European Communities (Amendment) Bill

HL Deb 28 April 1998 vol 589 cc154-218

3.18 p.m.

Lord Whitty

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Whitty.)

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Resumed debate on Clause 1.

Lord Moynihan

moved Amendment No. 23L: Page 1, line 13. after ("2") insert ((except paragraph 57)"). The noble Lord said: This amendment concerns Article 1, paragraph 9 (Article F.1 of the TEU, new Article 7 in the consolidated version) of the treaty, and Article 2, paragraph 57 (Article 236 of the TEC, new Article 309 in the consolidated version)—in other words, the human rights article about which I have some reservations.

These articles empower the Council of Ministers to suspend the voting rights or, indeed, any other rights from the member state country which it claims is guilty of "serious and persistent" violations of the Union principles of liberty, democracy, respect for human rights and fundamental freedoms and for the rule of law. Such a decision, that a member was in serious and persistent breach of the Union principle, would be taken by unanimity, minus the member state in question—for the accused country is not allowed to vote. The other member states are required to consult the European Parliament and obtain its assent. Once a member state is found guilty by the Council meeting in the composition of heads of state or government and acting by unanimity any subsequent decision to suspend the voting rights of that country will be decided by qualified majority vote. There is no provision for an independent arbiter. That country would have no right of appeal and there would be no role for the European Court of Justice in this procedure.

Once found guilty, rather than be expelled from the Union the member state concerned would have all its rights suspended including its voting rights. However, it would continue to be bound by all of the obligations inherent in the treaties of the Union and any further obligations that the Council might decide to impose, although the suspension of its voting rights would preclude it from having a say in such future obligations.

I have a few reservations about the article. First, how are the rights are to be defined? It goes without saying that in a democracy such as ours every Member of this House supports the principles of human rights, individual freedom and the rule of law. We on these Benches will do all that we can to safeguard and advance basic human rights, the need to protect individual liberty, free speech and the right to demonstrate, to have parliamentary democracy and to be governed by the rule of law. There is no division on these Benches as to those rights. But in the article that we are now considering the rights in question are vaguely defined. Does it refer to human rights as they are traditionally understood and as I have outlined—the right to free speech, to free assembly and habeas corpus—to which we all subscribe unreservedly, or does it include a wider and more controversial interpretation of human rights, such as a basic human right to a minimum wage or to abortion on demand?

In this country with our tradition of common law we would interpret "rights" as having the former meaning in reference to individual freedoms and liberties. The Bill of Rights of 1689 meant the protection of the individual from intrusion by other persons, groups of persons, the state itself or even the king. If that were the meaning here it is unlikely that the United Kingdom would ever fall foul of this article, but in Europe it could be interpreted in the latter way based on a looser definition that places an obligation on the state or on others to provide the right for the individual: for example, the right to work, the right to welfare, or the right to a pension. Therefore, in seeking to clarify exactly what the clause means it is most important to seek from the Government the definition of "rights" which will he used by the Union in the context of this article.

My second reservation is about the lack of judicial involvement. Under the Treaty of Amsterdam these questions will be dealt with not by a judicial body but by politicians sitting in the Council of Ministers; nor will there be an independent arbiter or right of appeal. Can the Minister inform the Committee whether there is a precedent in diplomacy or in law for the signatory to a treaty losing its rights but not its obligations at the behest of fellow signatories?

Thirdly, what is the true intention of this article? It will not do to claim that Article F.1 is simply a precaution against the sudden collapse of democracy in a member state. If one of our fellow members were to fall into dictatorship surely the logical response would be to end its membership of the European Union. Yet Article F.1 provides no mechanism for doing that. Instead, it specifies that the state in question would remain bound by all of the treaty obligations while losing its rights. I do not believe that that is the right way to deal with an undemocratic regime.

If the real intention of this article is to provide a remedy for really serious breaches of human rights, surely the logical remedy is expulsion or temporary suspension from the European Union of the country concerned. What justification is there for requiring such a country to be bound by decisions taken in its absence? Why were procedures to provide for expulsion not included in the treaty? It would be perfectly possible for other member states to give measured warnings to the offending state and to make clear that unless it mended its ways expulsion would follow. Can the Minister clarify exactly how this article will operate? I understand that it was intended as a safeguard against the possibility of one of the future member states of central and eastern Europe reneging on the fundamental principles of human rights, democracy and the rule of law.

I do not dispute that as we enlarge into central and eastern Europe where these traditions are relatively recently established and not yet entrenched some protection will be required for the integrity of the Union. As the Union is enlarged it is legitimate to consider what happens if any member state acquires a government that falls short of those fundamental standards. That involves not only new members. One of the reasons put forward for admitting Greece to the Community was to reinforce the changes that had taken place there with a return to parliamentary democracy and a proper standard of human rights. Within the European Union we have no experience of what would happen if hypothetically the Greek colonels returned to power or a military regime took over in the Iberian peninsula. I accept that these are very remote possibilities, but should that happen in any country of the European Union, or should a new member state with a short tradition of democracy fall into dictatorship and start persecuting its natural minorities, arbitrarily confiscating private property or suspending the due process of law, what would the European Union do? In those circumstances, would the other member states want that state to remain within the Union?

When one comes across serious and persistent abuses of human rights, as tragically one does in the former Yugoslavia, the response is not to invite the perpetrators of those abuses to join the European Union but without voting rights, but to apply a series of sanctions and to make clear that such behaviour is incompatible with an ambition to join the European Union. When the Commission delivered its opinions on the various pending applications for membership of the European Union a proven track record of respect for human rights was rightly one of the prerequisites. In that case, how will Article F.1 be of the slightest use? We are forced to the conclusion that Article F.1 could conceivably be used to disarm the national veto of any country that held up a measure that the other member states wanted. Can the Minister guarantee absolutely that this article will never be used or abused to deprive difficult countries of their vote on spurious human rights grounds? Further, can the Minister guarantee that the human rights clause will be invoked only if there were a massive change in one of the new or existing member states who posed a real threat to democracy? Is it not the case that the procedure can be used and abused to take away the voting rights of a recalcitrant government or member state who may have a perfectly satisfactory record on human rights but be responsible for some peculiar social provision that perhaps may be described as a breach of human rights depending on how "rights" is defined?

The Minister may say that this is a very remote example, but if the Committee is to carry out its responsibilities in relation to the scrutiny of this treaty it is incumbent on Members to identify scenarios that may not be very likely but which may be turned to the disadvantage of this country. It is also our duty to point out the dangers. So will the Minister confirm that there is nothing in the treaty to allow that danger to be dismissed as legally impossible? Anything can happen in international relations. Even though the provisions of the treaty envisage the clause being invoked only by the unanimous vote of all the member states except the one whose conduct is under examination, ratified by two-thirds of the Members of the European Parliament, it is still not unprecedented for provisions in European treaties, to which we have signed up, to be used in a way that was never intended at the time.

I shall give one obvious example. It is the way in which QMV procedures in respect of health and safety were used to introduce the 48-hour working week. No one in the previous government who agreed to QMV for health and safety measures at the time of the Single European Act ever contemplated their use to introduce a maximum length of working week. As Opposition, it is our duty to examine the provisions of treaties such as this and to ensure that there is no scope for abuse or for their use in ways never intended at the time or which might be to the disadvantage of this country.

It is difficult to say with certainty whether those procedures will ever be invoked, because every relevant situation that arises would be a political crisis and would have to be responded to according to the facts of the case. In practice, if some military regime were to seize power and to start to abuse human rights, Article F.1 would, in my opinion, not be the end of the story. The EU could not tolerate the situation indefinitely.

Nevertheless, Article F.1 flies in the face of precedent and of our constitutional tradition. It is for those reasons that I have put the questions to the Minister in the context of the amendment, which I hope will lead to her providing clarification for the Committee as to the purpose and the definition of this important part of the treaty. I beg to move.

3.30 p.m.

Lord Wallace of Saltaire

I wish to speak also to Amendment No. 37. I do not share all the views that the noble Lord, Lord Moynihan, put forward. This is consolidation of a number of declarations previously made in the European Community. Indeed, it was originally a British proposal in the Copenhagen Declaration of 1978 by that great European Foreign Secretary, the noble Lord, Lord Owen, that we should include in a formal declaration of the European Council a number of provisions in case new members—we were then talking about Spain, Greece and Portugal—should move backwards from democracy. It was something to which the British Government attached a good deal of importance at the time as a backstop.

We have all seen the European Community as part of the process of consolidating democracy in Europe. It was, in the 1950s, part of the process of consolidating democracy in the western part of the continent. In the 1980s it became part of the process of consolidating democracy in a number of Mediterranean countries; and part of the process of enlargement to central and eastern Europe has the same function. It was felt by the then British Government, and by others, that a backstop was useful—now consolidated into the treaty—in case of, the existence of a serious and persistent breach by a Member State of principles mentioned in Article F(1)". That is a useful backstop against that eventuality in a larger Community of countries which have not been consistently democratic over the past generation or more. We all hope that it will never be necessary but it is appropriate in a Community committed to the principles of democracy, political and civil liberties that the provision should be included.

We hope that on Report the Government will be able to give this place some assurance about the levels of information and reporting which they will give Parliament about purposes in the EU. Amendment No. 37 is one of a number of amendments which call upon the Government to report back to this place under certain circumstances. We on these Benches are concerned that the level of reporting and information provided to national parliaments should be as full as possible.

Lord Monson

It would be interesting to know whether the proposal put forward by Mr. David Owen, as he then was, referred to by the noble Lord, Lord Wallace of Saltaire, was as unbalanced and one-sided as this one. The noble Lord, Lord Moynihan, put the case for his amendment so well that there is little one can add. It is astonishing that the article gives the Council of Ministers, aided by the European Parliament, the sole power to decide upon expulsion without the intervention of any court of law. Is that not, in itself, a breach of the rule of law?

It is claimed by way of safeguard that the vote will be unanimous. Of course it will not be unanimous, because the accused state will not have a vote. Almost the worst aspect is that although the rights of the expelled nation may be withdrawn, the duties under the treaty will remain, and will have to be complied with.

The EU has always been compared by Euro-enthusiasts with a club. That is a spurious argument, as I cannot think of any club to which some members pay gigantic subscriptions, some pay very little, and others pay nothing at all but receive vast sums of money, given by the club, in order to join it.

For the sake of argument, let us suppose that one can compare the EU to a club. Is there any club which has the right to suspend members while obliging them to continue with their duties?

Lord Grenfell

Perhaps we should look more closely at Article 0, as amended, which states that, any European state which respects the principles set out in Article F(1) may apply to become a member of the Union. It shall address its application to the Council, which shall act unanimously after consulting the Commission and after receiving the assent of the European Parliament, which shall act by an absolute majority of its component members". Amended Article O appears to tell us that it allows an application to be rejected or shelved on the grounds of insufficient coherence to those principles. Using the example of a club, if a nation has joined the EU and has agreed to adhere to those principles as a condition of joining, surely it is those who have set those conditions who afterwards will be able to say that if those conditions are consistently violated, then they who set those conditions are those who will decide whether or not that particular state should have sanctions brought against it, including possible expulsion. There is no mention of expulsion here, but there is a general principle that those who impose the conditions are presumably those who will be the judges of whether or not, when those conditions are broken, an ultimate sanction of expulsion should be taken.

Lord Monson

Before the noble Lord sits down, does he agree that expulsion would be a better option for the accused state? Expulsion is surely better than having none of the rights but retaining all the obligations.

The Earl of Clanwilliam

Would it not be better if we were expelled, if we were to jolly well get out and stay out? That would be a simple answer. We have the ridiculous situation where the people of Great Britain will be denied the right, by QMV, to tell the Council and the Commission that we are not interested in their proposals; it removes our right to put the matter to our own Parliament for decision. In the meantime, we are required to remain true to the acquis communautaire.

There is a gracious caveat in respect of natural persons and legal persons. I have heard it said that lawyers are a race apart, but never that they are unnatural. This is just another example of how the European language is unnatural and foreign to us in this country. It is irrelevant to the system of parliamentary government that we treasure.

Furthermore, the suspension appears to be of schoolboy nature and immature. It is allied to the fatuous idea that the Council will be acting as a team— do not know whether in short pants or schoolboy caps. The reality is that each member is a national member of one of the states. They are each there batting for their side, promoting their national interests. The amendment brings before Parliament any case for suspension, for Parliament to decide how it should react. Any part of the treaty which is more likely to engender bad blood than this Bill is hard to imagine.

The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean)

Before addressing the specific impact of the amendments before us, I wish to set out clearly the Government's position on the new clause in the treaty—the so-called "sanction clause" to which the amendments refer. The new Article F.1 of the Union Treaty provides that in certain extraordinary circumstances, the Council can decide to impose sanctions on a member state which it believes to be in serious and persistent breach of the fundamental principles set out in the amended Article F, paragraph 1, of the Union Treaty.

The Government believe that the sanctions clause gives an important signal of the Union's determination to ensure full respect for democracy and human rights, whatever its size or membership. We have every hope that these provisions will never be used. They are carefully framed for use in only the most exceptional circumstances, such as a military coup in a member state.

The safeguards are that: the clause can be used only in the event of a "serious and persistent" breach of the principles in Article F, paragraph 1; a proposal to invoke these provisions has to be made by one-third of the member states or the Commission, and needs the assent of the European Parliament by two-thirds of the votes cast and a majority of members; the determination of a "serious and persistent breach" of fundamental principles must be made by the Council acting by unanimity minus the member state concerned.

Several noble Lords implied that they believed that the sanction might be used against the UK. The Government are confident that these provisions would never be used against the UK. As the Foreign Secretary said in another place on 12th November last year: so long as the Labour Party is in power, it will not be possible to find 14 EU states that will agree that the Government are in serious and persistent violation of democracy or of human rights".—[Official Report, Commons, 12/11/97; col. 912.] Against this background, the proposed new clause is both misconceived and redundant. It is misconceived because it is quite clear from the wording of the sanctions clause itself that it will be invoked only in the most extreme circumstances, as I have said, such as a putsch. It cannot, and will not be lightly used. It is inconceivable that it would be invoked simply as a result of a court judgment.

From time to time, member states of the Union are found to have offended against international human rights obligations in certain limited respects. But the Union will not be able, nor will it seek, to impose sanctions on them as a result of minor infringements. As I have made clear, and as the treaty clearly states, the sanctions clause can be applied only in response to a breach of fundamental rights which is both serious and persistent.

The noble Lord, Lord Moynihan, asked what are these fundamental rights. Fundamental rights for the purposes of the sanctions clause are not defined, nor will they be defined by measures proposed or adopted under Article 6.a which your Lordships debated yesterday. Article F.2 of the Treaty of the European Union, which is not amended by the Amsterdam Treaty, provides that fundamental rights are primarily those guaranteed by the European Convention on Human Rights. They could also include rights in other major human rights treaties or human rights generally accepted by all other member states. The UK has long been a party to the ECHR, which is now being incorporated into UK law.

We have nothing to fear from the sanctions clause, but the noble Lord went on to ask why, if a breach was so fundamental, should not the guilty state be stripped of EU membership. Participation in the European Union gives rise to a wide web of rights and obligations to citizens, companies and governments. To erase all those obligations at a stroke by expelling the member state would create huge confusion and penalise ordinary citizens, and ordinary businesses, who rely on their rights of residence and free movement, to name but two.

The noble Lord, Lord Wallace of Saltaire, asked about report-backs. We will be covering the question of parliamentary scrutiny when we deal with the scrutiny amendments at a later hour. Perhaps we may deal with the point then.

The noble Lord, Lord Monson, implied that the penalties exacted could include expulsion. That is not the case, as I hope I explained in answer to the noble Lord, Lord Moynihan.

The noble Earl, Lord Clanwilliam, expressed a number of fears about the way in which the clause might be used against the UK Government. In another place, the former Chancellor of the Exchequer dealt admirably with that point. He said that he understood the fears which some people have about the article, but he went on to say that such fears did not seem to him to be credible. I echo his words; the fears expressed in your Lordships' House on this point are not credible, given the sanctions which I have explained.

3.45 p.m.

Lord Monson

Before the Minister sits down, perhaps I may put one or two points to her. She claimed that sanctions would be applied only in extraordinary circumstances. The question is: who decides what constitutes extraordinary circumstances? The Minister went on to say that she was confident that the provisions would never be applied against the UK, certainly while a Labour Government was in power. I am sure that the previous Government was confident that a compulsory four-week annual holiday could never be introduced under the health and safety regulations, but that happened nevertheless. Is it not possible that if, for example, internment had to be reintroduced in Northern Ireland as a result of a massive terrorist campaign, Britain could find itself in the dock?

Baroness Symons of Vernham Dean

Not all of us would agree that a four-week annual holiday for the working people of this country is on the same scale of disaster as a military putsch.

The noble Lord asked who would determine a serious and persistent breach. I hoped I had explained that such a determination would have to be made by unanimity between the member states, excluding the member state concerned. All the other 14 member states would have to agree what amounted to a serious and persistent—those two words are important—breach.

Lord Stoddart of Swindon

I was most interested in what my noble friend said. I, too, am pleased to receive the assurance that under a Labour Government there would be no possibility that Britain could be caught under this article. However, I am concerned that the article states that the Union will be responsible for the protection of our freedoms, democracy and so forth. As the noble Lord, Lord Moynihan, pointed out, that seems to exclude national governments and national states. Is it not the national governments, the national states, the national ports and the national armies which safeguard the rights enshrined in the article? Therefore, should not the article ensure that the freedoms, democracies and so forth are to be safeguarded by the states and not by the Union?

My noble friend did not answer the question: what happens if a member state which is in continuous breach of the principles stated here, and which is told that it must forfeit all the benefits, then says "We are going to leave"? In those circumstances, under this article, as the noble Lord, Lord Monson, pointed out, it would in fact lose all the supposed benefits but would have to continue to take on the burden of the obligations.

