Lords Sitting of 18 June 1999

Preamble
The House met at eleven of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Ripon.

Genetically Modified Crops Bill [H.L.]
Baroness Miller of Hendon: My Lords, I beg to move that this Bill now be read a second time.
The Bill is short and simple. Its effect is also short and simple, although I am afraid that the explanation of its background and the reasons for introducing it are a little longer. I hope that your Lordships will not feel that they are too long.
The Bill amends the Environmental Protection Act 1990 and incorporates a definition taken from the Food and Environment Protection Act 1985. I stress those two dates—1990 and 1985. On 16th February, the Parliamentary Secretary for MAFF repeated to this House the Statement which had just been made in the other place. At that time I had the temerity to complain about the Government's failure to stick their head above the parapet, and give what I described as unequivocal guidance to manufacturers, retailers and consumers. In his response, the Minister accused me of having what he called, "some chutzpah", for daring to question the Government on that subject. He then launched into the usual tirade against the previous administration, whom he accused of having done practically nothing.
The two substantial Acts that I have just mentioned are part of the considerable "something' undertaken by the previous administration to protect the environment, as distinct from the mere 160 words of waffle contained in the Labour Party's manifesto. That states:
"No responsible government can afford to take risks with the future; the cost is too high. So it is our duty to act now".
This modest small Bill will oblige the Government to put their fine words into practice. At the same time it will provide them with the necessary legislative power.
Before I turn to the substance of the Bill itself, there is something else that I wish to clear up. This Bill is not about genetically modified foods. The production and incorporation of only three varieties into every-day products has been subject to stringent testing and licensing. There has been much authoritative scientific comment on the matter, not least from this House. The Bill does not deal with those products, nor does it interfere with their sale.
There is now certainly a demand for more specific labelling, so that members of the public do not have those products literally crammed down their throats without their knowledge. The fact that parts of the public wish to be able to make an informed choice is also beyond doubt. I am sure that appropriate labelling regulations, together with a voluntary code of practice among manufacturers and retailers, will receive universal support. The emotive language used by some
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sections of the press is no basis for an informed debate. The major supermarket chains and other food retailers, in response to what they see as their customers' demands, say that they are temporarily withdrawing genetically modified foods from their shelves. By that, they mean products containing genetically modified soya, tomato and maize. Here, "temporary" means, until they are sure beyond all doubt that those products are safe.
That brings me to the subject of this Bill. It concerns genetically modified crops, especially those in the current course of development and experiment. Every mouthful of food that your Lordships have ever eaten or will ever eat is derived from genetically modified crops or animals. Ever since the first nomadic caveman poked a hole in the ground with a stick and dropped a seed into it at least 9000 years ago, possibly even earlier, both deliberate and accidental cross-pollination, in addition to that occurring naturally, has taken place. Farmers have gradually improved their crops, meat and the milk-producing capability of their animals. Those of your Lordships who follow horseracing are well aware how the breeding and ancestry of each horse can make a tremendous difference to its value.
Then something happened to speed up the whole process of plant and animal breeding; something to reduce the time it takes to cross one plant with a relative, or to graft a plant with one desirable property onto another. In both cases, the growing time that this rather hit-and-miss method takes to produce a result was reduced. What happened was the discovery of DNA by Watson and Crick in 1953. Their discovery answered one of nature's greatest puzzles; that is, how genetic information is passed from generation to generation. Watson and Crick deservedly received the Nobel prize for their work. The advances in biology generated by that discovery cannot be exaggerated; for example, our understanding of cancer, of genetic and infectious diseases. It has enabled scientists to design plants and animals; to eliminate undesirable traits; or to introduce desirable ones. That is where the need for careful regulation comes in.
Let us suppose a plant is designed which is resistant to a particular type of herbicide. It can then be sprayed without harm to it. But let us suppose that the resistant characteristic is passed to different plants in an adjacent. field. We are then in danger of unwittingly creating a breed of "superweeds". For the purposes of testing and experimenting, a sanitary cordon is supposed to be created around the experimental crop. The controversy that has now arisen is over whether the current requirements are adequate or whether a wider sanitary cordon is required. The Government have received a certain amount of contradictory advice from various credible sources. That is perhaps a manifestation of Duggan's law.
To every expert there is an equal and opposite expert. English Nature, the Government's own specialised think tank, recommended considerable caution in the methodology of experiments in biotechnology arid the licensing of the ultimate products. The Government's own Advisory Committee on Releases into the Atmosphere (ACRE), for example, recommends a gap

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of 200 metres around a particular type of maize. The National Pollen Research Unit in a report, admittedly commissioned by one of the environmental pressure groups, challenges that distance as being inadequate. It wants a cordon of five or six miles on the grounds that pollen can be carried that distance by birds, the wind or even by bees.
Your Lordships may have observed or even suffered themselves from this phenomenon in the past few days. Anybody travelling around what we call the "West End" will have seen dozens of people with streaming eyes and noses caused by hay fever. The West End is almost solid brick, concrete and asphalt, so where does the pollen that causes the hay fever come from in Central London? The nearest sources in the West End are Hyde Park and Regent's Park. So, maybe it even travels further, but it certainly appears to travel a lot further than a derisory 200 metres.
The Soil Association calls for a five to six-mile cordon, but my noble friend Lord Reay, in his excellent and instructive presentation of the Report of the EC Committee on 27th May told your Lordships that these demands
"are so impractical as to appear to be tantamount to an attempt to prevent the introduction of the new technology".—[Official Report, 27/5/99; col. 1064.]
Frankly, and as a layman, I find the arguments about whether the sanitary cordon should be 200 metres or seven miles totally baffling.
For these experiments we need to use the widest appropriate cordon. In what I freely admit is Nimbyism, I ask why these field trials cannot be carried out in the middle of Kansas, let us say, or some other wide open space where there will be no danger to an intensely farmed and populated environment, or to butterflies or whatever, if, contrary to expectations, the GM crops cause problems.
The Select Committee chaired by the noble Lord, Lord Reay, made certain recommendations in its comprehensive report presented last December. I do not wish to be accused of selective quotations, but I do not want to take too long. The Select Committee confirms that genetic modification can offer great benefit to agriculture, industry and the environment. But the committee drew attention to the need to assess the risks, including possible delayed risks, as well as the potential benefits, simultaneously.
The report stated that the risks can be controlled by a strict management process and that any novel crop should be subject to an oversight system. It considered that the only way that knowledge of how such crops would interact with the environment can only be acquired by large-scale trials, but unequivocally stated that it considered that an outright moratorium would be inappropriate.
Finally, the committee welcomed the ability to set specific conditions for commercial release and said that conditions and regulations should only be imposed where necessary, which of course comes back to the controversial question. In paragraph 182 the committee states—and this is worth stressing—that monitoring is
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not a substitute for risk assessment. The committee also calls for a regime of reports of unexpected events and the occurrence of predicted ones. That is what my Bill calls for.
The Royal Society, in its comprehensive and incredibly interesting report published last year, made 13 strong recommendations and asked for further research on four major topics. It is sufficient to say that the Royal Society recognises the importance of biotechnology on the quality of food and the development of crops as well as the need for clarity in labelling of the ultimate products. But it also recognises the concerns about the new and developing technology and calls for collaboration between industrialists, public sector scientists, the regulatory authorities and environmental organisations.
This Bill is no Luddite attempt to prevent what is undoubtedly considerable scientific progress which can be of substantial benefit to mankind. It is also no rejection of developments which will be of considerable commercial benefit to farmers as well as to the bio-technology industry.
I recognise that companies such as Monsanto or Diatech, who have both been denigrated in some parts of the press as though they were villains, or Zeneca, are entitled to exploit their considerable investment in research. However, on the other hand, I do not think it did their cause any good when a spokesman for Monsanto made the incredibly arrogant remark:
"Consumer response is dictating the agenda when it should be science".
Last Monday I attended a presentation by SCIMAC (Supply Chain Initiative on Modified Agricultural Crops). It says that it represents the entire farm supply chain from initial seed stock to harvested crop, and that its members are the British Society of Plant Breeders, the British Agrochemicals Association, the National Farmers Union, the UK Agricultural Supply Trade Association and the British Sugar Beet Seed Producers Association. I have troubled your Lordships with the impressive list of members of this group, which I shall not call a pressure group, even though it is not exactly independent or impartial in the present debate, because it has also produced two important codes of practice which I have no doubt the Minister will refer to when he replies.
I assume that the Government have been briefed on these in the extraordinarily huge number of meetings that they are reported to have had with the industry since they came to power. I believe that there have been 104 with MAFF, plus many more with officials and Ministers of other departments, quite apart from those conducted with the Prime Minister.
One of the codes of practice is on,
"the introduction of genetically modified crops",
and the other is called Guidelines for growing newly developed herbicide tolerant crops. The two codes, which SCIMAC calls "self-regulation for the industry", are as impressive as the presentation was seductive.

