European Communities (Amendment) Bill

HL Deb 12 May 1998 vol 589 cc946-1013

3.8 p.m.

Report received.

Lord Stoddart of Swindon

moved Amendment No. 1. After Clause 1, insert the following new clause— DECLARATORY (". Nothing in this Act affects the sovereignty of Parliament or the constitutional principle that one Parliament cannot bind its successor."). The noble Lord said: My Lords, many noble Lords will know that I seldom move non-contentious amendments, but on this occasion I am sure that noble Lords will all agree that this amendment is very non-contentious. It deserves, and I hope will receive, the support of the whole House.

Having said that, I believe that there is a need to have the declaration in Amendment No. 1 as part of the European Communities (Amendment) Bill. I take that view because, first, we need to reassure those both inside and, more importantly, outside Parliament that their constitutional rights, privileges and ability to govern themselves are not being eroded step by step, with power being handed over to unelected bureaucrats or politicians who have not been elected by the British people and are not therefore under their control through the electoral process.

Secondly, we need to remind British Ministers that Parliament is supreme; and that, although it may go through a period of indolence or toadyism, it can still bite back and holds the ultimate sanction.

Thirdly, we need to educate the ignorant or arrogant in other countries that, however many deals they do with British Ministers, or whatever measures they force on Britain through qualified majority voting, in the last analysis Parliament is the ultimate authority and holds the eventual sanction of providing or withholding supply.

We also need to remind people that Parliament remains the ultimate highest court in the land and cannot be overruled by another sitting in a foreign city.

It is timely to have a declaration of this sort at this stage, because it is now 25 years—a quarter of a century—since we joined the then common market, when we were assured by Mr. Heath in his 1971 White Paper that accession to the Rome Treaty would involve no loss of essential national sovereignty". It is 23 years since we were told by a Labour Government in a booklet entitled, Britain's New Deal in Europe, issued during the 1975 referendum, that no important new policy could be decided in Brussels or elsewhere without the consent of a British Minister answerable to a British Government and a British Parliament. So I am restating what has already been said.

Since then, we have had the Single European Act 1985, which extended qualified majority voting to many other areas and made a start on police and judicial co-operation and foreign and defence matters. Then came the Maastricht Treaty, which only just scraped through the Commons on a guillotine, and which consolidated and extended the measures in the Single European Act and laid down the conditions and timetable for the completion of economic and monetary union and the introduction of a single currency.

Now we have the Bill that is before the House today—a Bill to put into the effect the Treaty of Amsterdam, which further extends Community competence, strengthens the foreign and security pillar, gives further powers in respect of police and judicial matters, and strengthens and extends the powers of the institutions. The president of the Commission is given new powers and an enhanced status. The European Parliament has had its powers increased through new areas of co-decision—34, I believe—and qualified majority voting has been extended.

The Government may very well say that all this is merely a case of sharing sovereignty. But that is simply not true. Sovereignty cannot be shared. You either have it, or you do not. So it really is time to have it on record that none of this affects the basic truth of parliamentary sovereignty and the principle that one Parliament cannot bind its successor.

Furthermore, this declaration would help to put some backbone into Parliament, when it is told, as it was over the Factortame case—the case concerning the Spanish fishermen—that legislation it passed to protect the interests and livelihoods of British fishermen had been declared illegal and that it was required to repeal it—backbone, that is, to tell government that no European court can tell Parliament what to do.

This declaration is meant to be helpful to Parliament, government and indeed the Official Opposition. This is not a wrecking amendment. If it were agreed, it would not affect the ratification of the Amsterdam Treaty. As I said, I wish to be helpful to the Government, as I always do—and on this occasion even to the Opposition—in that I want to strengthen their firm declaration that they are in favour of a Europe of nation states and against a federal or unitary union.

On 31st January 1997, during the debate in which this House gave a Second Reading to the Bill introduced by the noble Lord, Lord Pearson, to repeal Sections 2 and 3 of the European Communities Act, the noble Lord, Lord Inglewood, speaking for the then Conservative Government, stated: So we must and shall continue to argue and work for the sort of European Union which we believe is right: a partnership between nation states, working together through agreed decisions of decision-making where that brings real advantage".—[Official Report, 31/1/97; col. 1421.] So there is no question about the position of the then Conservative Government when this House passed that Bill to repeal Sections 2 and 3 of the European Communities Act.

The same is true of the present Government—that is, if the Prime Minister is to be believed. During and before the last election, Tony Blair wrapped himself in the Union Jack, and his famous and ringing declaration in his Sun article of 17th March that, "I'm a British patriot", gave reassurance to millions of voters that neither he nor a Labour Government would sell Britain out to a European superstate.

In order that people know what he said, I wish to quote from the article. He said: If there are those in Europe who want a federal superstate, we would refuse to go along. Furthermore, we would want to stop all of Europe moving in that direction. The people of Europe do not want such a superstate". He went on to say: I am a British patriot. Anyone who believes I would sell my country short has not listened to a word I have said in the past three years. I didn't change the Labour Party into the party it is today to give it all away to Europe or anyone else. But I look at the Tory record—on BSE for example, where nine months on from the 'beef war' John Major still hasn't got a bean out of Europe". That is what my right honourable friend the Prime Minister was saying to voters before the election. I am not at all sure, however, that by—

3.15 p.m.

Lord Randall of St. Budeaux

My Lords, I am grateful to my noble friend for giving way and showing such courtesy. I wonder if he would be kind enough to tell the House exactly what are the differences between his definition of "superstate" and that of the Prime Minister.

Lord Stoddart of Swindon

My Lords, that is for the Prime Minister to say. My view of a European superstate is well-known, and my position on it is expressed very well in the amendment that is before the House and to which I am now speaking. I believe that a European superstate would undermine our nationality and our self-government. That is why I am against it. The Prime Minister must speak for himself. I hope that his views are in line with mine, as they appeared to be when he wrote that article on 17th March 1997. It is clear; and if my noble friend believes that I am not telling the truth, I will send him a copy of the article.

I am not at all sure that by signing the Amsterdam Treaty my right honourable friend the Prime Minister has kept the pledge about stopping all Europe moving towards a federal Euro-state. There are clauses which he ought to re-examine, after which he might agree that they allow other countries to go ahead towards federalism, although perhaps he does not wish to do so himself.

Nevertheless, the strong message from the Prime Minister to the electorate on 17th March 1997 was that Labour believed in Britain. So do I and so, I hope, do all other noble Lords in the House. There is no better way of confirming that policy and Mr. Blair's mantle of British patriotism than by accepting my amendment. It puts on record the final safeguard of Britain's constitution and its continuation as a marvellous country with a great history and an able and tolerant people who want nothing better than to govern themselves through their elected Parliament and Government. I beg to move.

Lord Pearson of Rannoch

My Lords, I rise to speak in favour of the amendment to which I have put my name and which was so magnificently moved by the noble Lord, Lord Stoddart of Swindon. The stark fact is that this proposed declaration— Nothing in this Act affects the sovereignty of Parliament or the constitutional principle that one Parliament cannot bind its successor"— can only be true if one adds the words, "provided that Parliament retains the power to take the United Kingdom out of the Treaty of Rome". If that proviso does not apply, then the sovereignty of Parliament and the ancient principle that one Parliament cannot bind its successors have already been ceded to the treaty and there would be no point in the amendment.

That cession is not just inherent in this Bill which incorporates the amendments agreed at Amsterdam; it is also contained in the amendments agreed at Maastricht; in the Single European Act; and in the original Treaty of Rome itself.

The treaty uses three deadly weapons to remove national sovereignty in perpetuity. They are the qualified majority vote, the acquis communautaire and the fact that the treaty does not contain an exit clause. The treaty also contains a worthless pretence at safeguarding national independence, which is known as "subsidiarity". It is worthless because in areas covered by the treaty the Community decides the matters in which the nation states may remain independent. It also decides the matters in which they are to be subservient to the Community, as we saw in our debates at the Committee stage on 28th April (Hansard, cols. 170 to 191). We shall be returning to subsidiarity later in the Report stage and so I will not repeat any of the arguments now. Suffice it to say that the Amsterdam Treaty amendments on subsidiarity merely clarify and underline the supremacy of the Community over the nation state. So that is one area in the Bill which confirms that the sovereignty of Parliament has already passed to the treaty for as long as we remain a signatory.

Bereft thus of any protection from subsidiarity, we should look briefly at the treaty's three deadly weapons which are designed eventually to remove national sovereignty. The first is its system of qualified majority voting. As I never tire of reminding your Lordships, there are 87 such votes among the 15 member nations; 62 votes are required to carry a motion and 26 votes are required to block one. The United Kingdom has only 10 votes. So clearly we can be, and indeed often are, outvoted on matters which, were it not for our adherence to the Treaty of Rome, would have remained under the sole authority of this Parliament.

The villain of the qualified majority voting piece has turned out to be the Single European Act of 1985 which brought in a substantial increase in QMV by subjecting all our industry and commerce to its control. I understand that the United Kingdom in good faith promoted that expansion of QMV in order to facilitate the single market. The trouble is that it has backfired on us because we can be outvoted on the vast quantity of harmonising single market legislation which often penalises our global trade.

Recent examples of this would be the proposed EC Chocolate Directive, which your Lordships debated on 30th April, or the EC's proposed tax increases on our international art market which your Lordships debated on 10th December last year. Many other British interests have been similarly affected, including the workings of the common agricultural and common fisheries policies. There are at least a dozen other industries which I could name to your Lordships, but I have done so before and will not weary the House with examples now.

Looking back on it, more areas which were previously under national control were ceded to QMV by the amendments agreed at Maastricht. Now, the Amsterdam Treaty proposes to claim another 34 areas. So qualified majority voting is alive and well and expanding aggressively as time goes on.

The second deadly weapon is the acquis communautaire which decrees that whenever an area passes from national control to Community control, it can never again be given back to the nation states. The Community may keep still for a moment or two, but it never retreats. The Treaty of Rome is therefore a one-way ticket to the ever closer union of the peoples of Europe which is required in Article A.

There was a moment when my right honourable friend Mr. John Major, when he was Prime Minister, thought that some 25 per cent. of all EU legislation could be repealed as a result of the subsidiarity clause which the UK had caused to be inserted in the treaty at Maastricht. But in fact, not one single piece of useless bureaucratic interference has been so repealed, let alone anything more useful. So, that is the acquis communautaire in action and this weapon is also confirmed and strengthened in the Amsterdam Treaty which we are now considering.

The last weapon is complementary to the acquis and it is the remarkable fact that the Treaty of Rome does not contain an exit clause. So if we want to leave it, we have to break it, unless all the other nations are prepared to sit down and renegotiate a new treaty which we find acceptable. The chances of that happening are so remote as to be unreal, unless, of course, they were all convinced that we really were prepared to leave if they did not give us what we wanted.

I never cease to be amazed at how many people in this country regard the prospect of leaving the European Union as something negative or even frightening. They do not seem to appreciate that we give the EU much more than we get out of it, and so we could easily negotiate a bilateral trade agreement, as Switzerland has done. Indeed, we could negotiate a more favourable one than Switzerland has done.

We would then be free to follow our global trading interests comparatively unencumbered by the EU's stifling red tape and harmonisation. If we wanted to join another trading bloc, the Northern American Free Trade Area (NAFTA) makes a far better fit with our economy than does the European Community. Indeed, I was encouraged to see that Mr. Henry Kissinger last week floated the idea that NAFTA might be renamed the North Atlantic Free Trade Area, to include perhaps ourselves and maybe others.

Of course, like all other free trade areas in the world, it would not need a parliament or a commission or a council of ministers or a court of justice. That is because its aim would not be to create a corporatist superstate, designed to devour the sovereignty and independence of the nations which took part in it.

So it seems to me that the Minister who is to respond to this debate may be in a bit of a fix. Presumably she will not want to refuse to accept the amendment on the grounds that the Bill does affect the sovereignty of Parliament or the principle that one parliament cannot bind its successors. If so, I really hope that she will agree that the sovereignty we have already handed over could indeed be retrieved by a successor parliament, but only through substantial renegotiation of the Treaty of Rome or more likely by withdrawing from it altogether.

If the Minister comes to what I regard as that inescapable conclusion, I hope that she will not regard it as too terrifying or misguided an option. It is not. It is a perfectly simple policy option, like any other, which should be decided in the interests of the British people and not in the interests of the overweening political and bureaucratic machine in Whitehall and in Brussels which has come to so dominate and impoverish our lives.

3.30 p.m.

Lord Bruce of Donington

My Lords, I rise to support the amendment standing in the name of my noble friend and others. Political developments since we joined the then Common Market in 1972 have proceeded quickly, though in a series of small steps. So much so that perhaps it is necessary from time to time to go back to the beginning and find out just how much the situation in which we now find ourselves developed from the situation in which we were in 1972.

In common with your Lordships, I found some difficulty in going through the detailed provisions of the Treaty of Amsterdam as they affect the Treaty of Maastricht as amending the Treaty of Rome as amended by the Single European Act and so forth. To trace one's way through the intricate web of treaty legislation in which we have participated since that time is a considerable task. There is always a tendency barely to notice some of the smaller changes at the time they take place. It is only when one looks at the cumulative effect of those changes over a number of years that one begins to reflect on the enormity of what happened.

That was particularly brought home to me by paragraph 8 of the earlier substantive amendments to the European Union as set out in the Treaty of Amsterdam. I draw your Lordships' attention to that because it is unique. It says that paragraph 1 shall be replaced by the following: paragraph 1 [Article F in the old treaty] shall be replaced by the following: The Union is founded on the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law, principles which are common to the Member States". It goes on to say that paragraph 3 shall become paragraph 4 and the new paragraph 3 shall be inserted as follows: The Union shall respect the national identities of its Member States". I do not know whether or not your Lordships realise it, but that is the first time that the word "democracy" appeared in any of the treaties. It is useful to reflect that those who participated in the inter-governmental conference which led up to Amsterdam and the actual process of concluding the Treaty of Amsterdam should suddenly have realised that democracy is important.

Democracy is difficult to define. I suppose it can be said that we know when we have not got it, and we in this country, fortunately, have experienced a fairly advanced degree of democracy. We are accustomed—though not so much now as 20 years ago—to the power of Parliament. Such great leaders as the late Winston Churchill always profoundly respected the power of Parliament. Over the years I have found—others may yet have to tread, at any rate in length, the path that I have trodden—that the biggest menace to democracy is a power-seeking bureaucracy.

If we are going to follow the strict words in the treaty and uphold the principles of democracy and rule of law, one of the things we may have to decide, both domestically and in Europe, (though opinion may be divided as to whether it is necessary at all because it is so respectable to follow bureaucracy) is the deliberations and actions of the distinguished body of men and women who comprise the bureaucrats—they are enormously valuable and indispensable to the operation of modern society and indeed the enactment and enforcement of laws—and to what extent we can and should begin to limit the power of bureaucracy to dominate our lives.

At this stage of the debate, I do not wish to enter too intrusively or too embarrassingly into the events that attended the appointment of the chief of the European Central Bank, Mr. Duisenberg. That may be a little too embarrassing at the present stage. I should like the Government to accustom themselves to what happened before they embark on a definitive reply. But that is just one example.

The European Commission, right from the beginning, sought to take unto itself the greatest possible amount of power, not necessarily and exclusively for the carrying out of immediate tasks as it saw them, but for the purpose of increasing its own power and encroaching ever further upon the powers residing in member states.

With the permission of the House, I am constrained to give some examples of the steps we shall have to take if we are to follow the new provisions relating to democracy in Europe. They will be large in number and will take a number of years and several governments to accomplish. That is the fundamental reason why we insist on the confirmation of the edict that no government can bind their successors in what they do. Undoubtedly, over the next four or five years progressively, amendments will have to be made to the treaty and they will certainly lap over into the next Parliament after this. That is why we need a re-affirmation of the present constitutional position, as I understand it and as legally advised, that at present no parliament can bind its successors.

At the moment there are a whole series of fields which are not subject to any democratic control. I hasten to add that I shall quite understand those Members of your Lordships' House who would prefer things to be solved not democratically but by so-called and self-styled experts. I can understand that and I will make allowances for it. But talking, as I believe I may be, on behalf of large sections of the population not confined to the profession of banking, not confined to providing financial services, which of course are now called products, I think we are going to have to insist that the present series of bodies which are self-appointed should he subject to democratic control. By that I mean political control or governmental control and accountability.

Baroness Ludford

My Lords, I am grateful to the noble Lord for giving way. He has just referred to self-appointed bodies. I imagine that he does not mean that the Commission is self appointed. If he is citing the example of the appointment of the president of the European Central Bank, is it not fair to assume that the Commission wanted one person to be appointed for eight years and that it was national governments who were responsible for splitting that term? It is rather unfair to blame the Commission for the problems over the appointment of the president of the European Central Bank.

Lord Bruce of Donington

My Lords, owing to a personal affliction, I did not hear the majority of what the noble Baroness said. On the assumption that she wished to draw attention to the incongruity of a Member of the House of Lords who is not democratically elected referring to these problems, I would immediately agree with her. But that still does not diminish one's right to speak upon it.

Perhaps I may mention the organisations that are at the moment responsible to no one but themselves. They are, first, the administrators of the European Social Fund, established under Article 147 of the treaty. Then there are the members of the European Court of Justice, who are chosen from persons whose independence is beyond doubt. They are responsible to no one but themselves. Then there are the members of the Court of Auditors, who are chosen from persons who belong or have belonged in their respective countries to external audit bodies and who are specially qualified for this office. They are required in the general interests of the Community to be completely independent in the performance of their duties.

That is not always so. I can well recall an incident of four years ago when a member of the Court of Auditors felt it necessary to retire because he found that the Court of Auditors was under pressure from the Commission to alter a report which it proposed to submit.

There is also the Economic and Social Committee in Europe, which once again is responsible to no one and consists of representatives of various categories of economic and social activity. It is not bound by any mandatory instructions. All it is required to do is to consult with the Commission. Then there is the Committee of the Regions and the European Investment Bank. There is also the European Central Bank, on which I will not touch further at the moment.

There is a whole series of organisations. The European Monetary Institute, which will soon cease to exist, will have its functions taken over by the ECB. There are all these bodies which are accountable to no one. As I understand it—I may have to cite as an authority, although I hesitate to do so, the honourable Member for Hartlepool, Mr. Mandelson—something will have to be done. I am at one with him on that and I trust that those remarks, coming from the quarter that they did, will receive more general support.

The fact of the matter is that legislation, or proposed legislation, is a monopoly of the Commission, which is appointed by accord. Later amendments will deal with the president and members of the Commission. At the moment the Commission is responsible for all proposals. The Council of Ministers cannot act save on a proposal. Now there are proposals and there are proposals. Normally speaking, under the kind of leisurely society which is probably more conducive to a calm appraisal of a country's real problems, we used to have just about the amount of legislation with which we could cope in terms of its interpretation and in terms of its enforcement. Now we are bombarded with a whole series of proposals upon which explanatory memoranda have to be drawn up by the departments concerned in this country and in other countries. This has reached a point where the legislative machines in practically all the countries comprising the European Union are becoming so clogged that those politicians individually responsible for presenting legislation to their parliaments are unable to consider the proposals put forward by the European Commission.