Suppose the member state said it was not prepared to do this and was going to leave the Union, what then happens? How then does the Union, the member states, insist on and enforce what they have done? Will they then impose a whole range of sanctions or send in armies? What will they do? It has to be answered but my noble friend has not answered it, at least to my satisfaction. Could she now develop that point further?

Baroness Symons of Vernham Dean

As to my noble friend's first point, the position is safeguarded by the member states, all of which are democracies, 14 of which would have to be in agreement. It is not the Union acting independently of the member states; the member states have to be part of that decision.

As to my noble friend's second point in respect of a state being in that position. with loss of benefits but still having obligations—which I am sure we all agree is very unlikely—and deciding to suspend its membership, such a state would then have to negotiate its way out of the treaty that it had freely entered into, in the same way as it would any other international treaty. It would have to negotiate a way out or be in serious breach with the other parties to that treaty.

My noble friend is trying to complicate the situation rather more than is justified.

Lord Stoddart of Swindon

I am sorry to come back to my noble friend. I am not trying to complicate it; I am trying to understand it.

My noble friend has said that member states can negotiate their way out of the Union. There is no provision within the treaties for member states to negotiate their way out. If what my noble friend is now putting on record is confirmed and member states can negotiate their way out, that is very interesting. I am glad it is on record because it will certainly be referred to in the future, particularly in relation to economic and monetary union.

The clauses on economic and monetary union state that EMU and the single currency are irrevocable. In my dictionary "irrevocable" means that it cannot be altered, that it is for good. Is my noble friend now saying that a state which is found guilty under these clauses—or any other circumstances—can negotiate its way out, despite the Maastricht Treaty provisions on EMU and the absence of any mention in the treaties of negotiating a way out? If she is saying that that is all wrong and that we can now negotiate our way out, I will be delighted. If she can confirm that I am quite prepared to sit down and be quiet for a very long time.

Baroness Symons of Vernham Dean

I am so tempted. Whenever anybody says that I have said something interesting, a cold hand clutches at my heart and I listen with perturbation as to what it was I said.

It is straightforward common sense. I have said no more in relation to this than we have said from the first day of debating all the motions put before the Committee. In the extraordinary, unlikely, hypothetical position we have just rehearsed, a country which declared it was going to move away, suspend, get out of its membership would have to then go ahead and tell the others to whom it was committed through treaties how it proposed to do that. What I have said amounts to no more and no less than that. I do not think it is ever going to happen.

Lord Moynihan

I thank the Minister for her reply and noble Lords for their participation in the debate.

I was a little disappointed with the Government response. I made it clear that we are not debating the Europe of today, the European Union as it currently stands. In Committee we have to search behind the meaning of the words and the articles and to look to the future. When applied to a future circumstance, however remote, the application of the treaty will have certain effects and we need to be clear what those effects may be as outlined by the Government.

These scenarios are, of course, remote, but I am sorry that they were dismissed so lightly by the Minister. There are unprecedented provisions in this treaty and, in recognising these provisions, it is important to understand exactly what they mean.

The first area was the question of rights. I sought a definition of rights from the Minister, and she rightly pointed out that there is no definition in the treaty at the present time. It is important to understand what category of rights the Government believe is covered by this article. I regret that we were not told the Government's view in answer to that question.

The second area, which is probably of greater concern, is the selected quotation of Kenneth Clarke in another place on this subject. I will enlighten the Committee as to what was debated in another place and what Kenneth Clarke had to say on the matter. He was speaking to the heart of this amendment and the important subjects and questions which have been raised by noble Lords, both behind me and on the Cross-Benches, namely the distinction between expulsion and suspension, the merits of having the opportunity to expel a member state in extreme circumstances and the effects of suspension.

In his Second Reading speech he considered Article F.1—and here the Minister was right—to be an acceptable part of the treaty. He saw no cause for alarm that the provisions would be used for anything other than the objectives which they were designed for—for example, if there was a massive change in one of the new or existing countries that posed a real threat to democracy, such as the establishment of an entrenched fascist government. He went on to say that he did not see why, if a military regime took over a country in central or eastern Europe, it should be released from its European treaty obligations or why the United Kingdom should sever our trading contracts and the policing of those contracts by the ECJ merely because we disapproved of that government. He said: I would strongly object to a Government who were not respecting human rights casting votes at the Council of Ministers, and perhaps blocking action, when vetoes were the order of the day, without effective action being taken to stop them".—[Official Report, Commons; 2/12/97; col. 195.] Moreover, he added that should a military regime seize power and start abusing human rights in Europe he did not envisage that Article F.1 would be the only mechanism for the European Union's response.

That is an extremely important point. I am sorry that the Minister, in a very selective quotation, did not elaborate, as my right honourable friend did in another place, on the fact that if such an occasion took place, as must be envisaged and considered in the light of this amendment, suspension would be a preferable route. That is because ultimately, if it came to expulsion of a member state, there would he such a dramatic ramification and consequences, including the suspension of contracts, so great and so far-reaching, that the sanction in its own right would be a useless deterrent whereas suspension would provide a relatively effective redress.

With courtesy and respect to my right honourable friend in another place, it is important to place on record that his position, as exemplified in the Minister's answer, was not to be taken out of context but must properly come into the context of the question of expulsion versus suspension and why suspension has considerable merits over expulsion.

Many honourable Members in another place took the view that expulsion should be available and, in certain circumstances used. It was a fascinating and important debate. I hope that it is possible to engage in such a debate with the Government because it goes right to the heart of the reason why I tabled the amendment; namely, to elicit from the Government not only how they define "rights" but also what is the true intention of the article and why it was felt necessary to use the concept of expulsion. I wished to argue that case and to look in more detail at judicial involvement.

Having said that, I am grateful to the Minister and to Members of the Committee for participating in the debate. I shall return to the issue on Report. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 23M and 23N not moved.]

4 p.m.

Lord Bruce of Donington

moved Amendment No. 24: Page 1, line 13, at end insert ("other than the following paragraphs (which provide for the application of qualified majority voting in the areas cited)—

1. (A) Article 109q of the Treaty establishing the European Community set out in paragraph 19 of Article 2 (employment guidelines);
2. (B) Article 109r of the Treaty establishing the European Community set out in paragraph 19 of Article 2 (incentive measures for employment);
3. (C) Article 116 of the Treaty establishing the European Community set out in paragraph 21 of Article 2 (customs cooperation);
4. (D) Article 118(2) of the Treaty establishing the European Community set out in paragraph 22 of Article 2 (social exclusion);
5. (E) Article 119(3) of the Treaty establishing the European Community set out in paragraph 22 of Article 2 (equality provisions);
6. (F) Article 129(4) of the Treaty establishing the European Community set out in paragraph 26 of Article 2 (public health);
7. (G) Article 130i(1) of the Treaty establishing the European Community set out in paragraph 32 of Article 2 (framework programme for research);
8. (H) Article 130o of the Treaty establishing the European Community set out in paragraph 33 of Article 2 (joint undertakings for research, technological development and demonstration programmes);
9. (I) Article 191a(2) of the Treaty establishing the European Community set out in paragraph 45 of Article 2 (transparency);
10. (J) Article 209a(4) of the Treaty establishing the European Community set out in paragraph 52 of Article 2 (anti-fraud measures);
11. (K) Article 213a(1) of the Treaty establishing the European Community set out in paragraph 53 of Article 2 (statistics);
12. (L) Article 213b(2) of the Treaty establishing the European Community set out in paragraph 54 of Article 2 (independent advisory body on data protection);
13. (M) Article 227(2) of the Treaty establishing the European Community set out in paragraph 55 of Article 2 (measures for 166 French overseas departments and the Azores, Madeira and the Canary Islands); and
14. (N) Article 45(2) of the Treaty establishing the European Community set out in paragraph 27 of Article 6 (compensatory aid for imports of raw materials),").

The noble Lord said: I wish to make particular reference to paragraph (J) which refers to, Article 209a(4) of the Treaty establishing the European Community set out in paragraph 52 of Article 2 (anti-fraud measures)". That particular item is on page 41 of the document we are discussing. The Committee will see that it seeks to lay down, possibly with greater precision than before, the responsibility of the Community as a whole, the member states, the Commission and the Council in regard to the institution of effective anti-fraud measures.

I do not believe that anyone can query the necessity for such a clause being inserted into the treaty. Article 209a sets out the responsibilities which were seen at the time as being a desirable code and, indeed, desirable laws to which all parties should conform.

Members of the Committee will recall that in recent years there have been a number of inquiries in this House, headed by the distinguished chartered accountant Lord Benson, who spent years investigating the subject because he was convinced, as indeed was I, serving in a much more subordinate capacity, that fraud and irregularity were assuming such proportions in the Community as to imperil from time to time such reputation for integrity that it had.

For my part—and I believe that this was true also of the late Lord Benson—there could be little complaint about the way in which successive British governments tried genuinely to combat fraud against Community funds in this country. There were minor brushes from time to time in which I participated. It was pointed out to the government of the day that it was not exactly helpful, as regards checking on the absence of fraud and irregularity in relation to import duties, to cut the size of HM Customs and Excise whose responsibility it was to monitor the various transactions inside and outside the country.

Nevertheless, there can be little doubt, looking at the matter from the United Kingdom's standpoint, as one of the principal member states and, indeed, the third highest net contributor to the Community's funds, that on the whole the United Kingdom made some genuine effort. That could not be said of all member states. Without any hesitation or fear of contradiction, I mention in particular the case of Greece whose tobacco transactions and receipts from the Community, to which the noble Lord, Lord Boyd-Carpenter, referred from time to time, tended to be both fraudulent and irregular.

That left the responsibility of the institutions themselves; that is, the various agencies operating under the direct control of the Community or being part of it, the Commission and, indeed, the Council of Ministers. It is to those aspects of the matter that I now wish to turn.

First, I deal with the question of fraud generally and irregularity in the handling of Community funds. Frauds against the Community and the irregularities associated with disbursements, receipts and accountability have been widely highlighted in the press over the years so as not to require repetition, although I shall venture to mention some cases. For that purpose, I prefer not to use my own words which may be rather more incisive than those of the academically qualified. I use those of our own Comptroller and Auditor General of the United Kingdom.

So acute was the problem of fraud that it was raised and highlighted within the negotiations on the Maastricht Treaty. Members of the Committee will remember our former Prime Minister, the right honourable gentleman the Member for Huntingdon, coming back from Maastricht claiming a very great triumph in that he had urged and had eventually obtained agreement to an amendment to what was Article 189, now Article 248, which is at page 210 of the document to which I referred. He secured the insertion in the obligations of the Court of Auditors of the following: The Court of Auditors shall examine whether all revenue has been received and all expenditure incurred in a lawful and regular manner and whether the financial management has been sound. In doing so it shall report in particular on any cases of irregularity. The Court of Auditors shall provide the European Parliament and the Council with a statement of assurance as to the reliability and legality and regularity of the underlying transactions, which shall he published in the official journal of the European Community. That was claimed as a considerable victory. I am sure that the Committee will remember the claims made by John Major in that connection. It may surprise Members of the Committee to learn that little action has been taken.

Lord Wallace of Saltaire

I am sorry to interrupt the noble Lord but I thought that he was speaking to Amendment No. 24. The bulk of his argument seems to be concerned with Amendment No. 56, which comes later. Will the noble Lord confirm that he is speaking to Amendment No. 24, not Amendment No. 56?

Lord Bruce of Donington

I am referring to paragraph 52 of Article 209a(4) of the treaty.

I do not propose to give my account of what has happened but will report the considered verdict of the Comptroller and Auditor General on the annual report of the European Court of Auditors 1996—I shall refer to the date aspect later. The Comptroller's report was published four or five days ago and came into my possession last Friday morning. He stated that, it is a matter of serious concern that for the third year in succession the Court have declined to provide a positive assurance on the Community's payments because of the large number of errors identified". He adds that, the number of exceptions to the Court's assurance on the reliability of the accounts is also a matter of concern, indicating that the Commission have some way to go before they attain the quality of financial reporting expected of public sector financial statements. such as government accounts in the United Kingdom: and the Commission should produce clear and simplified financial statements of the Community Budget with more accessible financial information, prepared in accordance with generally accepted principles in so far as appropriate. The Statement of Assurance could also be published with the financial statements of the Community Budget. Making these two changes would he in line with the recommendation in February 1996 of the Committee of Public Accounts. Then, our own Comptroller and Auditor General continues—and I am not embellishing any of the errors that he reveals—with these words: In relation to the Common Agricultural Policy — the Council did not act on the Commission's proposals to eliminate the over-compensation of farmers arising from unexpected movements in world market prices. He adds that, the high level of error found in payments from the Structural Funds was unacceptable. For instance, 31 out of 69 Social Fund Payments had errors with a measurable financial impact. The Comptroller and Auditor General states at page 13 that, the Court estimated that farmers were overcompensated under the arable aid programme by some £2.2 billion … in 1995£96. and that producers had been overcompensated by at least £0.6 billion … under beef and veal premium schemes over a four year period …; the extensive use by the Community financial system of advances which were accounted for as actual expenditure. I could go on about the number of fully grounded complaints. Members of the Committee can read the Comptroller and Auditor General's report any time you like. It continues that, cash at hank, recorded in the balance sheet as £8.6 billion … was not accurately reflected in the accounts". For example, advances to non-European countries of £3.1 billion were omitted. The total value of advances and payments on account which were recorded as budgetary payments but which had not yet been definitely accounted for was at least £14 billion. I could go on but I do not intend to do so. Those observations are sufficiently grave to enable the Committee to form a judgment. The report sums up: The Court estimated that for some 4.3 per cent. of Community payments it was impossible to obtain sufficient evidence to reach a firm opinion as to the correct use of Community funds. That is not good enough. I am confining my criticisms to the Council of Ministers for the time being—and to the extent that my own country is involved because it is a member of the Council of Ministers and in particular of ECOFIN.

4.15 p.m.

Lord Wallace of Saltaire

The noble Lord has been speaking for 15 minutes on the subject of Amendment No. 56, not Amendment No, 24. I have trouble following the relevance of his remarks to Amendment No. 24. The Committee will not make progress unless it sticks to the relevant amendment under discussion. Some of us will be here when Amendment No. 56 is reached—I trust that noble Lord will be here. We shall make much better progress if we deal with each amendment in turn.

Lord Bruce of Donington

It is always easy to make agreeable progress when the facts revealed are agreeable. I can understand the noble Lord's discomfiture on having these matters brought to his attention. That will not deflect me from my duty in these matters, to which I have devoted 25 years of my life. I owe it to the Committee to explain the position as I see it. Members of the Committee may disagree with me but I ask them to bear with me a little longer. After all, I did not spend one and a half hours yesterday discussing the completely irrelevant subject of the social chapter. The matters now before the Committee are of considerable importance and should be attended to.

Why is it that after three years the Council of Ministers—which normally operates, at ECOFIN level, in a responsible manner—has not able to allow the Court of Auditors to certify accounts in accordance with the requirements laid upon it by the treaty? If the Community's accounts and the auditor's report were furnished to member states and Governments immediately after they were submitted, the Council of Ministers would have an up-to-date picture. Instead, the following procedure is adopted in striving for financial regulation, to which I objected at the time in the European Parliament.

Before the report of the Court of Auditors is published it has to go back to the Commission for its replies. But by the time that the Commission has completed those replies another six months has elapsed, which means that when the Council receives the document it is already obsolete. At that point, the Council may be disposed to think, on the basis of the voluminous explanations provided six months later by the Commission, that some progress is being made and may, therefore, decide to "let it go".

It is almost the same as a public company in the United Kingdom withholding the circulation of its report to the public and its shareholders until after the directors have had an opportunity to comment on the auditors' report which accompanies the accounts. Everyone knows that that would be quite an impossible position. If a public company tried to hold up the publication of its accounts until after the directors have had an opportunity to comment on them, it would, however short the delay, probably lose its quote on the Stock Exchange. That is what is wrong and is what should be altered.

I am afraid that there will have to be an exercise of courage and determination by governments of member states. I expect and hope that, far from allowing this matter to slide year after year with millions of pounds being lost through fraud and irregularity, our own Government will in the current year at ECOFIN put their foot down and demand the necessary explanations and the necessary changes. I beg to move.

Lord Whitty

I believe it would be helpful if I were to intervene at this point. I share some of the concerns expressed by the noble Lord. Lord Wallace, but I thought that my noble friend was probably coming towards the end of his remarks at various points in his speech, especially when he started talking about the mechanism involved. I say that because this amendment deals with the mechanism and it was grouped with all the other amendments on QMV that we debated at length last night. I do not intend to go over that ground again—and I do not think that the Committee should—on the basis of this amendment.

In relation to fraud, as the noble Lord, Lord Wallace, pointed out, there will be a substantive debate in that connection when we discuss Amendment No. 56 later tonight. I do not suggest that the Committee has the substantive debate at this time. Therefore, unless other noble Lords persist in pursuing the debate now, I shall confine my response to saying that everything that my noble friend said about the necessity for tackling fraud is shared by the British Government. However, it is an overwhelming case for what this amendment actually deals with; namely, moving from a paralysis of unanimity required on anti-fraud measures to one of QMV. Indeed, the noble Lord made more eloquently than any of us could the case for not accepting this amendment and for accepting the change in the Treaty of Amsterdam to move to QMV for anti-fraud measures—and the quicker the better.

Lord Bruce of Donington

With the leave of the Committee, and with considerable thanks to my noble friend, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 25 not moved.]

Lord Stoddart of Swindon

moved Amendment No. 26: Page 1, line 18, at end insert ("and the Protocol annexed to the Treaty establishing the European Community on the Application of the Principles of Subsidiarity and Proportionality""). The noble Lord said: In moving this amendment, I believe that it will be convenient for me to speak also to Amendments Nos. 26A, 30 and 54C. The Maastricht Treaty was sold to Parliament—that is, to the House of Commons and to the House of Lords—on the whole question of subsidiarity. Far from being a centralising treaty, as many of us believed that it was, we were told that it would be a decentralising treaty and that in future, far from being more centralised and gathering more power to itself, the European Community would give back to member states powers which had been taken from them and that it would be very strict about not taking any further powers.