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However, the effect was slightly marred by the statement on one of the slides that,
"there is no scientific basis for GM crop moratorium and that the first GM crops will be available for planting in the year 2000".
The year 2000 is less than 200 days away. The spokesman did say, when pressed, that they had no intention of providing the seed for commercial planting so soon. But I feel that unchallenged and without strict regulation, somebody may be tempted to jump the commercial gun.
I do not denigrate the efforts that the industry is making to ensure safety. On the contrary, its self-imposed regulations are, if I may say so without sounding patronising, entirely commendable. However, it does have commercial interests and what it offers by way of self-regulation is at least in part self-serving.
In a case where public health is at stake, and where there are grave environmental and ecological dangers, it is not for the industry itself to tell us what is right and what is wrong; or what is and is not needed. It is not for the industry to tell us what it will and will not do by way of precautions. It is the Government's responsibility and indeed their duty to take control and to place the public interest over commercial interest. It is not for the Government to accept without question the industry's assurances. It may be right and there may be no real dangers. But the Government have to pay regard to the public anxieties and the public suspicions. They may turn out to be ill-founded and even what the Prime Minister in an intervention called "hysterical", but the Government cannot simply dismiss them out of hand.
The Government have received a great deal of persuasive advice and unfortunately that advice goes in both directions. Until those differences are resolved—not absolutely because I admit that that is not possible, but beyond reasonable doubt—the Government must err on the side of caution; on the side of ultra-caution. The sum total of the scientific advice and pressure group statements, often, as I have said, conflicting in their conclusions about the need for or the desirability of GM crops, all seem to have one factor in common; that is, that there is a need for careful evaluation and even more for careful monitoring.
As the Government said in the passage in their manifesto that I have already quoted,
"no Government can afford to take risks with the future".
I find it difficult to understand how the Government, who rushed into banning beef-on-the-bone on the basis of an ultra-cautious statement that there was the remotest possibility, almost impossible to measure, of there being a problem, can selectively ignore the pieces of advice they are receiving in this public debate.
Statements by the Prime Minister seem to indicate that the Government are ready to go ahead with larger-scale field trials almost immediately. As I have said, almost daily there are articles and reports arguing one side or another of the debate. The Government themselves have commissioned yet another new report.
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The research from what the Independent yesterday called the,
"highly respected John Innes Centre",
provided convincing conclusions based on its research that genetically modified plants can cross-pollinate. I understand that as a result of that the Government are going to reopen consultations with the industry and with farmers, including organic farmers and I hope with environmental bodies to reassess the guidelines.
Perhaps we can look at a few other developments that have taken place in the past few days. It has been revealed that 309 trials of various sizes that were taking place last year are now reduced to 148 this year. Most of them were cancelled quietly, but one farm trial was cancelled last week in a great blaze of publicity. But before that another seven farm-size trials had been cancelled. In Norfolk alone the trials are down from 40 to 17. I have to ask, with this vastly reduced level of trials, what is the validity of any current research and what reliance can be placed on it? Are we now nearly back to the drawing board?
The unanswered question about the tests is this. Suppose they reveal that some crops cause some form of ecological damage, contaminate the surrounding area and wildlife and produce undesirable mutations in nearby fauna. How is anybody going to redress that? We cannot put the toothpaste back in the tube. Suppose the trials are successful. With all the public disquiet that has been caused and with the major supermarkets displaying notices saying how they are removing GM crops from the shelves, how will the public be persuaded to buy the stuff?
I say the "stuff' as a direct quote from the noble Lord, Lord Haskins, who was interviewed on the 'Today" programme on the radio on 9th June. He was being asked about the decision of the company he chairs—Northern Foods—to cease using GM products and supplying them, as "own brands" to various supermarkets. He said he wished he had never heard of the "stuff".
Only yesterday, in a written reply to the honourable Member for Lewisham Deptford, the Minister said,
"The Government welcomes the European Commission's plan to develop harmonised guidelines for GMO risk assessments for cosmetic products and will push in Europe for their adoption".—[Official Report, Commons, 1/6/99; col. WA 200.]
That included some of the issues about which we have been talking. Can the Minister assure us, first, that no consents will be given in the United Kingdom until that agreement is made in Europe? Secondly, will he confirm that the European regulations will be no less stringent than those which we want here? The Government and the producers threaten us that if we do not press forward with research, we will fall behind the rest of Europe and lose our place in a great, new, profitable industry. That assumes that the Germans and the French—two great agricultural economies—are prepared to take bigger risks with their environment than we are. Do we believe that?

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My Bill does not call for a ban, just more research; more tests; the laying down of guidelines in which the public can be confident; and the chance for Parliament to make an informed decision on behalf of the public. I commend the Bill to the House.
Moved, That the Bill be now read a second time.— (Baroness Miller of Hendon.)
11.27 a.m.
The Lord Bishop of Hereford: My Lords, I thank the noble Baroness, Lady Miller of Hendon, for introducing this debate on a matter which is constantly in the forefront of public concern. Your Lordships will remember that it is only three weeks since we had an important and wide-ranging debate on the EEC Report on EC Regulation of Genetic Modification in Agriculture, during which we touched on some profound ethical and philosophical as well as scientific and technical aspects of genetic modification. I do not want to go over that ground again. I believe that this debate should be more limited in its scope to the practical provisions outlined in the Bill for the amendment of the Environmental Protection Act 1990 in ways which will enshrine in law the broad principles with which the Government have already expressed sympathy.
Since the debate of 27th May I have had the opportunity of reading, like I am sure many of your Lordships, the conclusions of the Nuffield Council inquiry into the ethical and social issues raised by genetically modified crops—a report published on the day of the last debate. I warmly welcome that report, which in many of its recommendations points to the need for the sort of provisions contained in this modest Bill. The Nuffield Council report rightly emphasises the importance of the potential cumulative impact of genetically modified crops which could lead to unacceptable developments not apparent from their specific impact in individual cases. So it calls for,
"a broadly-based environmental audit of the likely cumulative impact of GM crops on agricultural practices and the environment",
and for,
"a powerful public policy framework to guide and regulate the way in which this technology is applied".
With that I am entirely happy, but I am less happy with the over-confident statement in the same council report that,
"There are such powerful utilitarian and welfare-based arguments for treating the environment carefully that no purpose is served by straying into philosophically contentious territory to bolster this case".
Would that that were so: alas, the utilitarian and welfare-based arguments have not done very much to protect the environment—in particular, biodiversity—in the face of the depredations of intensive farming, especially over the past 30 years.
My own childhood memories go back much further than that; in fact, 60 years. Like many of your Lordships, I know that the landscape in those days was full of birds, butterflies, dragonflies, grasshoppers, frogs, toads, newts and all those other delights of biodiversity which are now so rare, even at a time when
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the nation was straining every muscle to increase food production and was bringing back into cultivation many areas which had fallen derelict during the great Depression. Now such rich biodiversity is very limited indeed. In many places it is exceptional. In some places it is only to be found in specially protected areas, such as, for example, Wicken Fen in East Anglia, near Ely, in otherwise largely environmentally sterile, arable landscape.
I believe that it matters very much indeed that we preserve what is left of our biodiversity. In fact, we need to enhance it. We have a biodiversity action plan, but its benefits are potentially threatened by the possible consequences of the introduction of genetically modified crops with their presently unknown impact on the environment. That is why we so urgently need the research referred to in this Bill. Its wording is brief, perhaps inadequate, for no time-scale is spelt out, nor is there any indication of conditions which must be met before research on any particular GM crop may be deemed to have yielded satisfactory results.
In replying to the debate on 27th May, the noble Lord, Lord Donoughue, gave an assurance that research would, if necessary, continue beyond the year 2002, which was the date quoted in the course of the debate. It would be good to have that assurance renewed today by the Minister in the context of this Bill.
It would also be good if the Minister could give some indication of how the Government view the matter of the interface between experimental GM crop areas and organic farms; and not only organic farms but also environmentally sensitive areas and Countryside Stewardship areas where extensive farming is practised. This matter was raised by the noble Earl, Lord Peel, in the last debate. Although a written response was promised, the Minister was not able to give an answer in the course of the debate.
The noble Baroness, Lady Miller, mentioned the John Innes research, which has confirmed that some degree of contamination may be unavoidable. But that simply underlines the good sense of the request of the Soil Association for a six-mile separation zone. I do not believe that that is entirely impractical.
This leads on to a further point about the shape of this modest Bill. I fully understand that research must come first and that it must be thorough, vigorous and sustained before guidelines can be drawn up for the possible commercial release of GM crops. But guidelines are needed urgently for the research itself. I fear that this Bill may, implicitly at least, place too much reliance on the SCIMAC voluntary code of practice—a principle which, yet again, takes an unrealistically optimistic view of how self-interested individuals and organisations sometimes behave. I am grateful to the noble Baroness for what she said about the risks of that approach.
The report of the Nuffield Council was influenced by three main principles—those of general human welfare, of the maintenance of people's rights and of justice. They are admirable principles in so far as they go, but behind all our dealings with this difficult, uncertain and complex matter must lie the precautionary principle: we do nothing unless we are certain that it is safe to do it.