It is of course the oldest dodge in the world. If you want to confuse your Ministers, you make quite sure that the volume of proposals you lay before them is such that they cannot physically deal with it. That state has already been reached in the United Kingdom and has probably echoes in other fields that are more topical at the moment.

Those are the things we have to moderate. I do not mean moderate by some kind of drastic action that will cause friction in every quarter affected. I mean moderate by that kind of action which is the result of mature reflection by legislating chambers such as the other place and ourselves, where we are able to consider matters calmly, where we are able to put forward proposals and where we are able to secure public discussion, calm discussion, of the matters involved. If we do that, it may well be that the constitutional dictum which stands at the head of the amendment will have relevance to our own future society. For the sake of my country and for all of us, I hope that that will be the case.

3.45 p.m.

Lord Willoughby de Broke

My Lords, I rise to speak briefly in support of the amendment, to which I have put my name. The arguments have been put very clearly and I do not propose to cover the same ground. What is plain is that some of the provisions of the Amsterdam Treaty as they now stand are in direct conflict with the constitutional tradition of our own—for example, that no parliament may bind its successor. Any treaty which contains words such as "irrevocable" or "irreversible" is sowing dragon's teeth for the future.

Although I was unable to be in the Chamber for the Committee stage of the Bill, I read the Hansard reports carefully. I was struck by how often Ministers answering in the debates would try to persuade themselves and the House that the treaty as it stands would not mean that any future British government would have to take action contrary to their own interests or with which they disagreed. For example, one has only to look at the articles dealing with common foreign and security policies. One example is Article 14.2 which reads: Member states will refrain from any action which is contrary to the interests of the Union". The unwritten rider to that must be, even if it is contrary to the interests of a member state. Article 15 states: Member states shall ensure that national policies conform to common positions". Is it not conceivable that a member state may disagree with that common position? We need look no further back than the Falklands war to find differences between the position of the United Kingdom and of other members of the Union at that time. More recently, there was the Gulf war. There was a chasm between our position and that of some of our partners in the European Union. I remind noble Lords that Belgium's contribution was to refuse to sell us ammunition for the guns it had previously sold us.

All this goes to show that the idea of the European Union that one size fits all is simply unrealistic and will not work. I support this amendment because it will ensure that final decisions which affect us and our interests will always be taken at Westminster and not in Brussels. Whichever way one looks at the treaties on European Union, whether it is the Single European Act, the Maastricht Treaty or the Amsterdam Treaty, the traffic is all one way. We are gradually but inexorably ceding powers away from Westminster to Brussels.

When the noble Lord, Lord Stoddart of Swindon, introduced this amendment I believe he said—if I did not mishear him—that this was a contentious amendment. But I do not see how it can possibly be construed as contentious.

Lord Stoddart of Swindon

My Lords, I said quite the reverse. I said that noble Lords will be used to my moving only contentious amendments but that this amendment was uncontentious and that I believed that everyone could support it without any problem at all.

Lord Willoughby de Broke

My Lords, I am glad to hear that. This amendment is uncontentious and I apologise for mishearing what the noble Lord said. All it does is to enshrine in the Bill the unassailable fact of the supremacy of Parliament and to ensure that empty declarations relating to "irreversible" and "irrevocable" will be treated as the nonsense they are.

I do not believe that this or any government should be able to fetter their successors. I cannot believe that they would wish to do so. Therefore, I hope that the Government will be able to accept this modest and uncontentious amendment.

Lord Grenfell

My Lords, before the noble Lord sits down, can he tell us whether he is aware of the fact that the basic voting rule on common foreign and security policy is by unanimity? Where there are disagreements there has been introduced through the treaty the device of constructive abstention. Is the noble Lord aware of that?

Lord Willoughby de Broke

My Lords, I am indeed aware of that. But it does not alter the fact that in the past our position has been very different from that of some of our fellow members of the European Union.

Lord Moynihan

My Lords, I wish to say a few words on this new clause covering the subject of the sovereignty of Parliament and the constitutional principle that one Parliament cannot bind its successor.

As noble Lords are well aware, and as has been made clear during the exchanges we have had so far this afternoon, the notion of sovereignty, both political and legal, is one of the most complex and emotive of constitutional concepts. Given the unusual nature of our constitution, which is uncodified and which has evolved over a thousand years from Magna Carta to the Maastricht Treaty, this is particularly true within the context of our relationship with the European Union.

It is for that reason that I specifically wish to speak to this new clause. I want to clarify the Opposition's assessment of the effect that our membership of the European Union has had on the Diceyan tradition of parliamentary sovereignty, particularly since the legal relationship between the member states and the European Union is not simply one of conventional, international law between sovereign entities but instead it is unique in its supranational quality and its effect on the domestic law of those member states.

As noble Lords are well aware, it is our tradition that legal sovereignty rests with Parliament and that political sovereignty rests with the electorate. That means that every time we co-operate with Europe and sovereignty is affected, as in the Single European Act, the Maastricht process and now in the Amsterdam Treaty, it is incumbent on the government of the day to ensure that it is fully in the interests of the people of this country to do so. That is the point I wish to focus on because I believe it is particularly important since decisions taken in Europe are different in kind from those we take nationally.

The composition of national parliaments changes; national governments change and with them national policies. But in the European Union such changes do not take place every four to five years, giving the member states a chance to reconsider. Treaty change is permanent. If one member state changes its mind it cannot simply reverse policy; it needs the agreement of all other member states. Therefore, the issue of our sovereignty and decisions to transfer or share it within the European Union is one which rightly pierces to the very heart of the process of legislative scrutiny in which we have been engaged over the past few months. It is an issue which raises fundamental questions about the vision of Europe that the Government have for the future; about where the limits of European integration lie and where they should lie; and about the correct balance of powers between European institutions and nation states.

During the progress of this Bill it has sometimes seemed that in the Government's responses to our questions on this very issue they have managed to obfuscate their vision for the future of Europe rather than to clarify it. The progress of this Bill has demonstrated again that in your Lordships' House, across all political hues, voices can be heard championing their vision of the future of the European Union. This Bill has in particular raised questions concerning our constitutional principle that Parliament cannot bind its successors.

I wish to ask specifically about Article K.7 of the Amsterdam Treaty. That article explicitly involves the European Court of Justice in the home affairs pillar by giving it a degree of jurisdiction therein which has raised concerns about the continued supremacy of this key constitutional principle. At the very least this article encroaches on the intergovernmental structure agreed at Maastricht whereby the question of the jurisdiction of the European Court of Justice was to be left open. At the most it may have implications for the fundamental constitutional principle which the noble Lord, Lord Stoddart, has raised in introducing this new clause.

So can the Minister clarify whether a declaration, annexed to the treaty and giving notice to the other 14 member states of the UK's intention not to incorporate this article into law, was required before signing the treaty? If so, did the Government make such a declaration? Can the Minister confirm that, if such a declaration was not made and the Government adhered to their clearly stated commitment not to incorporate Article K.7 into UK law, that means that in the UK the treaty will be ratified in a form which is not the same as that ratified by the other 14 member states, which could render it invalid?

The issue of Article K.7 clearly illustrates that the provisions of the Amsterdam Treaty underlying this Bill have constitutional implications for this country. Any Bill which affects our constitution, the very guardian of our democracy, requires constructive, measured and adequate scrutiny in both Houses of Parliament.

That brings me to my second point. We have repeatedly heard from the Government that this measure is a modest treaty; an unexciting treaty; a treaty that is not radical; a workmanlike, pragmatic treaty; a compromise treaty; or in the favourite phrase of the noble Lord, Lord Whitty, a "consolidating treaty". The implication is clear: such a constitutionally timid treaty does not merit the forensic scrutiny to which it has been subjected. Indeed, the Bill's constitutional implications have been minimised so as to render it almost invisible by the Government. In our efforts to raise the profile of these issues during the Committee stage of the Bill, on occasions we have been accused of paranoia, demonology and fantastic constructions. Yet we have sought to explore the implications of the transfer of powers contained in the treaty. Such scrutiny is not paranoia; it is our essential duty, for every time that we co-operate with Europe and transfer or share sovereignty we must ensure that it is in the best interests of this country.

In this treaty there is an increase in the powers of European institutions at the expense of nation states. We do not say that such an increase is ideologically wrong, but we on these Benches strongly believe that each increase in the power of the European institutions, which necessarily involves a diminution of the powers of the nation state, must be judged against the key litmus test of the benefit that accrues to Britain. To be blunt, does such a transfer bring a quantifiable benefit to this country or represent an ever-finer shaving, chiselling, and gradual erosion of the powers of our national institutions? The Government plainly do not appreciate the point of this litmus test; or why would they seek to limit the scrutiny of this Bill as they did in another place?

It is tempting to take the view that this Bill cannot contain anything of very much import since one of the greatest sins of the Treaty of Amsterdam was its glaring omission of all those European Union problems which the IGC was intended to tackle and which the treaty left unresolved. It turned a blind eye to enlargement, quota-hopping and reform of the European Court of Justice. The sheer scale of its omissions does not justify relegating the treaty to the status of some kind of post-Maastricht MoT, overshadowed by the towering themes of the single market and economic and monetary union which underpinned the two previous European treaties, for this Bill (which incorporates into British law the treaty agreed at Amsterdam) has clear constitutional magnitude. That was why our procedure required it to be debated on the Floor of both another place and this House. One would expect disagreements over its constitutional magnitude and comparisons with the fundamental constitutional implications of the Treaty of Maastricht and the Single European Act, but that is not to deny that there are constitutional implications and a transfer of sovereignty contained in this Bill.

The Bill makes important changes to our relationship with the European Union. Those changes cannot easily be undone because the Bill gives effect to a major international treaty which cannot be set aside by a subsequent parliament but which provides for the transfer of substantial powers from the Parliament of the UK to sources of powers and authorities outside this kingdom. It provides for an extension of QMV and therefore the surrender of our veto. It will give more power to the European Parliament. It also includes the social chapter and a new employment chapter which will impose new regulations upon British people. It neuters any substance in the concept of subsidiarity. It also makes new arrangements for border controls and moves us closer to an integrated foreign and security policy. It changes the law on subsidiarity and gives more power to the President of the Commission.

These among others are important measures that need to be considered in the context of this new clause. They go to the very heart of the sovereignty of our institutions. Nor am I compelled by the Government's arguments on institutional change in this context. The changes made to the institutional arrangements of the Union are not merely technical, minor amendments but significant changes in the nature and powers of key European institutions.

I still fail to understand why the Government agreed to give more powers to the President of the Commission, which is a subject to which we shall return in a later amendment. Why should the President have the power to veto Commissioners recommended by member states? Why should all Commissioners now be required to work under the President's political guidance? These and many more points on institutional change demonstrate the constitutional significance of the Bill.

Yet in another place the Government ruthlessly moved to guillotine this Bill after only 12 hours in Committee. The remaining Committee, Report and Third Reading proceedings were crammed into just two days, thereby ensuring that a Bill with constitutional implications and involving potentially momentous decisions on QMV, the co-decision procedure, institutional change, flexibility, the free movement of people, discrimination, proportionality and subsidiarity, proceeded without full and proper debate. Parliament has not been given adequate opportunity to consider in detail the vitally important issue of sovereignty both here and in another place.

It is upon the management of the consideration of this Bill—it has been played down as a minor, amending, technical change to the existing treaties—that I have focused in the few words that I have uttered. That is why the new clause moved by the noble Lord and his colleagues is vitally important and that is why it is right and proper that this House should give it due consideration.

4 p.m.

Baroness Williams of Crosby

My Lords, I owe the noble Lord, Lord Moynihan, an apology. I indicated to him that I probably would not intervene in this debate. I shall do so only briefly, largely in the light of what he said. Perhaps just a couple of sentences should be added to the debate.

First, the Treaty of Amsterdam is a relatively modest treaty and a certain amount of it flows fairly directly from the implications of the Single European Act of long ago. I take one example. Because our citizens will be free to move around to seek work in other countries of the European Union, such matters as racial discrimination will no longer be issues for only one country but for all member states. That is just one obvious example. There are many other similar examples.

When one passes legislation, one must always consider that the consequences may be very far-reaching. It is quite clear that the consequences of the Single European Act—I make no criticism of the previous government for the passing of that Act—have been much greater than perhaps was imagined at the time. Like a stone falling into a pond, the repercussions continue today.

Secondly, so far we have looked almost entirely at just one side of the equation and not the other. Whether we like it or not, we live in a world in which the problems have moved on and have ceased to be contained within the borders of a single nation state. I give one or two examples of the way in which these problems have moved on which have absolutely no bearing on the European Union but a very close bearing on the sovereignty of the British Parliament. One example goes right back to the establishment of NATO in 1949. When in 1963 the then Prime Minister, Mr. Macmillan, accepted the deal under which this country received Polaris on strict conditions about the way in which it was used, we qualified our sovereignty in one essential respect; namely, national defence. From that day to this, at no time has the United Kingdom been free to use nuclear weapons supplied under agreement with the United States entirely according to its own sovereign wishes; for example, we could not have used nuclear weapons in the Falklands without the full agreement of the United States. I think that most of us know that.

A second example arose in the 1980s under the previous administration. That administration accepted the removal of controls over the movement of capital, as did many other advanced industrial countries including the United States. That had a tremendous consequence for our parliamentary sovereignty. It is true that today certain fiscal policies cannot possibly be pursued because the international bond markets respond in ways which make those policies too expensive to continue. That has grossly affected the ability of any British Government to do exactly what they please. The French Government, too, discovered that when, between 1981 and 1983, they attempted to buck the opinion of international markets. I do not say that that is either a good or bad thing; it is simply a very harsh fact of the world in which we live.

A third and final example is the nature of some of the challenges that confront us today, ranging from organised crime to environmental challenges with regard to the pollution of seas, lakes and rivers. These matters cannot be handled by one nation alone; they require an international response. In some cases, they involve agreements that go beyond individual sovereignty to the pooling of sovereignty. I do not want to detain the House, but one could give very many more examples.

I have a great deal of sympathy with those who say that we should fully examine this Bill. I have no objection whatever to sitting here for many hours while that examination takes place. I respect noble Lords' persistence on the matter. That is what parliaments are for. Having said that, I think we have underplayed seriously the nature of the world into which we are moving.

I give one final example; the impact of information technology. Although we might like to control information on the internet that is virtually impossible—even with regard to information which many of us regard as highly dangerous in terms of encouraging criminal activity. I simply ask that we address that and accept that we will therefore have to move in directions that are new and constitutionally different from the ones in which we have moved in the past.

Within the scope of those challenges, I believe that time and again the Treaty of Amsterdam leans over backwards to accept the rights of member states. We have heard the example from the noble Lord, Lord Grenfell, of the common, foreign and security policy. We will be discussing that matter on a later amendment. If you read the whole of that section very carefully, every possible attempt is made to allow countries which do not wish to participate to stand aside and not to be involved. But it is not unreasonable to say that they should not actively seek to obstruct the action of other countries.

It is of vast importance that we retain democratic accountability. That is a central task for this Parliament and the parliaments of other democracies in Europe. In my view the crucial element of democratic accountability lies in ensuring that there is full parliamentary scrutiny of European legislation. We will come to that later in this debate; but I believe it to be absolutely central and crucial. Attempting to talk about parliamentary sovereignty, which is essentially theoretical, without noticing the problems which must be addressed, is not a helpful way of addressing the dilemmas that confront the Government.

4.15 p.m.

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

My Lords, perhaps I may begin by saying that I have more sympathy with the argument that the noble Baroness, Lady Williams of Crosby, put forward than with the argument that the noble Lord, Lord Moynihan, put forward in relation to the impact of this treaty.

In the Government's view this is a relatively modest treaty or, as my noble friend Lord Whitty described it—the noble Lord acknowledged this description—it is a "consolidating" treaty. Nonetheless, it is a consolidating treaty which has made some extremely useful progress in some areas, notably on human rights, employment, equality, the social chapter, and parliamentary scrutiny. I accept that not all of the measures that the Government regard as "useful progress" may be regarded as such by others. Nonetheless, I do not think that we are dealing with anything more extraordinary here than a treaty which is essentially one of consolidation.

In your Lordships' House we enjoyed considerable scrutiny of the treaty after Second Reading: five Committee days, two now on Report and no doubt there will be a substantial commitment of time on Third Reading. So I hope that noble Lords will feel that in your Lordships' House we have given this a considerable amount of time and scrutiny.

This amendment, in the Government's view, is both unnecessary and undesirable. It is undesirable because if the new clause proposed in this amendment were to be inserted in the Bill, that would create doubts about other Acts of Parliament and other Bills. Similar clauses would have to be inserted into all Bills, especially those designed to enable the United Kingdom to comply with international treaties. That would clearly be unacceptable.

Nothing in the Amsterdam Treaty or in this Bill alters the right of this Parliament to amend or repeal any existing Act of Parliament. Nothing affects the ultimate ability of the United Kingdom to withdraw from the European Union, hypothetical and undesirable as that would be. But the amendment is also unnecessary because it merely restates the constitutional principle that no parliament can bind its successors.

The general position has already been explained, in Committee on 12th March, but I should like to restate it here. In our constitutional law, Parliament may amend or repeal any existing Act of Parliament. In that respect, this Bill is no different from any other. Of course, if a future parliament were to repeal the European Communities Act, that would put the UK in breach of its Community treaty obligations and the Government would have to negotiate the term of its departure from the European Union—something that this Government have no wish to contemplate.

Naturally, such negotiations would be extremely complicated. The United Kingdom has been a member for 25 years and UK and EU law are intricately interlocked. So although this Parliament ultimately retains the ability to repeal the 1972 Act and withdraw from the European Union, it would be by means of detailed and protracted negotiation. It is not a proposition to which I should like to give any currency in this House or elsewhere.

As regards the sovereignty of Parliament, the position is clear. Successive governments and parliaments have agreed that it is in the UK's best interests to work together with our partners within the Community framework. But should a future parliament decide that that was no longer appropriate and that we should no longer remain party to this treaty or to any of the others on which the European Union is based, then, as I have said, it remains open to us to negotiate our way out of them. That was the case before the Treaty of Amsterdam and it is unchanged by anything in that treaty.

Let us not beat about the bush. The amendment goes to the heart of the differences which have been aired in Britain and the European Union during our debates on this Bill. The noble Lord, Lord Pearson of Rannoch, went to the heart of the matter when he said that in his view the real villain of the piece was the 1985 Single European Act. As the noble Lord, Lord Stoddart, and indeed the noble Lord, Lord Pearson, and others have said on various occasions, what they really object to is our very membership of the Union. That is what this amendment is really about.

I respect the sincerity of the views held by those who support this amendment, but I disagree with them most profoundly. Withdrawal is not something which the present Government even begin to contemplate. On the contrary, the Government believe that our membership of the European Union is central to UK interests. This treaty is perhaps, as I have said, not as far reaching as the Single European Act—and certainly not as far reaching as the Maastricht Treaty—but it touches on the real concerns of ordinary people in areas like employment, the environment and the fight against crime. It contains many improvements of the kind that the Government declared they would seek in their pre-election manifesto. It provides the basis for a successful enlargement process. The Government believe that it is a treaty which is good for Britain and good for Europe.

