the dangers of it. Why did the Government win despite that feeling among many people? They won because they said, "Don't be afraid. We have the veto. Nothing can happen. We can stop everything". But the veto is hardly there anymore. The other member states now want majority voting and so the protection of the veto hardly exists. After Maastricht they have produced the new protection which is called subsidiarity. What does "subsidiarity" mean?

When my noble friend comes to reply—she is an outstanding Member of the Government—will she define what subsidiarity really means? Will it go the same way as the veto? Does it mean that individual nations can decide for themselves when they feel that their domestic problems are theirs and no one else's? We want no more double meanings. We want this nation to succeed and I want the Conservative Government to be the government that sponsors that success. They can do that only if they carry the nation with them. One cannot carry the nation if one has "clever-dick" excuses for moving in a direction in which one does not want to go.

7.31 p.m.

Baroness Hooper

My Lords, I can certainly confirm the description of my noble friend Lord Harmar-Nicholls of his role as a Member of the European Parliament, a role which he happily continues in your Lordships' House. What I am going to say will horrify him more than a little because I am speaking this evening both as a former Member of the European Parliament and also as a member of the parliamentary assembly of the Council of Europe. It is my fond wish that those two institutions should in the future—it will he the long-term future—merge and operate together so that we have a real and true Europe.

I realise that that issue is not a topic for the IGC agenda in 1996, but that goes for a number of matters that have been raised in the course of the debate today. I mention it in any event because it illustrates the fact that nothing stands still and that as soon as we reach agreement in one set of circumstances external changes occur. We are then faced with new challenges and new decisions have to be made.

As a further general comment perhaps I may say that the more I travel in those countries of central and eastern Europe which are already members of the Council of Europe and which aspire to membership of the European Union the more I realise that our culture, history and identity in this country are as much dependent on influences from central and eastern Europe as they currently are dependent on influences from the Celts, whose contribution was so well described by the noble Lord, Lord Elis-Thomas, many hours ago at the beginning of the debate. Indeed, in this context I very much liked the reference made by the right reverend Prelate the Bishop of Sheffield to St. Alcuin having a European mind. I believe that many Members of your Lordships' House who have spoken today have shown that they too have European minds.

What nearly everyone has agreed is that we should be positive and constructive. I certainly subscribe to that view and I was also pleased to hear my noble friend Lord Boardman pointing out that we have quite a good record in that respect. But let us not forget that the success of the Inter-Governmental Conference next year does not just depend on us and our attitude. Every member of the European Union will have to be positive in deeds as well as in words. So, instead of perhaps always being rather inward looking, let us concentrate on encouraging our fellow members as well as ourselves about the future of our participation in Europe.

In saying that, I agree with all those who have said that the continuing debate in the lead-up to the IGC is vital. My noble friend Lord Plumb referred to the international meetings and discussions in which he is currently involved and my noble friend Lord Shaw of Northstead referred to the work of the Reflection Group. I know that at a national level a number of preparatory measures are taking place, not least the setting up of a sub-committee of your Lordships' European Communities Committee. I can assure the noble Lord, Lord Stoddart of Swindon, that his hors d'oeuvre in the debate today will certainly be followed by a main course somewhat later in the year when no doubt we shall have the opportunity to debate the report of that sub-committee. I hope that this debate and others we may have will help to send out the right signals in order to prepare the right climate for a successful conference next year.

Some of today's debate has ranged considerably wider than the topics likely to be debated at the Inter-Governmental Conference. I was grateful at the outset to the noble Lord, Lord Richard, for bringing us down to earth by referring back to the source document, the Maastricht Treaty, and outlining the agenda that it spelt out. But we cannot expect at this stage—it is too early—to spell out in detail every single issue that will be examined at the conference. In saying that I certainly look forward to hearing my noble friend reply to today's debate. In spite of some of the criticisms that have been made it is entirely appropriate that her contribution should come at the end of the debate. Otherwise, we would have received the criticism that she was not prepared to answer and respond to comments that were made in the course of the debate.

Although anticipating her reply and the information that will bring us, I believe that the Government's agenda for the Inter-Governmental Conference is clear and positive. For example, in relation to subsidiarity, it has been spelt out time and again that we are in favour of seeing subsidiarity entrenched even further into the workings of the Community. In relation to a clearer definition of the roles of both the European Parliament and national parliaments, it is quite clear that the Government believe that the European Parliament certainly has the main role of focusing on scrutinising the Commission and holding it to account for its activities and spending but that nevertheless an important constitutional role remains to national parliaments to contribute to the democratic legitimacy of the European Union decision-making process.

The Government have made it quite clear that they agree with the remarks of the new President of the Commission, which were quoted by my noble friend Lord Plumb, that the Commission should do less but that what it does it should do better. The Government have always made it clear that enlargement is most important.

Another issue is the strengthening of intergovernmental co-operation in the fields of foreign policy and defence. My right honourable friend the Secretary of State for Defence has made it perfectly clear on a number of occasions —I am aware of this as a member of the parliamentary assembly of the Western European Union—that in European defence it is the time for a practical step forward in accordance with what has been agreed at Maastricht and that the European allies should now extend their ability to make a contribution to international crisis resolution, to peacekeeping and to helping with specifically European concerns where NATO is not involved. I believe that is all very clear.

As a final comment as regards the general and positive approach as opposed to the positive detail of what is going to be discussed, I wish and hope in your Lordships' House in a debate of this kind that we shall not hear in future noble Lords talking about "Europe" and "us". By all means talk about "the rest of Europe" but please do not let us make that kind of differentiation because it is not a, question of "them" and "us". I believe very firmly that we are part of them and they part of us.

7.40 p.m.

Lord Monson

My Lords, I entirely endorse the contention of the noble Lord, Lord Jenkins of Hillhead, that the United Kingdom should play a positive role at the 1996 Inter-Governmental Conference. That positive role in my view should be to articulate the feelings of the people of the European Community, as opposed to the aspirations of their elites. It is no good trying to influence or change their minds—at any rate the elites of the core countries of the Community, the original Six. For the most part, they are deeply, sincerely and passionately integrationist, federalist and intent on creating a United States of Europe as a rival to the United States of America and Japan, with a single foreign policy, a single army, navy and air force. To do them credit they have made that perfectly clear time and time again.