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My best endeavours to find out expert advice from genuinely disinterested sources have revealed again and again that the answer to some of the most frequently asked questions is, "We do not know". For example: how long should this research continue? We do not know. Is the six-mile radius round GM crops adequate? We do not know. Should there be baseline data against which to measure the findings of research? Well, it depends. I asked that question in the last debate and I was told that expert advice had been taken to the effect that a baseline survey was not necessary. I still want to challenge that answer. If the question is simply about cross-pollination of GM crops, then that may well be so because we are dealing with a new threat from newly-planted crops, but if we are talking about the impact of GM crops on biodiversity, then the answer must be that a baseline survey is essential so that change can be measured and losses and gains accurately recorded.
We are in new territory here. The precautionary principle must be paramount. There are other enormously significant areas which this modest Bill does not attempt to touch. The Nuffield Council report has some very wise and helpful things to say about the huge area of intellectual property rights and developing countries. I hope that in due course we shall be debating those issues and that the Government will be bringing forth legislation to tackle some of the points made very well indeed in this report. In the meantime, I welcome this modest Bill but I suspect that it may well need to be amplified and strengthened in its subsequent stages through your Lordships' House, or in another place.
11.35 p.m.
Lord Taverne: My Lords, I am also grateful to the noble Baroness, Lady Miller, for the way in which she introduced her Bill. It seems to be a Bill to which there is no great objection. I am not absolutely certain that it is needed, or that it will place further obstacles in the way of research. But that is something on which I very much welcome the attitude of the Government.
I am very sorry that I was abroad at the time of the debate in this House on the report of the Select Committee, so I want to make some general remarks about the subject now. However, perhaps I may begin by making it absolutely clear that I do not speak for my party. I have no axe to grind and no connection with any of the biotechnology companies. I am a passionate environmentalist and I believe that the threat to our environment is one of the most important problems of our time. But having examined the evidence over many years, including the two recent reports from the Royal Society by some of the leading authorities in this country, the excellent report from the Nuffield Council on bio-ethics and the two excellent reports from the Select Committee of this House and the Select Committee of the House of Commons, I do not share the current discomfort or the hostility to GM foods and crops.
It seems clear that the GM foods now on sale are at least as safe as conventional foods. One can never prove absolute safety, but they have been rigorously tested and, indeed, some strains of unmodified potato, for example,
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would fail similar tests. Moreover, while we should certainly be very cautious about the potential effects of GM crops on the environment, I believe that the risks of these crops have been overstated and I do not altogether share the view of the noble Baroness that they represent a grave danger. It is right that they should be tested in the laboratory, in small field tests and then in large field trials, and that is happening anyway. But there is no particular reason to consider them a special risk.
The Royal Society's report of last February suggested that our control systems are really effective and that the risk of gene transfers to wild plants are slight. The society said that the likelihood of gene transfer to wild relatives depends on the species of crop and the location in which the crop will be grown. It is noticeable that the scientists are very specific, particular and cautious, whereas the condemnation of these crops tends to be very general and dogmatic. The report states:
"It is inevitable that some gene transfer will occur from certain crops, but the level of gene transfer to wild relatives front GM crops is likely to be exactly the same as from non-GM crops".
The report then observes that, in general, cultivated crop species or "escapees" will not be competitive in the wild and that:
"It is also notable that disease and pest resistant crops have been available for many years as a result of conventional breeding techniques, and we are not aware of any reported problems as a result of transfer of such traits".
Further, I think it is important to stress that genetic modification has a great advantage over the traditional biotechnology that has been in use for centuries because it is targeted and selective and not random. I quote from an article in Nature which cites Mr Mike Gale who is the director of the John Innes Centre and who makes the following important observation,
"Surely putting in one gene is better than shuffling around tens of thousands at random"—
that we have been doing for centuries.
Finally, it should be noted that GM crops have now been grown commercially for some time on a large scale in the United States with no apparent adverse effects on people or on the environment. I believe there is no reason to think that the US system of control is weak or ineffective or that there are any relevant geographical differences between the United States and Europe. However, what I am most concerned about is the real danger that the present panic could prejudice the enormous benefits which GM crops can bring. They can hugely reduce the use of chemicals in farming and thereby have a beneficial effect on biodiversity. It is the present intensive farming methods which have been responsible for the decrease in biodiversity.
The House of Commons Select Committee was told that the introduction of GM cotton in the United States had reduced the use of chemicals in growing cotton by 80 to 90 per cent. English Nature gave evidence to the House of Commons Committee. It stated that GM crops,
"have the potential to solve the environmental problems of intensive agriculture".
As the Government Chief Scientist pointed out, modern intensive agricultural practices are unsustainable. Again, as the Nuffield Council reminded us—and indeed as the work of Professor Gordon Conway has shown—

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Vitamin A can be engineered into rice plants. This could save the lives of millions of children who now die from Vitamin A deficiency. I could multiply the examples. But this kind of evidence has been largely ignored, suppressed or distorted by the press, by some of the broadsheets as well as tabloids. The "Today" programme is one of the worst offenders. Some of the interviews by Mr John Humphries, who has a personal interest in organic farming, are a disgrace to fair and objective journalism.
Perhaps I am personally most disappointed by Friends of the Earth, whom I strongly supported until they became anti-science. By their concern with headlines rather than evidence they are now probably doing more harm to the cause of the environment than good. They were the ones who started the recent panic by building up Dr Pusztai as a leading expert. It is worth quoting the House of Commons report, whose contents the press ignored. The House of Commons said the following about Dr Pusztai. It mentioned of course that his assertions on the "Granada" programme attracted massive and unquestioning media interest. The House of Commons report stated,
"It transpired that Dr Pusztai's experiments involving GM material were incomplete and … that the experiments referred to had not been carried out. … Moreover, Dr Pusztai's interpretation of his research data was disputed, not only by the Rowett Institute, but also by an independent statistical analysis, commissioned by Dr Pusztai himself … Dr Pusztai told us that in his 110 day feeding trials, 'no differences between parent and GM potatoes could be found'. This directly contradicts his statement on 'World in Action'. Dr Pusztai's appearance before us attracted far more press interest than did some of our more credible witnesses. The press continues to give credibility to Dr Pusztai's claim despite it being contradicted by his own evidence".
The press has largely ignored evidence in the pursuit of sensation. The contents of the reports of the Select Committee of this House and of the Select Committee of the House of Commons, of the Royal Society and of the Nuffield Council on Bioethics, to which I have already referred, have hardly been mentioned. It almost seems a handicap in the eyes of the press that these bodies have carefully considered the evidence and tried to be objective and what is more, that the last two include some of the leading authorities in this country.
However, the most surprising intervention has been that of the Prince of Wales. His general views are well known. He is not impressed by scientific evidence or the scientific method and he prefers a more mystical approach. When the Nuffield Council, which includes a number of distinguished environmentalists as well as scientists, argued in a carefully documented case that GM crops are needed to feed the world, he described that as "emotional blackmail". Was he wise to enter the present controversy so publicly? He is of course entitled to pursue his interests in organic farming and to hold the views he holds on genetic engineering but he has now actively and publicly engaged in campaigning against government policy; namely, the field testing of some GM crops. He should perhaps carefully consider his position. It would be intolerable for a constitutional monarch to engage in political controversy. This is something the Queen has impeccably avoided throughout her reign.
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My last point concerns the role of the biotechnology companies. A kind of latter day Marxism now prevails which argues that government must not talk to companies and that the public must ignore the findings of company scientists because companies make profits. Of course the companies have a special interest; so, incidentally, do the environmental lobbyists whose membership depends on publicity and is boosted by scare stories. The companies' products should be independently tested and carefully regulated, and they are. It is in the interests of companies to have effective regulation, but it is also crucially in their own self-interest that their products are safe. If they are not, the companies face ruin.
Further, I think it is also fair to say that most people who work for these companies believe that they are doing good as well as earning a profit. Where would we be without the contribution of drug companies to the fight against disease? The pharmaceutical industry has been a great benefactor of mankind. If they are given the chance, I am sure the same will be true of genetic engineering and those who apply it to the growing of food.
Lord Kennet: My Lords, before the noble Lord sits down I hope that I may put a question to him. I have listened to his spirited speech with the greatest interest. My question concerns the so-called precautionary principle, which is something we all agree to on all sides of the argument but there does not happen to be any agreed version of what that principle is. Does the noble Lord accept the following version; namely, that the precautionary principle will be observed if one admits that absence of evidence of harm is not the same as evidence of absence of harm?
Lord Taverne: My Lords, unfortunately that is part of the principle on which some are proceeding; namely, that one has to prove a negative, one has to prove that food is safe. There is no way in which one can prove that it is safe. If that was a test applied, we would not be able to eat anything.
11.48 a.m.
Lord Lyell: My Lords, first of all I wish to thank my noble friend Lady Miller. Secondly, I might want to follow the noble Lord, Lord Taverne, after his spirited speech and say that perhaps over five years in Northern Ireland I was practising what I preached and overate to such an extent that I needed new clothes!
I congratulate my noble friend Lady Miller. I call her "hard work" Miller as I have been present in the Chamber most of this week. I have had the honour to sit on the Woolsack on four days and I am about to sit on it a fifth day. On those occasions the noble Baroness has spoken on employment, genetically modified foods, and I do not know what else. Certainly I think she has earned the title, similar to one that was awarded to me 22 years ago, of a multi-role combat Baroness; in other words five, 10, 15 minutes on any subject. Her speech this morning was a worthy lead in to her Bill.

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I am one of the least expert of the speakers in this debate today. I declare an interest in that I carry out fanning operations in Angus in Scotland, both arable and stock. However, I am certainly no scientist as regards arable farming. Over the past year or so your Lordships and the public have been bombarded with information on genetically modified foods and with some incredible stories that even I could not have made up in my deepest imagination.
If I am in doubt, I tend to ask for good advice; I am no scientist. Some 45 years ago, the decision was taken at Eton College that I should not take science; instead I should learn German. That did not go down well with some German people; they thought "They all cannot be that dim". But at least I know where to look for advice; the Scottish Crop and Research Institute at Dundee—which is just down the road from the noble Lord, Lord Kirkhill; I am pleased that he is with us today—and Dr Pusztai of the Royal Institute in Aberdeen, which is an equally famous scientific institute. I took the very best advice I could from the very best experts in Scotland—and I suspect in the United Kingdom—about this line of scientific inquiry, and particularly about crops. They have given me some very valuable advice.
Some of the information I have been given—which is relevant to my own neck of the woods and my own operation—concerns one particular kind of barley. We have been planting this barley for the past 32 years. This morning, an hour and a half ago, I spoke to my farm manager. He advised me that this kind of barley was planted in the north-east of Scotland before he started working for me in 1969 and that there is plenty of it around Angus and Kirriemuir. In 1986 it was mentioned to me by maltsters that the barley was particularly suitable for a certain kind of malting. Last week, distillers said to me "For goodness sake, please go on producing this kind of barley". Apparently it is considered in agricultural circles to be somewhat out of kilter and more or less mediaeval. Nevertheless, apparently distillers approve of this particular transgenic, mutated kind of barley—which only came to notice 40 years ago—as being of particular relevance to the making and distilling industry. I should stress that what you see is what you drink.
As has been said by previous speakers, we must trust experts in the field of biotechnology to carry on their experiments and research and we must take their advice. So far as concerns the plant breeding aspect of biotechnology, the science of biotechnology has assisted considerably in the quantity of crops produced. My noble friend Lady Miller pointed out that yields have improved and continue to do so. I agree with the right reverend Prelate. He recalled his childhood. I remember the war years in Kirriemuir in Angus when everything was done with a horse and cart. I also remember that there were ration books and a great shortage of food. I hope that the right reverend Prelate and your Lordships will accept that not everything about biotechnology is totally evil.
Scientists working in biotechnology have also improved the quality of crops, and created novel, new crops which have been found to be environmentally helpful for the United Kingdom. The continuation of
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biotechnological research is of particular importance in achieving the environmental benefits of reducing the use of agrochemicals and disease. Both aims are widely approved and are something that plant breeders and farmers wish to pursue.
I have had some very helpful comments from the British Biotechnology and Biological Sciences Research Council. It has produced a very eminent paper in which it said that "science cannot provide all the answers". I am afraid I was lost by the third line of the page, but at least I know where to look. I believe that lay people such as ourselves know where to look for such advice.
I have with me a copy of the Sunday Post, the biggest selling organ of the press in Scotland—the noble Baroness, Lady Ramsay, may know of it—which is read throughout Scotland. The noble Baroness, who is not in her place, said to me, "We do not get the Sunday Post". I do not think she meant to be rude; she is probably heavily involved with the broadsheets in Scotland. However, I can tell her what she is missing. It does not consist of lurid stories and coloured pictures of pneumatic young ladies. What she and others who do not read the Sunday Post are missing is good, competent advice and helpful comment—what we in Scot land call "couthy" advice—from quiet, competent and mostly Scottish experts.
I have a copy dated 23rd May 1999 which says that, after a week of controversy and confusion, the "Prof"— a typical Scottish term for professor—will answer questions; and eight or nine questions are answered in a very down-to-earth and understandable way. That did not surprise me. Professor Howard Davies is one of the professors and experts currently working in biotechnology and plant research at the Scottish Crops Research Institute in Invergowrie. As I live only 17 miles from there, I salute and take my hat off to it.
I have also received through the Scottish Crops Research Institute a most valuable document called An Introduction to Genetic Engineering. It consists of five pages; however, I must confess that I was lost after the first paragraph. It contained, however, a fascinating headline—which I am sure will interest my noble friend Lady Miller—which read "Ballistic impregnation". When I discovered that it dealt with wheat and barley, I tried to read the paragraph. That term may be of relevance to plant breeders but it is also of considerable relevance to those of us seeking to produce first-rate grain crops in Scotland and elsewhere in the United Kingdom.
The noble Lord, Lord Taverne, referred to the Royal Society report. I tend to be somewhat idle; I turn to the end and work backwards. I counted 17 recommendations. They were not all easy-going recommendations that the science and research should continue untrammelled; it contained considerable advice, caution and what I would term a braking effect. I believe that with advice of caution and good sense from the Royal Society, your Lordships and the public can he reassured. We can be reassured by following the recommendations; by following my noble friend and her Bill today; and by following the scientific and biotechnological industry, which seeks a proper and accepted regulation of this vital science.