The noble Lord, Lord Moynihan, argued about Article K.7 which he said could affect the sovereignty of this Parliament by giving the European Court of Justice jurisdiction to overrule national legislation. I believe that is wrong. The argument is based on a misunderstanding of Article K.7(6) There is no question that the article could be used to strike down legislation passed by Westminster. The references in Article K.7(6), which are often quoted, to the Court's jurisdiction over "framework decisions" or "decisions" do not refer to the decisions made by this Parliament. They refer back to the instruments which may be adopted by the Council under Article K.(6)(2)(b) and (c) respectively. As noble Lords will know, these are new types of instruments available to the Council under the Amsterdam Treaty specifically for co-operation in the field of police and judicial co-operation in criminal matters.

Article K.7(6) only allows the court jurisdiction over decisions of the Council and only in the field of police and judicial co-operation. That jurisdiction does not extend to measures taken by member states to give effect to their national law or resulting obligations. This article can have no effect on the sovereignty of this Parliament. It does not give the court the ability to override legislation by Westminster. On the specific point which the noble Lord made, Article K.7 will not be incorporated into UK domestic law.

The noble Lord, Lord Bruce of Donington, spoke eloquently in favour of democracy. It is a sentiment which the Government fully share. But his attitude exactly defines the difficulty which he and those who agree with him have in this respect. One way in which democracy in the EU manifests itself is through the European Parliament. However, I have heard little from the noble Lord in support of extending the powers of the European Parliament so that it can be an effective watchdog on the Commission or even on the Council. Indeed, the European Parliament is in the process of delivering its view on the appointment of Mr. Duisenberg as president of the European Central Bank.

Much of what was said by the noble Lord, Lord Willoughby de Broke, can be regarded only as an attack not on the Treaty of Amsterdam but on the whole framework of this country's membership of the European Union. This is not a framework which the Labour Government invented after 1st May. The basic tenets of our membership of the European Community were drawn up in 1972 by the then Conservative government.

I turn to some of the issues which run through the whole of our discussions on the treaty in relation to parliamentary scrutiny and accountability to Parliament. That represents much of what has worried noble Lords who have addressed this amendment and much of what has worried noble Lords who dealt with amendments in Committee.

The Government are committed to a European Union that is more open and democratic. We want a Union whose activities are transparent and whose decisions are subject to proper public and parliamentary scrutiny, as the noble Lord, Lord Bruce, suggested. We made proposals in the IGC last year and our presidency this year will help to achieve more open decision-making; better public access to documents; closer oversight by the European Parliament of legislative decisions that are subject to majority vote in the Council; and there will be introduced in the treaty a legally-binding minimum period for national parliaments to scrutinise legislative proposals.

The measures involving national parliaments are the most important. We believe national parliaments remain the primary source of democratic legitimacy in the EU. I believe that the noble Lord, Lord Moynihan, agreed with that in Committee. We will therefore take action nationally to reinforce progress at the EU level.

The Government have recently made proposals to strengthen the scrutiny of European business by this Parliament. They will build on the very extensive arrangements already in place. Your Lordships are familiar with the formal parliamentary scrutiny process. Each year about a thousand pieces of draft legislation and other EU business are examined by the committee of the noble Lord, Lord Tordoff, and its counterparts in another place. Their recommendations lead to several dozen debates and many high quality reports. I pay tribute to their work.

The information that we give Parliament, and the scrutiny carried out by Parliament, range even more widely than this. Every six months we publish a White Paper on developments in the European Union. This describes progress made and new initiatives launched in all areas of EU business, including economic, budgetary and monetary matters; agriculture, fisheries and food; the single market; common foreign and security policy; and justice and home affairs. It also sets out, for example, major proposals adopted, major treaties and agreements concluded, and key European Court of Justice cases.

In this House and another place there are regular debates on European Union business. Ministers from the Foreign and Commonwealth Office and other departments regularly give evidence on EU matters to Select Committees, including that of the noble Lord, Lord Tordoff.

We make particular efforts to facilitate parliamentary discussion of business before the European Council. Before each meeting, the Foreign Secretary provides a memorandum and gives oral evidence to the Foreign Affairs Committee in another place. That is followed by a debate on the Floor. After the European Council has met an oral report is made to each House. A Foreign and Commonwealth Office Minister gives oral evidence about the meeting to the committee of the noble Lord, Lord Tordoff. We provide other information on a more frequent basis. As the noble Lord, Lord Wallace of Saltaire, pointed out in Committee, each month we announce by Written Answer the agendas for future meetings of the Council of Ministers and a forecast of other main events over the next six months. Every meeting of the Council of Ministers is followed by a written report to Parliament.

These channels of information are supplemented by the regular occasions to question Ministers and raise subjects for debate. Taken together, these represent a considerable commitment to keeping Parliament informed, and facilitating parliamentary scrutiny, of developments in the European Union. By tradition, these arrangements are laid down in convention and standing orders or resolutions. We believe this flexible approach remains more appropriate than primary legislation.

We are, however, committed to building on these arrangements, as part of our efforts to strengthen the scrutiny system and to reinforce the role of national parliaments in the EU. The President of the Council has published a memorandum setting out our proposals. The memorandum takes up several proposals made by the noble Lord's committee and other Select Committees. It has been sent to the Modernisation Committee in another place, as well as other interested Select Committees whose views on its contents we would welcome.

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

We also propose to extend the scope of the scrutiny reserve to cover documents in the second and third pillars or on which political agreement may be sought at European Councils. And we propose to strengthen the arrangements for reporting to Parliament on Council meetings. As I have said, we already report on such meetings orally or in writing. We propose more detailed reports in future, by letters to Select Committee chairmen, to ensure that Parliament is better informed on the outcome of more important issues, particularly those which have been the subject of especial interest or debate in Parliament.

We should remember the strengths as well as the deficiencies in the scrutiny system. The 1996 report by the European Legislation Committee in another place noted that it "compares extremely well with others", and that the vast bulk of scrutiny cases are handled satisfactorily. The proposals I have described will build on and improve the existing system. They will add to the wider arrangements in place to report to Parliament and ensure proper scrutiny of European business.

I hope that the explanation I have given answers the specific points raised on sovereignty in your Lordships' House and has put them into the wider context of the scrutiny which we hope will be available through this treaty to your Lordships and to our colleagues in another place.

Lord Moynihan

My Lords, before the Minister sits down—and I am grateful to her for responding so fully to the points that were raised—perhaps I may clarify an important issue. She stated that the European Communities (Amendment) Bill, which we are considering today, will not incorporate Article K.7 into domestic UK law. Will she therefore clarify the procedure for enabling an individual member state to ratify the treaty in a form different from that which is ratified by the 14 other member states? Can the Minister say, for instance, how the Government intend to ensure that Article K.7(6) is not incorporated into our law? If the UK ratifies a treaty in a form which is not the same as that ratified by the other member states it could be rendered invalid. I should be grateful to the Minister if she could clarify the issue.

4.30 p.m.

Baroness Symons of Vernham Dean

My Lords, I can do so. Article K.7 gives member states the option, by declaration, to accept the ECJ's preliminary rulings jurisdiction in the third pillar. The UK will not make such a declaration. Therefore, we shall not accept that jurisdiction. When I said that Article K.7 will not be incorporated into domestic law, it is because we shall not take up that option. I hope that that clarifies that point.

Lord Pearson of Rannoch

My Lords, with the leave of the House, I wonder whether I could press the Minister on the three points I put to her. While, of course, the increased time for scrutiny is very welcome, and many of the other improvements which she mentioned for democratic accountability are very welcome, nevertheless would she not agree that, were a British House of Parliament not to lift the scrutiny reserve—in other words, that we were not to agree with a proposal from the European Union—and the proposal was subject to the qualified majority vote which I mentioned, all the scrutiny in the world would be of no use to us and we could be outvoted on the proposal in question? Furthermore, will she confirm that the acquis communautaire and the whole business of there not being an exit from the Treaty of Rome moves us inexorably in one direction only and not in the direction which some of us would prefer to go?

Baroness Symons of Vernham Dean

My Lords, this treaty provides what the Government said we should be doing in our manifesto; namely, it put us back into a leadership role in Europe. I recognise the point which the noble Lord has made about the possibility of being outvoted. On some issues there is the possibility of being outvoted. We shall deal with particular issues as we reach them in the course of our debate, as we did in Committee.

However, the safeguards which the Government have negotiated in the Amsterdam Treaty and the safeguards which this House and another place have in relation to scrutiny are very much better than they were before the negotiation of this treaty. The noble Lord nods. Therefore, I hope he will agree that this treaty improves the position over Maastricht rather than the reverse, which the noble Lord seemed to imply in his question to me.

Lord Stoddart of Swindon

My Lords, this has been a very interesting debate and longer than I thought it would be. Nevertheless, many important issues have been raised and I am obliged to all noble Lords who have taken part, including the Minister, who dealt extremely fully with the points raised and, indeed, has gone further in some cases.

As my noble friend said, the noble Lord, Lord Pearson, struck at the heart of the matter. Indeed, that follows his very successful operation on 31st January 1997 when he persuaded the House to pass a Bill which would have had the effect of repealing Sections 2 and 3 of the European Communities Act. Had he done that, and had we proceeded with it in both Houses of Parliament, we should not be discussing this matter today. Therefore, my noble friend is absolutely right that the noble Lord, Lord Pearson, got right down to fundamentals.

My noble friend Lord Bruce quite rightly mentioned the question of democracy. Because of the way the European Union works, democracy is undoubtedly a casualty. There can be no doubt about that, in spite of what the Minister said. Democracy is a casualty and ordinary people feel alienated by the whole issue. Indeed, my noble friend is right to warn against the creeping bureaucracy which, through the European Union and, indeed, through our own democracy, is increasingly dominating our lives.

The noble Lord, Lord Willoughby de Broke, referred to phrases in the treaties which refer to irrevocability and irreversibility. That is what worries so many people. If my noble friend would only say that in the last analysis they are reversible and not irrevocable, that would be extremely helpful. I am not at all sure that the Minister did that when she wound up.

The noble Lord, Lord Moynihan, made the very important point that we have a constitution which has not been imposed in writing on our nation. It has developed since the Magna Carta. It has developed in relation to the different needs of different ages. That is what is so good about the British constitution. It is a flexible constitution, and unlike many other constitutions, it has served this nation well. I accept that it might not serve other nations, but nevertheless it has served this nation very well indeed.

I am glad that the noble Lord raised also the question of Article K.7. While I was very interested in the Minister's reply, it may well be that we shall have to return to that matter. Indeed, an amendment has been tabled and we can explore the matter further when we reach that point.

Again, the noble Lord was quite right to say that this Bill is not a 3,000-mile service. It has constitutional magnitude. I believe that that was the phrase which he used. I wish that people would not say that this is only a small treaty. It is not. It has some extremely serious constitutional implications. That is what many of us are worried about. It is a pity that the House of Commons did not have a lot more time to debate the matter.

The noble Baroness, Lady Williams, said that the Amsterdam Treaty is modest. I do not agree with her. It extends the competence of the institutions of the European Union. I must disagree with her that it is something like, under NATO, Polaris being provided or sold to the British Government. That did not affect sovereignty at all. I must disagree with the noble Baroness about that. Polaris was a delivery system which was sold to the British Government. We had to buy it. As far as I understand it, there was no treaty. Polaris was sold to us on conditions. Indeed, if we did not comply with those conditions, we could not have used it. But that was not a question of undermining our sovereignty. That was a condition of sale. That is completely and utterly different. We needed the technology and, therefore, we agreed to that particular condition of sale.

The Minister gave a very long winding-up speech and we shall have to study it in Hansard closely because she said some important things. She emphasised the point—and this is important because some people take a contrary view—that Parliament could still repeal the European Communities Act 1972. If that were to happen, the Government would be obliged to denounce the treaties and to negotiate their way out of them. That is an important statement. Because of the words "irreversible" and "irrevocable", many people say that that cannot be done. However, my noble friend is saying that it can be done. That is a vital statement and one which we shall keep the Government to every time we discuss the matter. That being so, I really do not see why the proposed new clause should not be accepted. All my noble friend the Minister is doing is confirming what the proposed new clause actually says. The only difference is that my new clause would put it on the face of the Bill, and that would be entirely satisfactory.

My noble friend also talked about measures in the treaty and the Government's determination to have better scrutiny. But scrutiny is not really what is important; what is important is accountability. That is what our own Parliament keeps on losing. Ministers can go abroad, meet with Ministers from other countries and, provided that they have the consent of the Commission, the European Parliament, and so on, and a vote by qualified majority—in other words, other countries qualifying our decisions—our Parliament has no accountability. They are not accountable to Parliament for that. It does not matter whether the committee of the noble Lord, Lord Tordoff, considers the matter for 4 weeks, 6 weeks or not at all. Once the decision has been taken in Europe by qualified majority, or any other method, Parliament then has no role. If my noble friend would only tell me that the Government really do want better accountability and that they would be prepared to be mandated by Parliament before they went and made their decisions, that would be something. Indeed, that really would be progress. However, I fear that she is not going to tell us that today.

We have had a good debate. I am much obliged to all those who have spoken, especially my noble friend, who dealt with the matter very seriously and at proper length. I regret that the Government will not accept my amendment. I shall not insist on voting on the amendment today because I and, I believe, other noble Lords will wish to scrutinise what my noble friend and other speakers have said. Nevertheless, I have to give notice that I may wish to return to the matter on Third Reading when we may well have to seek the decision of the House. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.45 p.m.

Lord Mackay of Ardbrecknish

moved Amendment No. 2. After Clause I, insert the following new clause— REPORT ON ECONOMIC AND MONETARY UNION (". A Minister of the Crown shall, on 1st May 2003, 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 to be adopted, or decision taken or to be 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: My Lords, we had an interesting debate on the issue of the euro during the Committee stage of the Bill. I am returning to the debate today as I am a good deal more certain of the importance of the need for a clear report in five years' time than I was even two or three weeks ago. The reason is that we have had the meetings of ECOFIN and the Council of Ministers to start off the euro. If anything, it illustrates the point that we have to be vigilant about what government Ministers say. We also have to ensure that all the facts are laid at the disposal of the British people in a proper manner, before this country makes a decision to join the euro.

In Committee, we had just received the excellent report of the Treasury Select Committee of the other place. Indeed, I quoted from it fairly frequently during the course of my speech. Understandably, I did not receive much of a response on these points from the Minister because there is a convention that Ministers do not respond to a report of the Treasury Select Committee until the Government have responded collectively. Indeed, I do not suppose that I shall make any more progress today and drag from the Minister any comments on the Select Committee's report.

However, that does not in any way mean that your Lordships should not consider carefully what the Treasury Select Committee said. Indeed, the theme of my argument this afternoon—its text—is encapsulated in paragraph 40 of that report. I should like to read it to noble Lords, just in case they have not brought their copies with them into the Chamber. Paragraph 40—in fact, so important is this that it is repeated in paragraph (0 of the committee's conclusions—says: 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"— that is, the five tests outlined by the Chancellor of the Exchequer— 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. It will remain the case that the UK's decision will have to he made on a political and economic assessment of the balance of national advantage". I believe that the proposed new clause before the House this afternoon expresses those views in a slightly different way, but, nonetheless, the conclusion is the same: the need for a report in five years' time. I should have thought that that will be so, give or take a year or so. The Treasury Select Committee has come to a conclusion regarding five years and I have come to a conclusion about 1st May 2003. That is about the right time to start contemplating such a report. My proposed new clause says that there "shall" be such a report at that time, while the Treasury Select Committee is a little more vague. Nevertheless, I believe that we have come to the same conclusion.

When we discussed the matter on the last occasion and considered the report of the Treasury Select Committee, we were looking forward to the vital weekend meetings of ECOFIN and the Heads of Government at the beginning of May when decisions would be made about who satisfied the convergence criteria and about the presidency of the European Central Bank. I pointed out then the need for an honest approach to the convergence criteria and referred to assurances from the party opposite that the criteria would be rigorously adhered to.

One has to look backwards before one looks forwards to the year 2003. My worry is even greater than it was before the meeting of ECOFIN. Despite all the pledges that we had received, I believe that "fudge" was the order of the day. For example, on 4th June 1997 in the other place, the Prime Minister said: I have also made it clear, as we have always said, that the criteria for monetary union should not be fiddled, fudged or botched in any way. If they are, the answer is not to delay—the answer is not to proceed".—[Official Report, Commons, 4/6/97; col. 386.] Moreover, as recently as 25th March of this year, the Prime Minister said: I also agree that it is our duty as president of the European Union to ensure that the criteria are properly obeyed. We shall do so".— [Official Report, Commons, 25/3/98; col. 492.] I am not entirely sure that the Prime Minister obeyed his own words and that the criteria were not indeed fudged, and fudged again. We have gone over the matter, and I shall not do so again in any detail, but, however one looks at the criteria, they were certainly fudged in a very big way.

The Treasury Select Committee warned us of the fudge. At paragraph 12, the report says: Substantial concerns remain with regard to the state of the public finances. Although deficit levels have fallen and it appears that 14 of the 15 potential members had deficits below the 3 per cent reference value, a number of these countries benefited from one-off measures which reduced the deficit for a temporary period only. Progress on reducing debt levels has been far from convincing. The average debt level across the EU area stands at over 70 per cent of GDP and 11 of the 15 potential EMU members currently have debt levels of over 60 per cent. of GDP … In particular the very slow progress on fiscal consolidation made by Belgium and Italy provoked the EMI to comment 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'. The general assessment from both the EMI and Bundesbank reports, which was further expounded by the Governor, was that there is still a very long way to go before fiscal positions are sufficiently robust to ensure that the majority of member states will achieve the aims of the Stability and Growth Pact in the medium term". Yet, despite that, they all signed up. The criteria were not met. Everyone knows that they were not met. This is simply an arithmetic version of what I believe—if my memory serves me rightly—the queen in Alice in Wonderland said, "Words mean what I say they mean". In this case, the arithmetic means what I say it means.

When we consider the position of the United Kingdom in relation to the euro in the future, we cannot lose sight of the way the heads of government clearly decided that the end justifies the means. We heard that phrase just the other day in connection with another part of the world. But if the end justifies the means, I believe that we have to put some kind of stumbling block, test or whatever it may be, into the legislation on this treaty to make sure that before the United Kingdom makes any decisions a clear, concise report is available on all the various issues which are set out in my amendment. I shall discuss them in detail shortly.

It was not just the arithmetic that was fudged. The other fudge concerned the presidency of the European Central Bank. I think that Wim Duisenberg is a pretty good choice. He has made some robust comments since he was appointed president. I am not entirely sure whether that will endear him to some of the people who agreed to the fudge. It was quite clear that every member state bar one had decided that Wim Duisenberg should be president of the new central bank. That one state was, of course, France which dug its heels in. It is amazing that when any country, with the exception of Britain, digs in its heels, no one says, "Oh, they are not being communautaire". Yet the moment we dig our heels in about anything we are accused of being anti-Union, anti-communautaire and all kinds of other things. Yet France dug its heels in pretty effectively. France did not give way—as we used to be told good Europeans should give way—and it forced a compromise which was clearly in breach of the Maastricht Treaty.