But most of the ordinary people of the Community do not want a single army, navy and air force; they do not want substantially greater integration, more bureaucracy or more probing into the nooks and crannies of everyday life by people living hundreds of miles away and speaking a different language both literally and metaphorically. The narrowness of the referendum results in France, Denmark, Finland and Sweden, despite the massive propaganda facilities and substantial financial resources available to modern governments and establishments, amply demonstrate that, as does the revelation that three-quarters of the German people now oppose a single currency.

That is understandable since there is no point in replacing the deutschmark with the ecu unless the latter is going to be potentially more inflationary than the deutschmark. With 15 nations having an input into the administration of the ecu, it is bound to be more inflationary. Despite the apparently cast-iron safeguards written into the Maastricht Treaty, one can be certain that the moment widespread civil disturbances break out in one or more Mediterranean countries in consequence of deflationary policies being pursued by the central bank, the purse-strings will be loosened, interest rates will be lowered and the ecu will be effectively devalued against the dollar, the mark and indeed the Swiss franc.

On the Continent, when rules and regulations which are apparently set in tablets of stone run up against realpolitik, one can bet that realpolitik will always win, as the abatement of the massive fines imposed on Spain and Italy for the overproduction of milk and the continuing illegal subsidy to Air France and other semi-nationalised French companies fully demonstrate.

There is no time to say more about the disadvantages of the single currency except to commend to your Lordships an excellent article by Mr. Tim Melville-Ross, the Director General of the Institute of Directors, in The Times yesterday. Even he does not give all the manifold arguments against, but he gives a good few of them.

Strictly speaking, the United Kingdom's role at the 1996 conference should be confined, first, to opposing any extension of majority voting, with the possible exception of voting which affects the future of the CAP—I believe that the noble Lord, Lord Jenkins, had a perfectly valid point in that regard. Next, the United Kingdom should urge much greater caution about a single currency as opposed to a common currency—otherwise known as the "hard ecu"—so well advocated by the noble Lord, Lord Boardman; oppose greater powers being granted to the European Parliament, inevitably at the expense of national parliaments; and oppose any moves towards a single foreign policy, or a single army, navy and air force.

But these are all defensive moves. What of more positive ones? When departing from the strict agenda, as people invariably do, the United Kingdom representatives should take every opportunity to extol the inspiring clarion cry sent out by the European Research Group in its recent pamphlet A Europe of Nations to which the Prime Minister contributed a foreword. The group's programme has been contributed to by political figures from no fewer than 20 European countries: all the 15 European Union countries with the exception of Austria, Greece and Luxembourg, together with representatives from the Czech Republic, Hungary, Iceland, Norway, Poland, Slovakia, Switzerland and Turkey. That is truly Europe, unlike the truncated EU version that dares to usurp the name.

It goes without saying that the contributors to this pamphlet are every bit as pro-European as the noble Lords, Lord Jenkins of Hillhead, Lord Howe, Lord Richard and others. It is simply that they take a different view of the way in which Europe should develop. Among their important recommendations are that the Visegrad countries should be admitted to the European Union by 1st January in the year 2000. Long before that we should have dismantled all the tariff and non-tariff barriers against the importation of agricultural and manufactured goods from those countries which are such a disgrace at the moment.

All power should be assumed to rest with national governments unless explicitly stated otherwise in the treaties. The ambiguous principle of subsidiarity should be codified and strengthened. The European Commission should be reduced to the role of a civil service carrying out the will of elected Ministers and lose the right to initiate legislation. The European Parliament should be prevented from competing for power with national parliaments and should focus simply on scrutinising the work of the Commission. The European Court of Justice should be strictly confined to a specific judicial role interpreting the plain text of the treaties. The doctrine of the acquis communautaire should be abandoned. Responsibility for agricultural policy should be returned to the member states, The WEU should be decoupled from the institutions of the European Union and remain purely under the control of its member governments.

I suggest that that is a programme to enthuse and inspire ordinary people throughout the Community. It is not a blueprint for a simple free-trade association so criticised by the noble Lord, Lord Cockfield, but rather a variant on l'Europe des patries aspired to by General de Gaulle. The fact that in the French presidential election race the federalist, M. Edouard Balladur, is losing ground to the Gaullist, M. Jacques Chirac, ably assisted as he is by the openly Euro-sceptical M. Philippe Séguin, is an encouraging straw in the wind.

The noble Lord, Lord Cockfield, has often quite rightly reminded us that the Treaty of Rome aims at an "ever closer union between the peoples of Europe". Indeed, but bureaucracy, enforced harmonisation and constant interference in the aforesaid nooks and crannies of everyday life have the opposite effect. They create hostility between peoples. Conservatives often talk about getting the state off people's backs. It is only by getting the potential superstate off the backs of the peoples of Europe that one will pave the way for genuine harmony between them.

7.49 p.m.

Lord Pearson of Rannoch

My Lords, the noble Lord, Lord Jenkins of Hillhead, to whom we are indebted for this debate, started his speech by regretting that the cross-party pro-European alliance which existed in the 1970s appears to have grown weak in recent years. I imagine that the last five hours will have done something to reassure him—were he to be in his seat—that that alliance is still very much alive, at least in your Lordships' House, although I would agree with him that it has grown weak. I believe that it has grown weak because its arguments have grown weak and out of touch and are now often reduced to slogans such as, "We must be at the heart of Europe"; "We attract inward investment because of our membership of the Union"—as opposed to the market; "We must get in wholeheartedly and influence things our way"; "We'll be left behind by France and Germany who are going ahead with the Union anyway and that would be a bad thing", and so on. I fear all these slogans strike me as tired and out of date. They might have been relevant to the Europe of the 1970s when Germany's economy was booming and ours was labouring under Socialism, but none of them is justifiable today.

Listening to the first 10 speeches this afternoon and to several other speeches later, it struck me again, as it struck me at the time of our debates on the Maastricht Treaty two years ago, that another alliance is at work in this country and in Europe. It is perhaps a somewhat subconscious alliance, but it consists of politicians and bureaucrats, and I fear that it has grown out of touch with the aspirations of the people.

I have to say that that alliance is very well represented in your Lordships' House. Indeed, the majority of speakers in today's debate made their careers in politics or the bureaucracy. We have been privileged to hear a number of politicians and bureaucrats who have been very influential in setting up the Europe which we see today, and it is absolutely understandable that they are reluctant objectively to see it as it has become, which is very different from what they hoped it would be. Of course, that is only to be expected from at least one former Foreign Secretary, a former Prime Minister and from several ex-Cabinet Ministers, former European Commissioners and MEPs. I suppose that it is a bit like looking at your own baby when it is born. You tend to find it difficult to recognise the warts and other distortions which may be apparent to other people less involved in its creation.