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I thank my noble friend for bringing the Bill before us today. I look forward to hearing what the Minister has to say.
11.59 a.m.
Lord Annan: My Lords, a great deal of the wind was taken out of my sails by the admirable and well-balanced way in which the noble Baroness, Lady Miller of Hendon, introduced her Bill. I congratulate her on it. I was pleased, too, that she drew our attention to the fact that for centuries men have been genetically modifying things, such as our grafts on apple trees and on vines. Wisely in your Lordships' House, she also mentioned horse-racing. The way in which we have carried on is well known. The fantastic success after the war of the use of new varieties in India and the Far East—which saved the world from major famines—is an example of the genetic work that has taken place.
I am a little distressed that the noble Baroness ended on an ultra cautious note. I ask myself what Clause 4(a) of the Bill means. Research into the effect of the use of such organisms is open-ended; it never ends. One could deduce from the clause that because one can never be sure of the ultimate results of research there should be a ban on such tests for ever.
I also much agree with the speech made by the noble Lord, Lord Taverne. Most of the wind that I had in my sails left after the noble Baroness, Lady Miller of Hendon, had spoken, and it was totally evaporated by his speech. I agreed with every word that he said. He gave an extremely good exposition of the scientific problems facing us.
The media hype has been intolerable, and I hope that we do not give way to it. Every vegetable that we eat has carcinogens. The question is how many carcinogens. In this respect, I am reminded of the great French physiologist at the end of the 19th century, Claude Bernard, who said:
"Tout est poison. Rien n'est poison".
Everything depends on the dosage. That is the issue. How dangerous is it? I am glad that we have the Royal Society's evidence before us. Unless opponents of genetically modified plants can prove that they contain a dangerous level of poisonous material, they should be legalised.
12.1 p.m.
Baroness Miller of Chilthorne Domer: My Lords, I welcome this debate, and thank the noble Baroness, Lady Miller of Hendon, for introducing the Bill. Normally debates clarify a subject but this morning's debate has served only to mystify us further. It shows why the public are so mystified and why the popular press—which could perhaps be berated for not acting responsibly all the time—has been right to point out some of the difficulties, secrecy and hypocrisy that have been involved.
I wonder how much this Bill is a case of shutting the door after the horse has bolted. There are four steps along the road to planting genetically modified crops.
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The first was taken under the Conservative government in 1993. It seems strange that a Bill like this was not introduced then and that we did not have such a debate then. Most of the public were not even aware of what was happening. At that time restricted field trials were allowed. The full extent was certainly not realised by the public. On 15th June 1999, the shadow spokesman for the Labour Party, Michael Meacher, said:
"Over several years, there have been several hundred - I think 600 to 700 - small trial plantings of GM crops in this country".— [Official Report, Commons, 15/6/93; col. 147.]
The second step was barely restricted trial planting. As table three of the report published yesterday by the John Innes Foundation, commissioned by MAFF, makes clear, various plants have been subject to trials since 1993, from poplars to eucalyptus, apples, barley and tomatoes. Where did we find any information from the previous government about that or about how those trials went?
Today's Bill makes us think that this is something new, but it is clearly not. That may be why the public are so concerned. They feel that weasel words are being used. I am thinking of phrases such as "releases into the environment". Ever since experiments have been conducted on genetically modified crops, there have been releases into the environment. Even at agricultural shows, trial patches are available.
I accept that there is a point in conducting trials and in considering the outcomes. There is also a point in knowing what the dangers are for the environment, but any possible benefits have not been well served by the sort of hypocrisy that has recently been apparent. The public are unhappy with progress by stealth. There has still not been any clarification of whether this is a natural process. Several noble Lords have commented that genetic modification, in one form or another, has been going on for thousands of years. I agree with that, but today's technology is different.
I am not a scientist, and I am not qualified to explain the exact differences, but even someone with A-level biology would understand the difference between natural breeding and crossing a fish, say, with a plant. Until the dangers of what I would term unnatural crossing have been made clear, those who do not understand the technology, including me, will continue to question whether it is safe.
Do we need to grow these crops? On 15th June, the reply given by Mr. Meacher was again informative. He said:
"The honest answer is that we do not need GM foods".—[Official Report, Commons, 15/6/1999; col. 148.]
He added that companies like genetically modified foods because they can extend shelf life and withstand saline or dry conditions.
After the war we needed increased yields, but we now have vast areas of set-aside. Thus the argument that these crops can produce vastly increased yields in this country is a bit thin. The argument in the case of the developing world has also yet to be proved.
What will trialling crops in this country tell the industry? Will it say anything about how those crops will react when grown in Africa? Perhaps we could

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learn from the experience of the United States in growing these crops. How has biodiversity been affected there? Unfortunately, the United States' experience will not tell us much about how biodiversity in our country will be affected. First, biodiversity in the agricultural swathes of the United States of America is virtually non-existent. Secondly, we are as a country very different. We have a much richer biodiversity than the United States even though our biodiversity has been affected in recent years by very intensive farming.
The right reverend Prelate the Bishop of Hereford was right to say that we need to operate the precautionary principle carefully. We have environmentally sensitive areas and sites of special scientific interest. We are still pretty rich in biodiversity, and we do not know how much that will be threatened by genetically modified crops.
This debate is particularly timely because until now the Government have denied organic growers' fears that genetically modified crops pose a threat to their produce. Yesterday's report from the John Innes Foundation, commissioned by MAFF, gives much useful and detailed information on pollen distances. Its conclusions are pretty chilling for the organic sector. Paragraph 8.11 points out that the need for acceptable levels of contamination of organic crops should be decided, along with the need for easy and reliable methods of identifying and quantifying genetically modified contamination, which is in practice very difficult to achieve.
The report concludes that initially the releases of genetically modified crops will involve a limited range of modifications which will make testing for contamination and consideration of the consequences easier. But if the technology takes off in the United Kingdom, as it is already doing in other countries such as North America. Argentina and China, the range of modifications could increase dramatically. We may have to make a choice between growing genetically modified food and having a pure organic system. I would not to stray far into the area of the Prince of Wales's opinion on this matter or whether he should have had an opinion, but he is in the vanguard of organic food production. As an organic food producer and one who has consistently promoted that area, he is entitled to an opinion.
We should not stumble from one intensive agricultural system, which has done so much harm to our wildlife and biodiversity, possibly into another that has not been proved to be either more beneficial or to offer benefits to this country as a whole until that research has been carried out. As the noble Baroness, Lady Miller of Hendon, said, there are only 200 days before more widespread planting will be allowed. On these Benches we have consistently called for a moratorium on the commercial growing of genetically modified crops until at least 2003, in line with English Nature's recommendations to the Government. We particularly hope that the research will tell us more about the effects on the soil and on non-GM and organic crops, and what levels of pesticides may be used compared with non-genetically modified crops. There is a misconception that using genetically modified crops
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will enable much less herbicide to be used. In fact, as they are herbicide tolerant, the fact that much less needs to be used has not been finally proved.
Finally, I feel that the most important point is the cumulative and long-lasting environmental impact of growing GM crops on all wildlife, including birds, insects and invertebrates. In a previous debate I mentioned the fact that it took people a long time to learn the lessons of DDT and that effects on the food chain take years to show up. To think that by the year 2003 we will have learnt all the effects of planting a wide range of GM crops over vast tracts of this country is fairly optimistic.
12.12 p.m.
Lord Luke: My Lords, as my noble friend Lady Miller of Hendon said, this is a short and simple Bill. It seeks to amend the Environmental Protection Act 1990 and incorporates a definition taken from the Food and Environment Protection Act 1985. It does not concern GM foods but GM crops. The object off the Bill is to ensure that the Government have the proper legislative power to restrain the marketing of genetically modified seeds and plants until all possible research has been done to ascertain the safety of these organisms and their effect on the environment.
We on these Benches have been clear in our response to these matters. We believe that the Government should proceed slowly and cautiously. Food safety is paramount and that must always be the first consideration. However, today we are dealing with the effect of these experiments on the environment. Whatever happens to the various experiments which are being carried out, at the end of the day the Government have to exercise judgment, common sense and caution in their approach. As several noble Lords have said today, nothing will ever be absolutely certainly safe, as in life as a whole.
It is clear that a great deal more research is required. That is happening at the moment, and as far as possible we believe that the research should be carried out by independent bodies if at the end of the day the general public is to be convinced. After all, the use of genetic modification in medicine is becoming commonplace. The general public has not needed to be reassured as to the safety of that. It is just assumed to be safe.
Environmental considerations must centre on whether genetic modification is likely to spread naturally to other species, and perhaps cause the balance of nature to be upset. While the case of the butterflies in the United States, which received so much publicity, may not be apposite, it is possible that something similar could occur here. It is to be hoped that if in the course of experiments which are being carried out such a disaster were to occur involving one of our native species, it would be recognised.
As my noble friend has shown, there are wide discrepancies in the various expert views as to the amount of barrier needed to prevent such natural spreading. In fact I like my noble friend's idea that all testing should be done in, presumably, the deserts of Kansas. It occurred to me that the desert is a good place because it is difficult to get anything to grow there.