Indeed, the subsidiarity clause says that: The Community shall act within the limit of the powers conferred upon it by this treaty and of the objectives assigned to it therein". Some of us expected that that would be taken seriously and that we would see a whole raft of measures, which had gone for decision by the Community, returned to national governments and national parliaments. However, so far as I know, no significant item has been returned to the jurisdiction of national governments and parliaments at all under the subsidiarity clause. So far as we can see, a number of inquiries carried out since then have elicited the following information: subsidiarity cannot apply to any measure to do with the single market; in other words, nothing to do with the single market can be returned. That means, in effect, any measure dealing with economic activity. Even if certain products are not sold on the Continent but either domestically or to third countries, they have to comply with single market regulations. Further, despite various promises, not one single piece of Community legislation has been withdrawn, as I have already mentioned, in accordance with the principles of subsidiarity, though there has been some vague talk about legislation not being presented because of it. But, once again, we cannot have a list of those particular measures.

The new definitions of subsidiarity make it clear that the concept cannot question the powers of the Community defined by the treaty, as interpreted by the Court of Justice. The criteria will not apply to any area where the Community has exclusive competence. These have always been defined by the Community itself; in other words, it remains true that the decision of what is and what is not subject to the concept of subsidiarity is decided at the centre—not at the periphery and not by the member states. It is decided by the centre. So decisions are to be taken from the top down rather than from the bottom up. I believe that even the Liberal Party will be concerned about that aspect. I say that because we all know—at least, I have always been taught so—that in a real democracy, such democracy grows from the grassroots upwards. It is not imposed from the top downwards, because that is not democracy at all.

The new clauses on subsidiarity concentrate on the form that Community action should take rather than its substance. The following paragraph is added, in case anyone should get any strange ideas: Member States are required to take all appropriate measures to fulfil their Treaty obligations and not to prevent the attainment of the Treaty objectives". Paragraph 2 of the Protocol on Subsidiarity and Proportionality also adds that these principles, should take into account Article F(4) of the Treaty on European Union, according to which 'the Union shall provide itself with the means necessary to attain its objectives and carry through its policies"', whatever they may be. The worries expressed about this particular article at the time of the Maastricht debates have been fully justified. It is incompatible with any serious application of the concept of subsidiarity, which we all believed in and which we all said we wanted; but in fact it is what we have not got.

The concept of proportionality is supposed to take over from subsidiarity to limit the scope of Community action and to ensure that this does not go beyond the terms of the treaty. Again, the definition is from above rather than from below. The whole system is self-referential and circular. It has not resulted in less or less detailed legislation, as we have seen by the rafts of directives and regulations that keep coming from the Community to be put into operation by national governments.

According to leading European jurists, subsidiarity is not a legal but a political term. In the last resort it is the European Council that decides on the criteria and their fulfilment.

On the subject of the extent of legislation, it is worth noting that even official European Union publications are not certain how many legal Acts are in force. It is almost inconceivable, if not laughable, that they do not know how many legal Acts are in force. If they do not know how many are in force, how can they enforce them and how can people obey them? If the European Union does not know what the law is, how on earth can everybody else know what the law is?

Since many of the directives are amendments of old ones and are not counted as separate pieces of legislation, though they clearly are that, the closest anyone has come to giving a figure is the Danish MEP, Jens-Peter Bonde, who calculated that by 1996 there were 23,027 pieces of EEC/EU legislation in force—23,027. I repeat that figure so that it should sink into people's minds. But even he admitted that that is not completely accurate because "there are no complete statistics of the EU Acts".

According to a recent reply in the House of Lords, there were 1,845 pieces of secondary legislation, mostly regulations, which do not go through national legislatures at all. In 1997, at the same time, 1,124 such pieces were repealed or expired. That left a net increase of 721. But that, of course, did not include directives. It is not clear, so far as I can see, whether decisions or Commission opinions are included in that figure, so the whole business of EEC legislation seems to be shrouded in doubt, if not secrecy.

This may be a convenient moment to raise the question of accountability. The main initiator of legislation in the EU is the Commission, as we all know, though most directives are passed by the Council of Ministers. Whether the Council of Ministers always know what they are talking about is another matter, but those who have attended Council meetings will know more about that than I do. Neither of those bodies is, strictly speaking, accountable to anybody—the Commission obviously so, while the Council of Ministers regularly flouts agreements of obeying the will of national legislatures. We, in this Parliament, cannot bind Ministers to do what we believe they should do. Of course, under QMV, it would not matter anyway as long as the decision was taken by QMV in Europe.

It is also important to remember that of all the EU legislation, only directives have to be approved by the national legislatures. Mostly, they go through this place, the House of Commons and ourselves, in the form of statutory instruments. In other words, they are not debated at all. Regulations and other pieces of legislation are, on the other hand, effective from the date of publication or the designated date directly on individuals.

It seems to me that we need some proper answers on subsidiarity: what it means, what it is going to mean in the future and when we can expect the subsidiarity proposals to be put into effect. It is about time our Government, perhaps together with other governments, reviewed all the directives, all the measures that have come from the EU and which are operated by them, to see, first, whether they are still necessary—and if they are not necessary they should be repealed—and whether the European Union is exercising powers which ought now, in the light of experience and further experience, to be exercised in the member states. Above all, we ought to know just how many laws are in operation. The European Union or the Commission should be told that that is essential information which people and governments want if they are to understand exactly what is happening within the Community itself.

So I hope that my noble friend does take this matter seriously, that he really does believe, and this Government believe, in subsidiarity, that decisions should be taken at the point nearest to the people that those decisions will affect. Increasingly those decisions are being taken away from those whom they affect. I hope that on this issue the whole House will be able to unite, including my noble friend, in getting the subsidiarity proposals in proper context and to make them work as they were meant to work and as we were assured they were going to work when we discussed the Maastricht Treaty. I beg to move.

4.30 p.m.

Lord Moynihan

All Conservative members welcomed the principle of subsidiarity in another place, and I believe noble Lords from all sides of this House would echo their support for this principle. Subsidiarity or decentralised decision making is at the very core of what should be the appropriate vision for Europe, a vision of partnership of nation states in a competitive, decentralised and efficient Europe. But Amendment No. 26A and the new Clause 54C that I have tabled are both designed to highlight the unsatisfactory nature of the wording of the new protocol on the applications of the principles of subsidiarity and proportionality contained in the treaty and, in particular, paragraph 2.

Despite the new protocol's length, far from strengthening that important principle I have reservations to the effect that it will weaken it. From these Benches our main concern is that the principle of subsidiarity will not be developed and enhanced by Protocol 7 but instead its purpose will become confused and its progress impeded.

The principle that action should be taken at European level in areas where objectives cannot be achieved by action at national level, leaving only those areas where solutions need to be found by international agreement to be taken at Community level, was advanced by the former Prime Minister, John Major, during the Maastricht negotiations. Its inclusion in the treaty was a major achievement with a capital M. Following Maastricht, the previous government sought to develop the principle of subsidiarity at subsequent European councils in order to achieve a careful balance. On the one hand, the principle ensured that action at the level of the nation state should be the rule and community action the exception, while on the other hand it was important to ensure that subsidiarity could not be used to avoid single market obligations or, indeed, to circumvent requirements for the proper management of funds from the European Community budget.

It was the initiative of the previous government that led to proposals being brought forward to entrench subsidiarity further into European decision making. It was decided to include in the Amsterdam Treaty elements of the detailed rules for the application of subsidiarity, which had been agreed at the 1992 Edinburgh European Council. Indeed in 1996 the Government's White Paper, The Partnership of Nations, which set out Britain's negotiating position before the IGC, stated, The Community should only act where it has been given express competence and where action at the European level will bring clear benefits which cannot be achieved by member states acting alone". In other words Brussels should play no part in matters best left to nation states. The Opposition believe that this principle is an essential safeguard against remote, bureaucratic and unnecessary interference. But, equally, it allows matters that require common action to be handled at European level such as migration, environmental degradation, nuclear proliferation, political instability to the east and, especially, drugs. It is fair to say that once again people throughout Europe are benefiting from an idea that stems from the Conservative Party and the United Kingdom, formed by enshrining subsidiarity as an established principle of the European Union by which to determine European decision making. The treaty provided an important safeguard against over-centralisation and represented a major success for the British vision of a decentralised and deregulated Europe.

There are critics of subsidiarity and it is important that the Committee considers their views. They ask, for example, what regulations have been changed or what direct action has been taken as a result of subsidiarity. They complain that the Maastricht Treaty made few or no provisions for making the concept of subsidiarity a reality in the European Union. However, I think it is right and proper that I point out to those critics and to the Committee that the volume of new European Union legislative proposals being put forward has fallen rapidly with only 19 proposals for principal legislation in 1996 compared with 61 six years previously in 1990. I accept that this partly reflects the completion of the legislative programme which was required for the creation of the single market, but it also reflects the change in approach to Europe symbolised by the concept of subsidiarity.

Before Maastricht it should be remembered that there was no general presumption in favour of action at national level in any of the treaties, nor have we ever claimed that Article 3b of the Maastricht Treaty was perfectly applied and implemented. But the principle is an important one, as the noble Lord, Lord Stoddart, has mentioned. Article 3b represented a step in the right direction. We look forward to further steps as a result of the Amsterdam Treaty. But we have been gravely disappointed. The former Prime Minister, John Major, said, Take subsidiarity which I call national precedence. Subsidiarity enshrines in EC law the principle that the Community should not he permitted to do what member states can do themselves". I believe this is a critical set of amendments. It focuses on subsidiarity which represents an honest attempt to assert the primacy of the nation state. In my view such a concept connects particularly favourably at this time with what most people in Europe want. An increasingly integrated Europe is out of step with the heartbeat of most of the people of Europe. A major factor in people's concerns about the European Union is the perception that Europe generates too much legislation which is intrusive, over-regulatory and unclear. People fear integration by the back door and subsidiarity is a welcome response to that fear—a measure to improve the quality of legislation and to resist integrationist developments.

Against that background I believe the Committee needs to go further and ensure that subsidiarity has indeed become, as I am sure the Government will claim, a more effective safeguard as a result of their negotiations. We certainly look to those negotiating to ensure that the Treaty of Amsterdam achieves that. The aim of reinforcing the principle of subsidiarity through a treaty protocol, particularly to ensure that the European Union makes laws only when individual member states are not better placed to do so, was chief among the previous government's objectives for Amsterdam. That is why it was such a grave disappointment that the Government's new protocol on subsidiarity failed to fulfil this objective and represented no improvement, as the noble Lord, Lord Stoddart, has pointed out. We should look at the relevant wording which is critical. Let us consider the relevant wording in the Maastricht Treaty. Article 3b states, the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot he sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community". That is clear, but we must now consider what Protocol 7 in the Amsterdam Treaty achieved, especially key paragraph (2) which states, The application of the principles of subsidiarity and proportionality shall respect the general provisions and the objectives of the Treaty, particularly as regards the maintaining in full of the acquis communautaire and the institutional balance; it shall not affect the principles developed by the Court of Justice regarding the relationship between national and Community law, and it should take into account Article F(4) of the Treaty on European Union, according to which 'the Union shall provide itself with the means necessary to attain its objectives and carry through its policies'. The noble Lord, Lord Stoddart, was right; this is greater centralisation. That paragraph shows that for the first time the principle of subsidiarity has been expressly subordinated to those very principles, pillars and institutions, that created the supra national activity in the first place.

It is clear that paragraph (2) of Protocol 7 makes the concept of subsidiarity subject to the acquis communautaire, the European Court of Justice and Article F(4). Far from being improved by Protocol 7, the principle of subsidiarity has to a great extent been neutered and emasculated. As a result I put it to the Committee that subsidiarity will not be more effective—as I hope everyone in the Committee would wish—but less. Is it not the case that rather than genuinely clarifying and tightening the application of subsidiarity, this key paragraph (2) ensures that the sum effect of the protocol is that the principle of subsidiarity will mean what the Council, Commission and Court of Justice intend it to mean at any one time?

Under Maastricht the European Union unleashed a watchdog and they allowed it full licence to roam throughout the Community to restrict the extent to which the European Union sought to do those things that could be better done at national level. People may have reservations about the effectiveness of that watchdog, but at least there was such a sentinel. According to The Times the Government brought back from Amsterdam, a dog's dinner of a treaty". In the case of this protocol it is truly a dog that is muzzled and cannot whimper, let alone bark. Protocol 7 is now long and complex. Instead of stating a simple principle which everyone understood, even if it was ineffectively implemented, we now have a lengthy and unwieldy protocol full of contradictory statements. This will prove fertile ground for the European Court of Justice which will be able to interpret the protocol according to its vision of and attitude towards European Union development. Does anyone believe that such an interpretation will enhance and support the principle of subsidiarity? I believe it risks giving free rein to dominance by the institutions of the European Union and it will serve to confuse and undermine the principle.

The Government have said that the protocol is an improvement because if we believe a matter should be dealt with under subsidiarity and the Commission does not deal with it in such a way, it will be open to any nation state, including ourselves, to go to the European Court of Justice to redress the matter, whereas such a course would have been difficult under the previous provisions. But surely now the Court of Justice in effect becomes the arbiter on what is, or is not, subsidiarity and proportionality. Therefore the benefit of this will be dependent on the way in which the court chooses to interpret the confused and contradictory provisions of the protocol.

I very much hope, and indeed believe, that it will be of considerable assistance to the Committee if the Minister can respond to the legal points that arise from these comments. Will he reassure the Committee that the application of the principle of subsidiarity has not taken a backward step thanks to the complex Protocol 7, which has indeed been improved and enhanced? I also hope that when the noble Lord responds he will clarify the apparently contradictory nature of some of the paragraphs of Protocol 7.

On his return from Amsterdam. the Prime Minister said: The treaty gives subsidiarity, ensuring that decisions are taken at the European level only if there is real added value in doing so—real teeth through a binding protocol". On my interpretation, he was wrong. I believe that the protocol has in fact pulled the teeth of the principle. It seriously undermines it; and that seriously damages the national interest.

The basis of this country's approach to Europe has been one of balance—between the nation state and the European Union; between integration and intergovernmental action; between action at European level and decisions which are best left to individual nation states. From these Benches, we seek assurances from the Government that they will not act to disrupt the balance any further.

4.45 p.m.

Lord Renton

This group of amendments is very important. It could be thought by some to deal with a somewhat technical matter. But I am sure the Committee will agree, having heard the speeches of the noble Lord, Lord Stoddart, and my noble friend Lord Moynihan, that the amendments relate to a matter of fundamental importance—a complicated matter, unfortunately, but of great importance.

The European legislative process has become so difficult that at times it is almost unworkable. I mentioned earlier in this Committee stage, and perhaps I may remind noble Lords, that the principal lawyer who, a year or two ago, was responsible for supervising the negotiations on harmonisation among the 15 member states was almost in despair when he spoke at the European law conference in Rome which I attended. He said that we have to have fewer laws, and better laws. The problem is two-fold. It is partly due to the fact that there are now 15 member states with 11 different languages and at least half-a-dozen different types of legal systems. That makes harmonisation, which is an obligation under the Treaty of Rome, almost impossible and a very dilatory process—one which, frankly, is being achieved (a point that he made quite clearly) by a lot of fudging and proposed compromises which may be acceptable to some countries and not to others.

The principle of subsidiarity to some extent, though not so great an extent as we might wish, mitigates the problem. There is no doubt that our then Prime Minister, Mr. John Major, and our then Foreign Secretary, my noble friend Lord Hurd, did a great thing in persuading the representatives of the other European countries to agree to the principle of subsidiarity. There was one unfortunate result. Some members of the Commission produced a memorandum in an attempt to explain the application of subsidiarity, and did so in such a lengthy and complicated a way that the British representative on the European Court of Justice at that time (three or four years ago) described the memorandum as gobbledegook.

With that background, surely it is right that we should have some provision on the lines of Amendment No. 30, and go a little further, with a provision along the lines of Amendment No. 54C, in order that our own Parliament and people can be kept informed as to the effect of the attempt at harmonisation, modified by subsidiarity, upon our own laws, most of which have been established for years. Of course, we have to keep on legislating to keep up with modernity, but fundamentally our basic laws, and the principles that apply to them, have been with us for generations.

We must be very careful, however earnest some of us may be about wanting the European Community to succeed, to ensure that it does not merely create a new superstate which ignores the liberties, and the laws on which those liberties are founded, of the various member states. That is why this group of amendments deserves application by the Government. We are not pressing for amendments at this stage. However, I should very much like to see this group of amendments, and some other groups, passed by this place in order to give the Government and Members of the other place the opportunity to think again for the benefit of our people.

The Earl of Onslow

When we came to the Maastricht Treaty all those years ago, subsidiarity was extraordinarily difficult to define. The only then known definition was the subsidiarity as run by the Vicar of Christ in Rome, who allowed his subsidiary bishops sufficient leeway over matters in which he was not interested. That seems to be exactly what has happened in relation to subsidiarity within the European Community.

My noble friend Lord Moynihan says that there has been a watchdog about the place, looking to make sure that subsidiarity has actually been present. The watchdog strikes me as being a rather neutered chihuahua compared with the amount of subsidiarity that has actually been brought about.

I merely wish to ask what subjects have been declared subsidiary; how much subsidiarity there has been; and whether any matters have been repealed. In other words, has any acquis communautaire been "de-acquis communautaired"—if that is the right term? That is what we were promised in the Maastricht Treaty, and it appears there is an attempt to promise it in the Amsterdam Treaty. To someone like myself, who is becoming more and more doubtful, it seems to have some good provisions. However, if it goes on as it is, it will make the European Community quintessentially unpopular. There will be a terrific row and it will break up, unless we get the legislation more in tune with the wishes and desires of our people. I wish to know what has been declared subsidiary since 1992 and what action has been taken on it.