The Prime Minister described the situation in his Statement to the House of Commons, which the noble Lord the Lord Privy Seal repeated in this House. The Prime Minister almost denied that there had been a compromise. The noble Lord the Lord Privy Seal repeated the Prime Minister's words in this House, saying, Much of the subsequent press reporting has rested on this simple factual inaccuracy: that Mr. Duisenberg intended and wished to serve for a full eight years, as opposed to being nominated for that time, which is the time stipulated under the treaty … Mr. Duisenberg very properly made it clear that he would not want to serve a full eight years … he should at least stay until the euro was launched and all transitional arrangements, particularly the introduction of the notes and coins, were in place. This accorded with Mr. Duisenberg's own wishes that he oversee this process and step down shortly after".—[Official Report, 5/5/98; cols. 508–9.] The Statement continues at col. 509, At my suggestion"— that is the Prime Minister's— he stated his position personally, in his own words, to the Council. He explained that, because he would be 67 in 2002, he did not wish to serve the full term, but that it was his intention to see through the transitional arrangements for the introduction of euro notes and coins, including the withdrawal of national notes and coins". The amazing thing is that Mr. Duisenberg then went to see the European Parliament and was refreshingly honest with it. According to a report in The Times of last Friday, he dissociated himself with the, British brokered compromise at last Saturday's summit which effectively ended his tenure in 2002. He said. 'I have never stated that I will serve only four or five years. What I have done is indicated that I regard it not likely that I will serve the full term of eight years'". When asked if he might stay for the full term, he drew applause when he replied, Given good health, then yes". That is in fair contrast to what your Lordships and the other place heard last week. All he had promised the summit was that he would stay at least until the deadline for the changeover to euro notes and coins in July 2002. He said, I do not know how long beyond that I will serve. I do not intend to stand down at a specific moment in time which I would have in my mind now". He went on to say, There were efforts to convince me that I should announce a day to stand down. That is why it took so long last Saturday. I refused to do so. In that case I would not have accepted the job". That contrasts quite markedly with what we heard in your Lordships' House last week. I do not wish to embarrass the noble Lord the Lord Privy Seal in his absence, but I cannot resist one further quotation. The noble Lord said in replying to questions on the Statement, But there is no question about Mr. Duisenberg wishing to serve the eight years, as I understand it".—[Official Report, 5/5/98; col. 516.] That was not what Mr. Duisenberg understood when he went to see the European Parliament. He said, Given good health, then yes". What is clear about the events of the past two weeks—whether they concern the convergence criteria or the presidency of the European Central Bank—is that we cannot leave the decisions on whether Britain should join, or when we should join, if that is the decision that has to be made, just to the Government and to the heads of state. We need some clear, legal obligation that a proper report will be produced. That is what this amendment calls for. I refer not just to the Chancellor's five tests. I make no apology for repeating my next point. The Chancellor's five tests are the Chancellor's selected five tests. Many more tests could be applied, and perhaps they should be applied. At paragraph 25 of the report from the Select Committee on the Treasury, Christopher Johnson is quoted as having argued that, 'The Chancellor's tests are so loosely defined that anyone will be able to say that they have been either passed or failed, according to the dictates of political expediency'". Mr. John Arrowsmith suggested that, if no commitment is given as to when a further assessment will be made, 'there will be a lot of guessing going on and a lot of uncertainty generated in financial markets that could actually prove to be destabilising and, if you like, upset the apple care"'. At the end of that paragraph, the Select Committee concluded, We believe that the Treasury response to this Report should set out more precisely the ways in which the tests will be assessed, particularly to avoid uncertainty in the financial markets". My proposed new clause sets out in some detail the issues which the tests ought to address in order not just to prevent uncertainty in the financial markets, but also—dare I say it?—to prevent uncertainty in the political climate in this country. That is why I ask for a report which would examine a number of specific issues. It would, for example, examine the constitutional aspects not just of "going in" but also of "staying out". We are talking of whether we go in or stay out. That is an option which the British people and the British Parliament will have to decide.

The constitutional position will be important. However, given the public opinion polls in Scotland, one is a little fearful for the constitutional position of the United Kingdom in five years' time. However, that is another issue. As I said, the constitutional position is important. I do not normally share some of the more fevered suggestions—I describe them kindly—of my noble friend Lord Pearson of Rannoch or of some noble Lords opposite as regards the European Union. However, I am in some danger of being smitten by their fears when I read, for example, what Chancellor Kohl said to the Bundesrat just recently. I have taken to reading The European. In The European of 27th April my attention was drawn to evidence given to a Bundesrat committee by the German chancellor. The article states: He made it clear that monetary union is a process which will make European unification irreversible. He sees EMU as the single most significant step on the road to a federal Europe. He even regretted that the Amsterdam Treaty did not take integration further … Mr. Kohl's vision of a united Europe is based on the German model of a decentralised federal state: `What has been achieved over 40 years in terms of arrangements between the German federation and its constituent Länder—and it was no simple process—can nonetheless happen in the development of the EU.' There will be substantial devolution of power, as there is to the German Länder, but Europe is to have a federal government more powerful than anything admitted to in London". Those noble Lords who have heard me debate European issues know that I am a supporter of the European Union. But I am not a supporter of the kind of federal Europe that some noble Lords seem to think will be inflicted upon us. When I read Chancellor Kohl's views I become a little worried that someone in such an important position believes in going a good deal further than I, and I think the majority of your Lordships, would be happy to go. Perhaps the Minister can give me a flavour of what the Government feel on the constitutional aspects of moving ahead in the way Chancellor Kohl describes.

The next part on which we would like a report is the monetary and financial impact. By 2003 we shall be in a better position than today to judge how the monetary and financial aspect is working. I need say no more on that; it is self evident. We all hope that the Euro will work. If it does not work, the consequences for all the economies in Europe will be very serious indeed. But we wish to see how the monetary and financial systems are working together before we in this country decide to go in.

The third aspect is the impact on economic and social progress. That is very important indeed. I wish to draw your Lordships' attention to two points of view. They are not the only two, but I give them as examples. One is unemployment. I noted that in the Treasury Select Committee report at paragraph 32 it says: 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' … if structural differences persisted, 'you could have difficulty in getting a single monetary policy which is appropriate for the area', giving rise to `high unemployment persisting in some parts of the area with potentially inflationary pressures persisting in others'". I could continue at some length about the difficulty of one interest rate throughout all the 11 member states; and how for some of those member states that interest rate will be too low, and for others too high. However, we know that for the past five years under the previous government, we successfully pursued labour market monetary policies which enabled our unemployment to come down month by month on whichever count one takes, whereas our friends on the continent saw their unemployment rise month after month. It gives me no pleasure to say that, but that is a simple fact. Therefore employment is an important aspect.

The other aspect that I believe important—I know a little about it from my experiences in the past government—is pensions. By 2003 we shall be in a better position to see how the social policy—for example, pensions provision—is panning out in Europe. The impact of the ageing population in all our countries will be considerable. Some of our European friends have huge unfunded pension promises for the future. We are fortunate in that we have considerable funded pension provision in place—although, frankly, not nearly enough, and not covering nearly enough of our population. But at least it is a good deal better than that of our European friends. We shall want to be sure that no effort is being made by 2003 to translate those unfunded obligations from the individual member states to the union.

I believe that the new clause accords with what the Treasury Select Committee asks the Government to do: to produce in five years' time a balance sheet of the economic, social and constitutional advantages and disadvantages of joining up to the single currency. Given the events of two weekends ago, it seems sensible to tie this down in a legislative framework in case after the five years the Government treat the whole issue in the same fudging way as it was treated two weekends ago. I believe that that would be to the detriment of this country.

5 p.m.

Lord Renton

My Lords, before my noble friend concludes, will he bear in mind that the various matters set out in the amendment, with which I fully agree and which he has stressed as being important, will start revealing themselves within 12 months? I should have thought that within three years conclusions could be reached upon each of them. Five years in politics and economics is an eternity. If we wait until 1st May 2003, it means that this Government will be under no obligation to submit a report on these matters until after the next general election. Surely on further reflection my noble friend may at a later stage accept an amendment to make the period three years instead of five.

Lord Mackay of Ardbrecknish

My Lords, I am not often accused of being more generous than I should be. My noble friend makes the point that the date I have chosen would take us beyond the next election. But I am more interested in pinning down whoever will be the government then—I hope that it will be this side and not the other side—to an obligation to produce a report about the position of the euro. I am not sure that I agree with my noble friend that the position will be clear within three years. Much of the business as regards euro coins, notes and so on, will not come fully into play until, I think, 2002. Therefore while I understand my noble friend's point—I should look sympathetically at any further amendment he wished to put to my new clause—2003 seems about the right time. It accords with the Select Committee report. I commend this new clause to the House. More importantly, I commend it to the Government.

Lord Hughes

My Lords, before the noble Lords concludes, perhaps I may ask a question. The noble Lord, Lord Renton, pointed out that there must be a general election before the year 2003. If I heard the noble Lord, Lord Mackay, aright, he based his date on a speech made by the Chancellor when he said that it would be at least five years before this issue would have to be decided. "At least five years" does not necessarily imply that the report would be made by 1st May 2003. I do not assume that the noble Lord means that the Chancellor in 2003 will be Gordon Brown. But will whoever is Chancellor in 2003 be obliged to pay attention to this provision? We spent an hour and a half discussing the previous amendment during which debate it was emphasised that no Parliament can commit its successor. Would whoever was Chancellor on 1st May 2003 ignore the provision on the principle that he was not committed by what was done by the previous Parliament?

Lord Mackay of Ardbrecknish

My Lords, if we passed this new clause, and the government in 2003 decided that they did not wish to implement it, they would have to come forward to both Houses of Parliament with fresh legislation to rescind the legislation that we had placed on the statute book. The same argument could be made for every piece of legislation that we pass. I suspect that it would be a pretty brave government who would say, "We are not going to bother with a report". It might be clear by that time that there was no point in our joining the euro and we could not possibly join it, and therefore from that point of view a report was unnecessary. But in those circumstances a government would have to come before the House and bring forward new primary legislation to repeal any legislation passed in this Bill. I hope that answers the noble Lord's question. I shall not be drawn into whether or not the Chancellor will be Gordon Brown. Indeed, if the Labour Party cannot do better than the Scottish Nationalists in Scotland in the polls, shortly, Chancellor Brown may not even be a Member of Parliament for the United Kingdom.

5.15 p.m.

Lord Howell of Guildford

My Lords, I support this amendment tabled by my noble friend, in spirit at least, if not in its detail. I shall shortly explain to your Lordships why I have some reservation on the detail.

It is extremely timely that we should debate this matter again, although we debated it in great detail in Committee. A great deal has happened since then to affect the evolution of the whole gigantic euro project. Therefore it is right to return to the matter again, as we shall have to do many times in the future.

The spectacular part of the weekend meeting which reached certain decisions on the launching of the euro and the participation of member states was the argument referred to by my noble friend as to who should he chairman of the ECB and for how long. Whether that means that there will be a soft or a hard euro is not very significant. Both the candidates, Mr. Duisenberg and Jean-Claude Trichet, are extremely hard-line, tough, experienced, sound money-men. Whoever is actually at the helm of the ECB, it means that the euro will be administered and underpinned by a very strong monetary policy, whether the French Government or other governments like it or not. So, from the point of view of the euro itself, the issue does not really matter.

The more worrying aspect is the way in which the matter reflects a much deeper flaw and fault-line in the entire system. What it indicates should chill us all. It has been very well and successfully hidden for many years. I refer to the continuing underlying irritation, if not worse, between the French outlook upon European development and integration and the German outlook. That is a matter that we should all pause to consider. In the past, that irritation has grown to more than irritation and turned into some of the most ghastly consequences of the 20th century. That the French and the Germans should not irritate each other, and that they should work together, is a fundamental requirement for making the euro a successful currency in due course. If there is indeed a flaw in the system and that irritation is allowed to grow into a real division, then the euro is in trouble and the whole of Europe is in trouble. This country will be in trouble too. So the real worry is that it reflects a deeper difference of perspective as to what the whole euro project is about.

Is it about the French gaining control of their monetary destiny, as they always say in Paris, or is it about Germany finally submerging itself in a greater Europe and cutting itself off, or purging itself, of its past historical guilt, as is the basic story put forward by Chancellor Kohl—and very understandably? He wants never again the experiences of his youth. We do not know the answer to that question. It is not resolved. The events of the weekend before last proved that the matter is certainly not resolved but will continue, and will return to haunt the euro system in the future.

The second development since then—although it has in fact been going on all the time—is one that leads to my having doubts as to the precise wording of my noble friend's excellent amendment. I rather agreed with the intervention of my noble friend Lord Renton. Not only is 2003 a very long way away, but I would go further than my noble friend: it seems that the whole issue is knocking at our door, and coming in through the back-door of the British economy at a rate which many people did not foresee. It is already becoming daily more visible.

The truth is that already more and more countries are moving over to managing their entire debt in euro-denominated bond issues. The old currency-denominated issues of Europe will probably have disappeared altogether by this time next year, and the entire business will be conducted in euro-denominated issues. I am not talking about euro bonds; I am talking about euro-denominated bond issues, which are quite different. Luckily, the City of London appears to have the major role in managing those issues. I declare an interest: I work for an organisation involved in these matters. That is coming at a pace—it means that a great deal of the debt market will be denominated in euros, not in five years' or three years' time, and not when the currency finally appears and the individual denominations disappear, but long before then, almost before the official fixed date for the currencies of 1st January next year.

Secondly, it can only be a matter of time before our financial system and our bank statements all come, as they already do in France, in euros as well as in the local currency. Thirdly, a great many corporations will move over to parallel accounting in the local currency, the pound, and the euro currency. Fourthly, let us wait for the first take-over bid by a big European euroland corporation of a corporation or company on UK soil outside the euro zone. That will almost certainly be couched and put forward in terms of euros. There is no way in which we can pass a law saying, "No, that's a terrible thing. We can't have a take-over bid made in euros for a corporation in the sterling zone". We cannot stop that. It will happen; and the entire debate and bid process will have to be conducted in euros. Therefore I suspect, far from having to wait five years, we shall find, probably by this time next year, May 1999, that the pound has already become a parallel currency, and will continue to circulate but that the euro will circulate as well—albeit not as legal tender or underpinned by any law of this House or another place; nevertheless it will be there. The euro will have come in by the back-door.

That does not mean to say that there are not tremendous difficulties ahead for the euro system. I for one have grave doubts about what we—that is, we, the Europeans—have committed ourselves to in moving at this political speed into the euro project. But that is quite different from the point I am making; namely, that the euro has arrived, and has already arrived in the UK, and it will therefore be necessary for the two Houses of Parliament to have very detailed reports before them as from possibly this time next year about the impact on our own affairs, which will be very considerable indeed, and very massive, and will lead to all sorts of consequences for our own monetary system and our own economic and social progress, to use the words of the amendment.

Nobody, of course, knows how all this is going to work out. I said a moment ago that Mr. Duisenberg and Mr. Jean-Claude Trichet between them, if Mr. Duisenberg does move aside—which he does not look like doing before eight years—will run a very tight ship and a very hard currency. But other political and market forces may undermine their ranks. However much the ECB continues to raise interest rates, this is a system, an animal, as it were, the like of which has never walked the earth before. It is a single currency which cannot be compared to the Maria Theresa dollar or the gold standard; it has a single monetary authority but 11 budgetary authorities—allegedly bound together, as it were, bound round their legs by the stability pact, but no one knows exactly how that will work. Never before in history has such a system been attempted. It is a colossal experiment and, ironically, at just about the time when the present Government may be talking about Britain wanting to join, there could possibly be the most colossal crisis. My guess is that everything will happen very much faster than anyone realises, and long before we reach the next general election, the end of this Parliament or other matters, we shall find the maintenance of this position, of hoping one day that synchronisation will somehow come—frankly, I have never understood how, if we are "out of sync" now, we shall magically get "into sync" later. The whole of that position will be swept away by events of which neither this Government nor the governments of the other European countries are fully in control.

My regret is not only that it is a huge and dangerous experiment—and one that we could have managed without; although there are those who have said that the European Union could not go forward without a single currency, which I have never fully understood. My greater regret is that it has taken energies away from the real project of Europe. That project is the one for which our forebears and many in this House fought in a world war. It was to unite the whole of Europe in free republics and monarchies from Lisbon to the River Bug and from Calabria to the Orkneys. That was the dream of the united Europe. It was all destroyed after 1945 by the Soviet occupation. We had to wait 45 years, then the Berlin Wall came down and everyone thought, "That's fine, now we'll get on with the real project of Europe, embracing the new democracies of east and central Europe". But we did not. Seven years have gone by and we are still waiting.

Desultory negotiations have begun. We shall come to that at a later point in the debate, I know. It will probably be 15 years before any of those countries joins the Community. That was the main purpose; that was the dream. Instead, all energies have gone into the alternative project of EMU. It is interesting. No doubt many people will get rich and many new and fascinating economic developments will occur, but to my mind it is not in the main stream of what being a true European is about. It is, of course, irrevocable and irreversible, as noble Lords have pointed out. It is underpinned by a law which is superior to British law, so that we cannot go back.

I have enormous respect for the noble Baroness, Lady Williams, but she said something with which I am afraid on this occasion I disagreed most profoundly. She said that EMU was not very different from NATO or global capitalism. In other words, interdependence and trans-governmentalism are not different from the supra-governmental nature of the whole undertaking. It has a system of superior laws; superior to the laws of this House and the House of Commons and superior even to the judgments of the British courts which can be overturned.

With great respect to the noble Baroness, Lady Williams, it is not intergovernmentalism; it is not interdependence; it is a supra-national project. It is irrevocable and irreversible—or so the great leaders of the European Union say. Of course, when the irrevocable and the irreversible meet the contrary irresistible forces of market intentions—as will happen one day—we shall be in for the most almighty bust up. That is why we shall be swept in early; but later, perhaps by 2003, we shall just about be in the middle of the first tremendous crisis.

Lord Beloff

My Lords, unlike most contributors to the debates on the Treaty of Amsterdam, I am free of the necessity to say that I am, of course, in favour of the European Union. I am not. I believe that it was a mistake for Britain to sign the Treaty of Rome and I think we are now seeing many of the consequences which were bound to follow, although I admit that I did not see them at the time.

The speech which has just been made by the noble Lord, Lord Howell, who has great knowledge of these matters, is one with which I could not possibly bring myself to disagree—that is, in the sense that he is probably right that the tempo is being accelerated. But there are other things happening to which I called your Lordships' attention at an earlier stage of the Bill which one must look at again. They are political developments on the continent of Europe.

When the treaty was first signed, it appeared almost unthinkable that Chancellor Kohl would not be in power when the provisions about a single currency came into effect. It now looks not only likely, but very probable, that Chancellor Kohl is on his way out and that the kind of statement which he made about Europe becoming a single government, not merely having a single currency, will begin to look very dated. If Chancellor Kohl does not succeed in winning the next election, the well known German antipathy to the sacrifice of the mark will begin to make itself felt, even with the clumsy German political system. Therefore, we are not in a position to know, even within the next 12 months, who our interlocutors will be in Europe.

There is also the important point that, after all, when we come to discuss the important questions of the impact on employment, we have had one experience within the past decade of monetary union—the monetary union between western and eastern Germany. What has been the result of that monetary union? The relative economic positions of the two parts of Germany have not converged but have gone farther apart. As I pointed out to your Lordships a week or two ago, the result is the recrudescence of extremist right-wing and left-wing political parties in what was the German Democratic Republic. The idea that somehow or other those political and constitutional issues are secondary to the insights of multinational firms—often blinkered as to their own real interests—is something which this House should deplore.