Be that as it may, I have been quite depressed this evening to see how their mood has developed since our Maastricht debates in 1993. They now seem to take our loss of sovereignty for granted. They no longer pretend that Article 3b of the Maastricht Treaty, the infamous subsidiarity clause, is a shield against the further plundering of that sovereignty, as we were constantly assured by the Government in 1993; and they view monetary union as the certain and final surrender of that sovereignty with equanimity.

Well, I have to tell them that many of us—indeed, a growing number of the people in this country and Europe; possibly now a majority—do not share those cosy and unreal feelings which seem to pervade the political and bureaucratic club. We who are not politicians and bureaucrats, we who have worked, and work, in the real world of commerce and industry are not cursed with having brought us to where we are now in Europe, and we wish to see the IGC deliver a substantial repatriation of powers to the nation states. The noble Lord, Lord Stoddart of Swindon, and the noble Lord, Lord Monson, have already enumerated some of the powers which we wish to see repatriated, and so I will not repeat them now.

But we certainly want to see subsidiarity mean something, which at the moment it does not, or, if it means anything it means the opposite of what the Government assured us it meant in 1993. It means that the Community decides what nation states will be allowed to decide.

If my noble friend on the Front Bench thinks I exaggerate, could she perhaps answer the questions I put to the Government on 24th November 1994, the last day of our debate on the gracious Speech? What has happened to the initiative, inspired by my right honourable friend the Prime Minister, to withdraw 25 per cent. of all Community legislation, which he has assured us was agreed at the Corfu conference, and how does that fit with the Community's determination to maintain its doctrine of the occupied field, whereby once it has acquired a power, it never gives it up? Is the acquis communautaire dead or alive?

Would my noble friend accept that the Commission's work programme for 1995 runs to 72 pages and that it only pays lip service to subsidiarity? Is she aware that M. Santer has admitted that there will be some 52 of what he calls "new priority legislative proposals"—or one a week? A "new priority legislative proposal" is roughly what should be the equivalent of a Bill in this country—except that we import so many of them by delegated legislation. Does my noble friend accept that EC directives and regulations rose from 1,602 in 1993 to 1,800 last year, of which the regulations—which do not have to be sanctioned by national parliaments—rose from 1,160 to 1,579? It is one of those regulations which threatens the UK glasshouse lettuce industry, which employs 12,000 people. It is the absurd, continuing so-called "fine-tuning" of the single market which threatens the survival of the London bus, and much else. For instance, we are soon to have a directive harmonising the construction of lifts. In this respect, perhaps I can repeat a request to my noble friend. Can I ask her to explain to the bureaucrats in Brussels that a level playing field and a market are a contradiction in terms?

As to monetary union, does my noble friend agree that eventual monetary union would he likely to lead to a harmonisation of interest rates and taxation, and inescapably to political union? Can I ask her and those who favour monetary union whether they have thought of an ever weaker ecu after such monetary union, dragged down against the currencies of the vibrant economies of the world by Europe's sluggish, bureaucratic and over-politicised regime? Is that a prospect that they have really examined objectively?

Finally, can I ask whether it is such a terrible crime at least to contemplate tearing up the Treaty of Rome and all its works? As the noble Lord, Lord Stoddart, suggested today, until we have an unbiased cost-benefit analysis of our present membership, it seems impossible to know how unwise that suggestion might be. That was another question that I put to the Government on 24th November—again I got no answer. Certainly, the Europhile slogan that we get our inward investment because of our membership of the Union does not bear examination. Most of our inward investment comes to us because we have access to the European market, because thanks to the policies of this Government we have good labour relations and low inflation, because we are not saddled with the ruinous social chapter, and because we speak English. I cannot believe that the prospect of our monetary and political union with our weaker brethren in Europe can be much encouragement to potential investors.

So, the key question becomes: would the French, the Germans and the others deny us access to the European market if we left the Union, bearing in mind that we trade in deficit with Europe and have done so for 20 years? It seems most unlikely, but I do not imagine it is a question which we have ever dared to examine dispassionately. May I suggest that it is time that we did so so, that we might discover the strength of our negotiating position, which I feel sure is much stronger than at the moment we dare to hope? Only then can we enter the IGC negotiations in a suitably objective and positive frame of mind. Unless we can persuade our partners to create an altogether less stultifying framework for the free nations of a prosperous Europe, we should be determined to leave the Union, especially if that means leaving the European economy stuck in the slow lane of world economies which it so richly deserves.

7.59 p.m.

Lord Thomson of Monifieth

My Lords, the noble Lord, Lord Pearson, ended the debate from the Back Benches opposite by making a clear case for what he described as "tearing up the Treaty of Rome". Whether that would constitute a positive approach for the Government at the IGC, as he seemed to believe, I am not so sure. However, I believe that I speak for all noble Lords who have spoken—even, I am sure, for the noble Lord, Lord Pearson—when I thank my noble friend Lord Jenkins of Hillhead for launching this debate and for devoting one of the rare Liberal Democrat days to discussing the need for Britain to play a positive role at the 1996 Inter-Governmental Conference.

Compared to some of the debates that we have had over the last year or two on these issues, which have very often been ill-attended—indeed I have often felt ill-represented in your Lordships' House—this debate has been extraordinarily well attended. There has been a wide variety of views and it is very clear that the great majority have supported the proposition of my noble friend that the Government should take a positive attitude when the IGC is called. Whether we are going to get a positive attitude from the noble Baroness the Minister this evening I am not so sure. I think I share the lack of optimism of the noble Lord, Lord Cockfield, on that matter. Regarding the question of whether the Government are at the heart of Europe, of course we all know that the noble Baroness's heart is in the right place but we shall wait to hear what she has to say to us tonight.

The noble Lords, Lord Pearson and Lord Beloff, both raised the point about the state of public opinion on the European Union in this country and they argued that it had turned pretty negative. The noble Lord, Lord Beloff, speculated why. I will give him one strong reason. During the 15 years this Government have been in office there has been a generally negative attitude from them over the possibilities of British membership of the Community—not totally and all the time but, generally speaking, over the whole of the last 15 years. I am bound to say that I think it has immensely damaged Britain's capacity to influence European developments in our own legitimate national interests, as well as depriving Europe of a positive British contribution.