5 p.m.

Lord Grenfell

We need constantly to remind ourselves that the subsidiarity principle relates to areas where the Community does not have exclusive competence. I am therefore rather puzzled by the fear in the heart of the noble Lord, Lord Moynihan, when he considers paragraph (2) because he obviously has considerable difficulties with it.

It would be sensible to read paragraph (2) in conjunction with paragraph (4). In effect, paragraph (2) simply reflects the principle—particularly the part in the paragraph which says: it should take into account Article F(4) of the Treaty on European Union, according to which 'the Union shall provide itself with the means necessary to attain its objectives and carry through its policies'". That reflects the principle that subsidiarity must be related to what is exclusively in the competence of the Community and what is not.

I notice that the noble Lord was rather shy about referring to paragraph (4). I am not sure I heard him spell the words out. Paragraph (4) states clearly that: For any proposed Community legislation, the reasons on which it is based shall be stated with a view to justifying its compliance with the principles of subsidiarity and proportionality; the reasons for concluding that a Community objective can he better achieved by the Community must be substantiated by qualitative or, wherever possible, quantitative indicators". That seems to me to be an extremely sensible and hard test. If one reads paragraph (2) in conjunction with paragraph (4), I do not think the two are contradictory. Paragraph (2) sets the scene in which the subsidiarity principle might or might not apply. Paragraph (4) spells out clearly the hard test that the Community must go through in order to prove that it has the prior right to legislation.

The Earl of Clanwilliam

Before the noble Lord sits down, I should point out that paragraph (1) states: In exercising the powers conferred on it, each institution shall ensure", compliance with the principle of proportionality. Here we have proportionality raising its ugly face in competition with subsidiarity. As proportionality is the responsibility of the Commission and subsidiarity is the responsibility of ourselves, it is the Commission and the Council which exercise proportionality. That is in paragraph (1), so it totally negates paragraph (4) which the noble Lord dealt with.

Lord Wallace of Saltaire

The subsidiarity principle is extremely important and I have much sympathy with what was said by the noble Lord, Lord Stoddart, at the start of his speech. We see government as most effective when it is as close to the people as possible.

I also believe that from the outset the European Commission had certain centralising tendencies, a natural belief by the French fonctionnaires who established it that whatever was done in Brussels was done better. It has been important to establish with the principle of subsidiarity that we need to change the basis of a much larger and more diverse Community.

We must distinguish between politics and law here. A number of the arguments we have heard this afternoon suggested that unless absolutely everything is written into the treaty, they will not be contained. It was suggested at one point that if it were not in the treaty that a member state could leave, then it would not be possible. It was not in the Act of Union with Ireland of 1801 that Ireland could leave the United Kingdom, but it did. One cannot write absolutely everything into law.

The subsidiarity principle was written into Maastricht. I agree with many of those who have spoken so far that it has not yet been used as effectively as it should. The last Conservative Government must share part of the blame for that. They failed to build coalitions with like-minded governments—and there are some—in order to push the principle through. The British and the French Governments produced lists of items which they would like to be returned to national sovereignty; they were rather different. It was a standing joke in Brussels two or three years ago that the British Government were arguing at the same time that all animal welfare issues were better dealt with at Brussels than at national level, but that no human welfare issues, social welfare, should be better dealt with at Community level. We must be rather more consistent in arguing for subsidiarity.

However, the principle is now there to be used. The European Union is a process of continuing negotiation. I hope that the strengthened protocol within the treaty will be more effectively used by the British Government than the weaker version in the Maastricht Treaty which was used by the previous government.

Lord Beloff

I wish to dissociate myself from something which the noble Lord, Lord Stoddart, said. It was that when subsidiarity was brought back as part of the Maastricht Treaty, everyone applauded. I thought it was nonsense then; I think it is nonsense now.

There are two forms of recognised government in a civilised world: unitary governments and federal governments. Having spent most of my life studying the latter, it seems to me a perfectly valid form of government which, in a proper federal constitution such as that of the United States or Australia, can last for a long time. It does not give rise to endless tensions and is something to which the ordinary citizen can refer, to ascertain whether a particular exercise of governmental authority is federal or for the state and the province.

The European Union is neither a centralised government—if it admitted to that there would be universal expansion, not just in this country—nor, alas, is it a federal government because there is no clear division of powers to which the ordinary citizen can refer and upon which, as in the United States, Australia or Canada, a court can ultimately judge whether the boundaries have been correctly set.

For once, I agree with the noble Lord, Lord Wallace of Saltaire. The Union is in a constant process of negotiation and renegotiation. I believe that it takes up the energies of this Government and other governments which could be much better spent in measures to improve the lot of their own populations. Subsidiarity is a word which when I started teaching government, no one had ever heard except, as has been pointed out by the noble Earl, Lord Onslow, a few theologians. The introduction of the word has simply been a camouflage for the attempts of particular parts of the European institutions to acquire power under the cover of distributing it. We can get nowhere with this system. I can only tell the Committee that its time in dealing with the treaty is largely wasted because it will not survive.

Lord Renton

Before my noble friend sits down, may I ask him whether he agrees that, bearing in mind that all the European countries in the European Union are committed to subsidiarity, each of them should have the right to be told how it is working, if at all?

Lord Beloff

They may be committed to subsidiarity, as someone may be committed to a belief in astrology. It does not get us any further.

Baroness Park of Monmouth

I do not believe that I shall get the matter much further either. I wish to ask the Minister a question. If we consider paragraphs (4) and (5) of the protocol, and we recognise that the Community will act on its own only if there is no national way of doing something, what have we managed to establish formally as the time for scrutiny which we are to be given? That is one of the major problems. Matters are decided but because they come to both Houses so late it is virtually impossible to consider what the outcome will be. Whatever we think about subsidiarity, it is vital to establish an effective mechanism for keeping track and being given an opportunity to express a view. The protocol states on page 86, in paragraph (9): Without prejudice to its right of initiative, the Commission should: … except in cases of particular urgency or confidentiality, consult widely before proposing legislation". Who will decide whether it is so urgent that they do not have to consult? Also, I should also like to know more about the actual control of scrutiny within the mechanism of the Community. The representative states in paragraphs 129 and 130 of House of Lords Paper 25 on advancing parliamentary scrutiny of the third pillar: We looked at what was done in the Irish Presidency and something like 31 measures went through … but only seven of those measures actually went through the Council of Justice and Home Affairs Ministers". The committee asked, Do you mean that they went through other Councils? The answer was: They went through other Councils. I think five measures were adopted without debate by other Councils which never went to the Council of Justice". He went on to say that those Councils, as far as the representative knew, had no particular competence to make a specific decision. I am anxious to hear from the Minister therefore what we have done to ensure that we have effective, reasonable time for scrutiny.

Lord Pearson of Rannoch

I hesitate to embarrass my noble friend on the Front Bench who has done his best to defend the previous government's position on the introduction of subsidiarity. Indeed, I have just noticed a noble Lord leaving the Chamber. I am not surprised. He was a member of that Front Bench at the time when we spent many hours locked in combat over the Maastricht Treaty in 1993. I must point out to my noble friend that in his quote of Article 3b, as it was, of the original Maastricht Treaty, he missed out the vital 10 words which start the subsidiarity clause and which give the game away as to the whole intention of the clause. That is not in the least bit contradicted by the amendment we now see before us on the protocol on the subsidiarity provisions of the Amsterdam Treaty. The intention is merely confirmed.

To explain this point fully and to put it yet again on the record in your Lordships' Chamber I shall read the start of Article 3b, as it was. The vital 10 words are, In areas which do not fall within its exclusive competence". It then continues: the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community". A question which I first asked in a debate in your Lordships' Chamber on the Maastricht Treaty before it arrived here, in February 1993—many other noble Lords who have doubts about the entire European exercise have been asking the question steadily ever since—was: who decides which areas fall within the "exclusive competence" of the Community?

The answer is, and always has been, "the Community". That is merely confirmed with knobs on by Protocol 30, the protocol on subsidiarity in the Amsterdam amendments to the Treaty of Rome. I will not weary your Lordships by reading them out again. They have been fairly quoted today. However, I say to the noble Lord, Lord Grenfell, who prayed in aid paragraph 4 of the protocol, that the extract he quoted from that paragraph confirms my point exactly. When I ask who decides what is and what is not within the exclusive competence of the Community, the answer has always been the Community, not the nation states. From paragraph 4 the noble Lord quoted as follows: the reasons for concluding that a Community objective can he better achieved by the Community must be substantiated by qualitative or, wherever possible. quantitative indicators". But in the charge of whom? Who decides? The answer remains "the Community".

It is perfectly simple; the whole business of subsidiarity has always been a fraud. It is a fraud now. It is confirmed as a fraud in the Amsterdam Treaty and we should not look for any form of succour or defence for our national sovereignty from it.

5.15 p.m.

Lord Simon of Glaisdale

It is with great trepidation that I intervene in a debate on the various treaties which is being carried on by acknowledged experts who have been assiduous in their attendance in the debates. I do so because I saluted with enthusiasm the inclusion in the Maastricht Treaty of the word "subsidiarity".

The noble Lord, Lord Beloff, said that that word is new. It may be. If it was not in the vocabulary when he was teaching, it is undoubtedly new. But the idea behind it is not in the least new. It has been a matter of consideration by everybody who has been concerned with the science of government since the days of the ancient Greeks.

Subsidiarity is a perfectly simple idea. It means that no decision should be taken by any decision-making body which cannot reasonably be taken by a decision-making body which is closer to the person who is affected by the decision. For example, that principle was argued over between the confederationists and the federalists at the time of the American revolution.

I may say that I speak with diffidence in the presence of the noble Lord, Lord Beloff, since his preface and explanation in his edition of the federalist papers where it is a locus classicus. But it is not only concerned with federalism and confederation. Where shall the power lie? We have had to consider it in connection with our own local government from the days when local government stood up against central government—or perhaps it would be fairer historically to put it the other way round.

The question must be asked: who then decides? It seems to me that there is no alternative except to say that it is a court of the institution which decides how the principle will affect in any specific situation. In saying that, we must bear in mind that any institutional court is a centralising body. We must be on our guard against that. The European Court, like all similar courts, is a centralising body and so of course is the Commission. Like any body exercising power, the Commission has the greater power. That is why power corrupts. It corrupts, first, by creating a desire for greater power.

So we have two bodies—a court and the Commission—which will be trying to reverse and hold back the principle of subsidiarity. We saw it immediately after the Maastricht Treaty. It had been referred to in the memorandum which was designed to try and mitigate the inclusion of the principle which I venture to submit to the Committee.

What then should our Government be doing? They should be using all their powers to insist that the principle of subsidiarity is observed not in general but from case to case. In doing so they will be up against the two centralising bodies which I have mentioned, but they can still have an effect. I hope we shall hear from the Minister that that is what will happen.

Lord Pearson of Rannoch

Before the noble and learned Lord sits down, can he tell the Committee how he thinks that the British Government, with the best will in the world, can overcome a qualified majority vote which goes against them in this matter, as such votes usually do?

Lord Whitty

This has been a quite fascinating debate. It has been almost a consensual debate in certain respects in that everyone in the Chamber reflects what their view of subsidiarity is and thinks that we should have more of it.

The general difficulty that we have had with the concept since it was first introduced at Maastricht is that everyone has some concerns about the way in which European law is being made. They are not quite clear who ultimately is responsible for it and they had hoped that the words in the Maastricht Treaty would help to sort out more clearly and mechanistically how subsidiarity applied. I think it is true to say that everyone feels some disappointment that that clarity has not yet emerged.

Part of the reason is that we are not dealing with either a centralised state or a federal state, as the noble Lord, Lord Beloff, said; we are dealing with something that is organically changing in the light of negotiations between a number of independent member states, as the noble Lord, Lord Beloff, and the noble Lord, Lord Wallace, in unusual accord, seemed able to describe the European Union. In those circumstances we have to accept that an old medieval philosophical concept is a little bit of a jelly and quite difficult to apply in specific circumstances. Nevertheless, lying behind that is a very firm political intent by those who negotiated the Maastricht Treaty and by those who negotiated the Amsterdam Treaty.

Unfortunately, it is also true to say that some of the aspects of subsidiarity referred to here, particularly by my noble friend Lord Stoddart, with whom I have some sympathy, are somewhat broader than those which were incorporated in the Maastricht Treaty and which have been built on by the Amsterdam Treaty. At the end of the day, interesting discussion though this is, we are here at the Committee stage of the Bill and we have to look at the words that are changing as a result of the changes negotiated at Amsterdam. It is therefore important that we go back to those words.

The subsidiarity principle introduced at Maastricht states, as other noble Lords have said: In areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community". The third paragraph of Article 3b goes on to say: Any action by the Community shall not go beyond what is necessary to achieve the objectives of this Treaty". That is the proportionality principle. So Maastricht had set out those general principles of subsidiarity and proportionality but it was felt that it did not deal adequately with their application and that detailed guidelines were necessary. That is why we got the Edinburgh guidelines, put forward by the previous administration and supported by the then Opposition. Those guidelines set out detailed procedures for the institutions to follow to ensure that subsidiarity was properly adhered to.

At the intergovernmental conference prior to the election the previous government had argued that it was important to write the details set out at Edinburgh on the substance and the application of subsidiarity into the treaty itself in a legally binding and detailed form. We, as the Opposition and subsequently as the Government, agreed with that. When we entered the IGC negotiations last May a draft of the subsidiarity protocol was already in the treaty text which had been reached in draft by that stage. I must pay tribute to the Opposition for their part when in government in achieving that text. I therefore hope that they will welcome the outcome.

What I cannot quite understand is how the noble Lord, Lord Moynihan, can say today that that text is weakening the previous application of subsidiarity which was written into the Maastricht Treaty. I can see, as many noble Lords have indicated, that they may well wish that the words were stronger in the Amsterdam Treaty but I cannot understand the concept that they have weakened the position. They are based on the initiative at Maastricht but they are explicitly taking into that what was previously regarded as a negotiating triumph by the previous government at Edinburgh.

Lord Pearson of Rannoch

Perhaps I may help the noble Lord as one who did not regard the negotiation at Maastricht as a triumph. The new protocol on subsidiarity specifically removes any possibility that the acquis communautaire could be weakened or diluted by the subsidiarity clause introduced at Maastricht, which is what many people hoped it would do. The specific words are perfectly clear and have been quoted before. They say that the application of the principles of subsidiarity and proportionality shall respect the general provisions and objectives of the treaty"— fair enough— particularly as regards maintaining in full the acquis communautaire and the institutional balance. They give greater power to the court, which we all know is the engine of the treaty. This is knobs on. Subsidiarity means what we said it meant at the Maastricht negotiations of 1993, not what the Conservative Government said or those who thought it might be of any use to us said.

Lord Whitty

The point I am making is that the changes between Maastricht and Amsterdam do not weaken the position. The reference to the acquis communautaire was present to start with in Article B of the treaty on the European Union negotiated at Maastricht but then it was specifically reinforced in the Edinburgh guidelines. Those references to the preservation of the acquis communautaire were there already. We have not gone backwards. We may not have done what the noble Lord wanted but we have not introduced something which is less pro-subsidiarity than the previous text, which is what I thought the noble Lord, Lord Moynihan, and several other noble Lords were arguing.

The Earl of Onslow

Perhaps I may ask the noble Lord what to me is an important question. Can he please give me and the Committee an example of where subsidiarity has actually kicked in and where the European Commission or the court has said, "That is nothing to do with us. It is only to do with you?"

Lord Whitty

There are two categories of that. One is where, explicitly, proposals that the Commission was bringing forward before the Maastricht protocol and the Edinburgh guidelines existed were abandoned on grounds of subsidiarity, of which there are between 15 and 18 examples, which is perhaps not the long list which the noble Earl would have wished. Those would otherwise have come forward had they not been rejected on grounds of subsidiarity. Those are matters that were in the pipeline prior to Maastricht and Edinburgh. Secondly, as the noble Lord, Lord Moynihan, said, the totality of primary legislation coming forward has greatly reduced, in part because proposals which would go counter to the principle of subsidiarity have not been put forward by the Commission.

So there is a dog that did not bark in the night dimension to that argument. Nevertheless, the reality is that every proposition within the Commission now has to be subject to the subsidiarity test. No doubt there are people in the Commission who, for whatever motive, are attempting to get round the proposal, but measures are pushed through. This measure has led to fewer and fewer new propositions of competence and law. I believe that that will be a cumulative process. The provision with the acquis communautaire rolls it back in a significant way. Nevertheless, it is true that the acquis communautaire is not a fixed body of law. It can expand and contract. There are no great examples of it contracting at this point. Nevertheless, the acquis communautaire is not a fixed or constantly expanding body of law. Decisions can be made in the Community to reduce the acquis communautaire.

Lord Pearson of Rannoch

The noble Lord said that the acquis communautaire can expand and contract. Can he give any examples of where it has contracted or it is planned to do so?

5.30 p.m.

Lord Whitty

A significant number of transitional arrangements have been deleted from Community law over the years. I am sure that there will be greater ones. Nevertheless, the noble Lord is broadly correct: the total scope of the acquis communautaire has not retreated, but many regulations have been removed from Community law. The new atmosphere arising from the Maastricht and Edinburgh guidelines being applied within the Commission and Parliament, has led to situations which have not materialised which would have done otherwise. I can see that the noble Lord. Lord Pearson, is not totally convinced of this argument, but it is the best that he is going to get at the moment!

The new subsidiary protocol, which includes the Edinburgh guidelines, contains the following. It requires the Community to consider whether an issue under consideration has transnational aspects which cannot satisfactorily be regulated by individual member states; whether action by member states alone would conflict with the requirements of the treaty; and whether action at Community level would produce clear benefits by reason of its scale or effects compared with action at the level of member states.