Therefore, we come to what I think is the central point of the new clause proposed by my noble friend and with which, despite those reservations, I have no quarrel. The central point is the constitutional one. We have constantly been given to understand by the Chancellor of the Exchequer and by the noble Baroness, Lady Williams, that this is not a constitutional issue of central importance; namely, the final transfer of power from the British electorate to put in power or to chase out of power a government with which it is not in accord. That is, after all, ultimately what the constitution is about. To suggest that a government would be worth electing which would have no power over currency, which was a symbol of government not merely for decades but for centuries—or, as archaeology tells us, for millennia—is to embark on an enterprise which can surely only end in disillusion and disaster.

It is therefore absolutely essential that constant pressure is brought to bear on the Government to make clear whether there is anything in the idea that some kind of political influence could still have an impact on those splendid hard money characters whom everyone unites to praise. Hard money may be a good thing in some circumstances. It may be counter-productive in others. The assessment must be the assessment of the prosperity of the peoples involved.

Whatever one may think about French negotiating tactics, President Chirac has a point. The French people will not accept indefinitely having their economic fortunes dictated by the will of a country, their neighbour, twice their size and much more powerful industrially. There are bound to be frictions. They may have as many pâté de foie gras dinners in Avignon as they like, but in the end the French economy and the German economy are different. If one brings in the economies of southern Europe, the differences are even more marked. I find it difficult to understand how anyone can even flirt with the idea of Britain being part of that kind of enterprise, doomed, as it is, I fear, to failure.

5.30 p.m.

Lord Stoddart of Swindon

My Lords, I listened with great interest to the noble Lord, Lord Mackay of Ardbrecknish. Over the years he and I have been somewhat opposed over the issues of the Central Bank and our membership of the European Union. I understand his position and I am sure that he understands mine. I found his quotation from The European of 27th April to 3rd May interesting. It was a reference by Herr Kohl to EMU and the relationship of Germany to Europe through EMU.

For a long time many of us have been quoting Herr Kohl and others as saying that it is German policy to have a united federal Europe under the suzerainty of Germany. I have been criticised for saying that. I have been called a xenophobe and told that I am anti-German simply for quoting what Herr Kohl says. It seems to me that what I and others have been saying has now been made respectable by the noble Lord, Lord Mackay of Ardbrecknish. He too realises what the German agenda is and he is no more anti-German or xenophobic than I am. However, we need to understand the reality of the position and, in understanding it, be careful of what we do.

The noble Lord, Lord Howell, quite rightly cautioned against being pushed into this venture without knowing where we were going and what the results would be. He is quite right. It is absurd for this Gadarene gallop into the unknown to be taking place at this point in time, or for that matter at any point in time. We must recognise that going in will involve major risks. It has never before in history been tried. That does not appear to be borne in mind by all those who are enthusiastic about it. It is like saying, "It will be all right on the night". But, as the Conservatives found at the last general election, it was not all right on the night. We cannot exist simply on hope; we must grapple with reality. The reality is that there is no precedent to which we can refer and therefore it is dangerous to gallop in before we know what is involved.

Again, I do not believe that there has ever before in history been a single currency without first there being in place the political structures to manage it. Yet we are going into the single currency without the political structures which will make it viable. That is a recipe for disaster, and everybody knows that. We must understand what those political structures are. That is why we need a proper report. It will be no use the Government replying to the House of Commons' excellent report in the way that they so often reply to those of us who ask for a cost-benefit analysis of our membership of the European Union. From their reply, the benefits would appear to be self-evident. But they are not; and they are certainly not self-evident when we look to future economic and monetary union together with a single currency. We must be careful therefore what we do.

We must remember ERM. Can anybody forget it? I cannot, but some people can. What was the reason for the ERM disaster? It was because we rushed into it without knowing or contemplating the consequences. We were bounced into it at much too high a rate. We were probably bounced into it by the other countries of the European Union. I hope that I shall not be accused of being a xenophobe for saying that. It was in their interests that we should go in at too high a rate. It was a disaster, and we should remember that.

We should also bear in mind that if we go in, we shall lose control of our monetary policy and to a degree our fiscal policy also. How then will we deal with a possible slump? Bankruptcies and ruin will be inflicted on many industries, as happened when we came out of the ERM. Unemployment will rise to 3 million or 4 million. How will we deal with it if we are irrevocably linked into the European system and a single currency?

We discuss issues in this Chamber, but others discuss them as well. I was struck, on reading the Daily Telegraph of Monday 11th May, to see a letter from Mr. Rodney Leach. He is not a politician; he is not a Member of the House of Lords; he has never been a Member of the House of Commons, but he is a sensible and extremely experienced man. He is second-in-command at Jardine Matheson and a director of many other companies. He wrote an excellent letter under the heading, The euro is a leap in the dark". I cannot quote the whole letter, but if noble Lords will bear with me I should like to read the final two paragraphs. He said: The greatest problem of the euro is the democratic deficit. Whether it is to be the exclusive property of central bankers or part of the struggle for European political supremacy matters less than the fact that Britain's interests, if we were to sign up, would count for little. When unemployment again approaches three million here, as some day sadly it will, there would no longer be the democratic option of changing the team in charge of economic policy. Popular diction might then find its outlet in extremist reactions, as we have seen recently in Saxony-Anhalt and in France, where neo-fascist or neo-communist parties are now strong enough to qualify as coalition partners. There is a quiet campaign—unique to this country—to make an orthodoxy of the Clarke/Brown line that the single currency raises no significant constitutional issues, with the implication that to believe otherwise is the mark of an ideologue. When this is eventually put to the test of hard times, it will prove to be a dangerous fallacy". I sit down and let Rodney Leach's letter speak for me.

Baroness Williams of Crosby

My Lords, I am sure that the House is indebted particularly to the remarks of the noble Lords, Lord Renton and Lord Howell of Guildford—I shall come back to that in a moment. In the remarks of the noble Lord, Lord Renton, taken together with the noble Lord, Lord Howell, we see the difficulty of trying to put a date into an amendment of this kind.

The noble Lord, Lord Howell, pointed out that matters were moving much faster than may be implied by a date of this sort, and the noble Lord, Lord Renton, said that we had no way of knowing exactly when the next election will be; we can make an assumption about it but we may get it wrong. Clearly the Government are committed to a referendum in any event and in my view therefore the amendment is probably otiose.

In fighting a referendum, whatever view the Government take at that time, they will have to set out their case to the British people in great detail, as will those who take differing views on the matter. The crucial issue is to ensure that the British people are as fully informed as possible.

In that context one matter that I profoundly regret is that the previous government did not make available information about the European Monetary Union, which I believe they should have done, because we now have to look at a country which is less well informed than most of its neighbours in respect of the implications, or possible implications, of European Monetary Union.

The noble Lord, Lord Howell, pointed out that euro-denominated bonds are growing very fast, and perhaps I might add to that a more pedestrian thought. Last weekend I took part in a business forum in Ipswich for East Anglian business people in the presence of both a German businessman of some standing, whose company has a number of subsidiaries in this country, and a Dutch financial expert. Both of them pointed out that in their view the companies in East Anglia should move as quickly as possible to denominating prices in euros, and this is years before there is any possibility of this country joining the euro system. They felt that British companies would lose out very badly in their export markets unless they began to move very quickly in that direction.

The noble Lord, Lord Howell, did not express a particular view about when there should be a decision with regard to the European Central Bank and the single currency, but what he did do, and was absolutely right to do, was warn the House, and he gave us a very strong sense of the urgency of this issue, whether or not Britain becomes a full member. I ask that we meet at some time to discuss the point that he raised with regard to what I had to say, but in the meantime perhaps I may say this. Of course, he is absolutely correct on the legal and constitutional aspect, but I was not making that point; I was making a point about the de facto issue of sovereignty. The noble Lord will understand that I was a member of a government which had to accept quite specific intervention by an international monetary fund in existing government policies as a condition of receiving a loan to enable them to sustain sterling through a difficult period. Therefore, I am much scarred by an awareness that all the sovereignty that may exist in constitutional terms can be very much qualified by the harsh facts of economic and financial life.

I now turn very briefly to the clause moved by the noble Lord, Lord Mackay of Ardbrecknish.

Lord Beloff

My Lords, I am sorry to intervene, but the noble Baroness is again making a fundamental error of definition. Nobody would deny, for instance, that in 1939 the country—I will say Estonia in the presence of the noble Earl, Lord Carlisle—was a sovereign independent state. That status did not help that country when the Soviet armies approached. There is interdependence, and there are different degrees of dependence: political, military, economic. However, these are totally distinct from constitutional sovereignty, which is the right of people, unless they are impacted upon from outside, to settle their own fortunes.

So long as the noble Baroness persists in confusing interdependence—a characteristic of all forms of society—with legal constitutional independence, her argument can make no impact.

Baroness Williams of Crosby

My Lords, I appreciate the remark made by the noble Lord. I thought that it was almost exactly the point that I had made a moment or two before. I was indeed indicating that there is constitutional sovereignty. I was accepting the argument of the noble Lord, Lord Howell, on that issue and I was pointing out that in the hard world of power constitutional sovereignty does not necessarily mean that one is able to pursue the policies one believes to be right for one's own country.

I return for a moment to the argument I was making about the moving of the new clause by the noble Lord, Lord Mackay of Ardbrecknish. I did feel that he was, to say the least of it, rather ungenerous in his estimate of what has actually happened over the past two years. The truth of the matter is that if one looks back at the remarks that were made in this House, in another place, in the Financial Times and in other serious newspapers in this country, almost nobody expected the European monetary process to start on time; almost nobody expected 11 countries to be members of it and almost nobody expected the date of the European Central Bank's launching to be on exactly the date that was first opined as the earliest possible date. We did what so often in this country we have done. We underestimated the other countries of the European Union in their capacity to meet the timetable that they had set themselves. We have done that ever since the Messina Conference of 1950; we did it over the Treaty of Rome; we did it over the European defence community, and we have done it time and time again.

I would plead with Members of this House and, indeed, with our own Government to recognise that we have to look at the actual timetable of events and not at what we might wish to be the timetable of events. That means that, inevitably, we have to deal with the reality and not with what we might wish to be so.

5.45 p.m.

Lord Stoddart of Swindon

My Lords, will the noble Baroness give way?

Baroness Williams of Crosby

My Lords, I will not give way for a moment. Allow me to complete my argument and then I will give way. The reality is that 11 countries have made an immense effort in terms of approaching and in most cases meeting the convergence criteria. That is something nobody imagined that they would do. The crucial outcome of that great effort is that they have now accepted a philosophy of stable pricing and there is acceptance of a resistance to inflation, which is something totally new, especially for some of the countries of southern Europe. I feel that it would be less than gracious of us in this House not to recognise the scale of that achievement. We may indeed wish to criticise certain elements of it. We may wish to make the point that Belgium or Italy, for example, have not wholly met the debt criteria, but we should at least recognise, whether or not we decide at the end of the day to join the European Central Bank and to accept the single currency, that this has been an astonishing and major achievement, and one about which there are almost no predictions in this House or in another place that would suggest we might actually meet it. I give way to the noble Lord.

Lord Stoddart of Swindon

My Lords, to some degree the noble Baroness has answered the point that I wish to make to her. She said that this country underestimated the commitment of other countries. I do not believe that is so at all. What we overestimated was their ability to hold to agreements that they had made through treaties, such as the Maastricht Treaty. It has actually been crucial, or it was crucial, we thought, that all countries should meet the Maastricht criteria in every sense. They have not met the Maastricht criteria in every sense—and some of them have missed it by a very long way and by creative accounting—so perhaps the British people or the British Government were a little too trusting of the other countries, rather than underestimating their commitment.

Baroness Williams of Crosby

My Lords, I merely say that creative accounting is not unknown in this country, too.

In conclusion, I turn to the situation as regards enlargement that was raised by the noble Lord, Lord Howell of Guildford. I believe him to be absolutely tight. The crucial historical goal for this century and the beginning of the next century is the enlargement of Europe. I agree fully with the concern of the noble Lord. Lord Howell, as regards the possible divergence of energy. However, I must say, and say clearly, that if the United Kingdom had consistently given the lead it should have given in Europe and had consistently attempted to shape European goals and European policies, enlargement would, in my view, have been able to be that central priority.

I conclude with a quotation from one of the closest friends of the United Kingdom—Holland—and in particular the chairman of the Netherlands International Institute of Relations, which is the equivalent of Chatham House. It is a very recent quotation made at a special session that was held to recognise the launching of the UK presidency of the European Union. This is what Mr. Alfred Pijpers, who is not a politician, but a very distinguished expert on international affairs, said: It was widely felt in the Netherlands and the rest of continental Europe that during the long period of Conservative government, Britain developed an increasingly sceptical and even negative attitude towards the European Union". That is not a position from which it is easy to commend the central importance of enlargement. I believe it is important to say that we could have gone much closer to achieving that goal much more quickly had the United Kingdom recognised the speed at which the rest of the European Union was actually moving.

Baroness Knight of Collingtree

My Lords, I rise briefly to give warm support to the amendment because I feel that we do not know anything like enough about a matter which will not only affect this country for many years to come but change our country totally and completely. I must say to the noble Baroness, Lady Williams, with whom I sat for many years in another place, that it is not something to marvel at that a group of countries gets to the starting post; what is to marvel at is if they succeed in the race that is to follow.

I have heard little about the concerns expressed by economists. What about the letter which went out from 153 leading economists in Germany some three months ago saying that they were very worried indeed about how economic and monetary union would be brought about? Economists in other countries have expressed their concern. They have said that it is rather as if the leaders of great countries are saying that such and such a thing must happen, without recognising that there are enormous problems in making it happen.

We have to recognise that there are many problems on the monetary front. Our unemployment figures and cost of living figures are totally different from those of other EU countries. Furthermore, we are the only country in the whole of Europe that is a net exporter of gas and oil. Therefore, changes in the prices of petrol, gas and oil will affect us in a completely different way. It is all very well to say that we will join when economies converge, but how do we know that they will lock? I cannot see that they will.

It is important to know about the constitutional impact of what is proposed, but I am also worried about what the effect will be on our foreign policy. I think back to a recent occasion when we supported America over the difficulties with Saddam Hussein. We were the ones who did. France was very much against us. What rows there would be if we joined in a European currency. I cannot see that happening unless we have a federated United States of Europe and I am quite certain that most people in this country do not want that.

Finally, I am certain that all of us and many thousands outside the House will want to know a great deal more about how it is proposed to bring economic and monetary union about.

Lord Bruce of Donington

My Lords, in the few remarks I was able to make some half an hour or so ago I mentioned the importance given in the Treaty of Amsterdam to democracy and the rule of law. I wish to concentrate on the rule of law in addressing myself to the subject matter of this amendment.

Your Lordships will recall that a Statement was made in the House on 5th May concerning the deliberations of the Council of Ministers, the heads of state, the European Council, or whatever it may be, on 2nd May. Your Lordships will recall that at the conclusion of the exchanges on the Statement I mentioned the fact that the appointment of Herr Duisenberg was, strictly speaking, unlawful because the provisions of the treaty, in particular those of Protocol 18 to the Maastricht Treaty and of Chapter III, Article 11, were not adhered to.

I do not think that we can be picky and choosy about this. If we believe in the rule of law—we apparently believe in the rule of law when it suits us—what was decided on 2nd May does not seem to have been an admirable way in which to approach the treaty. Your Lordships will recall that I drew the attention of my noble friend the Lord Privy Seal to this matter. He ventured to suggest that my interpretation of the article concerned was wrong. He said: I shall consider Chapter III, Article 11.2 of Protocol 18 of the Maastricht Treaty. I do not know what opinion I shall arrive at, but I suspect that my opinion will probably be on the side of the Council".—[Official Report, 5/5/98; col. 521.] I do not see how that can be because the terms of the protocol and, indeed, of Article 112 of the amended treaty are quite specific. They do not mention, as Herr Duisenberg himself pointed out, any designation of a person by nationality as probably going to be the next holder of the post. Nothing in the protocol or the treaty refers to the nationality of the person to be appointed or the person next to be appointed. The text is quite clear: Their term of office shall be eight years and shall not be renewable". Either the text of the treaty is right or it is wrong. There is no question of fudging this in the same way as various other issues were fudged.

The noble Baroness, Lady Williams, mentioned some points which she thought to be of general interest in determining our attitude towards monetary union. I would have expected her above all people to have been mindful of the law, particularly in the light of the matters that I ventured to raise and which are incorporated in the treaty. But she did not. She confined herself to, if I may say so with respect, the usual generalities, with which we are familiar, about the broad arguments for monetary union. She did not mention that there are 20 million unemployed people in Europe at the present time and she did not mention, when assessing her own country's contributions to the Community, that we subscribe £2.5 billion annually out of taxpayers' funds. That did not seem to attract her attention in the slightest.

I hope that we are able finally to lay to rest the question of the legality of the appointment of Herr Duisenberg. Quite clearly, I am right and the treaty is right. It would at least ease the position if we could have a complete admission of that, bearing in mind, as I ventured to mention at the time, that the Government have had the opportunity to amend the clauses at a number of stages ever since Maastricht and right up to the intergovernmental conferences which led to the new Amsterdam treaty, but they did not. Protocol 18 remains and Article 11.2 remains. I invite the Government to confirm that in presenting those facts to the House I was absolutely correct.

The Earl of Clanwilliam

My Lords, so 11 nations have signed a piece of paper and the booming baby euro has suddenly been born and is expanding at a vast rate. However, many dissensions belie the sense of unity. Much has been said already on this issue, so I shall proceed straight away to the point that we should remember, which is that the bank has no political input or agreed basis of operation except the authority of its own expertise. There is no effective parliament to which the central bank has to report. Therein lies the heart of the democratic deficit that is bugging the whole prospect.

One is tempted to fantasise on the contents of the reports that are called for by this amendment. Certainly, they will not contain any information from the European Central Bank because Mr. Duisenberg has said that it will not publish any reports for probably 16 years. We do not want to have any part of such a bank.

A country that has a new interest rate imposed on it without any definition as to why it is being done may become out of line with the bank's requirements. The Commission will then impose the rigours of the stability pact, which will further weaken the ability of the country in its efforts to repair its economy. In the meantime, unemployment and rising inflation will cause unrest, as has already been mentioned, and the government will probably fall—not the euro—followed by an administration cobbled together by a group of warring politicians. We will have Italy all over again. What a happy scenario! There will be no effective mobility of labour through lack of a common language, and the prospect of the transfer of manufacturing facilities, prompted by cheap labour in the failing country, is a delusion, as firms will not transfer their plants to unstable economies. At the same time the minimum wage will be a further disincentive to the transfer of manufacturing facilities.

We should instead enlarge the single market, as has been said, and create a stable industrial base in line with the World Trade Organisation agreements by reorganising the common agricultural policy and the common fisheries policy. We should allow the single currency to develop alongside national currencies. We could all use the euro. It could be a universal currency that we can put in our pockets. Any firm could have it and put it in the bank against its use in trading facilities with Europe. We should allow the currency to develop alongside our own national currency in the manner of the hard ecu which was originally suggested by Mr. John Major. We would then be in a position where everyone could use the ecu without any problems.

6 p.m.

Lord Grenfell

My Lords, I shall be brief because I know that the debate on this amendment has gone on for a long time. I wish to make a few points directed to one or two statements that have been made.