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However, I seem to remember that sandstorms have brought sand all the way from Morocco to this country, so again the barriers might have to be rather wide. One cannot be absolutely certain of the course of the wind and how it may pick up pollen and transport it a great distance, and of course there are the peripatetic bees, which can travel great distances.
As I have said, depending on the tests all proving negative, at the end of the day the Government must take decisions and exercise judgment in the national interest. The object of this Bill is that such decisions should be made only after all possible tests have been carried out, and after a report has been brought to Parliament. Full exploration of any possible risks to the environment must be made before any commercial planting is allowed to proceed.
The fears of organic farmers, one of the fastest growing sections of British agriculture, must be fully taken into account and any trials which take place within effective reach—whether by bees, wind and so on—should also be especially closely monitored. A report in The Times recently suggested that contamination of some organic crops had already taken place. That is worrying if it is true. Research may prove new doubts and problems and show that at least five years may be needed before commercial planting might take place. Analysis of the results of research should be on a continuous basis, keeping the public informed and making policy at appropriate moments on the basis of sound science.
The main concern on these Benches is that commercial planting of herbicide tolerant and insect resistant crops might be permitted before research into the environmental consequences had been properly completed, evaluated and reported on. This Bill effectively and succinctly sets out to ensure that this extremely exciting new technology is introduced gradually and with all due caution. After all, at the end of the day it may turn out to be one of the most important developments of the 21st century. It is vital that we get it right. The Bill seeks to ensure that it will be approached in the best possible way and the general public's legitimate and natural worries are assuaged. We support the Bill.
12.18 p.m.
The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Lord Whitty): My Lords, I join the noble Lord, Lord Lyell, in congratulating the noble Baroness, Lady Miller of Hendon, on her stamina and versatility during the course of the past few days. It makes us shudder a little on the Government Benches when we see on what new piece of legislation she is leading for the Opposition. I congratulate her also on the way in which she introduced the Bill today and all noble Lords on the tone in which they have conducted the debate, which has been rather better than some of the discussion outside this place.
As the right reverend Prelate indicated, this issue has raised a wide range of concerns, has led to deep scientific and moral divisions, and has raised
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understandable concerns among the public and those who comment. We are dealing with an issue that is complex and emotive, and it is difficult to resolve entirely the differences between the various sides. That said, I must indicate that I shall not deal with all those great issues today. I shall attempt to concentrate on the Bill that is before the House and take up one or two of the points that were made towards the end of the debate.
To respond generally, although we accept many of the concerns expressed by the noble Baroness, Lady Miller of Chilthorne Domer, the noble Lord, Lord Luke and the noble Baroness, Lady Miller of Hendon, and although we would be considerably more cautious at the other end of the argument than the noble Lords, Lord Taverne and Lord Annan, indicated themselves to be in approaching this whole subject, we agree with the noble Lord, Lord Taverne, that the Bill is not necessary in terms of the regulatory framework. The Government are absolutely committed to operating a safe and transparent regulatory system. However, we believe that the current regulations achieve that. We therefore do not believe that the Bill adds anything to the transparency or safety of the current regime.
It is important that we get a feel for the scale of what is currently going on in this country as regards different genetically modified crops. The current regulations came into force in February 1993. Since that date there have been 166 research applications to release genetically modified organisms. Some of those cover different locations, but that is the total number. In the vast majority of those cases, the research is finished. We are talking about 54 small-scale research activities which are currently allowed and are on-going. In none of those has there been any incidence of damage to the environment. That in itself is a strong testimony to the effectiveness of the safety regime.
At present we are moving on to larger-scale tests, because we have to understand the wider environmental and biodiversity effects of these crops. Therefore, as of today, six farm-scale trials are already under way and we envisage next year moving to a total of 60 such sites, 20 of each of the main crops, autumn and spring rape and maize. Those will all be carefully controlled farm-scale trials to test the effect of biodiversity about which a large number of concerns have been expressed both in this debate and more widely. After the planting of those crops, the normal rotation of the fields will need to be reverted to, so that a proper assessment can be made over the subsequent two years of the full effects. That is what is presently in the pipeline. I thought it important to set the context so that people understand that we are dealing with a relatively small number, even next year, of carefully controlled experiments. They are experiments about which there are a large number of uncertainties, and we are proceeding with extreme caution.
It is also necessary to explain to the House how the current regulatory system operates. The regulatory process is governed by EC Directive 90/220, which is given effect in the UK by the Environmental Protection Act 1990. Consents for release for research or any other

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purpose are issued by the Secretary of State for the Environment, Transport and the Regions in England; the Scottish executive; and now the Welsh Assembly.
For cases encompassing environmental and agricultural matters, the Secretary of State acts jointly with the Minister of Agriculture. Separate legislation applies in Northern Ireland, but the effect is the same. Applications to market GMO products would pass through the same procedure; but they must also be submitted through the competent authority of the EC member state where the product is intended first to be marketed, and then be cleared at Community level before a consent is granted.
The purpose of those controls at UK and EU level is to prevent or minimise any potential damage to human health and to the environment that may arise from the release of GMOs. The release regulations require any person wishing to release or market GMOs to conduct an environmental risk assessment and to provide comprehensive information on the planned release. The consent holder must be constantly aware of any risk or damage to the environment and must notify the Secretary of State if there is any information that would indicate a change in the level of risk. Requirements are now being introduced in the context of the revision of the EC directive which establishes the principle for risk assessment and post-marketing monitoring provisions. That is intended further to reinforce the safety of the regime.
The Secretary of State relies on independent scientific evidence that has been provided by the Advisory Committee on Releases to the Environment. There has been much comment on that committee. I am pleased to inform the House that my colleague, Michael Meacher, will later today announce the future membership of that ACRE committee.
Directive 92/220 is currently being amended. The noble Baroness asked for an indication of our attitude within the European negotiations. Those amendments will give us the opportunity to clarify and extend a number of key provisions. The objective of the directive, which the Government fully support, is that of protecting human health and the environment. The Government wish the scope of the directive to be more clearly defined than at present and the risk assessment to cover direct and indirect, immediate and delayed effects. We must make sure that the conclusions of the risk assessment are confirmed through effective monitoring by competent authorities. We want to make sure that the regime is transparent and that the public are given information about the activities governed by the directive. Of key importance is a change in the committee procedures for resolving objections lodged by one or more member states. We want to see a greater and fairer weighting of the views in these procedures. We believe that our attitude as regards that will be successful at the European level and indicates that we are constantly striving to improve the regulatory regime at that level. That is the background against which this Bill is proposed.
I respect the views of the noble Baroness in bringing the Bill forward. However, it does not seem to add anything either to the exhaustive scientific study of
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every dossier which is carried out by the DETR, advised by its scientific experts on ACRE, or to the overarching framework of bio-safety which exists in the UK and the EU.
There are four key points in the Bill. The first proposes an amendment calling for,
"research on the effect of the use of",
GMOs before any release may take place. The term "use" presumably refers to use in the research programme; at a further stage it would be covered by other regulations.
Such an assessment is already carried out under the current regime before any consent is issued. Such amendment is therefore unnecessary. The environmental risk assessment required by the current regulations must consider in detail the effects of the use of a GMO, including direct and indirect, immediate and delayed effects.
ACRE's remit was recently extended to take account of the indirect and cumulative effects of GMO releases on biodiversity in particular. It has been further strengthened by the agreement reached by Environment Ministers in December. While the revision of the directive continues, new principles for risk assessment and monitoring will be introduced. The UK is therefore asking applicants for consent to release or market GMOs to apply a modified procedure of risk assessment. Although it is quite similar to the current regime, it will be better. Holders of consents to market GMOs will also be required to monitor the performance of their product and verify that the assumptions in the risk assessment supporting the application are borne out in practice. Therefore, I do not think that the first main provision of the Bill is necessary.
The Bill's second point concerns the preparation of guidelines for each GMO release. Each individual consent now lays down very clear conditions on which the GMO may be released. That includes a requirement of post-release monitoring. On top of that, crops grown in the farm-scale evaluations will be subject to the SCIMAC guidelines. Those lay down strict requirements, for example, to ensure traceability, separation distances and good agricultural practice. The guidelines will now be enforced by legally binding contracts, penalties for non-compliance and independent audit. This shows that the proposed requirement for guidelines is already covered by the existing regime which lays down clear conditions.
The two remaining central points in the Bill relate to parliamentary approval. This would take us into new territory for parliamentary activity in such fields. The Government do not believe that it would be appropriate for Parliament to consider each individual application for the release of GMOs. Once the regulations that govern the release and the criteria for applying the rules have been set, the grant of consents must be an operational matter for the relevant Secretary of State. The Government believe that the regulatory framework secures protection of human health and the environment.. and Parliament has been extensively involved in scrutinising and approving the legislation.