Moreover, the Commission has to consult widely and, whenever appropriate, publish consultation documents before proposing legislation. All those feeding into that consultation process have in mind the issue of subsidiarity. These principles are gradually bringing about—I agree that it is gradual and not comprehensive—better, more appropriate and effective law-making regulations at European level. Those changes resulting from subsidiarity should not be seen in isolation. They go hand in hand with other efforts that the Community is making in that direction. I refer to the Amsterdam guidelines for improving the quality of legislation. I am sure that Members of the Committee will welcome that. There is also the campaign for simpler legislation in the internal market, which I am sure that the business sector will welcome greatly.

So there has been some progress as a result of the subsidiarity principle being written into the process. But it is not a mechanical application and in the present circumstances it cannot be so. The Commission has withdrawn some legislative proposals and it has not come forward with others. I cannot see that the protocol we have adopted as a result of the Amsterdam Treaty in any sense weakens the influence exerted at Maastricht. Since then it has extended gradually through the institutions in order to establish that what is done at nation state or lower levels should be done at those levels and not automatically assume a European involvement in such legislation or other action.

There is a slight tone in some of the debate that because the subsidiarity principle has not worked perfectly we should not pursue it but reject this protocol and therefore the treaty. That is what we would be doing. But this is an important part of the future atmosphere of law-making for the Community. This protocol will help the law-making to work better.

We have to accept that there has been some achievement so far. Those who work in and out of Brussels will have seen that in drafting legislation the Commission has taken a different and often more sensitive approach to national circumstances. The result has been that the amount of primary legislation we have had to consider has gradually fallen. Although that may not have happened in the past year, the amount of primary legislation has certainly dramatically fallen from the years in which concerns about subsidiarity were particularly strong.

The Earl of Onslow

I know that the amount of primary legislation has fallen, but the amount of regulation arising from the primary legislation has increased. So it has just been a different shape rather than a different volume of legislation.

Lord Whitty

That is not the easiest thing to measure. But clearly, once one has primary legislation then regulations flow from it, as with national legislation. The point about the acquis communautaire is that the scope of what should be done at European level as against national level has not increased; the rate of new primary legislation has not increased. In order to carry out that primary legislation there may have been some increase in the level of regulation.

The whole question of law-making in the European Union is extremely complex. But I believe that towards the end of the debate Members of the Committee were addressing the issue that although subsidiarity is not perfect, at the end of the day the question is who decides what is appropriate. It is clear that there is no satisfactory answer for those who regard anything that the Community does with deep suspicion.

Naturally, at the end of the day, the Community will decide what it does within its own area of exclusive competence. But as regards subsidiarity, ultimately there must be a role for the Court of Justice but it will be a longstop role. The decisions on subsidiarity will reflect the Commission taking into account the requirements of subsidiarity as regards the proposals for legislation. The Council of Ministers will take account of subsidiarity when it comes to consider those proposals.

The protocol has set out what subsidiarity means for all the institutions and the procedures the institutions must follow during the legislative process. It is true that, in the last resort, the court will be better able to ensure that the subsidiarity principle is properly applied on the firm legal basis of the explicit protocol written into the treaty. In our view that is a power for the court. But it is an advance on the general language of Article 3b of Maastricht and the Edinburgh guidelines which were not themselves justiciable. The Government are confident that the European Court of Justice will implement this protocol effectively in line with the general view across the European Union that the principle of subsidiarity has to be enforced.

The Earl of Clanwilliam

Is it not the duty and the responsibility of the Court of Justice to ensure the ever deepening and widening of the Community, and that therefore its card is already marked in advance against the use of subsidiarity?

Lord Whitty

The role of the Court in this respect is to ensure that the terms of the treaty are applied and to resolve disputes over the application of those terms. Therefore, the Court will be acting as would any court in deciding what those terms mean.

Lord Pearson of Rannoch

If there were to be a dilemma in the mind of the Court—I agree with my noble friend Lord Clanwilliam that that is extremely unlikely—surely the Court would have to find in furtherance of the ever closer union of the peoples of Europe", which is in Article A of the treaty. The Court is the engine of the treaty. Why would it wish to go in any other direction?

Lord Whitty

The Court is the arbiter of the treaty; it is not the engine of the treaty. The Court acts as would any national court in interpreting the legislation which is applied in the institutions which it governs. That is the role of the Court. That is the only way in which the Community can operate on any effective constitutional and legal basis. I appreciate the fact that the noble Lord does not want any of those institutions, but if we have any of the institutions, we have to have a court to ensure that the rules apply. That applies in the area of subsidiarity just as elsewhere.

The noble Baroness, Lady Park of Monmouth, referred to the question of scrutiny. That matter is probably best taken in the next debate, which will relate to the national parliaments.

As I have said, this is a bit of a jelly of a topic. However, it is a very important principle. We need to find new ways to ensure that what we all mean by "subsidiarity" is effectively followed by the institutions of the Community. We believe that the Treaty of Amsterdam improves on what was there before, but it is not perfect. None the less, I think that we all agree that the principle should be supported. Therefore, I ask the noble Lord to recognise that the wording of this protocol reflects that principle at least in part, even if not sufficiently for his purposes. Therefore, I hope that he will be prepared to withdraw his amendment at this stage.

Lord Renton

The noble Lord has not yet mentioned the Government's attitude with regard to Amendments Nos. 30 and 54C which are grouped with this amendment. Whether or not the principal amendment is accepted, I should have thought that either of those two amendments, which enable our Parliament to be kept informed, should be welcome to the Government. The noble Lord's views on these two amendments would be helpful.

Lord Whitty

Amendment No. 30, which deals with reporting to Parliament on the principle of subsidiarity, is couched in such terms that it requires reports on the application of the principle of subsidiarity throughout the Union. It would not be possible for the Government to produce that report. The institutions of the European Union could produce such a report which would then be subject to scrutiny by this House. Indeed, the Commission has already undertaken work on its current annual review which is, I believe, entitled Better Law Making. It provides documentation which is subject to the scrutiny processes of this House. It includes the Commission's report on the application of subsidiarity within its processes and will, in the normal way, include the British Government's comments on the Commission's report.

Lord Renton

That answer does not apply to Amendment No. 54C which stands entirely on its own. The Minister has not considered that.

Lord Whitty

I am not sure of the distinction which the noble Lord is making. However, perhaps the question of reporting should be dealt with in the whole context of scrutiny because subsidiarity is only one aspect of the way in which we consider Community legislation in this House and in another place. It would probably be better to deal with those amendments in that context. The Government are in no way reticent in allowing in this House and in its committees debates on proposed European legislation and on the Commission's reports on such legislation.

5.45 p.m.

Lord Stoddart of Swindon

This has been a long and fascinating debate in which we have had many sensible contributions. I do not want to spend too much time replying, but there is a dispute about exactly what "subsidiarity" means and about its effects. It is absolutely true that those who expressed doubts about the principle during our Maastricht debates have been proved right, as the noble Lord, Lord Pearson, said, because neither my noble friend nor anybody else has been able to show that subsidiarity has worked in any tangible way. My noble friend said that some legislation that might have been introduced was not introduced, but, unfortunately, we shall never be able to judge whether or not that is so. There are no tangible examples of how subsidiarity has helped to slow down or to prevent the centralising tendencies of the European Union. That is what this debate has been about.

As the noble Lord, Lord Moynihan, said, the debate is also about whether the protocol helps or hinders the position of subsidiarity. I do not know how we can reach a decision on that, but what worries me is that a simple statement of principle has now been cluttered up by 13 paragraphs, of which I believe 10 are additional. Once the Commission and the Court get their fingers, eyes and minds on that, there is no knowing what they might do. As the tendency is to centralise, they are almost bound to try to undermine the principle of subsidiarity. I am afraid that my noble friend has not reassured me on that point.

As the noble Lord, Lord Renton, said, one unfortunate result of the provisions on subsidiarity has been that the Commission produced a memorandum on the matter which was so gobbledegookish that apparently nobody understood what it was talking about. If no one knew what the Commission was talking about, can we be sure that the Commission itself knew what it was talking about? We must bear such points in mind and take into account the strictures of the noble Lord, Lord Renton, in saying that we must ensure—apparently, we all believe this—that the European Union does not become a European superstate by ignoring the laws and traditions of member states which have been operating not just for a few years, but for many generations. I believe that we should heed that.

The noble Lord, Lord Wallace, said that we cannot write everything into law. That is true. But the problem is that in matters European, the Commission wants to write everything into law. It wants to put everything down on paper in order to bind the member states to its policy and its direction. Our own law gives a certain flexibility for interpretation by the courts. As far as I can see, it is the European Union and the Commission which want to tie everything into words so that there can be no doubt and no escape for member states.

The noble Lord, Lord Beloff, said that he did not agree with me that everybody applauded the subsidiarity clauses in the Maastricht Treaty. He is absolutely right. I did not applaud them myself. As usual, the noble Lord goes right to the heart of the matter in saying that they do not matter and we are wasting our time discussing this particular clause. It is the job of this House and another place to scrutinise legislation. Even though we may believe that we are wasting our time we should nevertheless scrutinise it.

The noble and learned Lord, Lord Simon of Glaisdale, saluted the insertion of the word "subsidiarity" into the Treaty of Maastricht. He told us that it was a very good thing. He said that subsidiarity was all about the science of government. Who could quarrel with that? Unfortunately, he went on to say that the Commission and the European Court would make decisions towards centralisation because that was what they were all about. Perhaps I more than anyone else respect the noble and learned Lord for his legal knowledge but, most unusually, he appeared to contradict himself. Although he applauded the system of subsidiarity nevertheless he believed that the people who would implement and interpret the provisions would do their best to undermine them. I hope that I do not misrepresent the noble and learned Lord.

Lord Simon of Glaisdale

Perhaps the noble Lord will allow me to intervene. The difficulty that arises is that these institutions are manned by human beings. The principle of subsidiarity is well established. But I ventured to say that the Court would try to centralise because that was in the nature of a constitutional court. Similarly, the Commission will try to mitigate the principle, as it did immediately after it was enunciated with a powerful memorandum at the Edinburgh Conference. One must accept that, but it does not mean that the principle itself is not one that is well worth laying down and that the Government should not do all that they can to vindicate that principle whenever it arises. I speak as a strong pro-European.

Lord Stoddart of Swindon

I thank the noble and learned Lord for underlining the whole principle and explaining that subsidiarity can operate only as long as it is worked at and we can undermine the baleful centralising influence of the Commission and the European Court.

My noble friend Lord Whitty did his best to provide the Committee with some reassurance about subsidiarity. I am not sure that he succeeded. However, it is not his fault. It is very difficult to give an assurance about subsidiarity. The problem is that there are no examples. I felt rather sorry for my noble friend. He sought to reply to a debate that was highly critical of what had happened on subsidiarity without being able to refute what had been said. But I am quite sure that my noble friend is a strong supporter of subsidiarity and wants more devolved power from the European Union. He does not want to push power up; he wants some power to come back down. If I understand my noble friend correctly, he and his colleagues will do their best to ensure that the principle of subsidiarity really works this time and will take forward the matter. Because I believe that he will do that, I seek leave to withdraw the amendment.

Amendment by leave, withdrawn.

[Amendments Nos. 26A and 26B not moved.]

Lord Moynihan

moved Amendment No. 26C: Page 1 line 18, at end insert ("and the Protocol on the Role of National Parliaments in the European Union""). The noble Lord said: I beg to move Amendment No. 26C. In introducing this amendment, I am grateful to my noble friend Lady Park for her insight into the matters that I am about to raise. She would have introduced this amendment far better than I am capable of doing. I believe it is important that the issues she raises are considered in detail by the Committee. It is with some pleasure that I move this probing amendment. This is not a matter in respect of which there is any difference of principle with the Government. I believe that there is a good deal of common ground between us on this matter. The purpose of the amendment is to give the Committee an opportunity to debate the role of national parliaments within the European Union.

The amendment deals with the provisions of the treaty contained within the protocols to allow a minimum six-week period for scrutiny of Community and third pillar proposals by national parliaments. The protocol also provides a new consultative role for COSAC (the Committee of National Parliamentary Scrutiny Committees). It will come as no surprise to the Committee to hear that these Benches welcome the fact that the treaty includes measures to permit better scrutiny of Community legislation by national parliaments.

The previous government led the way in Europe to ensure that the Treaty of Amsterdam contained such a measure and that national parliaments were given a greater role in scrutinising European legislation. The requirement for a six-week notice period before the Council decided on legislative proposals had its origin in important work carried out by the Select Committee on European Legislation. Declaration 13 of the Treaty of Maastricht on the role of national parliaments in the European Union stated the importance of encouraging greater involvement of national parliaments in the activities of the European Union. It called for the exchange of information between national parliaments and the European Parliament to be stepped up and for national parliaments to receive Commission proposals for legislation in good time for information or possible examination.

But the previous government were keen to make the main elements of Declaration 13 of the Treaty of Maastricht legally binding by entrenching them in the treaty, for it was clear that a legally enforceable provision was sorely needed. In 1994, in the first of its reports on the 1996 Intergovernmental Conference, the Select Committee on European Legislation was scathing about the lack of openness and accessibility of the process. According to the report, not only was the principle of making information available to national parliaments in good time before a Council decision routinely ignored, but the unpredictability and lack of notice led that committee to conclude that laws for European citizens were "to be made in a private club".

I quote from paragraph 61 of the 24th Report of the Select Committee: The process of legislation in a democratic society always contains the elements of proposal, consideration, amendment if necessary, and approval. This process works only if what is proposed is clear, if it is widely available, if there is publicity and public consultation, and if there is time to consider the proposal before decisions are taken". European law accounts for a large and growing proportion of the law of each member state, as we have learned again in these Committee proceedings, yet increasingly it appears "to be made in a private club".

The committee listed a selection of 42 documents which in the previous 14 months had been found to be of legal or political importance but which it had had to consider without an official text. The committee singled out for criticism the use of unofficial texts and the absence of a minimum period of notice for legislation to be considered in the Council. The Committee will be aware that that was compounded by difficulties in obtaining documents attributed to translation, transmission and organisational delays.

Such difficulties have long been a problem for national parliaments, and particularly for those like the Westminster parliament with a demanding and extensive European scrutiny system. Other problems arose from unpredictable Council agendas, late Commission proposals, and the bunching of business towards the end of a presidency notice. As a result, in its report, the Select Committee recommended a 4-week period of notice to protect the interests of national parliaments and the citizens they represent. It stated: It seems to us that the minimum period of notice should be four weeks", that is, four clear weeks between the official text of a document being available in the appropriate language in every national capital and a decision on the document being taken in Council.

However, on the publication of the Select Committee's 27th report on 18th July 1996—a year and a day after that recommendation had been made—the situation worsened. That report listed a selection of 75 documents of legal or political importance which the committee was forced to consider without an official text. It excluded documents where the committee had an unofficial text, or the Commission document and no expectation that there would be a change. But, as the Committee is aware, an unofficial text is not a depositible document available to this place and to the public more widely—not least to those who may be affected by the legislative proposal contained within it.

The Select Committee again attributed that "lamentable state of affairs" to four main causes: the unpredictability of Council agendas; late production of proposals and other documents by the Commission; the preparedness of the Council to take items at short notice; and the slow transmission of documents. The Select Committee acknowledged also the previous government's role in working to resolve that unacceptable situation. It stated: No blame attaches to the Government for the situation. Following our report last summer, Foreign and Commonwealth Office Ministers and officials have kept up pressure on the Commission and the Council Secretariat for quicker production of documents and more orderly organisation of business, and have raised with them the particular difficulties which we have encountered". The committee reiterated its recommendation of the previous year: In our view the difficulties will only be solved by the introduction of the binding four-week period of notice which we recommended last summer". On the recommendation of that Select Committee, which was endorsed unanimously by all the European affairs committees of parliaments of member states' at the COSAC meeting in October 1996, the British Government tabled a treaty amendment which formed the basis of a draft protocol. That appeared in the treaty text presented to the Dublin European Council in December 1996. As a result, the period of notice now enshrined in the protocol is legally enforceable. That is the good news.

Now for some perceived problems associated with the protocol. In the preamble to the protocol that appeared at Amsterdam, the desire to enhance the ability of national parliaments to express their views on matters which may be of particular interest to them is indeed expressed, but is it not the case that national parliaments have to have an interest in everything the Union does and legislates for, for it is binding on all their people? Will the Minister confirm when the starting point for the six-week period of notice between the depositing of Commission consultation documents before the European Parliament and the Council of Ministers and the date when they are to be discussed within the Council will be? I believe that my noble friend Lady Park is interested in that point. We need to know the starting point for that six weeks, and I should welcome the Government's clear answer to that question.

Will the Government give an assurance that the six weeks will start from the date that the relevant documents are delivered to national governments over whom national parliaments have control rather than the date the documents are made available to the European Parliament and the Council as a whole over whom national parliaments do not have control, in order to avoid the possibility of a delay in transmission? Will the Minister confirm that it can take up to six weeks for documents to be sent on from Brussels? So unless the six weeks start when Westminster receives its copy, it would seem that the time allowed would frequently still be insufficient to permit parliamentary scrutiny.

There is of course an exception to the six-week rule on the grounds of urgency. I would be grateful if the Minister could assist me by defining what is an exception on the grounds of urgency. What type of legislation does the Minister envisage that that exception would cover? Does the Minister agree that it is essential to ensure that that provision is defined tightly to avoid the exception becoming the norm, and that the Council should be required to state formally the grounds of urgency?

Those are specific, detailed questions on an important part of the work done by the Government in negotiation. I am sure that the Minister will have no difficulty in clarifying the two points that I have raised. I underpin a broader more general important point; that on these Benches we believe that national parliaments remain the primary focus of democratic legitimacy within the EU, for it is they who hold national Ministers to account.