The first relates to what the noble Lord, Lord Beloff, said. He said that the French people will not long tolerate having a powerful neighbour dictating economic policy to them. Precisely—but that is exactly what EMU will remove. The noble Lord smiles, but that is the case. Economic and monetary union will remove the kinds of influences that he was so concerned about, such as Germany having power over economic decision-making in France.

Lord Beloff

My Lords, I am grateful to the noble Lord for giving way. I believe that he misunderstood me. My view is that it is not so much that the bank will he an instrument of German control over France, but that unelected bankers, with the kind of philosophy which Mr. Duisenberg has already revealed of keeping everything to himself, will create the kind of social discontent in France which is evident daily for anyone to see who goes to that country. There are strikes, demonstrations and other movements. I sometimes wonder whether noble Lords ever read the newspapers.

Lord Grenfell

My Lords, noble Lords do read newspapers, but not necessarily the same ones as those read by the noble Lord. That may be the difference. I come back to the point. The noble Lord said that Mr. Duisenberg and the bank would be keeping everything to themselves. I am not clear what he means by that. The people running the European Central Bank may not be elected officials, but they have been chosen because they are very good central bankers.

I believe that the result achieved in Brussels—although it was an extremely messy process, which I deplore—is a good one. The noble Lord, Lord Howell, pointed out that now we have the prospect of maybe 12, if not 16, years in which the European Central Bank will be run by two men who are both hard money-men. That is absolutely correct. So although I deplore the manner in which it was achieved, I am quite comforted by the result. If anything, France shot herself in the foot. One thing is certain in that as a result of the events in Brussels, the European Central Bank is going to be even more cautious about political interference than it was before. That is quite right because we need an independent central bank.

As regards Mr. Duisenberg, the 16 years referred to by the noble Earl, Lord Clanwilliam, and the fact that there will be no reports for 16 years, perhaps I may point out to him that that is simply not the case. Mr. Duisenberg said that he did not believe it was a good idea to publish reports which tracked the course of discussions and named the names of the people who were parties to them. I believe that he is absolutely right. Serious consequences can flow from a report of that kind being made immediately, or even a short time after, the governing body, which is the board, has met.

The Earl of Clanwilliam

My Lords, will the noble Lord reflect on the arrangements made by his party for the management of the Bank of England? It reports immediately each month.

Lord Grenfell

My Lords, I know that it does, but I am talking about the European Central Bank. There are different considerations here. Let us suppose that there is a recession in France. The vice-president of the European Central Bank, who is a French national, will not find it easy if the course of the arguments that he follows in that body are immediately published. If he makes one recommendation he will be accused of favouring his own country, but if he makes another he will be accused of the opposite. There does not seem to be very much point—and Dr. Tietmeyer agreed—about publishing in detail.

The point I am making is that it is wrong to say that no reports will be coming from the European Central Bank for 16 years. Of course there will be reports. The bank is going to explain why it has arrived at certain decisions without laying out at the time all the arguments in great detail as though it were the transcript of a meeting. Every quarter the president of the European Central Bank will be going before the European Parliament to explain what the bank has been doing and why it has done it. That is the kind of accountability and transparency that we are looking for. It is a great mistake to pretend that if the reports made are not in extensor they are not proper reports. That is wrong.

I come briefly to the question raised by my noble friend Lord Bruce. He mentioned the 20 million unemployed, as though the introduction of a single currency were bound to have a negative effect on that. If one cares to read what Dr. Otmar Issing, currently of the Bundesbank and now of the executive board—and most probably the chief economist of the European Central Bank—has said, he has encapsulated the situation very well in the following words. In Brussels he referred to the fact that price stability was the primary objective of the Central Bank, while taking into account what it was that the member governments saw as being the essential economic policies that they wanted pursued in Europe. He said: Price stability, and the resulting low interest rates, will he instrumental in securing higher levels of investment, increased growth and new jobs". It is not the responsibility of the European Central Bank directly to be creating jobs. But by pursuing price stability and being very firm on that, in the end, as Otmar Issing said, that should lead eventually to an increase in jobs.

The final point I wish to make is this. I hear voices in your Lordships' House suggesting that if there is no precedent for something, then it is too risky to take on. I do not remember the Wright brothers having any real precedent for getting an aeroplane off the ground when they went about their particular enterprise. But I find it distressing that we live in a time when people believe that where there are no precedents no risks should be taken.

Of course EMU is a gamble, but it can be made to work provided that there is a good independent central bank and that the governments who are members make their views heard. They will do so through informal discussions in the Euro 11. They will all make their views known through ECOFIN which will have primacy over Euro 11. They will also be heard in the governing council and general council of the European Central Bank.

It is not as if EMU has been introduced with no clear ideas as to whether or not there are structures in place to make it work. The structures are in place. If they are used properly, there is a very good chance that EMU will prove to be the success that many believe it will be and that it will become a major reserve currency in the world and serve the single market in the way intended.

It would be a pity to take the view that just because we are uncertain that it will work, we should shy away from it. If that had been the policy all the way through, the European Union would never have got off the ground in the first place. I know that that would have given great pleasure to a number of noble Lords, but the truth of the matter is that we should give this a try. There are so many signals to suggest that it is a good move to make. We should have the courage to set aside some of our fears about what may happen if it goes wrong and make a determined effort to ensure that it goes right.

Baroness Oppenheim-Barnes

My Lords, before the noble Lord sits down, perhaps he will clarify the point that he has just made. If as he says we should give it a try and it does not work, is he saying that the consequences will be so insignificant that we should just get out of it and give something else a try?

Lord Grenfell

My Lords, I withdraw the words "give it a try". I meant that we had to try very hard to make it work. We are not certain that it will work, but we have to try.

Lord Belhaven and Stenton

My Lords, before the noble Lord sits down, I should like to return to some recent remarks. I believe that my noble friend Lord Beloff meant that not many noble Lords read French newspapers. It is not a matter of what newspapers noble Lords read. If any noble Lords read French newspapers they may come to the conclusion that France is in turmoil, with strikes and every kind of disorder.

Lord Grenfell

My Lords, perhaps I may inform the noble Lord who has just sat down that I left my home in the centre of Paris this morning and that neither when I read my newspaper which I picked up along the way, nor when I travelled to the Gare du Nord did I become aware that France was in turmoil. I assure the noble Lord that I read the French newspapers every day and I have seen no recent signs of that. I believe that the last manifestation that I saw occurred some distance away and that on that occasion some shopkeepers were complaining about working hours.

Lord Hughes

My Lords, apart from anything that my noble friend the Minister may say about the desirability of inserting an amendment of this kind into the Bill, it is obvious to me that if the point arrives when the Government of the day know exactly where they stand in relation to the currency, they must make a report of some kind to Parliament. I would be surprised if it did not include the three points contained in the amendment of the noble Lord, Lord Mackay.

I do not support this amendment in its present form because I believe that it would be unworkable. I can envisage two sets of circumstances. Before 1st May 2003 there may well be a situation in which the Government of the day are in possession of all the facts to enable them to make a decision on which they wish to report to Parliament. If before 1st May a Minister rose to say that he wished to make a report to Parliament on the position and asked to be absolved from the necessity to make it a year or 18 months hence as provided for in the 1998 Act, I do not suppose that there would be any difficulty in obtaining consent to that.

But there is another possibility. It may be that some time at the beginning of 2003 the Minister responsible may know that he will not be in a position to make a statement on 1st May 2003. If the noble Lord, Lord Mackay, is right, according to the answer provided to me the Minister would have to ask Parliament to pass another Act enabling the Minister to say that he would not be in a position to make the statement on 1st May 2003 and asking Parliament to remove that provision from the legislation. That would be absolute nonsense.

It is obvious that whatever the merits of this amendment it is defective in that it refers to a specific date. If it had said "at the earliest possible moment" or words to that effect, it would have been appropriate to whenever it was suitable to make the statement, but including the date 1st May 2003 makes the amendment unworkable. Quite apart from the merit of inserting this into the Bill at all, I believe that if we are to have such an amendment, it should be one that works.

6.15 p.m.

Lord Pearson of Rannoch

My Lords, I was not going to intervene in this debate but I feel that I must do so very briefly given the unbounded optimism and enthusiasm of the noble Lord, Lord Grenfell, for this project. There was discussion earlier in the debate about the timescale which is in the amendment. I am sure that the noble Lord and the Minister on the Front Bench will be aware that there is a well informed view in the City of London that it may take as long as two years after 1st January 1999—in other words, up to about 1st January 2001, more or less—for the inherent stresses in the economic and monetary union project to become irresistible. I have referred to those stresses before. Essentially, they are that the single interest rate and the single exchange rate, which the project forces on disparate and diverging economies, will not be able to hold their people together for much more than two years. On the one hand, we must be looking at much increased tax from the countries which are doing better and/or civil unrest in the countries which are in decline and which will not be getting the tax from the donor countries.

I do not know whether it is appropriate to put that question to the noble Lord, Lord Grenfell, at Report stage. I am sure that I can look to the noble Lord the Minister to reply in a way that perhaps his noble friend the Lord Privy Seal did not reply in the debate on the EMU Statement the other day; nor did the noble Lord himself reply when I put that question as clearly as I could in the debate on 28th April.

Finally, I cannot sit down without taking issue on two points raised by the noble Baroness, Lady Williams. Referring to sovereignty, she touched on the well-worn analogy to NATO. The slogan runs that we gave up our sovereignty to join NATO, so what do we have to worry about if we give up any sovereignty over the powers to tax and spend which go with EMU?

Lord Grenfell

My Lords, perhaps the noble Lord will allow me to intervene. We are not giving up powers to tax. Under EMU every government has the right to tax high if they wish to spend high or to tax low if they wish to spend low. We are not surrendering the power to tax.

Lord Pearson of Rannoch

My Lords, I accept the point raised by the noble Lord, except that those of us who know how the European Union proceeds are well aware of the discussions now in Brussels about the necessity for a unified tax system under EMU. They are very much more confident and advanced than they were even before the absurd events of a fortnight ago. The particular machinery to which I should have referred—and to which I did refer earlier—is the single interest rate and the single foreign exchange rate for disparate and diverging economies.

I come back to the point made by the noble Baroness, Lady Williams, that we gave up our sovereignty, or some of it, or much of it, to join NATO and therefore what is the problem now with the EMU project or, indeed, with the whole European project. The answer of course is that we can leave NATO when we want, but we cannot get out of the quagmire, the quicksand, the quaking bog of the Treaty of Rome into which we have so foolishly strayed already.

Finally, the noble Baroness, Lady Williams, said that those of us who doubted that EMU would start on time have been proved wrong. That is not quite right. We said that we did not think that the proposed countries of the Economic and Monetary Union project would meet the requirements. In that we were quite right. We did not foresee with complete clarity that the European enthusiasts would go ahead and fudge the issue and carry on, whatever the treaty said, in any case.

Then the noble Baroness said that she wanted to congratulate the participating nations which are joining EMU on having got to the station and got to the train on time. The trouble is that we have not the faintest idea where the train is going, but there are some very dangerous signals ahead.

Lord McIntosh of Haringey

My Lords, perhaps I may start by saying how much I agree with the noble Lord, Lord Howell of Guildford, when he said that it was necessary and appropriate that we should debate this matter again after the weekend of 1st to 3rd May. As he rightly said, our debate on the previous occasion was in anticipation of the great events that then took place. We are now not only past that date, but I would have hoped, and I still do hope, that we are past some of the more hysterical reactions which took place immediately after that weekend on the decisions that were then taken.

There is no doubt that they were important decisions. Since our previous debate heads of state or government have agreed that 11 member states: Belgium, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, Spain and Finland, will participate in EMU on 1st January 1999.

In line with the information that we gave to Parliament before the Special Council, the United Kingdom voted in favour of the participation of each of those 11. Some noble Lords before and since have expressed concern about the participation of some of those countries. In particular, I recall a debate initiated by the noble Lord, Lord Chesham, about the participation of Italy.

But we supported the Commission recommendation. We did so because all of the 11 countries joining the euro have been confirmed by the Commission and by the European Monetary Institute reports as having made substantial progress towards economic convergence on the basis of the treaty criteria.

I repeat the point that I made before that what they and we were looking for was not spot convergence at any single date but convergence over a period of time. Of course, there were elements in which spot convergence did not occur. There were examples in Italy, Belgium and other countries in which the formal requirement at a particular point in time, if you stopped the clock at that time, would not have been compliant. But the important point has always been, and was recognised by the Commission and the European Monetary Institute to be, that the direction of progress in all cases was the right direction. That is confirmed by the framework for fiscal discipline which is provided by the stability and growth pact.

The high debt countries—and of course there have been high debt countries—have been reducing their debt to GDP ratios in recent years and are committed to reducing them in the future.

The declaration agreed on 1st May reaffirmed the commitment to fiscal discipline, economic reform and job creation—vital ingredients to the success of Economic and Monetary Union.

The decision on 2nd May on participation in the single currency was a historic decision carefully prepared and in line with market expectations. It removed any remaining uncertainty as to the start date of, or participation in, the single currency.

I said that it was appropriate that we should be having this debate at an interval after those decisions took place because what was conspicuous about the immediate reaction was how wrong it was in emphasis and, indeed, in the conclusions reached. In particular I want to refer to the excessive emphasis which was given to the issue of the presidency of the European Central Bank. The heads of state or government reached agreement on the appointment of Wim Duisenberg as the first President of the European Central Bank. He indicated that he would not wish to serve a full term. The heads of state or government agreed that he would be succeeded by a Frenchman. M. Chirac indicated that his nomination would be M. Trichet, Governor of the Banque de France and no head of state or government found any difficulty with that suggestion.

It has been suggested in debate this afternoon that because Mr. Duisenberg has not been precise about the day that he will wish to retire—indeed, he has indicated that there may be considerations affecting his retirement date which are not yet known—somehow that is a breach of the Maastricht Treaty. It is now being suggested that he is likely to stay on for the full eight years. Noble Lords cannot have it both ways. Either they are making the swingeing attack on the breach of the Maastricht Treaty which my noble friend Lord Bruce of Donington made or they are saying that the Maastricht Treaty is going to be observed and somehow that is a terrible thing as well. I do not know which side noble Lords will take when they come down on this interesting but not fundamental issue. All I can say is that they cannot have it both ways.

I shall not go into the other, perhaps much more important, decisions that were taken about the membership of the executive board, the vice-presidency and the varying terms of office of the remaining members of the board. But all I can say is that it is going ahead entirely as planned. When the European Parliament gives its decision tomorrow—because it held its hearings up to the end of last week and will vote on its opinion tomorrow—heads of state or government will agree the formal appointments by written procedure and the European Central Bank will be formally constituted and able to proceed with its preparations for 1st January 1999.

Anybody reading the press coverage, particularly on the Sunday and Monday of the first weekend in May, would think that a disaster had happened. Because a debate took 12 hours longer to conclude than was intended, it was the process that commentators in the press appeared to think to be important. They seemed to ignore the fact that agreement was reached, a strong executive board will be in place and that the European Central Bank will proceed as planned. The judgment of the press at that time, and particularly of opposition politicians at that time, was shown to be faulty by the reaction of the markets.

It was anticipated from the outset by all of these people in their immediate reactions, including the Leader of the Opposition, that when the markets opened on the Monday they would show their disapproval of the whole procedure and their belief that the Economic and Monetary Union had somehow been stillborn or born in some deformed way. The markets totally disproved that. The reaction of the markets shows that the decision was the right one. Their reaction shows that there is a strong executive board at the start of the single currency and it increases the likelihood that EMU will succeed. And we want it to succeed. We have always made clear that we want it to succeed. If the economic benefits of membership are clear and unambiguous, we want Britain to participate in it and to participate therefore in that success.

There are many potential benefits: for instance, an improved single market; greater transparency; greater competitiveness; reduced transaction costs; greater opportunities for trade and investment; and many advantages which we will see only when we do not have them and the other 11 countries do.

Noble Lords, as is their right, have highlighted uncertainties. The Government have always said that for the full benefits of EMU to be realised, the economic reform of labour, transport and capital markets must continue. That is why we are pursuing our agenda of economic reform at home and during our presidency of the European Union.

A consensus behind the need for economic reform is building. I refer noble Lords to the declaration agreed by the Council of Economic and Finance Ministers (ECOFIN) on 1st May. That declaration goes well beyond re-emphasising the importance of sound public finances. It reaffirms the commitment of member states to economic reform and job creation. Member states committed themselves to producing reports on their products and capital markets as well as their labour markets. That pushes economic reform up the EU agenda. It increases the likelihood that the full benefit of EMU will be realised. This Government will be seeking further progress before the Cardiff European Council.

Many of the issues we are discussing will come into effect before or after—whether or not—Britain joins the economic and monetary union. The noble Lord, Lord Howell of Guildford, in what I dare to say was an extremely thoughtful and impressive speech, spoke of the existence of a parallel currency. It is called by the nastier term "Eurocreep", and I am glad that he avoided using it. Of course, that will come into effect in the period before we join. When the Chancellor made his speech on European monetary union at the end of last year, we were right to emphasise the preparations that we are making for the single currency. We are making them because they have to be made, irrespective of whether and when we join.

I turn to the amendment. I have no objection to the noble Lord, Lord Mackay of Ardbrecknish, leaping on to paragraph 40 of the 5th Report of the House of Commons Select Committee on the Treasury. It is entirely legitimate to do so. He was too kind to me when in the previous debate he said that I did not respond to the report because the Government had not made their formal response. I did not respond because he had read the report and I had not. I had been on the Bench the whole time the Treasury report had been available and no one had given me an advance copy.

Perhaps I may remind the noble Lord about the status of the report and the committee. The committee includes as its chairman Giles Radice, who is high up in the European movement. It also includes Sir Teddy Taylor, whose views are pretty well known and who left the official Parliamentary Conservative Party for some time. Therefore, it is hardly likely that the committee will go out on a limb. Indeed, it states explicitly in paragraph 6 of its report that members of the committee have differing views as to the intrinsic merits of EMU and that it therefore decided it would be unproductive to attempt to reach a view as to whether the UK should or should not participate in stage 3.

Indeed, the committee scrutinised the framework for making the decision which the Chancellor set out. In paragraph 40, which the noble Lord, Lord Mackay, quoted, it stated that it would not be possible for there to be a final report giving all the answers to all the problems. The committee acknowledged that history would not stop at the date of some "final report".

The noble Lord, Lord Mackay, fell into that trap. He is proposing that history should stop on 1st May 2003. I looked up 1st May 2003 in the hope that it would be a Sunday. Unfortunately, it is a Thursday, so he gets away with that on a technicality. But the idea of a single date five years away is a total nonsense. That is revealed by the fact that until yesterday the noble Lord's amendment related only to measures to be adopted or decisions to be taken. It was only yesterday that he and his colleagues woke up to the fact that some measures might already have been adopted and decisions taken. They wrote that into the amendment.

We do not need reports of that kind, not because the date is silly—although it is—but because it is inconceivable that the issues set out in the amendment will not have been reported to Parliament on many occasions between now and 1st May 2003. I do not know what measures and decisions might be on the table at that date, but I know that any there are will have been subject to the normal scrutiny procedures of this Parliament. Those procedures were repeated for the record by my noble friend Lady Symons only two hours ago.