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This House in particular has had a number of debates on the whole area, and no doubt will continue to do so in terms of broad policy. It does not seem to the Government that to bring individual applications for consent to Parliament is the appropriate way to deal with this very difficult, and often highly technical, issue. That is, therefore, our view on the Bill. While we commend the noble Baroness on a number of the concerns that she has expressed, some of which we are taking on board in our efforts to improve the regulations at EU and UK level, I am afraid that we cannot support the necessity for the Bill.
The right reverend Prelate the Bishop of Hereford raised the question of the need for baseline surveys and ecological studies. The baselines for these studies are paired comparisons between GM crops and non-GM crops. That is how we establish any difference that GM crops may make to the wider environment. English Nature, the RSPB and the Institute of Terrestrial Ecology are all involved in those assessments. The right reverend Prelate also questioned whether voluntary guidelines were enough. The SCIMAC guidelines go over and above the existing EU legislation that I have outlined. We are backing that up by the measures that I have outlined. While they are industry-based voluntary guidelines, they are rigorous and the back-up in the regulatory mechanism is there.
Much concern has been expressed here and elsewhere about the implications for organic farming. The Government take this seriously and recognise the concern about evidence of long-distance pollen transfer which comes from government-funded work. Pollen can travel long distances, but in normal agriculture it is also true that most plants are pollinated by those near them. The frequency of cross-pollination decreases rapidly with distance. The SCIMAC guidelines include separation distances based on those which already successfully protect the integrity of ordinary commercial agricultural crops. Nevertheless, we recognise that there are concerns in this area. For example, we shall consider the John Innes report to which reference has already been made. In particular, we recognise that the organic sector has a serious concern about avoiding contamination of air produced by GMOs. MAFF is in discussion with representatives of organic farming and will carefully take their views into account, together with further scientific information, in any further measures that are needed.
Today, we have been debating a regulatory framework which deals with living genetically modified crops rather than the food end. Reference has also been made to cosmetics and medicines, but I shall not deal with those matters today. The Government have indicated their desire to ensure that there is a safe regulatory framework. I refute the allegation that the Government have been driven by particular commercial concerns. We shall continue to attempt to achieve, and will achieve, a balanced view of the considerations. Since the noble Baroness mentioned it, I refer to the furore reflected in the "Today" programme yesterday about the alleged hundreds of meetings between Ministers and representatives of GM companies. That is
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grossly exaggerated. I can speak in detail only about my own department. My colleague Michael Meacher has had precisely three meetings with representatives of GM companies and probably a dozen or so meetings to deal with industry bodies and international aspects of this problem. Ministers and officials have also had a significant number of meetings with the environmental groups that take a different view.
I do not believe that the fact that we have some contacts with GM companies should be regarded as in any sense sinister. We need to have such meetings. I hope that government, the scientific community and those who draw up regulations and enforce them will continue to recognise the need to work closely with industry but also the deep concerns in the agricultural community, among consumers and public opinion generally in this area. However, we believe that the present regulatory framework and the improvements in the pipeline make this Bill unnecessary. I hope that the noble Baroness will take that into account.
12.35 p.m.
Baroness Miller of Hendon: My Lords, I should like to thank all noble Lords who have participated in this morning's debate. Most noble Lords, with slight reservations, have supported the Bill, even though the Government do not believe that it is necessary. In thanking the Minister for his very good reply, I am sorry to learn that when Ministers see me opposite them—I shall carefully read Hansard tomorrow in case I did not correctly understand him—they have a slight shudder. That bothers me immensely. I always try to be extraordinarily helpful to the Government.
I also thank all noble Lords and my noble friend for their kinds remarks. In particular, I thank the noble Lord, Lord Annan, who spoke in the gap, for recognising that my Bill and my speech sought to be well balanced. The noble Lord, Lord Taverne, generally welcomed the Bill, although he wanted to ensure that it was well balanced. He said that I had made reference to "grave concerns" and so forth. I went on to say that the assurances of industry might turn out to be right and there are no real dangers, but the point is that we do not know for sure.
The Bill does not discuss whether or not GM crops are safe; it is much more to do with public perception and concern and to try to settle their fears once and for all. The Bill is about not being bounced into full field trials. The Minister will understand that many of the smaller farm trials have been abandoned. Some of them have been abandoned noisily and some we have not heard about at all. The Bill is also about not being bounced into commercial exploitation of these products until agreement has been reached that the individuals products, one by one, are safe beyond reasonable doubt. I certainly do not suggest that it should be proved 100 per cent beyond doubt, which we cannot have. Therefore, when the Government give a product a licence all the facts will have been openly debated and transparent. Those facts will be put before Parliament, which will give its approval on behalf of the people. However, I understand the Minister's comment that that would entail going into a new area.

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The noble Baroness, Lady Miller of Chilthorne Domer, and I share the same name and sometimes tend to be confused. However, I believe that on this issue we are very much at one. If one went back just a year, hardly anyone was concerned about this matter. This is a new matter with which the public have a problem. Anything that we can do to help in that process will be good in the long run and will deal with all the matters that we want to deal with.
I make one point to the noble Lord, Lord Taverne. I do not believe that this is a political matter at all. I said that this was a matter for government because it will be the responsibility of government to take whatever action is necessary to calm people's fears.
I shall not return to what the Prince of Wales did or did not say. I am certain that he did not make a comment in a political way. The comments made about it being constitutionally improper are inappropriate. I was pleased to hear the noble Baroness, Lady Miller of Chilthorne Domer, state that those on the Liberal Democrat Benches did not feel that anything he said was out of order.
In thanking noble Lords again, I express the hope that the House will give the Bill a Second Reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

European Community Legislation (Impact) Bill [H.L.]
12.40 p.m.
Lord Willoughby de Broke: My Lords, I beg to move that this Bill be read a second time.
It will not have escaped your Lordships' attention that today is Waterloo Day. It seems particularly appropriate that the Bill I present is heavily influenced by the playing fields of Brussels. The purpose of the Bill is to require the relevant Minister to report to Parliament on the impact on British business of specific EU legislation that has been put into law either by a directive or which has become law automatically through secondary legislation and regulations.
It will be no news to the Government that businesses in this country, large and small, feel that their competitiveness is being seriously eroded by the never-ending tide of legislation which has been coming their way; most comes directly or indirectly from Brussels.
I should like to give your Lordships a few examples of some of those directives and regulations. There is the parental leave directive; the acquired rights directive; the working time directive; and the VAT directives in all their glorious variety. I think that we are now on the sixth VAT directive. The urban waste directive will add massively to the costs of fish processing plants. As one example, a firm of fish processors sent me information which indicates that their charges are likely to rise from £40,000 to over £1 million a year. We have the landfill directive. The dangerous goods safety adviser directive requires the use of a certified safety adviser during
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loading, transport and unloading of dangerous goods—and I am informed that dangerous goods under this directive will include Tipp-Ex and aerosols. The Birmingham Chamber of Commerce has estimated the cost of that directive at £580 million with a benefit to industry of only £30 million.
Then we have the multiplicity of regulations. I give two examples. The Dairy Products Hygiene Regulations run to 165 pages and require a PhD in microbiology and a law degree to understand them. Then we have the impending disaster to the rural economy caused by MAFF's current interpretation of the Meat Hygiene Service Regulations whereby small abattoirs, meat processors and their suppliers will be forced out of business by having entirely disproportionate costs forced upon them.
Then there are the fire regulations, the health and safety regulation and environmental regulations. I do not need to continue. Your Lordships get the general picture.
I wish to run briefly through the Bill. Clause 1 defines the purpose of the Bill and at subsection (4) states what the report shall include. Subsection (4)(c) requires the Secretary of State to assess what could or should be done to reduce the cost and burden on business. Paragraph (d) requires that the report contain separate chapters on the impact on business in Scotland. Wales and Northern Ireland. Subsection (5) requires that the impact assessment be laid before the UK Parliament by the end of May following the financial year to which the report relates. This gives the Government about seven weeks in which to prepare the report. This should ensure that the impact report is relevant and can be acted upon.
Clause 2 requires that the Secretary of State consult widely with all those affected and that arrangements be made and advertised to enable individuals and organisations who may have missed that consultation to make their own case to the Minister and his representatives.
Clause 3 requires the Minister of the Crown to state at Second Reading of a Bill what provisions, if any, the Bill contains to give effect to Community legislation, and what that legislation is. This is similar to the present statement on the face of a Bill which indicates compliance or non-compliance with the European Convention on Human Rights.
Clause 4 defines the Community legislation which is within the scope of the Bill, and the meaning of "impact" for the purposes of the Bill.
The Minister will probably say that there is already adequate scrutiny of EU legislation in our two Houses, and that in any case regulatory compliance costs assessments are issued whenever a new law or regulation is enacted. I do not agree that that is adequate. Nor, I believe, does the Federation of Small Businesses, the CBI, the Institute of Directors, or the Employers Forum on EU Social Policy, all of which I have consulted on this matter. The EU Scrutiny Committees report on selected EU legislation. As a Member of your Lordships" Select Committee I can testify to how much hard work goes into making those reports both thorough and balanced. But