Will the Minister confirm—this is no light question in the context of a further shift in powers towards the EU institutions—that the Government concur that national parliaments remain the primary focus of democratic legitimacy within the EU? In a Europe which is to flourish as a partnership of nations, national parliaments must remain the bedrock of democratic legitimacy and accountability. They represent the primary forum for the exercise and application of democracy, and for the expression of the will of the people in elections.

Far from acting as the guardians of democratic accountability of our national Parliament, at Amsterdam the Government allowed many powers to be diminished and undermined, and transferred to the European Parliament, and into the hands of unelected officials, as we debated at length last night with regard to the presidency of the Commission. I have asked specific questions, and I shall be grateful if the Minister could reply to the wider and critically important issue of national parliaments remaining the focus for our democratic legitimacy? I beg to move.

Lord Bruce of Donington

I am happy to endorse and agree with practically everything that the noble Lord, Lord Moynihan, has put forward on behalf of himself and the Opposition. There can be no doubt as to the accuracy with which he has presented the whole question to the Committee. I support him warmly.

I shall refer briefly to the protocol itself. One notes a slight tendency to indulgence in the national parliaments. The second paragraph of the protocol states: Desiring, however, to encourage the greater involvement of national parliaments in the activities of the European Union and to enhance their ability to express their views". That is a tepid expression of the real position in this matter of national parliaments. Members of the Council of Ministers are responsible to their respective parliaments and to the members of parliaments. It is not merely in order that members of parliaments may express their views, but in order that they may be able to exercise such powers as they may have over their own Ministers before their Ministers, in the Council of Ministers, come to decisions on proposals put forward by the Commission. It is a vital part of British national life that Members of Parliament should be informed fully of Commission proposals and other important documents in good time for them to be able to consider them.

I hope that your Lordships will forgive me when I say that I have studied European bureaucracy for a long time. In general terms, I know how it works. It is not unique to Europe; it applies to all bureaucracies. Bureaucracies can easily establish their ascendancy over politicians by flooding them with paper so that they have no real chance to read through documents in detail, and still less time to present them to their Ministers. It must be said immediately that we have had a surfeit of paper flooding in from Brussels and elsewhere. Sooner or later, that must give rise to the corresponding ways in which the British Parliament, through its Ministers, makes its ideas known to its public when, as a specific condition of the Commission's proposals, a directive, draft regulation or whatever is required.

We must face the fact that our own bureaucracy, to whom I offer my warmest support, finds it difficult to deal with the flood of paper. The Council of Ministers, whether at Ecofin or wherever, is fully sensible of the position. That is why COREPER reveals most matters which go before the Council of Ministers. It has before it proposals, decisions, draft regulations and so forth. COREPER, which members of the Commission attend, arrives at its own decisions—presumably after consultation, if necessary, with London in the case of the United Kingdom—as to what needs to be considered and decided upon by the Council of Ministers. It decides and puts on List A what can be signed and agreed by the Council of Ministers without any particular discussion or deliberation at Council level. That makes it more practical to deal with the flood of paper, and I have no objection to that.

However, it must be admitted that even after that, and even on the assumption that the document is delivered in the United Kingdom giving six weeks' notice under the protocol, it takes some time to go before the various Select Committees. In the House of Lords, there is the Select Committee on European legislation or one of its sub-committees, and there is a Standing Committee and a Select Committee in the other place. It is clear that some documents do not go through the committees because only the most important of those which arrive—or what the civil servants of the House decide are the most important—are considered by the Committees. That does not apply only to unimportant documents, or to items which are deemed to be unimportant.

However, the fact must be faced that some legislation which is prepared at Commission level, the importance of which is a matter of opinion—it is not always universally agreed—can go on to the statute book without it having official governmental approval purely because at some level it has been decided that there are not the facilities or the time to deal with it. We must face that fact.

I wish to touch on one of the most important documents. One of the most important proposals which comes from the European Commission is the Community budget. It is an important proposal. As your Lordships are fully aware, and as I have previously indicated, we are the third largest net contributor. In the current year, we will contribute more than £1.5 billion net out of the Consolidated Fund and therefore we have an interest in such matters. I was perturbed, therefore, to read in confirmation of a matter that has long been conveyed to me unofficially and verbally, the observations of our own Comptroller and Auditor General in his report published last Friday. At paragraph 2.18, he states: In their 1995 Statement of Assurance, the Court noted that the Community's financial statements were internal documents, had never been published, and were presented to the Council and Parliament only in French. The Court concluded that it would be better if the accounts of the European Community could be published, preferably with the Statement of Assurance, but that the Commission would need to make the decision". At paragraph 2.19, he states: In February 1996 the Committee of Public Accounts noted that the full accounts of the Community Budget were produced as an internal Commission document and were not available in English. The Committee were concerned that improvements should be made to the Community's financial statements, in order to provide more usable information and enhance the accountability of the Commission for the use of the Community Budget. The Committee recommended that the United Kingdom Government press for the publication of audited accounts in a clear format accompanied by the Statement of Assurance. In their response the Government promised to raise the matter with the Commission". Those are not my words; those are the words presented in a cool and factual form by our own Comptroller and Auditor General.

It is the case that there are delays. I will not say that they are deliberate—far be it for me to impute motives in these matters, save where they are obvious on the face of it. It is remarkable, for example, that Sub-committee A of the House of Lords' Select Committee on European legislation was unable to obtain a copy of the 1998 budget in time for it to be given consideration. Therefore, there is no examination this year of that very important document, the Community budget. It shows not only the total income and expenditure, the proportionment, the abatements and so forth, but it shows the individual items of expense all through the titles. It also enables detailed questions to be asked and enables English Members of Parliament to become aware of exactly what is happening in Europe.

I do not need to tell businessmen and companies that life is about money and that money makes the whole thing run. Therefore, I hope and assume that the Government will be forthright about the issue. During years in opposition one cannot have the resources to enable even a large and well financed party to study all such questions in detail. I know that as a result of personal experience, cost and time during the past 25 years. It is not possible for any government to do everything at once and I am satisfied that the Government will do their best. Perhaps I might respectfully suggest that they must not only do their very best, but that they must stick their neck out and insist that we receive the documents to which we are entitled. I am sure that even those most preferred supporters of a federal state in Europe will agree with that. I sincerely trust that I shall receive support from the Liberal Democrat Benches for such a mild proposition.

In the belief that they will do something about this, I ask Her Majesty's Government to insist on our proper rights. There is no reason why, in this respect, we should lag behind Germany and France who have their own special arrangements under the Elysee Treaty of 1963. It is time that we asserted ourselves. The House may feel constrained to agree that something has to be done.

Lord Wallace of Saltaire

I shall be brief. I welcome the protocol that strengthens the role of national parliaments. It is clear that national parliaments need to have greater and more rapid access to Community documents and more time to consider them. We have to make it work.

Last Thursday evening, when I took part in a debate on the report on the convergence criteria which joined the ratification of the Maastricht Treaty, I noted that there had been carried in the Commons an amendment insisting that the Government should report each year to Parliament. While I had the pleasure of listening to the noble Lord, Lord Mackay of Ardbrecknish, giving a very detailed exposition of how this year's financial projections fitted in with that criteria, the House was extraordinarily empty. If we are to carry these amendments through and insist on greater parliamentary scrutiny, we have to make it work.

With the greatest of respect to some of my colleagues, there is a Gresham's Law of parliamentary scrutiny, that Euroscepticism drives out reasoned criticism. That is one of the reasons why on those occasions the Benches of the House are so often very thinly occupied.

The Government already provide agendas for future council meetings and reports them in Written Answers in Hansard. I hope noble Lords are aware of that. I tear them out each month. I sometimes even look at them.

Lord Stoddart of Swindon

I have just listened to the extraordinary statement that Euroscepticism drives out reason. That presumably means that any scepticism drives out reason. I have always believed that it was scepticism which brought reason, not drove it out. If parliamentarians, whether they are Eurosceptical or Eurofanatical, cease to be sceptical and to discuss all these matters, I do not know where we are going and what our purpose is.

Lord Wallace of Saltaire

I think the noble Lord nevertheless took my meaning and I am sure he understands what I intended to say.

I have been serving on the European Communities Committee for a short time. I note that the Government do not always very quickly manage to get documents received from the Commission through to the National Committee for scrutiny. That is something on which we would like some assurance from the Minister, either now or at Report stage.

I welcome the developing co-operation between National Parliament Scrutiny Committee, which is fostered by COSAC although it does not only come through COSAC. We have begun to exchange information about how much each national committee has got out of its government and what documents have been provided. That is a welcome step forward. The next meeting of COSAC, which will be in London in a month's time, will enable us to talk about how we may improve parliamentary scrutiny of the third pillar. We intend to do that now with the British presidency.

It is important that this protocol is not only carried into effect in the treaty but that we have every possible assurance from Her Majesty's Government that they will make it work in practice as well as they can.

Baroness Symons of Vernham Dean

We have had a remarkable and unusual degree of agreement in Committee this afternoon on these amendments. In speaking to Amendment No. 26C I will speak also to Amendments Nos. 36 and 38 which are grouped with it.

The Government are determined to build a European Union that is more open and more democratic. The Council of Ministers, the European Parliament and, in particular, national parliaments all have a part to play in this effort.

We argued successfully in the IGC for more openness: a treaty-based public right of access to documents, including in the second and third pillars; publication of Council votes on legislation; and publication of new third pillar proposals. As presidency, we have now tabled further, follow-up proposals.

The requirement for greater democratic oversight is very strong. It is a requirement that has been espoused by all sides of the Committee this afternoon. Again we made some progress in the IGC by providing for co-decision with the European Parliament in legislative areas that are subject to majority vote in the Council.

As the noble Lord, Lord Moynihan, said, the principal source of democratic legitimacy in the European Union is national parliaments. It is to national parliaments that governments are answerable; it is to national parliaments that people most readily identify. That is true in all member states. We must therefore reinforce the role of national parliaments too.

I am pleased to say that here too the IGC recorded real progress, including on proposals made by the Government, which are reflected in the treaty we are discussing today. For the first time the role of national parliaments is now recognised in proper, legally-binding form in the treaty.

Before Amsterdam the treaty said nothing about national parliaments. Maastricht achieved no more than a declaration on the need to send documents to national parliaments in good time. A Conference of European Affairs Committees was set up in 1989 to bring together national parliamentarians. The noble Lord, Lord Tordoff, is one of its most distinguished contributors. Yet COSAC has gone unmentioned in the treaties.

The protocol agreed at Amsterdam changes that. The protocol's main feature is to create a legally-binding minimum period of six weeks between the circulation of a proposal and a Council decision on it, except in genuinely urgent cases. This will greatly facilitate scrutiny by national parliaments.

The protocol also provides for an enhanced role for COSAC. The role will be non-binding and consultative. That is sensible because, as COSAC has recognised, COSAC cannot formally represent the views of national parliaments but it is the best specialist source of a collective view. It is right that the treaty should acknowledge this expertise.

The Government strongly supported the protocol. We pay tribute to those in this House and another place, including the noble Lord, Lord Tordoff, and his committee, whose thinking and reports first inspired the protocol.

We successfully proposed extending the protocol. First, at our suggestion, its provisions apply to third as well as first pillar documents. We recognise the great interest of this House in justice and home affairs issues. The protocol will help this House to pursue those issues. Secondly, we proposed, and partners agreed, that the minimum notice period should be extended from four to six weeks.

We sought this extension because of the time it takes from a proposal being sent to the Council Secretariat for it to reach member states in Brussels and then arrive in capitals. Two years ago it took an average of 40 days. That period is now much reduced but it can still take up to a fortnight. The effect of our proposal is to ensure that national parliaments will still have four clear weeks to study draft legislation. We hope that an electronic transmission pilot project now under way will help further in that respect.

I wish to be clear on this point because the noble Lord, Lord Moynihan, asked me to be specific. The six-week scrutiny period begins when the document is received by the Council Secretariat. It is then translated and distributed to member states. It is exactly because of that provision that member states decided to extend the period in the national parliaments' protocol from the four weeks proposed by the committee of the noble Lord, Lord Tordoff, to the six weeks that now appears in the protocol. I remind the Committee that the Government are already committed not to agree proposals until they clear national scrutiny, however long that takes. That commitment will remain.

But existing parliamentary rules rightly allow the Government to agree urgent confidential or trivial proposals before they clear scrutiny. That reflects the fact that business can arise at short notice and may, on occasions, require urgent attention.

6.30 p.m.

The Earl of Onslow

Will the noble Baroness give an example of something which will be so urgent that it need not come back to Parliament? That would help everybody. It is easy to use words like "urgent" and "trivial", and examples would help.

Baroness Symons of Vernham Dean

For example, it may be that urgent sanction measures were needed in respect of a particular country, or that there had been an ecological disaster which needed urgent action. There may be an outbreak of an epidemic on which nations in the EU feel that there should be urgent action. I hope that provides a flavour. I do not wish to go too far into the matter, but I hope that I have provided examples where urgency may require that clause to be invoked.

The point is that the provisions of the new protocol will strengthen national parliaments' role in ensuring democratic legitimacy. They will help to rectify weaknesses in our national scrutiny system and we shall build on the new provisions in our separate proposals to update and strengthen our national arrangements.

My right honourable friend the President of the Council published a memorandum in January setting out our broad proposals. The memorandum takes account of proposals made by the relevant committee of this House and another place. It has been sent to the committee of the noble Lord, Lord Tordoff, whose views on its contents we very much look forward to receiving.

Our plans include giving Parliament a strengthened formal role in the scrutiny of second and third pillar business. Detailed arrangements must reflect the specific characters of those pillars. For example, in the second pillar, the nature of business means that confidentiality is vital and decisions are often needed at short notice. That may require explanatory memoranda to be submitted after adoption of a proposal.

Our plans include also extending the scope of the scrutiny reserve to cover documents subject to scrutiny under the inter-governmental pillars and to cover legislative proposals on which agreement is reached at the European Council. We propose also to strengthen arrangements for reporting to Parliament on meetings of the Council of Ministers.

As the noble Lord, Lord Wallace of Saltaire, said, we already report on all such meetings orally or in writing. We consider that more detailed reports in the form of letters to Select Committee chairmen will ensure that Parliament is better informed on the detailed outcome of more important issues, particularly those which have been the subject of special interest and debate in Parliament.

The national proposals that I have outlined will reinforce the EU-wide provisions laid down in the Treaty of Amsterdam. The treaty rightly provides for a stronger role and a clearer voice for national parliaments. I believe that those provisions should be welcomed and I commend them to the Committee, particularly as reinforced by the additional provisions which I have been able to outline to the Committee.

My noble friend raised a number of questions in relation to the Comptroller and Auditor General and his reports. We certainly agree that there should be as much transparency as possible in the European Community's financial affairs. We agree also that the British Parliament must be entitled to as much information as can be made available. I shall certainly draw the detailed comments of my noble friend to the attention of my colleagues who are responsible for Community finance.

I indicated that I should like to address also the specific concerns raised on Amendments Nos. 36 and 38. Before each meeting of the European Council, the Foreign Secretary sends to the Foreign Affairs Committee of another place a memorandum detailing subjects for discussion and listing the main documents to be discussed. That memorandum is made available to both Houses. Each month, the Government give details, by means of Written Parliamentary Questions, of the agenda of the following month's councils. All proposals for legislation and other important documents are submitted for formal parliamentary scrutiny within two days of their receipt in London. They are then the subject of detailed explanatory memoranda provided by the Government.

By tradition, those matters have always been dealt with by resolutions or Standing Orders both in this House and another place. The Government believe that that remains the more appropriate route, rather than that of primary legislation. I hope that, on that basis, the noble Lord will feel able to withdraw his amendment.

Lord Moynihan

I hope that I can do so but I am sure that the Minister will allow me to make one or two comments on her useful reply and on the contributions made by other Members of the Committee.

I asked the noble Baroness two specific questions. I am not as happy as she would like me to be on either of the two answers which she gave. First, my noble friend Lord Onslow raised the definition of "urgency". The Minister answered that to the best of her ability, and I understand that it must be very difficult to give precise hypothetical examples for the future.

However, the thrust behind the question was not so much a request for a detailed list of exceptions on the grounds of urgency but rather to seek an assurance that this Parliament will know the moment the Council has determined that a subject is an exception on the grounds of urgency so that it can be aware that the procedure of the six-week rule, which has been outlined, will be waived. When the noble Baroness takes into account the representations of the noble Lord, Lord Tordoff, I ask her to give due account also to the arguments put forward during this debate and in particular the importance which the Opposition attach to the need for the Council to be required to state formally and immediately when it decides that there will be an exception on grounds of urgency.

Equally, the Minister will no doubt be aware that I am rather disappointed in relation to my hope that the six weeks would start when the documents arrived in Westminster. I appreciate the argument that she put forward so clearly and I recognise that the period was extended from four weeks to six weeks to enable those additional two weeks to be used for the delivery of such documentation. If we knew that that would work, we should be a lot more confident. The critical issue to take into account is not so much the date on which the documents are received by the Council Secretariat but rather the date on which Westminster receives its copy. The Minister recognised that that is an important issue. I understand that some experiments are under way to address that subject.

Once again, I urge the Minister to consider the comments that have been made about the importance of time for due consideration of documents and whether or not we can find a mechanism to ensure that Westminster receives the paperwork well in advance and preferably on a specific date in advance of consideration by the Council.

In conclusion, I thank the Minister and other Members of the Committee for their contributions. I welcome the Government's commitment to the role of national parliaments. There have been occasions during the proceedings when some of us have had cause to doubt the Government's position, not least in our lengthy debates last night in regard to qualified majority voting. As it is so important that national parliaments must remain the primary focus of democratic legitimacy in the European Union, I ask the noble Baroness to consider my two questions and the important intervention of my noble friend Lady Park of Monmouth.

Baroness Park of Monmouth

I want to make one additional point about the need for scrutiny as long as possible. In my limited experience in one committee, things usually arrive from the Commission necessarily with no cost benefit analysis or one that is not real or relevant. To achieve one requires consultation and various agencies must be asked to give evidence. That is not easy to do in a hurry. It is difficult to make a serious recommendation to the Government on scrutiny if one is not able to deal with that dimension. I urge that in any representations that are made, that issue is taken into consideration. I thank my noble friend for his kind remarks.