We are committed much further than that. When the Government decide that we have the measure of stable convergence that is necessary to begin the process of entry to the European economic and monetary union, at that stage we will be committed to the triple lock; the Cabinet will make a decision; Parliament will make a decision and the people of this country will make a decision in a referendum. Even if EMU were not to be debated between now and then at a fundamental as well as at an occasional level, it is inconceivable that we would go to the people of this country without a full report covering at least all the points set out in the amendment.

6.30 p.m.

Baroness Nicholson of Winterbourne

My Lords, before the Minister sits down, will he assure the House that despite its insistence on regular reporting to your Lordships' Chamber this amendment will not be brought out again on Thursday and an unlimited tranche of time given to this debate once more?

Lord McIntosh of Haringey

My Lords, in Committee, I was accused of being tetchy for pointing out that procedures in this House allow matters to be debated at unlimited length and as often as any noble Lord likes. I can give no assurance that the noble Lord, Lord Mackay of Ardbrecknish, will not bring forward a similar amendment if he needs or wishes to on Third Reading.

I believe that my noble friend Lord Hughes was right when he made it clear that the amendment is unnecessary. It is also patently apparent to all of us who have an open mind on these matters that it will be damaging. I urge the House to reject it.

Lord Renton

My Lords, before the Minister sits down, perhaps I may presume to correct him. It is a fixed rule of this House that we cannot raise matters on Third Reading which have been fully debated either in Committee or on Report.

Lord McIntosh of Haringey

My Lords, I have found ways of getting round that, as the noble Lord, Lord Renton, knows, and I do not doubt the ability of the noble Lord, Lord Mackay, to do the same.

Lord Mackay of Ardbrecknish

My Lords, the noble Lord, Lord McIntosh of Haringey, was rightly cautious. He did not fall into the trap of trying to give me a lecture from a newcomer as to what we can and cannot do in this House. I shall decide in a few minutes whether to take the step necessary to prevent me bringing this matter back on Third Reading.

We have had an interesting debate. I listened with interest to the noble Lord, Lord McIntosh, and I am glad that he thanked me for my kindness on the day the report was published. However, I know the convention is that Ministers do not respond to Select Committee reports in detail. I appreciate some of the points made about the report and I understand that the Government will present to the House of Commons their own fuller report in response to the Select Committee.

I thought that the noble Lord was on slightly weak ground when he said that the Select Committee's report was a sort of compromise between the Europhiles like Giles Radice and the Europhobes like Teddy Taylor. I should have thought that that was the strength of paragraph 40: that despite the wide range of opinions in the Select Committee, it was able to reach that conclusion. It is now two or three weeks since I read the report, but if my recollection is right, in the proceedings of the committee where it decides to agree or disagree with amendments tabled by various members, no amendments were tabled to paragraph 40. It was agreed and nobody attempted to vote against it. That is my memory. I do not have the report at the moment and I cannot check that. However, if I am wrong, I am sure that the noble Lord will correct me.

Lord McIntosh of Haringey

My Lords, an amendment was proposed to paragraph 40 which was carried.

Lord Mackay of Ardbrecknish

My Lords, therefore, the paragraph is indeed the majority wish of the committee.

Lord McIntosh of Haringey

My Lords, six to five.

Lord Mackay of Ardbrecknish

My Lords, I shall not ask the noble Lord to go further and tell me what the amendment was. However, I do not believe that it was to strike out the whole paragraph or to strike out particularly pro or anti-European sentiments.

The noble Lord, Lord McIntosh, and the Chancellor of the Exchequer extol the virtues of the euro. Therefore, I am slightly puzzled as to why they, as a government, are not beginning the steps to enter it. After all, we meet more of the convergence criteria than most of the 11 who have been allowed to join. It seems to me that if the Government really believe what they keep on telling us, they should be prepared to put it to the test. The fact that they do not makes me wonder whether they are as confident about the advantages of the euro or about their ability to sell it either to Parliament or to the British people. But that is another issue.

This amendment refers to the year 2003. I explained why I chose that date. It has to do with the five years mentioned in the Treasury Select Committee report. By that time, we should have a fairly clear view of how the project is working out and whether it is succeeding. The noble Lord, Lord Grenfell, hopes it will succeed but he indicated just a slight tremor of doubt when he spoke. That is quite legitimate. He feels that we should put our minds to making a success of it. I have made clear on a number of occasions that it would seem to me not in Britain's interests, now that it has started, that it should fail because we should be caught up in the resulting economic disturbance, which would not be good for our economy.

The point about 2003 is that it accords with what the Select Committee said. I have put down a proper date. If I had known that that would be the sticking point for many noble Lords, I may have made it slightly vaguer and suggested that it should be within five years, or something like that. That tempts me to bring back the matter at the next stage with that as the change which would be well within the rules of order.

In an intervention, my noble friends Lord Howell and Lord Renton thought that we should be able to tell long before 2003 how successful the project was. They may or may not be right. However, as I explained, the year 2003 was chosen by myself and my noble friends on the basis of the five-year period suggested by the Treasury Select Committee.

The choice of Mr. Duisenberg and the subsequent choice, if that is what it is to be, of Jean-Claude Trichet is an indication that perhaps the euro will be a firm currency. Indeed, Mr. Duisenberg's evidence to the European Parliamentary Committee last week would certainly encourage one to think that it will be a strong currency.

However, I must say to my noble friend Lord Howell that there is no guarantee that Mr. Trichet will be the next president of the European Central Bank. The Statement, which was given by the Prime Minister and repeated here, said: Secondly, that we expected his successor to be French". Indeed, the noble Lord, Lord Tordoff, picked that up. The Statement goes on to say: President Chirac made clear his nomination would he Jean-Claude Trichet".—[Official Report, 5/5/98; col. 508.] But in an intervening exchange, when the noble Lord, Lord Tordoff, asked whether he had heard correctly that the Statement said that the next president would be French, the noble Lord, Lord Richard, said: It was M. Trichet—not just a Frenchman—who was nominated". On re-reading the Statement, I do not believe that to be correct. It is quite clear that a Frenchman is to be nominated. If something happens to Mr. Trichet, if he falls under the proverbial bus, it will be another Frenchman.

Indeed, Mr. Duisenberg said in his evidence last week that he found slightly absurd the leader's promise to guarantee his vacant job to France. He said that the summit deal to hold his job for a French national amounted to a breach of the Maastricht Treaty because it contained no references to specific nationality as a credential for the post. Therefore my noble friend Lord Howell should not be so reliant on those two gentlemen holding those posts for the next 12 or 16 years because the Statement does not exactly say that. There is certainly a way out on the part of the French Government.

The noble Baroness, Lady Williams, talked about enlargement. Just to show that I listen and agree with her occasionally, I agreed absolutely with what she said about enlargement. Indeed, it is rather a pity that as much energy has not been put into enlargement as has been put into the creation of the euro. In the long march of history, it may have served Europe better had more energy been put into enlargement rather than the creation of the euro.

Therefore, I still believe that this is a difficult issue for us. I do not wish to delay the House further on this matter. As I have suggested, the amendment accords clearly with the Select Committee's findings. The House of Commons should be allowed to discuss those findings before the Bill becomes law. If this amendment were passed, then the House of Commons would be able to consider the issue in the light of the report by the Treasury Select Committee.

I was undecided, but having been given a lecture from the Liberal Democrat Benches that I should not bring this matter back at the next stage, I shall make sure that I cannot do so by asking the opinion of the House.

6.46 p.m.

On Question, Whether the said amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 76: Not-Contents, 138.

Division No. 1
CONTENTS
Annaly, L.	Marlborough, D.
Astor, V.	Marlesford, L.
Astor of Hever, L.	Massereene and Ferrard, V.
Baker of Dorking, L.	Molyneaux of Killead, L.
Balfour. E.	Monson, L.
Belhaven and Stenton, L.	Montagu of Beaulieu, L.
Beloff, L.	Moran, L.
Berners, B.	Moynihan, L.
Biddulph, L.	Munster, E.
Blatch, B.	Northesk, E.
Boardman, L.	Norton, L.
Bridgeman, V.	Onslow of Woking, L.
Bruce of Donington, L.	Oppenheim-Bames, B.
Cadman, L.	Palmer, L.
Carnck, L.	Park of Monmouth, B.
Clanwilliam, E.	Pearson of Rannoch, L.
Coleraine, L.	Pilkington of Oxenford, L.
Crickhowell, L.	Plummer of St. Marylebone, L.
Cross, V.	Rankeillour, L.
Dartmouth, E.	Rawlings, B. [Teller.]
Dean of Harptree, L.	Rennell, L.
Exmouth, V.	Rodney, L.
Gage, V.	Seccombe, B.
Gray of Contin, L.	Shaw of Northstead,L.
Grimston of Westbury, L.	Skelmersdale, L.
Hemphill, L.	Stockton, E.
Henley, L.	Stodart of Leaston, L.
Home, E.	Stoddart of Swindon, L.
Howell of Guildford, L.	Strathclyde, L. [Teller.]
Jeger, B.	Strathcona and Mount Royal, L
Jenkin of Roding, L.	Sudeley, L.
Kimball, L.	Thomas of Gwydir, L.
Kintore, E.	Tryon, L.
Knight of Collingtree, B.	Ullswater, V.
Liverpool, E.	Wakeham, L.
Lucas, L.	Wharton,B.
Lyell, L.	Willoughby de Broke, L.
Mackay of Ardbrecknish, L.	Wise, L.
NOT-CONTENTS
Acton, L.	Dubs, L.
Addington, L.	Eatwell, L.
Alderdice, L.	Evans of Parkside, L.
Allenby of Megiddo, V.	Ewing of Kirkford, L.
Amos, B.	Ezra,L.
Archer of Sandwell, L.	Falconer of Thoroton, L.
Beaumont of Whitley, L.	Farrington of Ribbleton, B.
Berkeley, L.	Gallacher, L.
Bethell, L.	Gilbert, L.
Blackstone, B.	Gladwin of Clee, L.
Bledisloe, V.	Goodhart, L.
Blyth, L.	Gordon of Strathblane, L.
Borrie, L.	Gould of Potternewton, B.
Brooke of Alverthorpe, L.	Graham of Edmonton, L.
Brooks of Tremorfa, L.	Grantchester, L.
Burlison, L.	Gregson, L.
Carlisle, E.	Grenfell, L.
Carter, L. [Teller.]	Grey, E.
Chandos, V.	Hacking, L.
Cledwyn of Penrhos, L.	Hampton, L.
Cocks of Hartcliffe,L.	Hamwee, B.
Crook, L.	Hanworth, V.
Currie of Marylebone, L.	Hardie,L.
Dahrendorf, L.	Hardy of Wath, L.
Davies of Coity, L.	Harris of Greenwich, L.
Davies of Oldham, L.	Haskel, L.
Dean of Thornton-le-Fylde, B.	Hayman, B.
Desai, L.	Hilton of Eggardon, B.
Dholakia, L.	Hollis of Heigham, B.
Donoughue, L.	Holme of Cheltenham, L.
Dormand of Easington, L.	Howie of Troon, L.

Hughes, L.	Prys-Davies, L.
Hughes of Woodside, L.	Puttnam,L.
Hunt of Kings Heath, L.	Ramsay of Cartvale, B.
Hylton,L.	Randall of St. Budeaux, L.
Islwyn, L.	Razzall, L.
Janner of Braunstone, L.	Rea, L.
Jay of Paddington, B.	Redesdale, L.
Jenkins of Putney, L.	Rendell of Babergh, B.
Judd, L.	Richard, L. [Lord Privy Seal.]
Kennedy of The Shaws, B.	Rochester, L.
Kennet, L.	Rodgers of Quarry Bank, L.
Kirkhill, L.	Russell, E.
Levy, L.	Sainsbury of Turville, L.
Linklater of Butterstone, B.	St. John of Bletso, L.
Lockwood, B.	Sandberg, L.
Lofthouse of Pontefract, L.	Scotland of Asthal, B.
Lovell-Davis, L.	Sefton of Garston, L.
Ludford, B.	Sewel, L.
Mclntosh of Haringey, L. [Teller.]	Shepherd, L.
	Simon, V.
Mackie of Benshie, L.	Simon of Glaisdale, L.
Maddock, B.	Simon of Highbury, L.
Mallalieu, B.	Smith of Gilmorehill, B.
Mar and Kellie,E.	Steel of Aikwood, L.
Mason of Barnsley, L.	Symons of Vernham Dean. B
Merlyn-Rees, L.	Taylor of Blackburn, L.
Meston, L.	Thomas of Macclesfield, L.
Mishcon, L.	Thomas of Swynncrton, L.
Molloy, L.	Thomson of Monifieth, L.
Monkswell, L.	Thurso, V.
Montague of Oxford, L.	Tordoff, L.
Newby, L.	Turner of Camden, B.
Nicholson of Winterboume, B.	Walker of Doncaster, L.
Nicol, B.	Walpole, L.
Ogmore, L.	Whitty, L.
Orme, L.	Williams of Crosby, B.
Peston, L.	Williams of Elvel, L.
Ponsonby of Shulbrede, L.	Williams of Mostyn, L.
	Winston, L.

Resoled in the negative, and amendment disagreed to accordingly.

6.55 p.m.

Lord Moynihan

moved Amendment No. 3: After Clause I, insert the following new clause— COMMON FOREIGN AND SECURITY POLICY (". Her Majesty's Government shall not take any steps to participate in the decision-making arrangements for the common foreign and security policy (CFSP) applicable under Article J.13 of the Treaty on European Union (as set out in paragraph 10 of Article 1 of the Treaty signed at Amsterdam on 2nd October 1997 amending the Treaty on European Union, the Treaties establishing the European Communities and certain related Acts) until each House of Parliament has come to a Resolution on a motion relating to the CFSP tabled by a Minister of the Crown."). The noble Lord said: My Lords, I indicated in Committee that I intended to return on Report to the issue of the new decision-making procedures applicable under Article J.13 of the Treaty on European Union, as set out in paragraph 10 of Article 1 of the Treaty of Amsterdam. We had a valuable and comprehensive debate on foreign policy in Committee in which we appreciated the Minister's detailed responses to a wide range of arduous and probing questions, which demonstrated the high level of interest and concern over matters relating to the common foreign and security policy in your Lordships' House. We were grateful that the Minister dismissed the fear that the Amsterdam Treaty could be a Trojan horse for a supranational foreign policy, and for her confirmation that the Government intend to ensure that the CFSP remains intergovernmental, with overall strategy on foreign policy issues and the most important decisions of principle taken by unanimity in the European Council, as indeed they should be.

Likewise, we appreciated the explicit recognition that qualified majority voting is not appropriate for foreign policy decisions and that it is essential for us to retain our national veto in that area. A member state vetoes a common foreign policy proposal when it considers that its national interests would be damaged by such a proposal. Under majority voting, it would have to accept that damage. But if a country felt strongly enough to veto a proposal in the first place, it is likely to feel strongly enough to complain loudly about being over-ruled. The result would be a member state resentful at seeing its national interests overridden and an artificial European common foreign policy discredited before it had even begun, as the rest of the world would know that it was contested even within Europe.

However, although we have retained our national veto, the Amsterdam Treaty nevertheless makes significant changes to the CFSP decision-making process. The case for those changes was not made satisfactorily in Committee. The argument that the introduction of automatic qualified majority voting for the implementation of decisions will make the CFSP more effective has not been proved. It still remains for the Government to explain what benefit would be gained from the provisions in paragraph 2 of Article J.13; for the treaty continues the distinction between decision making on principles of policy, which will still be unanimous, and on the implementation of those decisions, which will now generally be by QMV. The fact that qualified majority voting will now automatically apply to the implementation of many decisions leaves open many questions about the feasibility of maintaining that distinction; for example, could not an implementing decision for one country touch on points of policy for others? When this happens who will determine what is implementation and what is policy? I am not convinced that the line between principle and action is sufficiently clear-cut to merit the automatic introduction of QMV.

In the Minister's opinion what is a trade sanction? Is it a principle or is it an action? I take the example of the United Nations resolutions to criticise human rights in China. The present Government, despite their ethical foreign policy—increasingly tattered and careworn though it is—and to the jaw dropping amazement of human rights campaigners the world over, took the extraordinary decision not to support a UN resolution on human rights in China, apparently solely in the interests of maintaining a common foreign policy in Europe. In the eyes of the previous government such a resolution represented a straightforward matter of implementing agreed policy in a timely way, while for other member states it appeared to be an error of judgment. How would the automatic procedures for QMV have worked in that case? I should like the Minister to clarify how this change to allow automatic QMV for implementation of decisions on the basis of common strategies will, allow Europe's voice in the world to be heard more clearly and will improve the effectiveness of CFSP co-operation when the line between principle and action is not always black and white so that we risk the creation of an artificial forced common foreign policy supported by most, instead of a true common foreign policy agreed by all". Nevertheless I am grateful for the Minister's definition of a new CFSP instrument—the common strategy—which she envisaged would not be very different from existing joint actions but which somehow would give the European Union's common policies more weight on the world stage. When they are genuinely common policies agreed by all this is a worthy and desirable objective. However, I should be grateful if the Minister could provide us with a little more detail on this point. The treaty provides for common strategies in important areas of foreign policy where member states have interests in common and where they agree there will be advantage in working together. To what extent does the Minister envisage that this new instrument will be used? Can she give examples of current important areas of foreign policy where member states have interests in common to which she anticipates the common strategy would be applied? To what extent does she anticipate decisions of the Council on CFSP will be made using common strategies and therefore decided by QMV? What decisions concerning important areas of foreign policy is it likely to result in which we would then have no power to prevent? Given that the number of decisions taken by QMV in the Council of Ministers will ultimately be determined by the number of common strategies decided upon by consensus in the European Council and by the political will of a particular presidency to try the QMV procedures on decisions of a secondary nature, what vision do the Government have for the practical operation of qualified majority voting?

I return to some questions on the national veto mechanism or "emergency brake" and the provision for constructive abstention. In Committee I said that if past experience has taught us anything it is that constructive abstention is a tool best used in a "can't", not "won't", situation when a country agrees with a decision but for domestic reasons is not able to participate in its adoption, particularly in the light of paragraph 1 of Article J.13 which requires abstainers to accept in a spirit of mutual solidarity that the decision commits the Union as a whole and they cannot undermine or seek to thwart it subsequently. Can the Minister confirm that, given paragraph 1 of Article J.13, constructive abstention is not an adequate and appropriate mechanism to deal with real disagreements between countries over foreign policy decisions to implement common strategies—and therefore taken by QMV—and that the only recourse for a country in this position would be the emergency brake mechanism? As the House is aware, the emergency brake can be pulled by a country when it has important and stated reasons of national policy which cause it to oppose a decision, thereby preventing a vote being taken. I should be grateful if the Minister could confirm that it is the individual member state activating the emergency brake that will determine what is an important and stated reason of its own national policy, and that no one else will arbitrate on what constitutes this.

Furthermore, if a number of other states can achieve a qualified majority on the decision, is it not the case that the adoption of the decision would be regarded as postponed, for the matter could then be referred to the European Council for a decision to be taken by unanimity which the country in question would have to veto? As the Minister pointed out to the Chamber in Committee, I am aware that referral to the European Council reflects the current reality that if Foreign Ministers cannot agree, they pass an issue to heads of government or state in the European Council to attempt to resolve the issue by unanimity. But what guarantees can the Minister give that a country in this position would not be under pressure to accede to the implementation of a forced common foreign policy decision?