With one or two notable exceptions, there has been no Cabinet leadership on the benefits of British membership of the Community. The minorities in Parliament, who have a principled view of a deep dislike of Britain being part of the European Community, have had a field day, attacking the Community all the time: sometimes over serious issues of sovereignty and the sharing of sovereignty and sometimes over the minutiae of the behaviour of the European Commission in the matter of such great issues as the curvature of cucumbers and similar matters.

There is always a need for constructive criticism of the European Community and of the Commission. I am not, as has been pointed out, a totally dispassionate witness in that capacity, but the Commission is like any other political and bureaucratic institution: it is fallible and it makes mistakes. What I think is important for people in this country and Members of your Lordships' House, in making a judgment about British interests in Europe, is a sense of proportion concerning these criticisms. For example, the level of Community fraud is obviously a crime and a scandal. The reports of your Lordships' Select Committee have made a notable contribution to getting the Community at last to take more effective action about this.

However, all Community public expenditure taken together—the CAP, the Cohesion and Structural Funds, the lot—amounts to 1.25 per cent. of the Community's GDP, compared to an average of about 50 per cent. of GDP accounted for by national government spending in Union countries, where there is ample scope, as we all know, for criticism of bureaucratic national practices. This must be seen in proportion against the fact that membership of the European Union has been the reason why Britain has attracted over 600,000 new jobs since 1979. Nearly half of all Japanese, American, Korean and foreign investment into the European Union comes to this country. London is a magnet for overseas banks. There are 520 banks from 76 countries, with the Deutchesbank just moving its foreign investment banking from Frankfurt to London. Someone told me recently that there are more German banks in London than in Frankfurt.

This inward direct investment and the outward flow of financial skills would both be seriously adversely affected if a single European currency were to emerge with Britain choosing to remain outside. Apart from the quantifiable economic benefits of British membership, there are the unquantifiable benefits of Britain playing the role it ought to play in making the Union an effective force for peace in an increasingly fragmented and fanatical European continent. We are, in fact, in danger of turning our backs on our history and leaving the leadership of the European continent to France and Germany while we become petulant spectators on the sidelines.

The Government appear to hope that major issues of change can be avoided by the IGC, but the Maastricht Treaty agenda itself includes important matters. As the noble Baroness, Lady Rawlings, pointed out, it includes the question of the future of the Western European Union and the development of effective foreign policy and defence arrangements. These are very big issues. I think she is perhaps optimistic in feeling that the issue of the timetable for economic monetary union will not come up, or that issues like enlargement and the massive unemployment that still remains in a Europe, where the recession is retreating, will not be issues raised at the IGC. Whatever the treaty says about the agenda, I think that member countries will bring their own agendas.

So what are the real options for Britain at the IGC and beyond? The Government's preferred option appears to be the claim that they can convert the rest of the Union to their concept of a minimalist Community, concentrating on international competitiveness—obviously very important—and on the expansion of the free trade concept to which the noble Lord, Lord Cockfield referred; also opting out of social policies and, I suppose, praying that a final decision on a single currency and economic monetary union may be delayed indefinitely. I prefer to call that not an option but a pathetic illusion. Sir Leon Brittan dismissed it in a sentence recently when he said in London: Those who stubbornly believe that EMU is not going to happen are simply overlooking the level of commitment which exists in the rest of Europe". The danger of the Government's present approach to the IGC, with their talk at times of vetoes, is that it would cast us in this country in the role of wreckers. We would be seen as preventing the majority in the European Union from moving forward to tackle the undoubtedly formidable problems of combining enlarged membership from east and central Europe with efficient and democratic decision making. As the noble Lord, Lord Cockfield, said, we would not in any case succeed. The only wrecking that would be done would be the wrecking of what remains of our influence among our partners on the mainland of Europe. In that situation, which I profoundly hope does not happen, the lesser evil would be to step aside and let those who want to move faster towards integration do so; but it would be a sad second-best action for Britain.

I hope that the Minister will allow me to say that I find a strange paradox in the behaviour of the Prime Minister. On Northern Ireland, Britain's other overshadowing problem, he has shown vision and determined courage; yet Ulster is an issue which arouses deep traditional fears among Conservatives and it also involves questions of sovereignty. Over Europe, if he had chosen to show the same leadership he could have put Britain truly at the heart of Europe. I hope it is not too late for a change of attitude on the part of the Prime Minister and the Government.

We are an island nation with a fortunate history, protected from foreign invasions. We have undoubtedly an insular psychology. The grand vision of a European union, with all that can mean in terms of peace and prosperity for the citizens of Europe, demands a high quality of leadership from governments in all the countries concerned. There are difficulties in all the countries, but this is particularly so in our country. I end by pleading with the Minister and, through her with the Government, to respond to the Motion moved by my noble friend and to make a positive contribution to the "Group for Reflection and to the IGC that follows it.

8.9 p.m.

Lord McIntosh of Haringey

My Lords, like other noble Lords, I am grateful to the noble Lord, Lord Jenkins of Hillhead, for raising this issue. I hope that he will be pleased at the quality of much of the debate that followed his speech. I was interested in the fact that he started by saying that this was not really an issue of party politics. To me, in the real world politics are party politics, and if this is not a political issue, I do not know what is. I hope that it does not mean that the noble Lord is pursuing his withdrawal from the arena of party politics. Joining the Liberal Democrats is of course a first step in that direction, but I hope that he will stay with us in party politics for some time to come. He has a lot yet to contribute.

I noticed also that neither his speech nor that of the noble Lord, Lord Thomson of Monifieth, mentioned what might be the view of the Liberal Democrat Party of the agenda for the IGC. I did not hear one suggestion from any Liberal Democrat speaker about their party's policies and the way in which they should be presented at the conference. Perhaps they will find some other opportunity to enlighten us, but in the world of party politics we expect—I shall attempt to provide it—not merely negative comments but some commitment to a policy position.

Nevertheless, it is clearly right that there should be an open debate before the IGC. We must be grateful to the noble Lord, Lord Jenkins, for opening that debate in your Lordships' House. It was notorious that before the Maastricht Summit public debate was very restricted indeed. Whether it was for the conspiratorial reasons which have been adduced by a number of noble Lords I rather doubt. But it is still a fact that there was not much public debate before Maastricht; and that many of the proposals at Maastricht came as a surprise to the ordinary people in Europe. As a result, the ratification of Maastricht was a very much more difficult process than it ought to have been.