Lord Moynihan

My noble friend reinforces the sentiments of the Committee and adds considerable weight, from her great experience, to the points made to the Government for their consideration. I thank my noble friend and others who have participated in this debate and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

6.45 p.m.

Lord Pearson of Rannoch

moved Amendment No. 27: After Clause 1, insert the following new clause— REPORT ON ECONOMIC AND MONETARY UNION (". A Minister of the Crown shall lay before both Houses of Parliament a report containing details and an assessment of—

1. (a) the constitutional impact,
2. (b) the monetary and financial impact, and
3. (c) the impact on economic and social progress,

on and in the United Kingdom of any measure adopted, or decision taken, by the Union pursuant to the objective set out in Article B of the Treaty on European Union of establishing economic and monetary union ultimately including a single currency."). The noble Lord said: This has been billed as a tidying-up debate on European economic and monetary union after our lengthy debate on 12th March, which we did not conclude then because the noble Lord, Lord Bruce of Donington, was unable to move Amendment No. 27—which remains on the Marshalled List.

I propose to deal with just one of the loose ends left from that debate but an important one. Those of us who believe that European monetary union is a most unfortunate project sometimes point out that among its many weaknesses is that the proposed euro area is not an optimum currency area. We mean that the separate national economies that are to form the area are not and will not be genuinely convergent, even if there has been a good deal of fudge to meet the Maastricht Treaty's criteria for the countries concerned to qualify for EMU.

When one economy will be in boom, another will be in decline. The most important weapon normally available to an independent economy in those circumstances is to be able to raise or lower interest rates. The foreign exchange rate will also fluctuate in line with the judgment of foreign exchange markets. The instrument of taxation is also available to a national government.

Those of us who criticise EMU point out also that a third solution to ease economic shocks in an optimum currency area occurs if its labour is comparatively mobile and can move from depressed areas to prosperous areas and vice versa. Mobility of labour in the United States of America is much greater than in Europe.

Those who support EMU often reply to those fears by pointing out that the USA is not an optimum currency area and nor is the United Kingdom, so what are we fussing about? It may be that there is no single optimum currency area. Certainly the English have only just discovered that they in effect pay a lot of money every year to support public services and so on in Scotland. The northern Italians are steadily growing less happy with the substantial support that they give every year to the Mezzo Giorno.

In our debate on 12th March at col. 347, the distinguished economist, the noble Lord, Lord Peston, took that line rather strongly and emphasised why the USA is not an optimum currency area. He told the Committee that one of the favourite exam questions that he used to set when teaching in that country is whether it would have been advantageous for West Virginia, which at the time had serious economic problems, to have its own currency so that it could devalue. Thus the noble Lord explained why the incredibly successful United States of America, as he called it, is not an optimum currency area.

On 12th March, I failed to put an obvious point to the noble Lord, Lord Peston, but will put it now to the Government. I am sure that we all much regret the absence of the noble Lord, Lord Peston, who would otherwise join in. It may be true that the USA is not an optimum currency area, but it is true that that country's people accept interstate transfers, which can amount to as much as 12 per cent. of a state's gross domestic product. The American Embassy informed me that in 1995, the average per capita contribution from the federal budget throughout the United States was about $863. Moreover, the inhabitants of Virginia—which has presumably recovered economically since the time that the noble Lord taught there—accepted in 1995 that they received only $535 each from the federal budget, in the knowledge that each inhabitant of the State of Columbia received no less than $3,926 or a difference of $3,391 per person.

The inhabitants of Europe are not at all used to paying each other such subsidies—certainly not to nationals in other countries of Europe. The European Union's present budget amounts to little more than 1.67 per cent. of national GDP. European countries do not need to make those transfers because their economies can respond individually to economic shocks through the adjustment of interest rates, tax rates and fluctuations of their separate exchange rates on the foreign exchange markets.

What will happen in the EMU zone when there is only one interest rate and one foreign exchange rate? When the Minister answers, he will no doubt agree that for the foreseeable future labour will be less mobile in Europe than in the United States of America. A clause in the Treaty of Rome says that one state should not bail out another, although Mr. Delors did not appear to agree. Indeed, EMU's birth certificate—or the Delors report of 1991—ominously foretold: EMU will necessitate greater fiscal disbursements at EU level. How do the Government foresee the situation developing under EMU, whether or not we are in it? If there are not to be massive interstate transfers to countries whose economies are in decline from countries that are more happily placed, what will happen to countries in recession? If there are to be such transfers, how will the inhabitants of the donor countries react? That question goes to the heart of the EMU debate and I look forward with interest to the Minister's reply.

Lord Stoddart of Swindon

Amendment No. 27 asks for a report on economic and monetary union that will take into account the constitutional impact, monetary and financial impact, and the impact on economic and social progress. These are important matters. While it is true that we discussed the wide implications on a previous occasion, nevertheless, we have not discussed this particular amendment. It asks first: what is the constitutional impact? The Chancellor of the Exchequer told us that there is no constitutional bar to our joining the third stage of EMU and a single currency. He may very well be right to say that there is no constitutional bar; but, let us make no mistake about it, there are constitutional implications.

As the noble Lord, Lord Pearson, just explained, this is a political project. Indeed, if it goes forward it is almost certain that it will have taxation implications for the British people and the ability of the British Parliament to decide the levels and forms of taxation that may be applied. So there are indeed constitutional issues involved, and I believe that we should know what they are and how the Government feel about them. We are not just talking about an economic project. Indeed, the European countries—certainly Germany, France and Italy—see economic and monetary union as the biggest and, perhaps, the final step towards complete political union. We are therefore entitled to know the constitutional impacts and to have a report.

What about the monetary and financial impact? It appears that the House of Commons is today publishing a report. According to an article in the Sunday Telegraph it will make some very serious statements. Indeed, the article says: The credibility of the Government's strategy on the single currency will be dealt a serious blow by an influential committee of MPs this week, on the eve of next weekend's landmark European summit to agree the launch of the euro … [the] pro-European [committee] will warn the Government that its current timetable for deciding whether to join a single currency will mean taking a decision before the full economic facts are known. Their warning challenges the wisdom of the Government's intention to decide whether to join monetary union early in the next parliament". Indeed, the article continues to say that both Tony Blair and Gordon Brown, will this week restate their view that, in principle, membership of the single currency would be of benefit to Britain, and that the determining factor will be whether it is in Britain's economic interest". It is quite clear that the Select Committee believes that it is not in the best interests of this country to join such a union, certainly for the next five years and until we know just exactly what the effects will be. Therefore, it is very reasonable for this Chamber—and, indeed, for Parliament as a whole—to ask what the monetary and financial impacts will be.

We should certainly know what the impact will be on economic and social progress. That is vital. I say that because all attempts at monetary union in the past have ended in disaster. For example, let us think about the Werner Report, which introduced the economic and monetary system in the 1970s. What happened to it? We found that it did not serve its purpose of giving us stable money and low inflation. Moreover, during the whole period industrial growth in Europe actually fell by 5.9 per cent. Of course, that had very bad implications for unemployment and for the progress of people's standard of living. So the Werner Report and the "snake" ended in disaster. They then progressed to ERM, and we all know what happened to that. We all know that that ended not only in disaster for the country—high unemployment and a slump—but also in total disaster for the Tory Government at the last election. It is no wonder that they are a little worried about imposing the single currency too soon, or perhaps at all.

Those are very good reasons as to why we should have a report. Another reason is the manner in which things are done in Europe. I believe that I described what has happened over economic and monetary union when I last spoke. Germany. France, Italy, as well as the Belgians and the Dutch—the British Government are not of this view—want economic and monetary union at any price. Of course, the prime movers are Germany and France. They will do virtually anything and make any deal as long as they get what they want. However, France and Germany do not always agree. At the Dublin Summit, when they were agreeing the stability pact, it appears that they were at severe loggerheads about how the pact should work. Indeed. Jacques Chirac took the view that the stability pact, which the Germans feel is absolutely vital for the sake of EMU, was, an invention of German technocrats". He went on to say that he believed that that was against the national interest of France. The quarrel spilled over into the main session and at one stage, according to the BBC television programme screened last Sunday night, it appears that Chancellor Kohl and Jacques Chirac got up, went into a corner and started quarrelling and arguing between themselves. All the other delegates eventually gathered around to watch what was going on as if it were a prize fight.

It seems that that is the way that things are done in Europe. I do not want them done that way here. In this country we do things in a rather different way—at least I hope that we do. I also hope that my noble friend can assure me that we do, that we have a decent, well thought-out and considered position and that we take time to ensure that we get the right answers. I therefore make no apology for saying these things at this stage of the proceedings. I recommend to my noble friend that he writes to the BBC—and, indeed, this applies to the whole of the Cabinet—and asks for the videotapes of those three programmes on how the EMU programme has been formed. I am sure that the BBC will be only too pleased to send the videotapes; indeed. I believe that it will be an eye-opener. Any other Member of this Chamber who takes an interest in such matters—and, by God, they are interesting programmes—should also send for the tapes.

Therefore, I hope that my noble friend will give some replies to the matters that have been raised and that he will indeed consider accepting the amendment. It would certainly do no harm and, indeed, it might do a lot of good.

7 p.m.

Lord Bruce of Donington

Perhaps I may ask my noble friend to give serious consideration to the proposal contained in Amendment No. 27. I am sure he will agree from his own long experience of politics in many fields—as other Members of the Government will realise also—that in political action timing is everything. When considering the steps that may or may not be taken by the European Union which affect ourselves—and in particular with regard to economic and monetary union—one has to make sure that, subject to whatever considerations may arise later, the date fixed for a specific action which has an effect on our constitutional, financial and economic and social progress, is sufficiently far ahead for us to be able to take into account the events that are likely to take place in the interim—that is to say before the proposed Union action is taken. One has to take particular account of steps that are already in the pipeline of which we may not become aware until the action takes place.

Perhaps I may give a specific example. Because the sum involved is billions of pounds, we shall have to consider the impact, for example, of the abolition of duty free. That will have considerable effects on the financial fortunes of the country. It may, therefore, have some indirect effect one way or the other in due course on our fiscal policy. One has to bear in mind also that there are proposals in the pipeline—I have seen them—which are not due to come into operation for another couple of years in regard to Commission proposals for the standardisation of VAT throughout Europe. These are important matters that we have to consider at the same time that we deliberate upon proposals emanating from the European Commission and from the Community.

If there is one thing that all of us may have learned—on the assumption that all of us can do with a bit of extra learning—it is that we are living in a state of flux. Things do not stand still for us to consider them, they progress the whole time. It has been stated very authoritatively this afternoon, and I think very temperately, that the constitution of Europe, if there is to be any kind of constitution, is a varying, developing quantity. We have to fix a point in time which enables us adequately to be able to assess the position, without wishful thinking, to make quite sure that what is to be done has definite effects on the way in which we conduct our affairs here. That is what I conceive to be underlying Amendment No. 27. There should be a straightforward appraisal in the Government's view of exactly how this will affect us, within certain fluid limits, obviously, because the whole thing is flexible. In that spirit, I venture to commend the amendment to the House and to the Government.

Lord Mackay of Ardbrecknish

It is particularly appropriate that we should be discussing these important matters today. After all, this weekend the Council of Ministers will have to meet under the British presidency in order to decide the states which will join the first stage of the monetary union; the rates between the currencies; and the interesting question of who should be the candidate for the president of the European Central Bank. All those questions may take a little time, and I suspect the president of the European Bank may take perhaps a little more time than just the weekend.

It is also appropriate because today the Treasury Select Committee in another place has produced an interesting report which the noble Lord, Lord Stoddart, has already mentioned. It is not often that I am ahead of the noble Lord but I have had a quick read of the report. I did not have to read the press speculation of the weekend. The noble Lord was busily engaged in the Chamber while I was happily sitting in my office reading through this most interesting report.

It starts off by simply reminding us that this weekend has a significant importance as regards the economic and monetary union. Some serious decisions will be made over this coming weekend. It is interesting that some of the decisions relate back to the last time that the noble Lord, Lord McIntosh, and I faced each other across the Dispatch Box; namely on the Bill regarding the independence of the Bank of England. I mentioned the matter in my speeches on the Bank of England Bill but the noble Lord brushed it aside. It is interesting that it is underlined in the Treasury Select Committee report from the other place. It is this. The legislation this House has just spent many happy hours passing about the Bank of England is not nearly sufficient for a single currency. Indeed, the Government will have to bring forward another Bill on the Bank of England if the Prime Minister ever gets the courage of the Chancellor's convictions and decides to join the single currency, or to apply for membership of the single currency. The Government will have to remove its powers to set an inflation target, for example. The Monetary Policy Committee will just become an advisory body rather than a decision-making body; and the Treasury will have to give up its right to override the Bank in exceptional circumstances. I recall that the noble Lord, Lord Peston, in an intervention at Report stage in the Bank of England Bill, said that he felt that the European Central Bank legislation would be deficient if it did not have some power within it to allow the politicians—the Commission, I suppose it would have to be—to override the decisions of the Bank in exceptional circumstances. So it will be interesting to see this Bill at some stage when the Government make up their minds on the subject.

Perhaps more interestingly from my point of view, the term of office of the members of the Monetary Policy Committee will have to be increased to five years. The noble Lord, Lord McIntosh, will have to eat some pretty strenuous words of his own. When I suggested that three years was far too short a period, he told me that I was absolutely wrong. He said that it would be wrong to contemplate five or seven years, or whatever, and that three years was the right period. So the poor noble Lord who will reply will have to eat his words if we ever start to go through another Bill on the Bank of England in order to allow us to join the single currency.

I return to the important decisions to be made this week and to the amendment before us which asks for a report. It is interesting to note that the Treasury Select Committee's report published today states clearly one of its serious conclusions on the whole survey. The Treasury Select Committee of the other place is composed of members of all parties: the Conservative Party, the governing party, and even the Liberal Democrat party. They all seem to have managed to agree on these conclusions. Perhaps I may read out paragraph 40 because it underlines the need for a report containing details of the monetary and financial impact, and the impact on economic and social progress. Paragraph 40 states: We agree that if the Government decides to recommend that the UK should join it is imperative that a 'final report' be produced. We recommend that it should also contain a comparative assessment of the consequences of entry and of staying out in the long term. For the reasons we have outlined, it would not be desirable for the final report from the Government before any referendum simply to contain an updated assessment of the five tests". Those are the five tests that the Chancellor has drawn up. I shall say a few words about them later. The report continues, However, we conclude that it will not be possible to judge 'clearly and unambiguously' either the 'success' of EMU or the answers to all of the Chancellor's five tests for at least five years". According to anyone's calculations, that means a date well into the next parliament. The report continues, It will remain the case that the UK's decision will have to be made on a political and economic assessment of the balance of national advantage". If I may say so, that paragraph sounds extraordinarily similar to my party's policy on these matters, which was from time to time derided by the governing party. I am delighted to note that the noble Lord, Lord Barnett, is present as he also took part in the debate on the Bank of England Bill. He will no doubt wish to take part in the next Bank of England Bill when these provisions will have to be changed.

What will the report that we are discussing have to contain? The report is called for not only by the noble Lords, Lord Shore of Stepney, Lord Stoddart of Swindon and Lord Pearson of Rannoch, but is now also quite clearly called for by the Treasury Select Committee in another place. The report will have to contain a number of measures. But before we reach that stage, the all-important weekend will take place when the tests will be discussed. I believe that ECOFIN has already stated that 11 out of the 15 members have passed. I speak as a former schoolteacher when I say that if I was told that some of them had passed, I would think that arithmetic had been stood on its head because by no stretch of the imagination can it be said that all 11 countries have passed the Maastricht criteria which were established some years ago.

As I said last Thursday evening in this Chamber, the European countries have made strenuous efforts to meet the criteria and they have done extremely well. However, they have not all succeeded in meeting the criteria and, more importantly, some of them have attempted to meet the criteria in ways which cast doubt on whether they can meet the stability pact subsequent to meeting the criteria. When I spoke on these matters from the Treasury Bench I used to tell the Chamber that it is not just a case of getting under the wire of meeting the criteria that is important, but rather it is important to meet the criteria in the long run. That is where the stability pact is hugely important.

It is because the markets do not believe that the euro will be a hard currency and that the convergence criteria will lead to a rigorously obeyed stability pact, that we have the problem of sterling being set at such a high value. Manufacturing industry is suffering considerably as a result. Some people point to the high interest rates imposed by the Monetary Policy Committee because it has only one weapon in its armoury and one objective and, naturally, it must use that one weapon to achieve that one objective. I believe that the members of the Monetary Policy Committee have increased interest rates in this country five times since the general election in May of last year. That, of course, attracts money into this country but it is not the whole reason for the increase in the value of sterling. Part of that increase in the value of sterling is due to the fact that the markets do not believe from what they see and read that the euro will be a strong currency. On the contrary they believe that it will be weak.

Deficit levels have fallen. As I used to say, the convergence criteria are worth following regardless of the euro because they make for sensible economic policies. We followed those sensible economic policies. That is why we have left this Government with a golden economic legacy which, frankly, they are frittering away. As regards the convergence criteria, 14 out of 15 potential members now have deficits below the 3 per cent. reference value. It must be recalled that some of them have taken one-off measures to get below the deficit level. I hear someone say, "Of course they have'', as if that is fine. But how do they keep below that level and obey the stability pact that arises later if their measures are only one-off measures?

The Italians have done extraordinarily well, and one has to admire them. They have achieved that reduction partly through the sale of state owned agencies. It is interesting to note that the Government now approve of the sale of state owned agencies, but that is another story. The Italians have also achieved that reduction by means of a one-off tax. But how will they manage to keep below these reference values next year when they no longer have the one-off tax? That is not a question for me to answer; that is a question for—

7.15 p.m.