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I can also testify to the fact that legislation and draft legislation pour out of Brussels at such a rate that proper scrutiny has become impossible, never mind the fact that the Commission bureaucracy seems to have major problems in getting the papers out within a time-scale which will allow for proper scrutiny. This has been the object of complaint by the Select Committee on several occasions, with little or no effect to date as far as I can see. In any case, scrutiny is no substitute for proper legislation.
The compliance costs assessments are inevitably imprecise. They come before the true costs can be properly assessed. I ask the Minister how widely these compliance costs assessments are distributed. Do the businesses which will be affected by them receive them as of right; or do they and their representative organisations have to find out what is in the legislative pipeline and then ask for them? That is the only question I shall ask the Minister. I hope that he will give me some comfort on that. I do not deny the usefulness of these preliminary assessments; and my Bill does not seek to replace them. It requires the Government to report on past costs annually.
If the costs for the year are roughly the same or less than the preliminary assessment, then all well and good. If, however, the costs are greater, the Government will have to explain how and why these costs have increased; how they got it wrong; and what they propose to do to put it right.
One obvious example is the effect of EU legislation on employment. Has a measure been job positive or job negative? If positive, fine; if negative, then Parliament should know that its enactments have damaged employment. On 12th May the noble Lord, Lord Haskins, who is in charge of the Better Regulation Task Force, made a most encouraging speech—it was his maiden speech—in an excellent debate on small firms. He said that,
"bigger businesses have the resources to comply with complex regulations. Small ones do not".— [Official Report, 12/5/99; col. 1238.]
I shall now present your Lordships with an astonishing statistic. Microcompanies—that is, companies with up to 10 employees or fewer—make up nearly 95 per cent of all businesses in this country, and they employ over 10 million people. They are the creators of new jobs. By contrast, big companies seem to cut jobs when the bottom line looks rocky. One has only to look at the headlines:
"Barclays announced that 6,000 jobs are to go";
and—
"Invensys shedding 5,000 jobs";
and this morning in The Times—
"Prudential to cut 4,000 jobs".
Small companies could replace those jobs, but they need support, not strangulation by regulation. They need directives to be applied flexibly, as they are in other countries of the EU, and not gold-plated by overzealous bureaucrats as all too often they are in this country. We need to take more advantage of derogations where they are available and need to interpret the spirit of the directive rather than its strict letter.
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For example, the preamble to the Social Chapter on Parental Leave—it is giving small business quite a headache—states:
"This agreement takes into consideration the need to enhance the competitiveness of the community economy and to avoid imposing financial administrative and legal constraints in a way that would impede the creation and development of small and medium-sized undertakings".
Therefore, there are such provisions, even in some of the more radical EC legislation, which ought to be taken on board.
This Bill is not anti-government. Indeed, it seeks to work with the grain of government policy in its endeavours to reform the European Union labour market. It is not anti-European; it is not xenophobic; and it will not cause us to miss the various trains, planes, boats and bicycles which are now so vital to our future well-being. However, it is anti the unnecessary legislation still flowing from an arrogant and discredited Commission and it is anti gold-plating. By the way, am I alone in wondering what this discredited Commission, which resigned en bloc and in disgrace only four months ago, is doing still turning out these regulations?
This Bill is pro employment and pro business, particularly pro small businesses, which are the lifeblood of this country's economy. During the debate on small firms, I was interested to note that my noble friend Lord Taylor of Warwick, whom I have never met or spoken to, asked at col. 253 of Hansard for an annual statement to Parliament on the costs of regulation and the Government's plan to reduce that cost in the following year. This Bill would do exactly that and would be welcomed by business and I hope by government. I commend it to the House.
Moved, That the Bill be now read a second time.—(Lord Willoughby de Broke.]
12.50 p.m.
Lord Bruce of Donington: My Lords, on reading through the Bill which has been presented by the noble Lord, Lord Willoughby de Broke, my first reaction was one of sympathy. Any information that is helpful to the business community and to the citizens at large is most welcome. Indeed, it may be within the recollection of your Lordships that for the past quarter of a century I have made repeated requests—I shall not say "demands"—for such information, and not always with adequate response.
Therefore, my first observation is that we are dealing with information about the past. It has no bearing on what is going to happen in the future, aside from the presentation of a report. Although it may be rumoured to the contrary, that I have little sympathy with Ministers, I have a great deal of sympathy with them. I know the time which they have at their disposal after they have dealt with the ordinary administrative affairs of their departments and carried out the tasks in their original brief and those added to it by the Prime Minister; and I must say that the requirements relating to the compilation of a report on the impact costs of EC legislation—on what happened in the past and after the event—are formidable indeed. I doubt whether any Minister working full-time on the preparation of a report on what happened last year would be able to spend a couple of hours a day going through the stuff before it finally reached its reform.

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Let us see what the Bill requires of the report. It is to be:
"a summary of the views of the individuals and bodies consulted",
and the consultative requirements are extensive. It is:
"a summary of representations … where the impact identified by the Secretary of State or by any individual consulted or from whom he has received representations … should be taken to reduce or offset that impact".
In addition to general assessments affecting Scotland, Wales and Northern Ireland, and the Scottish Parliament, the National Assembly of Wales and the Northern Ireland Assembly, not later than May after the financial year to which it relates the Secretary of State has to provide all those bodies with a report, but before he does so in relation to the year that has passed he must consult,
"organisations representing business and industry, including small businesses … trade unions … organisations representing companies providing financial services … registered charities … organisations representing the legal and accountancy professions".
I am glad to see that last provision and I look forward to any consultations which the noble Lord may care to have.
All that represents not only time that must be spent by the Minister and his senior and semi-senior civil servants, but time that must be taken by the people who are interviewed. There will be an additional cost on business to provide that time after the event, without being able to influence in any way what has happened. I do not believe that that is the right way of going about it.
Incidentally, I observe that one of the Ministers pre-empted today's debate by providing a Parliamentary Answer to a Written Question tabled in another place yesterday. Mr Brady asked the Secretary of State:
"What estimates his Department had made of the cost of … the social chapter's parental leave directive … the works council directive … and part-time work directive to British business".—[Official Report, Commons, 17/6/99; col. 204.]
In reply, the Minister indicated that he would issue a statement and that a regulatory impact assessment will accompany the draft regulations. Therefore, the noble Lord on the Front Bench can already claim that in part he has pre-empted what is required by the noble Lord.
It must not be assumed from this that I am not in sympathy with the broad drift of the proposals. Indeed, I am very much in sympathy. But it seems to me that the effort to impart information should be made before the regulation is approved and not afterwards. I have already indicated that even the production of the report ex post facto would take a long time. It might therefore be complained that providing the information before the regulation is approved will also take some time. But what does that matter?
I do not discern, and many of your Lordships will not discern, a demand by the electorate of Europe last week to be provided with more regulations. In fact, there was no demand for any regulations at all. Therefore, I ask myself whether the European population—made citizens of Europe at Maastricht—are loud with complaints that they have not been provided with any regulations for at least a year. On the assumption that the Commission stopped issuing regulations, on the assumption that the
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Council decided that the small amount of time it devoted to considering anything was worth while sacrificing, Europe might have a whole year without any regulations whatever and without raising the slightest complaint. Of course, the agricultural community would complain if from time to time agricultural prices were not amended in order to conform with exchange rate variations and so forth. But there would be no complaint.
Moreover, I regret to say that it is also the case that there is no realisation either in government or outside of the origins of the great majority of these regulations. I shall be dealing with that matter later today, time constraints permitting. As I shall endeavour to show at a later stage in our proceedings today, regulations emanate from hundreds of committees without any intervention of Ministers at all. Some of the regulations have a very great impact indeed on the lives of businessmen.
Unfortunately, I have not time to read examples of regulations made without any intervention from Parliament whatsoever and probably without any consideration even by Ministers. They have had considerable ill-effects on our business community. I can cite case after case, quoting the regulation concerned, where it has been sought to enforce it by the enforcement authorities in our own country on behalf of the Commission and ostensibly on behalf of the Community. Many of them have ruined individual businessmen. It has involved firms going into liquidation on account of the interpretation of measures that subsequently, through legal action—too late, of course—proved to be wrong.
Firms have gone into liquidation in this country and incurred vast legal costs because of an interpretation of Community regulations, all of which are covered in this Bill. Therefore, I urge Her Majesty's Government in reply to this debate, while legitimately rejecting it, that they should nevertheless take on board the lesson that is involved: that is, that all legislation brought from the Community to this country, before it goes on to the statute book or becomes enforceable, should be subject to an impact assessment. That would be done by the Government themselves and by business. The regulations certainly would not be missed in the country. There will be no clamour; no processions down Whitehall or assemblies in Trafalgar Square, or even in the country towns, protesting that people have had no regulations for a year. It would not even be noticed, in the same way as the public did not notice the European elections which took place last week.
Therefore, while disagreeing with the noble Lord's Bill on the ground that it deals with the past, on behalf of myself and I believe many others, I would like to thank him very much indeed for bringing forward this Bill, enabling ourselves and I hope others to learn from it and to make quite sure that any regulation from the Commission, from wherever it emanates, is subject to proper scrutiny and estimates by the Government of the impact costs before it reaches the statute book and is enforced. On those grounds alone I shall certainly give a fair wind to the Second Reading of the noble Lord's Bill so that it will enable further and profitable discussions of the real issues involved.
1.3 p.m.
Lord Pearson of Rannoch: My Lords, of course I support this excellent Bill and congratulate my noble friend Lord Willoughby de Broke on his initiative in introducing it. However, I am not entirely sure whether my noble friend intends that his Bill should apply only to Euro legislation which will have been forced down our throats in any preceding year or whether the Government would be required to report annually on the result of all Community legislation with which we have been saddled since our tragic decision to join the European Economic Community, or Common Market as it then was, in 1972.
I feel sure that the latter requirement, if not already included in Clause 1, is essential if only to bring home to the Government and to the people of this country the full extent of the calamity which our adherence to the Treaty of Rome has brought us. If that means that the complaint made by the noble Lord, Lord Bruce of Donington, is extended to legislation which is even older than the legislation that he has in mind, then I suggest that Ministers and their civil servants could spend very much more time doing that and not pursuing new legislation in Brussels.
The people of this country have been assured by all three of our political parties and by our political media for at least 25 years that our membership of what is now the EU is a good thing. There is no serious debate about what life for this country might be like if we left the Treaty of Rome or the EU and maintained our present trading position with it. Both the previous government and this one steadfastly refuse an objective cost-benefit analysis.
So it is a great credit to the common sense of the British people that recent polls show that some 40 per cent of them want to leave the EU despite all the lies that they have been told by the aforementioned parties for 25 years and that a much higher percentage of them are certainly not going to be fooled into signing up to European economic and monetary union, that final prison door of full political subservience to Brussels, as the election last week clearly demonstrates.
This Bill goes to the heart of why the British people remain so staunchly and wisely Euro-sceptic. That means that they dislike the Treaty of Rome and everything which it allows the bureaucracy in Brussels to force on us. Euro-scepticism does not mean that most British people dislike the Continent of different European nations, each with its own glorious history and culture, which they admire and respect. We Euro-sceptics love that real Europe: we hate the Treaty of Rome and all its works.
We have only to consider a short list of those British interests which have already felt the dread hand of the crazy Bureaucrats in Brussels—and which I suggest that this Bill should cover—to see why that is so. Apart from our currency, those interests include our food, water, fisheries, agriculture, waste disposal, art market, slaughter-houses, Eurobond market, working week, herbal medicines, bridges, sparkling cider, lorries, take-overs, dairy farmers, towbars, whisky distillers, pheasant shooting, market gardeners, Civil Service, egg
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producers, taxis, cheese makers, paper rounds, boat builders, legal system, hallmarks, oak trees, duty-free shopping, ponies, condoms, the roast beef of olde England, the London bus and the excellent lavatory designed by Thomas Crapper.
Behind every one of those damaged or threatened interests lies an almost incredible saga of bureaucratic excess and ineptitude in Brussels, which has often been gleefully made even more damaging by our bloated bureaucracy and pusillanimous government Ministers here.
Of course, I do not have time to go through each one now, but if any noble Lord wants to challenge me on any one of the interests that I have mentioned, I will be delighted to give him the full, ghastly, unexpurgated story of how Brussels came—
Lord Stoddart of Swindon: My Lords, I am most obliged to the noble Lord for giving way. I listened to the long list of things coming out of Brussels. I sympathise with the noble Lord and understand. He mentioned a directive on condoms. I believe that the general public would consider that quite way out. Could he, perhaps, elaborate on that? What has the European Union to do with condoms?
Lord Pearson of Rannoch: My Lords, I am grateful to the noble Lord. By coincidence I was looking at it this morning just to make sure. I have here, in a plain brown envelope, the European Union directive on condoms. We are often told that the European Union has ceased interfering in the nooks and crannies of British life. But I can tell noble Lords that these 50 pages prove the opposite. There was nothing wrong with the UK condom manufacturing industry when this directive was introduced in 1996.
I am happy to take the noble Lord and your Lordships through some of the unbelievable detail of this piece of interfering nonsense which, as I say, runs to 50 pages. For example, on page 6, we come to the definitions of a condom. Such definitions are all legally binding in a directive. It states:
"For the purposes of this European standard, the following definitions apply".
There is quite a lot that I shall spare your Lordships in the interests of propriety, but we then come to Article 3.5 where we are told how to recognise a visible hole in the condom:
"A hole in the condom that is visible under normal or corrected vision".
But our friends in Brussels are not going to leave us with that. They want to describe in law what a non-visible hole is at Article 3.6. It is:
"a hole in the condom that is not visible under normal or corrected vision and is defined as a defect through which a quantity of water can be forced by rolling a condom containing 300 millilitres of water (or",
your Lordships will be pleased to hear,
"electrolyte) on coloured absorbent paper such that all parts of the surface of the condom are brought into contact with the absorbent paper, the quantity of water being such that it can be detected visually as a wet mark on the paper".