The noble Lord, Lord Shaw of Northstead, rightly referred to the work of the Reflection Group which has been set up under the French presidency. I shall want to say a word or two about the contribution to that Reflection Group of the European socialist delegate, Elisabeth Guigou, but it is not just that; there will be more preparation. Under the Spanish presidency there will be an extra Council meeting in Majorca in September. We can expect a more serious attempt at wider debate, and that must be welcome.

Of course, we must be realistic about the scope of the IGC, because listening, as I have, to almost all of the speeches, I have heard many which are about issues that are very much wider than the treaty revision issues which will be coming before the IGC. I was surprised to find that so many Members on the Conservative Benches were anxious to have a re-run of the debacle which hit them in another place last Wednesday. I should have thought that they were so badly burnt then that they would not wish to go over that ground again. I was also a little disappointed to find a number of noble Lords wishing to go over the ground of the 1993 Maastricht ratification debates because the IGC' s role is very much more limited, as has been suggested, and I cannot avoid repeating some of the valuable points made at the very beginning by my noble friend Lord Richard. Article A of Maastricht says that the purpose is ever closer union among the peoples of Europe. But then Article B, in specifying what should happen at the IGC, refers to improving the effectiveness of Community mechanisms and institutions. That is what the conference will be about, rather than some of the wider policy issues which have been referred to. Of course the Community mechanisms and institutions have a purpose. Their purpose—I summarise rather than expound—is to promote economic and social progress; and to promote economic and social cohesion. There is reference to the establishment of a European monetary union and possibly of a single currency. There is the whole issue which has not been referred to, interestingly, of the common foreign and security policies which are expected to lead to a common defence policy and possibly in the future to common defence. There is the issue of Union citizenship; there is the issue of close co-operation between member states—note that it is co-operation between member states—on justice and home affairs. And all of that is within the context of subsidiarity. That is what is set out in Article B of the Maastricht Treaty.

Article 189b goes a little further, because it refers to co-decision procedures, which I take to be jargon for talk about majority voting and unanimity. I want to come back to that issue also later. Finally, the first declaration refers to bringing energy, civil protection and tourism into Community competency.

Those are all important issues. The revision of the treaty to give effect to those objectives is not unimportant. But I suggest that much of the debate will be secondary to the two fundamental changes which are taking place in Europe which could blow away much of the discussion that will take place at the IGC.

The first, of course, is enlargement. What appears to be the case, almost without it being discussed as a matter of principle, is that we in Europe—I mean what the noble Lord, Lord Pearson, calls the elite as well as the people—have accepted and welcomed the idea of the enlargement of the European Community. The result of that is that we shall land up in 10 or 15 years with a Community of 27 members, rather like—I am sorry to see the noble Baroness, Lady Hooper, is not in her place—

Noble Lords

She is.

Lord McIntosh of Haringey

My Lords, she is in a much more distinguished place, and I beg her pardon. We shall end up with co-terminality between the Council of Europe and the European Community—a very welcome prospect—but we should think about the effect of that.

The noble Lord, Lord Ezra, referred to the effect on enlargement of the CAP. I put it the other way round. I cannot see how the CAP in its present form can survive with 27 members.

Similarly, I cannot see how those additional 12 members will come in if we are going to be just a free trade area. They want much more than that, but they do not want federalism. We cannot have federalism with 27 states. So much of the discussion about the ultimate result of ever closer union—if people are afraid or hopeful of federalism coming out of it—will be blown away by a Europe of 27 member states. That is one of the factors which will limit the scope of the IGC.

The second of course is the whole concept of what the Prime Minister called a multi-track, multi-speed, multi-layered Europe; in particular the single currency issue which has been referred to by many noble Lords.

Let us first make it clear that we in the Labour Party do not propose to abandon unanimity as a criterion for much of the decision-making of the European Union. As Robin Cook made clear in the debate last week, we shall still be demanding unanimity for fiscal and budgetary policy; for foreign and security issues; for changes to the Treaty of Rome and other areas of key national interest. But at the same time the Government's policy of opting out, in particular on the Social Chapter, has meant that there is, in practice, majority voting, with the UK being left out of many of the important issues—social and employment issues—which are being considered by the European Union. Therefore, we have majority voting and a diminution of our sovereignty by our own decision to opt out of some of the provisions of the Maastricht Treaty.

More important is the issue of the single currency. Let us agree that we shall not have a single currency in 1997. Only five member states have reached the stage of convergence, even on the existing criteria. They would have to get there quickly, certainly by 1997, if in 1999 there was to be convergence on the 1997 principles.

But 1999 is going to be very different. No longer will it be a requirement that a majority of members of the Community—that is, eight member states—shall achieve a convergence and decide to impose a single currency. By 1999 there could be a core of member states going it alone and raising for us the different issue, which we have not yet faced, of what happens if there is a single currency which we are invited but not required to join; in other words, if there is an inner circle with all the political and economic fragmentation that that might bring about.

I agree with my noble friend Lord Desai who criticised the convergence criteria set down by Maastricht for a single currency. I agree that the definitions are unsound. My view is that they are central banking criteria rather than governmental criteria and that, if they are achieved, the result is likely to be an equilibrium, but an equilibrium at a low rather than a high level. Far more important than any of those are full employment, growth and convergence in productivity. My noble friend was right in saying that we cannot wait for that, but at the same time we must expect it and must work towards it.

I have left myself little time to do what I wanted to do; that is, to set out in more detail the policies that were set out in another place last week. I believe that the Labour Party has a vision for Europe that goes beyond the day-to-day policies. The vision of a democratic and social Europe was set out by Elisabeth Guigou. That is where I begin to agree with the noble Lord, Lord Harmar-Nicholls, and my noble friend Lord Bruce of Donington, who spoke of the need to bring with us people rather than politicians.

Incidentally, I strongly object to the noble Lord, Lord Pearson of Rannoch, saying that he is not a politician, unlike other noble Lords who have taken part in the debate. He has been a distinguished insurance broker for most of his life and I have been a market researcher for most of mine. However, when we are here we are both politicians and we take a party whip. The noble Lord cannot escape responsibility for being a politician simply by denying it.

That vision of a democratic and social Europe is one to which the Labour Party adheres. We do not believe that the leadership so far shown by this Government—there is always time for repentance—has indicated any sign that they understand the issues before Europe and this country which will arise at the Inter-Governmental Conference next year.

8.23 p.m.