Lord Pearson of Rannoch

I am anxious that my noble friend should not miss the best part of the story about the Italians' one-off tax which is, of course, that the Italian Prime Minister, Sig. Prodi, has just appeared on Italian television to assure the Italian people that once they have got under this hoop he will give the money back.

Lord Mackay of Ardbrecknish

My noble friend illustrates the point I am trying to make. They will get under the wire on a one-off basis. I think that the Commission and the European Central Bank will find it extremely hard to keep the stability pact in order. I have some confidence that the Bundesbank will at least try to keep it in order but I think it will have some difficulty in doing so. As I said, we can pay tribute to all the member states of the European Community for having met the deficit reference value. However, as regards the average debt level, the story is slightly different. According to the Treasury Select Committee, 11 of the 15 potential EMU members currently have debt levels over 60 per cent. of GDP. The Netherlands at 70 per cent.—10 percentage points above that figure—is not doing too badly. Sweden has a figure of 74.1, but it does not want to join EMU and so I suppose we can set it aside. Italy has a figure of 118.1 per cent., which is 58.1 percentage points out. I am told that the Italians are reducing that figure. They are indeed doing so. However, I saw some figures the other day which suggest that two years ago the figure was about 122, and about 120 to 121 the year before last. Now it is 118.1. I hope my memory has served me correctly as regards those figures, but if it has not I am sure that someone can correct me. That is not exactly a Christopher Chataway sprint—perhaps that shows my age!—towards 60 per cent. Speaking as a simple mathematician rather than an economist I would not consider that to be a fast rate of approach towards 60 per cent. The figure for Belgium is 118.1 per cent. despite the fact that vast amounts of European money are spent in that country to support the people who run the European Community. Its rate of approach to the 60 per cent. level would not fill me with much fear if I were running away from it, if the Committee understands what I mean.

We have an interesting situation where suddenly the rules can be fudged for those two countries and indeed for the others as regards the 60 per cent. of GDP rule. The Treasury Select Committee points out that the European Monetary Institute commented that, there is an evident ongoing concern as to whether the ratio of government debt to GDP will be 'sufficiently diminishing and approaching the reference value at a satisfactory pace' and whether sustainability of the fiscal position has been achieved". It is interesting to note that by the time the report that is called for in this amendment and in the Treasury Select Committee's report is published, we shall know whether continuing progress has been made to achieve these targets. I have my doubts, because of the undeniable pressures that will build up when the single currency comes into being and, with it, a single interest rate. That is extremely important. I might say in passing that, thanks to the sensible economic policies of the previous government, interestingly enough the UK satisfies the debt, the deficit and the long-term interest rate and inflation criteria. So this country fulfils all the criteria. But of course, thanks to the opt-out negotiated by my right honourable friend John Major at Maastricht, we are able to decide for ourselves whether or not to enter. I cannot remember that opt-out being cheered by the Opposition—but then, the world changes; not only do they cheer it in retrospect, but they are prepared to take advantage of it.

The Treasury Select Committee goes on to state an important matter that would have to be included in any report; namely, The sustainability of the EMU project depends not only on debt ratios and deficits but on high levels of employment, employability and social cohesion". I recall, again when I was speaking from the Treasury Bench, that the then Opposition kept telling me that those other criteria, in addition to the three laid down at Maastricht, were every bit as important and we ought to be demanding that they be met. Is it the Government's intention to address the high level of employability, employment and social cohesion? After all, despite the fact that we have unemployment problems in this country, they are nothing as compared to those of many of our colleagues in the European Union. It is interesting that, after having denied that the Conservative Government's labour market policies were having an impact on employment, the party opposite is lecturing other countries in Europe to take up the same kind of employment policies that this party pursued and they opposed. I just hope that European politicians do not have a long memory. Otherwise, they might have fun at the expense of whichever government Minister will try to persuade them that the policies pursued by the United Kingdom are the right ones, when just over a year ago in opposition they were saying that those policies were wrong.

As I said, the economic and social progress report will include the five criteria laid down by the Chancellor in his interesting document. The Select Committee draws attention to a comment by Christopher Johnson, who is UK adviser to the Association for the Monetary Union of Europe. Writing in a personal capacity, he said: The Chancellor's tests arc so loosely defined that anyone will he able to say that they have been either passed or failed according to the dictates of political expediency". That is a exactly the position that we face in relation to the tests. We need more rigorous tests than those applied by the Chancellor. We need not only the three tests that I have already mentioned; we need tests in relation to employment. I am amazed that the Labour Party is prepared merely to brush aside such important matters.

For example, paragraph 32 states that the Governor of the Bank of England argued that, wide divergences in unemployment rates pose a real question as to the sustainability of that situation in the absence of much more flexibility in labour markets in Europe"— "that situation" being the rising unemployment on the Continent in contrast to falling unemployment here. He referred to: high unemployment persisting in some parts of the area with potentially inflationary pressure persisting in others". That is one of the matters that the report will have to address in whatever number of years to come. Having one interest rate for the 11 member countries which, it appears, will join the currency will cause very considerable pressures in two directions. The first will be that of the "over-heaters"—Spain, Portugal, the Netherlands, Ireland, and eventually Italy. In economic terms the conditions in those counties will be too loose. They will have high growth but, with it, the danger of inflation returning to haunt them. On the other hand, because of the single interest rate, Germany and France are likely to be the stagnators. Their monetary policy will be too tight, and they will see GDP growth accelerate only modestly. As a result, it will be doubtful whether they are able to do much, if anything, in relation to their high unemployment rate.

We do not have to gaze into a crystal ball. We have only to look back at 1992 and compare Italy with France. As noble Lords will remember, that was rather a traumatic year. The noble Lord, Lord Stoddart, referred to it. There is an element of truth in the idea that the ERM and the problems of our exit from it caused the Conservative Government's troubles which haunted us all the way to the general election.

To compare Italy and France, the interesting point is that Italy also left the ERM in 1992. Thereafter, monetary conditions in Italy were considerably loosened in comparison with those in France. The net result was that Italy's exports overtook those of France in terms of percentage growth year on year. The Italian position has improved greatly, as I acknowledged earlier, and as almost everyone who studies these matters knows.

The question is this. Had the Italians not been able to leave the ERM and devalue their currency, what would the picture be for Italy? It would certainly not be the picture that allows even a generous interpretation of the Maastricht criteria. The Italians would have been in a very sorry economic state had they not been able to do that and had their interest rates been fixed by some central organisation.

I make no secret of the fact, and noble Lords who heard me speak before Easter will know, that I understand and appreciate the arguments that can be made in favour of a single currency. However, I believe that the dangers of a single currency can equally be argued. The dangers have always been that the imposition of a single interest rate over economies at different stages in economic cycles could be such as to blow the whole European experiment apart. As a supporter of the European Union as it is at present, I should certainly not welcome that.

Some noble Lords will recall listening to one or two interesting speeches from the noble Lord, Lord Dahrendorf, from the Liberal Democrat Benches. The noble Lord is not in his place today. In a much more knowledgeable way than I could, the noble Lord underlined that point. I hope that he has not changed his view; I see no reason why he should have done. The noble Lord's view is simply that his idea of Europe—which is the Europe that we see now—could be hugely damaged by a single currency that failed to work.

It is therefore important that we examine very seriously all the issues outlined in this amendment. It is important that there should be a report. I do not know what the Government intend in relation to the Treasury Select Committee report. Clearly, if they reject this amendment, they will have to reject the proposal of the Treasury Select Committee; namely, that a final report should be produced. In conclusion, I underline this point. The Select Committee believes that it will take at least five years before this country can be in any position to decide whether or not the single currency experiment has worked and whether or not it is in our interest to enter into the currency. That makes a lot of sense; it is the policy of my party as expounded by Mr. Hague that it will be at least well into the next Parliament, and even the Parliament after that, that we can arrive at a conclusion on behalf of the United Kingdom.

7.30 p.m.

Lord McIntosh of Haringey

It falls to my lot as Deputy Chief Whip to address the induction courses which this House holds for new Peers. I tell them, as I have to, that particularly in legislation we have no time limits; particularly in Committee we have no restriction on the number of times that Members of this House may speak. Because we have no Speaker, there is no control over the relevance or length of the speeches in this House. Those who come to the induction courses hear me with incredulity and disbelief, especially those who come from the House of Commons, where they are used to somewhat more disciplined procedures.

There is another induction course next Tuesday. I shall cut short my speech and just say: "Please read Hansard for 28th April. Please read the debate on Amendment No. 27 and pay attention not only to what was said but also to where the speakers came from". It is noticeable that those speakers who were Members of the House of Commons feel their freedom most keenly and use it most liberally.

I remind the Committee of the status of the amendment. On 12th March we had a four-and-a-half hour debate on economic and monetary union. After four hours, when I had finished my wind up speech from the Government Front Bench, my noble friend Lord Stoddart—as is his right—asked whether it was possible to decouple Amendment No. 27 from Amendment No. 2, which had been the subject of debate for four hours. After another half hour—because my noble friend Lord Shore of Stepney took half an hour to wind up, as is his right—my noble friend Lord Bruce of Donington said, "But I wanted to speak to Amendment No. 27." So in acknowledgement of the undoubted right of my noble friend Lord Stoddart to ungroup Amendment No. 27, I said: "We haven't reached it yet". That was pretty foolish of me.

We had four-and-a-half hours' debate, in which we covered all aspects of European and monetary union except perhaps the question which is raised by Amendment No. 27—that is, whether there should be a report containing details and an assessment of:

1. "(a) the constitutional impact,
2. "(b) the monetary and financial impact,
3. "(c) the impact on economic and social progress",

of decisions taken by the Union, pursuant to the objective set out … of establishing economic and monetary union". I am grateful to both noble Lords who paid some marginal lip service to the wording of the amendment and the subject under debate. Other noble Lords did not even try. I shall answer the debate about the amendment. I shall respond as best I can and then make such observations as are possible. Given that I had no notice whatever of the wide range of irrelevant matters which were raised, I shall make such response as I can to the other parts of the debate.

Lord Pearson of Rannoch

With leave, we are in Committee at the moment. The Minister is free to answer any parts of the debate that he wishes. Nevertheless, I thought I detected a slight imputation that perhaps my remarks were not earthed in the amendment. Nevertheless, when the Minister comes to read Hansard tomorrow, if he allows me to take the amendment as read because it will be printed in Hansard, he will find that my remarks were targeted entirely on those aspects. The remarks were repeated by my noble friend Lord Mackay on the Front Bench. If the noble Lord answers nothing else, he should at least try to tell the Committee what will be the result of a single interest rate in an EMU of disparate and diverging economies.

Lord McIntosh of Haringey

That question does not arise in the amendment. As I have said, I shall do my best to answer points which noble Lords have made, however irrelevant they are to the amendment.

Amendment No. 27 would require a report on all EMU measures and decisions. The first category of the report would be the constitutional impact—that is, decisions over the participation of a member state in EMU. At least, that is what I take it to mean. Of course, the Act will not be enforced within the next seven days. But I remind the Committee that tomorrow and on Thursday the European Parliament will adopt an Opinion on the Commission and EMI reports on monetary union.

The Earl of Onslow

The impact of disparate interest rates all over Europe is certainly covered by: the impact on economic and social progress". Therefore, it is slap bang in the middle of the amendment.

Lord McIntosh of Haringey

If the noble Earl is dissatisfied with my answer when I have completed it, he will have an opportunity to say so at such length as he chooses. Such are the procedures of the House.

Tomorrow and on Thursday the European Parliament will express its opinion on the Commission and the European Monetary Institute reports. On Friday, ECOFIN will make a recommendation on which states can be taken to have fulfilled the criteria. On the morning of Saturday, the European Parliament will adopt an opinion on the ECOFIN recommendation which will have been made on Friday. On Saturday afternoon, the heads of states and the governments will confirm the member states who are to join European monetary union on 1st January 1999. Over the weekend, on Saturday and Sunday, ECOFIN will announce the bilateral conversion rates which will come into force.

Those decisions are not subject to amendments in this Bill, which will not have completed its passage through Parliament. So what constitutional matters referred to in the amendment will arise after next weekend? Of course, the important matter to which I am sure Members of the Committee who dealt with the amendment were referring was the question of UK participation. I remind the Committee that the Government have already made it absolutely clear that if they decide in favour of participation, they will not seek entry without the agreement of Parliament and of the people in a referendum. The European Communities (Amendment) Act 1993 requires an Act of Parliament before the UK can move to Stage III of EMU. So there can be no doubt that the object of: (a) the constitutional impact", in Amendment No. 27 will be achieved. It must be achieved by law and the Government have no intention whatever of skimping on reporting to Parliament or on the other measures which have been promised.

The second and third categories of decision referred to in the amendment are: the monetary and financial impact, and … the impact on economic and social progress". I acknowledge what was said by the noble Earl, Lord Onslow: it covers anything. It is legitimate, within the scope of the procedures of the House, for noble Lords to speak about any subject, however remotely related to economic and monetary union, in the course of the debate on the basis of those words. That is what Members of the Committee have done. The noble Lord, Lord Pearson, made a most interesting analysis of optimum currency areas. He drew comparisons with the United States and asked me a number of specific questions about the future of economic conditions in the 11 member states which we expect to join after EMU has started. The noble Lords, Lord Pearson and Lord Mackay of Ardbrecknish, recognised the degree to which convergence has been achieved. The latter paid tribute to Italy no fewer than five times, I counted, in the course of his entertaining speech.

It is common ground that the fears which existed a year or two ago that there was no hope of convergence on the monetary criteria laid down at Maastricht have now been largely laid to rest. Of course, there will be accusations of fudge, accusations that many of the monetary measures which were laid down at Maastricht have been achieved on a point basis rather than on a sustainable basis. We shall see what results from that. We do not believe that achieving convergence on a point basis is satisfactory. Our whole approach to economic and monetary union has been the need for sustainable convergence over a period of time. That is why, in addition to the monetary criteria, the Chancellor laid down the economic criteria to which reference has already been made.

The Chancellor set out five tests which will indicate whether our joining economic and monetary union is in the national economic interest. Those tests are, first, achieving macro economic stability through sound fiscal and monetary policies; secondly, setting the right framework for low inflation through our reforms to the Bank of England and our commitments to monitor the inflation target in the light of the practices of the European Central Bank; thirdly, ensuring that our fiscal rules and deficit reduction plan continue to be consistent with the terms of the stability pact underlining our commitment to avoid an excessive deficit; fourthly, promoting greater flexibility in the UK economy and in Europe; fifthly, negotiating to secure the best interests of our financial sectors and to open up the single market in financial services.

The noble Lord, Lord Mackay, reading from the Treasury Select Committee report produced this afternoon, quoted an extract from my old and dear friend Christopher Johnson. As the noble Lord knows, he is a lifelong and devoted Euro enthusiast; some would even say—I do not believe he would mind—he is a Euro fanatic. Of course, for somebody who is a total Euro enthusiast some of the wording in the criteria is bound to be a little loose.

I must say to the Committee that I am no more bound by the quoted words of Christopher Johnson than by the quoted words of the Sunday Telegraph, anticipating a report which only came out this afternoon, or by the quoted sight—I saw them as well—of the three Channel 4 programmes on economic and monetary union showing a huddle around President Chirac and Chancellor Kohl. We do not make policies in this country on the basis of press reports of that kind. They were wonderful programmes. I pay tribute to them. They were enormously helpful, but we will not make policy on who huddles around whom at an international conference.

My noble friend Lord Stoddart at least made an attempt to relate the matters of which he spoke—on more than one occasion—to the amendment before us. The noble Lord, Lord Pearson, thinks that he has done so. If, when I read Hansard as he suggests, I find that he has done so and that his most interesting academic disposition on optimal currency areas relates to the amendment, I shall gladly send him a handwritten note to acknowledge that he was right.

The noble Lord, Lord Mackay, simply made fun. He knew perfectly well that his speech on 12th March was a Euro enthusiastic speech from which he had to recover at the last minute. The Leader of the Opposition was sitting beside him so he leapt free and expressed his scepticism about economic and monetary union in order to maintain his well-deserved place on the Opposition Front Bench. He got his own back this afternoon; he quoted at length from a report which he knows—because I have been here on the Front Bench—that I have not seen. He knows that I am not in any position to reply to his detailed criticisms.

My understanding from the chairman of the Select Committee is that it is a much more balanced report than Members of the Committee suggest. It pays some attention to the dangers of staying out of economic and monetary union as well as to the undoubted risks of going in and the undoubted requirements there will be for detailed consideration by the Government, by Parliament and by the people.

To return, as I must, to the amendment, I suggest to the Committee that the amendment would not serve any useful purpose which is not already served by the Government's intentions. I therefore invite the noble Lord, Lord Pearson, to withdraw it.

7.45 p.m.

Lord Pearson of Rannoch

I will not press the Minister on the point made by my noble friend that, if the Government reject this amendment, they are rejecting the Treasury Select Committee's report which asked for a similar amendment. That would be unfair until the Minister has had the opportunity to read the report in question. The Government can then come to their own conclusions.

I am not an economist, but even I understand the relationship between a single interest rate and an optimal currency area. A single interest rate is only safe in a currency area if the economies within it are not widely divergent. If we do not have that, then we will have massive transfers of resources within the area or unrest within the area.

In that sense, my remarks and the remarks of all Members of the Committee who spoke—to whom I am extremely grateful—were targeted on Amendment No. 27, particularly paragraphs (b) and (c). Even if the United Kingdom does not join EMU, as I sincerely hope it will not, the effect of the others joining will be great indeed on monetary and financial affairs, economic and social progress and on employment. I am a little surprised that the Minister cannot grasp that fact and accept the amendment. But, in view of the hour, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 28 to 43 not moved.]

Lord McIntosh of Haringey

My Lords, I beg to move that the House be now resumed. In moving this Motion, I suggest that the Committee should not start before 10 minutes before nine o'clock.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.