I wish to ask the Minister about the operation of CFSP as a whole. To help clarify the points I wish to raise, I have focused on a case study in foreign policy; namely, recent events in Sierra Leone. How can the Government justify the changes to the CFSP decision-making procedures which bring us a step closer to an integrated foreign policy when the Foreign Secretary purports not to know the policies being undertaken by his own officials in the name of the British Government? When he finally finds out about these policies, he actively disagrees with them, professing deep concern and promising an inquiry and that appropriate action will be taken against anyone found to have transgressed. How on earth will the Foreign Secretary ensure that Britain plays a leading role in devising and co-ordinating common foreign policies in Europe when he does not even know what his own department is doing? How will he work to mould key common foreign policies in Europe in the image of British Government policy when the case of Sierra Leone has proved that he cannot be relied upon to know what British Government policy is in the first place? How will he have any credibility to ensure Britain's voice is heard when he was unaware of British Government involvement in a situation where arms were supplied in breach of a UN embargo?

This is not the first time the Foreign Secretary has been caught on the hop. Speaking on the situation in Kosovo only the week before, he was unaware that British troops were on exercise in Macedonia. Just how credible does the Foreign Secretary's promotion of an EU ethical arms code appear in the wake of the Prime Minister's extraordinary new foreign policy doctrine of the ends justifying the means, even to the extent of breaching UN arms embargoes? That is the scenario for this country, with the Foreign Secretary responsible for our input into CFSP, where ignorance is used as an excuse for negligence and where innocence of the facts is prayed in aid of incompetence. But what sort of CFSP would the Prime Minister advocate given that he is now praising the very same Foreign Office officials whom the Foreign Secretary only six days ago roundly disowned?

The Prime Minister would presumably support a CFSP in which the ends justified the means, in which it is permissible to condone breaches of international law and to undermine the credibility of the United Nations if it means the right results, and then to massage the terms of any awkward arms embargoes to claim that they were not breached deliberately. Does the Minister agree with the Foreign Secretary, who has said, The Government have consistently supported the legitimacy of the United Nations. This Government abide by the resolutions of the Security Council and are committed to the rule of international law. We have not and we will not condone any breach of international law"? Or does she agree with the Prime Minister, who has said it was the right thing to do, thereby somehow managing to distinguish between deliberately breaking international law, which he deems to be wrong, and inadvertently doing so, which he condones as long as it results in a democratic regime being restored to power after any illegal military coup? That is a distinction which the Foreign Secretary clearly does not make for he has said that no one, presumably including the Prime Minister, should understate the gravity of a breach of a Security Council resolution. From her statement yesterday, when the noble Baroness told this House that the Prime Minister's assessment of the arms to Africa affair as a "hoo-ha" constituted an admirable summary which we would all do well to remember, I must conclude that the Minister agrees with the Prime Minister and not the Foreign Secretary.

Yesterday the noble Lord, Lord Avebury, raised questions about the alleged human rights violation in Sierra Leone since the restoration of President Kabbah. He asked whether, contrary to the impression given by the Prime Minister … one of the legacies of the counter coup is that they have been left with an ethnic militia known as the Kamajors which is hostile to other groups within the territory and that far from promoting reconciliation, the restored government have charged 59 people with treason and locked up 2,000 others without charge, most of whom are northeners or ethnic Krios and that this is hardly a recipe for the national reconciliation of which both Resolutions 1132 and 1162 have spoken".— [Official Report, 11/5/98; col. 823.]

Lord Grenfell

My Lords, perhaps I may ask what this has to do with Article J.13 of the treaty?

Lord Moynihan

My Lords, absolutely everything. I can fully understand why the Government Benches do not want to hear this as a case study. This is a severe and lasting embarrassment to the performance of the ministerial team at the Foreign Office. But the real relevance is this. It goes to the heart of the CFSP. How on earth will the British Government manage a common position on a foreign policy issue if one week they take position X and the following week they completely change their position? Will they exercise the emergency brake because the Prime Minister has determined that the foreign policy as determined by the Foreign Secretary a week before was wrong? No, my Lords. I believe it vitally important to look at case studies. In Committee we looked at the French position as opposed to the British with regard to Iraq—another good case study. I note that the Government Benches did not jump up at that time and object to the fact that a useful case study, pointing out the weaknesses inherent in the CFSP, was not brought to the Committee's attention.

To reinforce the point, it would be important for the British Government, sitting with our European colleagues, to know what British foreign policy is.

Lord Taylor of Blackburn

My Lords, perhaps I may draw to the noble Lord's attention that we are at Report stage rather than in Committee. There is a big difference between the two.

7.15 p.m.

Lord Moynihan

My Lords, I am totally aware of the difference between Committee and Report stages. If the noble Lord intervenes to state that this new example also causes him discomfort, no doubt he will be able to listen carefully to the implications for his Government's policy with regard to the CFSP.

I wish to go into areas which were not covered in sufficient detail in Committee, where specific answers were not given to questions I raised. I used as an example the question raised yesterday by the noble Lord, Lord Avebury. It is relevant to note that the Foreign Office position, given by the Minister, was, I do riot have information on what is happening at this moment in Sierra Leone".—[Official Report, 11/5/98; col. 824.] Does the noble Baroness have the information today? The 2,000 locked up without charge are in gaols in Freetown. There are thousands more detained in the principal cities of Bo, Kenema and Makeni. It was reported to me earlier today that fighting continues in many areas outside the capital. Mèdecins sans Frontiéres have reports of mutilations occurring now. Are any of those at the hands of the Kamajors in our Prime Minister's newly-embraced favourite African country?

How great has been the collaboration between the tens of thousands of well-armed Kamajors and their Nigerian supporters? For the Nigerians are also subject to European Union and Commonwealth embargoes on arms. In the context of this debate, will our European colleagues turn a blind eye to the arms flow from Nigeria if the ends of the Prime Minster's new foreign policy justify the means?

Yesterday the noble Lord, Lord Avebury, the noble Baroness, Lady Williams, the noble Lord, Lord Tordoff, my noble friend Lady Young and I raised important questions regarding the humanitarian aspects of the issue. What evidence is there of the British Government actively pursuing national reconciliation, to which both Resolutions 1132 and 1162 refer? Or will the answer once again be, "I do not have information on what is happening at this moment in Sierra Leone"? If that is the answer, what hope do we have of seeing the creation of a consistent set of common foreign policy and defence initiatives in Europe? What implications does the Minister think the British Government's doctrine of the ends justifying the means would have for the common foreign and security policy in Europe? We now have a Government who when they so choose are above the law, and an Administration authorised by the Prime Minister to cherry pick those laws it chooses to obey and those it chooses to flout.

It would be hypocritical to criticise our European partners, or any other country in the world for that matter, for pursuing a similar policy. This is the road to unravelling and ultimately demolishing the edifice of international law and the legitimacy of international organisations to uphold that law in the name of the values upon which our society is based: peace, security, democracy and human rights. This is an architecture which the mature democracies of the European Union helped to design; and those same democracies willingly agreed to be bound by its terms. If it is undermined by the very states which built it, who or what will be the arbiter of what is or is not internationally acceptable?

A country's foreign policy is a mirror reflecting its national interests and its values and principles. It is for that reason that our foreign policy should be decided here with the Foreign Secretary answerable to the House. At least Foreign Office Ministers will be ultimately answerable to this House for their conduct in the arms to Africa affair. In Committee I emphasised our belief in the potential of the CFSP. Where it acts with the grain of our national traditions and represents the coincidence of our national interests with those of our European partners, it will succeed. But where the CFSP is forced into the rhetoric of solidarity and unity, when whether for geographical, political or historic reasons that does not reflect reality, it will surely fail. And it will surely fail if there is not consistency in policy coming from the government of the day.

The purpose therefore of the new clause is to enable the Minister to reassure the House that the new decision-making procedures for the CFSP do not represent a forced march down the road to an artificial common foreign policy which is against those very national interests the Government purport to promote. I beg to move.

Baroness Ludford

My Lords, I do not dispute that the noble Lord raises some important points on Sierra Leone. He referred to the role of my noble friend Lord Avebury in raising those concerns. However, perhaps we should concentrate on the amendment. I intend to speak more directly to it than has the noble Lord.

The amendment relates to the procedures of the common foreign and security policy. First, I believe that the amendment is unworkable and unnecessary. It is unworkable because it would prevent the speedy reaction that the European Union needs to be able to adopt in crisis situations. The noble Lord referred to the potential of the common foreign and security policy. I submit that that potential will not be realised if the decision making is slow and cumbersome.

Secondly, the amendment is unnecessary because there are sufficient safeguards. Indeed, those safeguards to protect member states' interests have been referred to by the noble Lord. Perhaps I may enumerate them.

Article J.13 starts from the premise that decisions are normally taken unanimously, both in the European Council and in the Council of Ministers. The article goes on to outline the procedure of constructive abstention while allowing, as the noble Lord mentioned, for respect of the principle of mutual solidarity. That is another safeguard for a national government.

The article then states that, by way of derogation from the normal rule of unanimity in implementing measures of joint actions and common positions, there could be qualified majority voting. Joint actions are defined as specific situations where operational action by the union is deemed to be required. That is the point on which we need to focus: specific situations requiring operational action.

Were the amendment to be accepted, it would introduce another hurdle of bureaucratic delay in trying to arrive at that operational action. But even the procedure of QMV is subject to the emergency brake to which the noble Lord also referred, whereby member states can oppose a majority vote. So there are a series of layers of safeguards for member states' interests.

My worry about the common foreign and security policy is that it is not sufficiently fast and effective in its response. The decision-making has been described by one commentator as "heavy and ornate". This amendment would introduce another element of heaviness and ornament.

The European Union is currently faced with challenges in Kosovo, Algeria, the Middle East and the Gulf—conflict in areas close to us, affecting our security in all kinds of ways. It is such considerations which have no doubt led the Foreign Secretary and the Prime Minister to try to make the European Union more of a player in the Middle East peace process, somewhat matching the role of the United States.

The European Union seeks to guarantee peace, prosperity and democracy for its citizens. One of the ways it can do that is to have an effective voice in world affairs. This amendment would make that more difficult. It would be an unnecessary and unworkable impediment to British participation in the common foreign and security policy.

It may well be that Europe needs to streamline its activities, respecting the principle of subsidiarity in some domestic areas where it could be deemed to be fussy and bossy. I feel rather strongly about some of the rules on food safety, local cheeses being banned, and so on. But the quid pro quo is that we must use political capital to increase the arguments for Europe to have a common voice in the world. That is one of the essential things that the European Union must do. That is what it can uniquely do for the citizens of Europe: act jointly to preserve that peace and security. We must transfer this energy, perhaps from some of the streamlined activities, to the international arena. If we believe in Europe acting effectively on the international stage for the security of our own citizens, this amendment should be strongly resisted.

Lord Howell of Guildford

My Lords, I support this amendment tabled by my noble friend. I realise that it affords this House an opportunity to survey further the common foreign security policy scene, although we covered a great deal of the ground in considerable detail in Committee. I welcome this further opportunity since here, as elsewhere, matters are changing all the time.

It might be worth commenting in passing that, nowadays, in the modern state about 70 per cent. of all external affairs—what used to be called foreign affairs—are to do with trade and investment. We have of course handed over responsibility lock, stock and barrel to the institutions of the European Union for trade and investment. So it is inevitable, whether we like it or not, that very large sections of what might appear to be foreign policy—to do with sanctions, trade and the promotion of commercial interests around the world—are not in our hands any more. They are guided by men of considerable ability and world prominence such as Sir Leon Brittan, and Karel van Miert, the competition commissioner. That explains why on the world scene we hear a good deal more about those two gentlemen than we do about many a Foreign Minister, or indeed the other external commissioner, Mr. Marin, or the high representative who emerges from the Amsterdam Treaty. So one needs to start from the fact that a large chunk of the external affairs of this country operates under a completely different system which will not be very much affected by the machinery or intricacies of joint actions and qualified majority voting in the narrow foreign policy area. Nevertheless, it is the narrower area of various issues of more traditional foreign policy, which do not include trade, on which we must concentrate; and presumably they are in the minds of those who want Europe to speak—as we just heard from the noble Baroness—with a common voice.

There is a good deal of nonsense talked about the apparently desperate need for the European Union to reach a common view, and have a common or even single (a terrifying prospect) foreign policy. It is one of those needs that is alleged to exist, and a lot of rhetoric surrounds it as to how Europe cannot be itself and find its destiny unless that is done. I believe that we need to be fairly cautious in assessing these fine speeches.

My noble friend Lord Moynihan is absolutely right to warn us, as he did very clearly in his excellent speech, about the dangers of trying to search for a common foreign policy for its own sake and then creating an artificial foreign policy where it would have been rather wiser to have allowed the normal bilateral allowances and associations to form—or possibly even a common position to come together, but not driven by some imperative that there has to be a foreign policy. I am worried for the future that the alleged imperative—that somehow a common strategy and common positions must be established in this issue or that—will lead to more divisions and difficulties in the handling of those sensitive world issues. I am worried not merely for vague reasons but because the record tells me that that is likely to happen, and has happened in the past.

The history of the past 10 years of European searches for foreign policy has not been a happy one. I know it has led some people to conclude, "There you are. We told you so. Why did we not have a more effective machinery and we could all sing from the same hymn sheet?" That is one reaction. The alternative reaction is that it might have been better to be a little more cautious in rushing for a single policy.

The most recent event where there was an attempt to have a common foreign policy, which fell to bits in some disarray, and where it might have been more dignified not to have attempted it in the first place, was the handling of the latest Iraq crisis. I wish to turn in a moment to a further serious crisis, the handling of which we need to think about extremely carefully. However, further back, before Iraq, there was the Bosnia tragedy, where there was great difficulty on the part of EU members in getting together a common position. Again, some said that we should have had better machinery and others asked: why did we try?

Before that, as noble Lords with longer memories will recall, there was the absolutely disastrous example of an attempt at a common policy leading to the worst outcome. I refer to the German-driven insistence that there should be recognition of Croatia, despite statements in the Badinter Report that the independence of Croatia and its recognition failed on every legal principle. Nevertheless, it was so deemed by the Germans. Because the pressure was on for a common policy and for all EU members to fall into line, and it was believed at the time that by agreeing with the German insistence there would be some trade-off and benefits elsewhere, the independence of Croatia was prematurely recognised, with catastrophic and bloody results. So one has to be very careful indeed about pushing ahead on these fronts.

The more serious issue now developing is one which your Lordships may wish to discuss more fully when we come to the subject of enlargement. It is partly an enlargement issue and partly a foreign policy issue. I refer to what is now happening in Turkey and Cyprus. There we have the makings of a first-class crisis emerging which demands foreign policy handling of the utmost sensitivity by all EU members as well as by the EU collectively. It has a role because the matter of Turkey has been raised by enlargement.

I was interested in the quotation which my noble friend Lord Moynihan produced yesterday at Question Time in your Lordships' House. It was by Mr. Richard Holbrook, who is a somewhat disappointed man after his visit to Cyprus. He found great difficulty in getting any agreement off the ground. He found no movement in Cyprus between parties. Indeed, he found movement backwards towards dangerous tensions which may lead heaven knows where.

Yesterday my noble friend quoted Richard Holbrook as saying: [The] EU's decision to open membership talks with Cyprus in March was a correct one, but the failure to put Turkey on the same basis as the other 11 countries that began the accession process was a mistake".—[Official Commons, Report, Commons 11/5/98; col. 813.] Mr. Holbrook is not everyone's friend, I know, but he knows what he is talking about. The mistake is one for which we will pay dearly, in its effect of embittering Turkey and exposing it to all the turbulence of the growing Moslem minority, soon to be majority. There are also the difficulties with the Kurds and the central Asian powers. Although far to the north of both the Gulf and the Arab/Israeli situation, they have an influence and an input into those. There is also the question of their neighbouring position to Saddam who is still in Baghdad. All those are terrifying potential crisis areas where the European powers need to proceed with the greatest delicacy and the utmost co-operation with each other, shoulder to shoulder, but without trying to rush into common positions where someone is left behind and told, "You can constructively abstain", and others are told this, that and the other.

It is a dangerous position, a dangerous moment, when European Union foreign policy needs to be handled not by automatic machinery but by the most sensitive and careful discussion between foreign ministers. Hitherto they have not handled it well and that has created the situation which Mr. Holbrook rightly says is a mistake. I believe it will be an extremely violent and hot crisis before long.

I have nothing against the sensible idea of our European neighbours and ourselves in the European Union seeking to establish in certain situations common positions vis-à-vis Chechnya, aspects of central Asia and the handling of China in some matters. Common positions are sensible enough. It is when we are told that there must be elaborate machinery to press us on towards common strategies, a much bigger matter, and common policies, which are bigger still, that I become alarmed.

In my experience, when we were dealing with foreign policy issues in another place whenever we discussed common foreign and security policy with our European neighbours, they were tremendously in favour in general of the machinery doing it all. However, when it came to specific items, it was hard to find one on which they were prepared to go along with their own recommendations. Practically every serious issue had a rider attached to it, namely, that it was a vital interest and therefore could not be subjected to the machinery of joint action, as with a common foreign and security policy. Alternatively, if it involved the military, the Germans fought strongly on it. They said, "We could never contemplate exposing any policy which involves our military to a CFSP machinery. The issue of using our military is so sensitive, so central and difficult to handle inside German politics that it would have to be under our complete control".

I complete a brief intervention by saying: let us have sensible allowances and co-operation among the European powers and work with the troika system that we had in the past. Let us have common positions, but beware of creating useless machinery, which like the sorcerer's apprentice, would develop its own momentum and press us towards common and, as my noble friend rightly says, artificial positions.

We can and do work effectively with our European neighbours, with France on certain matters, with Germany on certain matters and with Italy on certain matters. We can somehow manage to square the circle between the WEU concept and the NATO concept, both of which are important to us.

I believe that too much searching for too much machinery for a common foreign and security policy will, as with EMU, which we were discussing earlier, start by being an alleged instrument for unity and end by being a violent instrument for division.

7.30 p.m.

Lord Pearson of Rannoch

My Lords, before my noble friend sits down, I congratulate him on his thoughtful and probing analysis. However, does he agree that a large part of the problem is that foreign policy is an essential attribute of a state? It is in the European Union's quest for statehood that we see its desire to meddle and interfere all over the world. Does my noble friend agree with that? It is an important part of the analysis. I agree with him; I do not think that bad workmen should be given newer and sharper tools until they have proved that they can use the ones they had before.

Lord Howell of Guildford

My Lords, I wish to qualify what my noble friend said—and he is perceptive on such matters—by repeating what I said at the beginning. In trade matters, the pass is already sold and external trade issues which are foreign policy are handled by the European institutions. But on the rest, I agree that when we hear the rhetoric—perhaps we should not take it too seriously—about the need for a European destiny, it is time for some of us to button up our coats. We know about people seeking European destinies. They have done it in the past; we have spilt a lot of blood and made great efforts to stop them, and we do not wish it to start again.

Lord Haskel

My Lords, I beg to move that the debate on Amendment No. 3 be now adjourned.

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

Lord Haskel

My Lords, I beg to move that further consideration on Report be now adjourned. In moving the Motion, I should indicate that the Report stage will be resumed not before 8.35 p.m.

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