Baroness Chalker of Wallasey

My Lords, I am sure that the whole House is extremely grateful to the noble Lord, Lord Jenkins of Hillhead, for initiating this debate. We have heard a series of notable speeches. They have covered the entire spectrum of views. However, if one necessarily starts on the left-hand side of the circle one might end up on the right-hand side, as the noble Lord, Lord Stoddart of Swindon, appeared to indicate he had.

We have had a long debate about much more than the positive role that we should play in the Inter-Governmental Conference in 1996. On the whole, the debate has been remarkably constructive about the future of the European Union. It will be important to read carefully what all noble Lords have said and I shall enjoy doing so. Certainly, the many contributions have been helpful in presenting the real balance of opinion in this country, as the Gallup poll showed last Friday and as my noble friend Lord Blaker explained today.

Perhaps I may comment on not having spoken earlier in the debate, for which I was chided by the noble Lord, Lord Richard. When such a Question is tabled the Government spokesman does not normally speak twice. If the Government spokesman spoke twice, the amount of time for Back-Benchers to speak in the debate would be reduced. Furthermore, as a result of tonight's performance, I am certain that this is but the first of a number of debates on the Inter-Governmental Conference that might take place during the next one, two or three years, or however long it takes to reach a conclusion.

I wish to be positive. We are members of the European Union, not because of idealism or romanticism but because our European Union membership is in Britain's national interest. Of course there are costs to membership; any organisation has to have rules and we will not always like them. But the benefits of our membership outweigh those costs, as my noble friend Lord Oxfuird indicated tonight. Indeed, we always do our best to obtain a sound cost-benefit analysis but whether others would necessarily have the same premises and therefore arrive at the same conclusions is obviously a further debating point between myself and the noble Lord, Lord Stoddart of Swindon.

Membership of the European Union means jobs, investment and prosperity that we would not otherwise have had. From what I saw in the days when I was fully employed by industry and in the days since, when I have been a politician, I have no doubt about that. However, I am still fundamentally interested in making industry work. We must use our European Union to help industry, British and European, to create a greater economic base for our people.

The Union is the world's largest trading bloc with 40 per cent, of world trade. Britain is more dependent on trade than any other large industrial economy. We are the world's fifth largest importer and exporter and the European Union now takes 53 per cent. of our visible exports, as my noble friend Lord Blaker said. The single market, though not yet complete, offers our businesses huge opportunities. Britain is selling croissants to the French, smart cards to the Germans, pizzas to the Italians and—especially for my noble friend Lord Beloff—chocolates to the Belgians. I hope that he will be eating English, chocolates if he buys them in Belgium because he will find the quality superb.

Our trade surplus in financial and business services with the rest of Europe tripled from £1 billion in 1983 to £3 billion in 1993. During the past six years our car exports to Europe have more than doubled. In 1994 we produced more cars than for 20 years.

Membership of the European Union has reinforced the position of the City of London as the world's biggest foreign exchange centre. More than 70 per cent. of European foreign exchange transactions and 90 per cent. of European cross-border equity deals go through London. As the noble Lord, Lord Thomson of Monifieth, said, the Deutschebank has just moved all its foreign investment banking from Frankfurt to London. Those are exactly the issues to which my noble friend Lord Boardman referred. London is the financial centre for the European Union.

European competition laws mean that, whatever the inhibitions of national governments, barriers to trade are coming down across Europe, and so they must. We have all heard the arguments about airlines, but British Airways is now flying from London to Orly Airport, a route which was for so long wrongly protected for Air France. But we must go on and go further.

We have become a magnet for inward investment and, directly or indirectly, that has brought more than 600,000 well-paid jobs to the UK since 1979. We attract one-third of all inward investment into the European Union. In the past two years alone there have been more than 400 inward investment decisions, safeguarding around 100,000 jobs, many in areas of high unemployment. The reason that those companies are attracted to Britain is because we provide an open, deregulated environment for business. They would not come unless we were also active, committed members of the European Union, pushing the Union down the open, free market path that it has followed since we joined.

Membership of the European Union has allowed us to promote free trade, open market policies across the world. The GATT deal was clinched by a British Commissioner—Sir Leon Brittan—negotiating on behalf of Europe as a whole. That is a huge step towards the open, world-wide trading system which the UK has always supported. Britain, with its dependence on foreign trade, will benefit more than most from the completion of the Uruguay Round. The GATT deal is worth about £500 for every household in this country and the combined value to Britain of the single market from the GATT Round is estimated at between £20 billion and £35 billion.

Lord Bruce of Donington

My Lords, I am sure that the noble Baroness would wish to be fair and to complete the trading picture by stating quite correctly that the deficit on visible trade with Europe over the past 10 years has amounted to £72.9 billion.

Baroness Chalker of Wallasey

My Lords, this country does not live by visible exports alone. It lives by invisibles too. The overall cost-benefit analysis, which is what I was being asked for at one point in the debate, must take into account visibles and invisibles.

It is against those benefits that we need to balance our net contribution to the budget. Britain and Germany used to be almost the only net contributors. Now Germany contributes almost five times as much as we do. France now makes a similar net contribution to ours. The Netherlands is not far behind. Italy, Sweden, Finland and Austria have all become net contributors too.

That development has brought a very welcome change in the attitude of member states to budgetary discipline and value for money. I say that because Britain has been fully involved in all those arguments in Europe and it has been winning them. The evidence is undoubted. The single market was largely a British crusade. There is now universal acceptance of Europe's historic responsibility to achieve EU enlargement to the east. Yet that was by no means accepted a few years ago. There is a new accent on competitiveness and free trade in the European Union which delivered a market-opening GATT deal in the teeth of French opposition. And there is greater concern—and not before time—about budget discipline, fraud and the mismanagement of funds.

As my noble friend Lord Plumb said, we should be extremely grateful to your Lordships' Select Committee for all the work that it has done to enhance proper control of what goes on in the Community. We are now starting to see the beginning of agricultural reform, although there is still a long way to go. Subsidiarity—and I shall return to that in a few moments for my noble friend Lord Harmar-Nicholls—is now part of Community life. The pillared structure of the Maastricht Treaty, which ensures that crucial areas remain for national co-operation and not for the Community, was a major setback for European integrationists and centralisers, and yet we drove it through. Above all, there is now general acceptance of the importance of respecting national identity and diversity within the Union, which must never develop into a federal superstate. A prominent European said only last year that only Great Britain had asked the real questions before Maastricht even if—and I agree with the noble Lord, Lord McIntosh—there was inadequate debate in the country as a whole. When one tried to debate the issues before Maastricht, many people simply were not interested. I can say that from my own direct experience. I addressed meeting after meeting and looked at many, many blank faces—and not because of what I said either.

But the same prominent European went on to say that the construction of Europe, without our questions, was virtually on auto-pilot. That was not my right honourable friend the Prime Minister; it was the former President of the Commission, Jacques Delors. He recognised the unique contribution which Britain had made and goes on making. We are not afraid to ask difficult questions of our partners about European construction and we shall continue to do so.

We are determined to play a positive role, but that does not mean that we have to go along with each and every suggestion' that is made. I shall look at all the suggestions that have been made in this debate and in particular those to which I cannot refer in my winding up this evening.

The noble Lord, Lord Bruce of Donington, was quite right to say that the Commission must not get too big for its boots. The Council is the decision-making body. Subsidiarity is working well. It is reducing the Commission's inclination that it had in the past to become involved in the nooks and crannies of our lives. I can tell the noble Lord that progress is being made in relation to financial matters. The new budget Commissioner is now required to vet all proposals with budgetary implications before they are passed to the College of Commissioners. That is something for which the United Kingdom has pressed for some considerable time. Members of this House who were Members of the European Parliament have also pressed that issue.

The noble Lord, Lord Bruce of Donington, was right also to say that in the past the Commission produced too much legislation. The UK success at Maastricht in relation to subsidiarity has meant that the number of proposals for primary legislation has fallen significantly: 185 in 1990; 47 in 1994. There is still a problem with subsidiary legislation because changes have to be made, but even that is under clear scrutiny and will be reduced.

My noble friend Lord Shaw of Northstead made the point about fraud. Fraud against the Community budget and the continuing waste of Community resources are totally unacceptable. Much is now being done to address the problem. The Commission has reinforced substantially its anti-fraud work, but much more still needs to be done. Therefore, we persuaded our partners to agree a plan of action at the Essen European Council. That plan of action is now under way. We are determined to deal with fraud.

My noble friend Lord Shaw of Northstead was the first noble Lord to mention the Reflection Group. Perhaps I may spend a few moments dealing with that and institutional issues. Last week the Prime Minister made clear our approach: that the institutional balance between the parts of the Union should not be altered significantly. That is certainly our approach to the IGC. As I said, the Council must remain the primary decision-making institution of the Union but it must be strengthened, as my noble friend Lord Shaw said. The Commission must concentrate more on management and value for money and less on its legislative role. The key issues will be the proper implementation of legislation and effective action against fraud and waste. The noble Lords, Lord Bruce and Lord Desai, and my noble friend Lord Shaw mentioned that.

We see no case for giving the European Parliament significant new legislative powers. It must grow into the powers that it has already under the Single European Act and the Maastricht Treaty.

We believe too that national parliaments must be the primary focus of democratic legitimacy. As my noble friend Lord Shaw said, we should like to develop the role of national parliaments in European Union decision-making.

The Reflection Group will meet first on 2nd June in Messina and then regularly during the second half of this year. Its mandate is to look at the functioning of the treaty. No doubt it will suggest options for possible improvements. My honourable friend Mr. Davis will be working hard in that group on those issues and is also already discussing with colleagues how we can make the whole Community work better. That is exactly what we wish to do.

A number of your Lordships spoke of the European Court of Justice. As I said at Question Time earlier today, we need a strong court to enforce Community rules and obligations. There are aspects of the court's jurisprudence which cause us concern; in particular where judgments have had unforeseen or disproportionate financial implications for member states. Therefore, we are considering what proposals to make to address those concerns at the 1996 IGC. But we are not alone in that. Other nations also wish to make proposals and such proposals will be made in a positive manner.

However, we shall certainly not be seeking to emasculate the Court as some would obviously like. We need to be clear that the Court is there to ensure that others comply with their obligations. We must ensure that others keep to what is decided by the Council. The Court's role is to interpret and apply the treaties and EC legislation. There are a number of recent cases which show that the Court is now more sensitive to members' concerns—the World Trade Organisation ruling and the recent European Development Fund ruling are but examples of that process.

My noble friend Lady Rawlings, the noble Viscount, Lord Waverley and many other speakers spoke about the ERM and EMU. In another place on 1st March the Prime Minister set out our policy clearly and at some length. Therefore, I shall not repeat those points. However, perhaps I may emphasise the fact that there can be no intention of rejoining the ERM in the lifetime of this Parliament. I believe that we are all clear on that point.

At other times during our debate we went into the question of variable geometry, but the noble Lord, Lord Bruce of Donington, said that we would be wrong to talk in abstractions. Perhaps I may just explain to the noble Lord that "variable geometry" means a flexible Europe. More flexibility will obviously be essential to a Europe with more members. There is no way, without flexibility, that we could increase the number of members of the European Union to 20 or, indeed, beyond that number. Therefore, we must work for sensible flexibility in Europe.

My noble friend Lord Harmar-Nicholls, asked for a definition of "subsidiarity". We have discussed the matter on numerous occasions. It is defined very clearly in Article 3B of the Maastricht Treaty. That article was a considerable success for Britain. It says simply that the Community can only act if it has been given the power to do so and has genuine value to add over national action. Moreover, if it does act, then it should do so in the least intrusive way possible. I could speak more about subsidiarity and perhaps I shall need to do so in order to convince my noble friend. However, I should also like to tell my noble friend Lord Pearson that in the report to the Brussels European Council, the Commission said that it would propose the repeal of about 25 per cent. of all existing legislation. Some of that would be repealed for good, and some replaced with a smaller number of new proposals. That work is well under way. It certainly demonstrates that the acquis communautaire is not sacred, nor is it untouchable.

We all know that the European Union is facing unparalleled challenges over the coming period. Enlargement is vital to embed democracy and market structures in eastern and central Europe. NATO and the Western European Union must be adapted to the new tasks. We need to forge a new European Union relationship with Russia. Therefore, I beg that we do not become mesmerised by next year's Inter-Governmental Conference. It is still a year off. While we shall work away positively at it, as the noble Lord, Lord Jenkins of Hillhead, asked, and we shall play, as my noble friend Lord Oxfuird requested, a very constructive role, there is a great deal of other priority work to be done. In any case, we do not expect dramatic results from the 1996 process, nor should we encourage the speculation that great changes are in the wind.

Maastricht has barely had time to settle down and it is, by general consent in Europe, too soon for major new departures. There is certainly much useful work to be done; but it may not be as exciting as some noble Lords might wish, and others might fear. I believe that I can assure the noble Lord, Lord Jenkins of Hillhead, that we shall go into the IGC not only with a positive agenda but also with an absolute determination to improve the operation of the Maastricht Treaty and to build upon its flexible pillared structure.

Our proposals will include the improvement of the Common Foreign and Security Policy. We shall step up the fight against organised crime and terrorism, especially in the field of drugs, to which my noble friend Lady Rawlings, referred.

Lord Harmar-Nicholls

My Lords, may I ask a question?

Baroness Chalker of Wallasey

No, my Lords. We shall further develop the subsidiarity principle and strengthen the role that national Parliaments can play alongside the councils and the European Parliament. Another priority is to continue the work, as I mentioned earlier, against the mismanagement that has taken place in the Community budget. Therefore, there is much work to be done and much support for the British approach. There is no great pressure for new Community competences, and there is no plot to collapse the pillared structure of the treaty. We shall not be waiting fearfully to see what others may throw at us. We shall be where we should be: at the heart of Europe, shaping the agenda.

In conclusion, the nations of Europe are here to stay. People are rightly proud of their nationhood, their history, their languages, their culture, their traditions and their heritage. The sense of national identity reflects deep feelings which governments ignore at their peril. As I believe the right reverend Prelate the Bishop of Sheffield said, nationhood can slide all too easily into yobbish nationalism—or, at least, extreme nationalism—into xenophobia and hatred.

Twice this century European rivalries have plunged the world into war. We never want to see that happen again. It is not just a truism: it is truly right that the European Union has been central to the stability and the prosperity which western Europe has enjoyed for the past 50 years. It certainly provides a framework which goes well beyond international co-operation. Nations can and will continue to pursue their interests, but enlightened self-interest demands a level of regional co-operation which was never imagined by our forebears. No longer do the nations of Europe protect their markets at the first hint of recession; no longer are they free to subsidise their companies at will.

Similarly, it is not just a question of prosperity. The European Union as a pole of stability in Europe, has buttressed democracy in Spain, Portugal and Greece when those countries emerged from dictatorship. It also provided a framework for peaceful unification in Germany. Now it is, again, proving its value for the democracies that are emerging after the collapse of the Soviet Union. For all its faults, the European Union, with NATO, is a sure foundation for peace in our continent. It is the basis upon which we must continue to build.

Perhaps I may return to the Motion tabled in the name of the noble Lord, Lord Jenkins of Hillhead, who was himself a much respected President of the European Commission. The Motion calls attention, to the need for the United Kingdom to play a positive role in the Inter-Governmental Conference of 1996". I should emphasise that it will, indeed, be an Inter-Governmental Conference; it is not an initiative of the Commission and it is not a report to the European Parliament. It will be a conference between the member governments of the Union to review the treaty. Each government must decide what, if anything, they wish to propose by way of treaty change to their own national Parliaments. I can assure noble Lords that Britain will approach the IGC in a positive spirit. As my right honourable friend the Prime Minister said in another place last week: the conference can and should usefully improve the way in which Europe operates, and we shall present a range of our ideas at the conference".—[Official Report, Commons, 1/3/95; col. 1063.] They will be ideas to develop and improve the Union, not for the convenience of its public servants nor for the glory of its politicians; hut for the sake of all the people of Europe.

Lord Harmar-Nicholls

My Lords, before my noble friend sits down—

Noble Lords


Lord Harmar-Nicholls

My Lords, the procedure of the House is well known to all of us—

Lord Strathclyde

My Lords, my noble friend Lady Chalker has sat down. My noble friend Lord Harmar-Nicholls tried to intervene during the course of my noble friend's speech; but she chose, because of the time limit, not to allow such an intervention. That permitted my noble friend to answer many of the questions posed by speakers in today's debate. As I said, my noble friend has now sat down, and the noble Lord, Lord Jenkins of Hillhead, will now reply.

Lord Harmar-Nicholls

My Lords, is the acting Leader of the House—

Noble Lords


Lord Harmar-Nicholls

My Lords, is the acting Leader of the House seeking to change the customs of this Chamber? It is accepted that the intervention I want to make is a proper one. I wanted to ask my noble friend—

Noble Lords


Lord Harmar-Nicholls

My Lords, if there is a conflict between the application of Maastricht and the application of the Treaty of Rome, which treaty is the superior one?

8 50 p.m.

Lord Jenkins of Hillhead

My Lords, I am not a great believer in a second speech from the same person on the same subject on the same day. Therefore, my comments will be very brief. Also I suspect that noble Lords may be beginning to prefer the thought of the first course of their dinner to a second course from me. I thank noble Lords who have participated in the debate which has been a worthwhile one and has struck a new and slightly more constructive note in our European debates than we have heard recently.

For me, the debate would almost have been worthwhile alone for the speech of the right reverend prelate the Bishop of Sheffield in the—if I may put it this way—catholicity and generosity of his historical and geographical sweep. He made me almost feel I was listening to an address from John Henry Newman.

Noble Lords


Lord Jenkins of Hillhead

My Lords, I will not say at which phase in the career of that distinguished Anglican who became a cardinal. I turn to comment, possibly a shade less generous, about the noble Lord, Lord Pearson. When he was speaking I was reminded of the Manifesto of the Three Tailors issued early in the 19th century which began, "We, the people of England". I thought his doctrine that those who had any experience of these matters and who had been concerned with any political or administrative matters should not speak on them, was interesting and novel. It would certainly leave a good deal more space for him to speak in this House, and we might hear him very frequently in those circumstances.

Lord Pearson of Rannoch

My Lords, may I—

Noble Lords


Lord Jenkins of Hillhead

My Lords, the noble Lord, Lord McIntosh of Haringey, was worried that I was deserting party politics. Parties have their place, but they can get above themselves. Some of the puerility of party politics in this country has done a good deal of harm to our handling of the European issue. The noble Lord rebuked my noble friend Lord Thomson and myself most mightily for not having set out in detail the Liberal Democrat programme. He then spent a good deal of time doing that; and then, at the end, said he had not left himself enough time to set out the Labour programme. However, we are all subject to time factors.

I now turn to the Minister. She is, as always, the acceptable face of Toryism. I thank her for her speech this evening. There were parts of it which I preferred to other parts; but what I thought was the case—and I cannot say better than this—was that the parts of it I preferred were those which she prepared more herself and had her personal conviction behind them. In any event, I thank her for her reply as I thank all those noble Lords who have spoken. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.