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We go into design:
"Condoms may be of the designs given in the following list",
but I shall spare your Lordships that because it is not intended to be exhaustive. However, I imagine that some of your Lordships would find that list quite informative.
We come to bursting volume and pressure and we are told that a defective condom is defined as,
"a condom which fails the requirement for volume or the requirement for pressure or both requirements; ie, a condom failing both requirements is counted as I defective condom".
I cannot go through all 56 pages. We have a page and a half on how we decide the length of a condom. You are not allowed to say, "Just measure it". There are some amazing diagrams. We have two and a half pages on the method for the determination of bursting volume and pressure of a condom. We have another two and a half pages, starting on page 24, for the method of the determination of force and elongation of break of test pieces of condoms.
There is a new offence here at F.3.1, I think:
"Preparation of test specimen. Move the condom inside the package such that it is away from the area where the package is to he torn. Tear the package and remove the condom".
Then the offence:
"Under no circumstances use scissors or other sharp instruments to open the package".
Earl Attlee: My Lords, my noble friend is going into great, perhaps excessive, detail. Is there anything about recycling in the directive?
Lord Pearson of Rannoch: My Lords, I think there is. I am very happy to send my noble friend a copy of the document so that he can study it at his leisure.
On page 25, we get to F.5.2:
"Calculate elongation at break",
that is Eh, in brackets,
"as a percentage of each test piece by using the following expression",
so this is the formula,
"K + 2d - p x 100 / p
where:
K is the length of the test piece in millimetres, rounded to the nearest millimetre",
and so on. That incredible document is now being pursued by the EU on a worldwide basis. It demonstrates what I was saying before; that this is the kind of detail which British manufacturers have to put up with. As far as I know, they were making perfectly adequate condoms before. Indeed, they were world leaders in condoms before this nonsense came out. I am grateful to the noble Lord for his intervention.
Taken together, the damage done to those British interests and the costs incurred in following the relevant diktats from Brussels all add up to a colossal drain on the British economy. But this cost is hidden from the British people because if there is one aim that our three political parties share in their attitude towards the Treaty of Rome, it is a determination to keep its results from the British electorate.
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One can talk privately now to former Conservative Ministers who confess that much of their time as Ministers, and even more of the time of their civil servants, was taken up in disguising the fact that legislation they were introducing was in fact imposed upon this country by Brussels. This certainly applies to the Ministry of Agriculture and I suspect it runs across the board.
Another fairly big example would be the water directives, especially the urban waste water directives, the drinking water directives and the bathing water directives, the latter of which, when I sat on your Lordships' Select Committee, was described as a complete waste of money by no less than our own Department of Health.
No one seems to have the faintest idea how much those cost or what their benefit has really been, and certainly no one has dared to look at what the cost and benefit of cleaning up our water on our own initiative would have been without the massive additional and often superfluous cost imposed by Brussels.
For example, I remember that in 1996, the noble Lord. Lord Stoddart of Swindon, elicited from the Government the fascinating statistic that we had by then, since 1972, spent some £14,000 million on water purity dictated by Brussels and only £1,000 million on infrastructure and supply. I do not know what the current figures are and would be grateful if the Minister could supply them when he comes to wind up. However, when I was on your Lordships' Select Committee three years ago, it looked as though spending on infrastructure and supply, which is not dictated by Brussels, would be rising to around £10,000 million by 2002, but the spending on Brussels directives has spiralled up to around the £40,000 million mark since 1972. Will the Minister clarify this and would he also be good enough to confirm that the usual bureaucratic stupidity is observable in the fact that the massively expensive drinking water directive does not require the lead pipes in people's houses to be changed, which are what cause much of the supposed damage to health? Will he confirm also that the United Kingdom had some of the purest drinking water in Europe before this nonsense started? Can he estimate what proportion of our vastly increased water charges are due to European water directives as opposed to additional expenditure on infrastructure and supply?
Finally, and I think importantly, can he tell us what all the other European countries are doing about these directives, not just some of them but all of them? I had a Written Question on this recently and the Government said that one or two countries were following them, but we have not the faintest idea what most of them are doing.
As I have indicated, this Bill, if drafted sufficiently widely, would expose the true effect of our adherence to the Treaty of Rome, which is why the Government will not want it. That is the real reason that they will not want it.
After all, this Government continue to mislead the British people about the European Union just as assiduously as did the previous Conservative

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government. I have only time to give your Lordships two examples of that. First, let us look at the example of the Prime Minister himself in Questions in the House of Commons last week on 9th June, at cols. 639 to 643, when he repeated twice one of the most inaccurate and misleading slogans which is constantly uttered by those who favour handing over the last shreds of our national sovereignty to the emerging corporatist superstate in Brussels.
At col. 639, the Prime Minister was putting the Government's well-worn position that they would join EMU if it proved to be successful and if the Government judge it to be in the national economic interest. The Prime Minister went on:
"That is because more than 50 per cent. of our trade is with Europe and more than 3 million jobs are dependent on Europe".
Then at col. 641, the Prime Minister was teasing the Conservatives by suggesting that the logic of their position of wanting to renegotiate some aspects of the Treaty of Rome meant that they would have to take the UK out of the EU. He want on to say:
"Given that more than 50 per cent. of our trade is with Europe, that would be a mistake for Britain".
But it is simply not true to say that 50 per cent of our trade is with Europe. What is true is that perhaps as much as 42 per cent of our exports go to the EU, quite a chunk of which merely pass through Rotterdam and Antwerp to destinations outside the EU.
But that 42 per cent represents only some 14 per cent of UK gross domestic product, which is surely a fairer yardstick of our overall trade than exports alone. To confirm those figures, your Lordships could look at a Written Answer that I received from the noble Lord, Lord McIntosh of Haringey, on 18th January.
Therefore, I hope that the Government will stop using this grossly misleading figure of 50 per cent when they promote the need for our membership of the European Union; nor does the Prime Minister's figure of 3 million jobs depending on our trade with the EU appear to have any basis whatever in fact. As evidence of that I would refer to a Written Answer that I received from the noble Lord, Lord Simon of Highbury, on 30th March 1999 in response to my Question as to the effect of the European single market upon net UK job creation figures between 1993 and 1997. The Answer he was obliged to give was:
"There are no meaningful figures on the effect of European single market legislation upon net UK job creation between 1993 and 1997".—[Official Report, 30/3/97; col. WA32.]
We are, of course, powerless in the European Union, thanks to the terms of the treaty. I shall not remind your Lordships again of the terms of qualified majority voting which make that inevitable. Certainly in all areas covered by the single market, all of our industry, commerce and environment, that is so.
It will not come as a surprise to your Lordships that my solution to the problems covered by the Bill would quite simply be to leave the Treaty of Rome. There is really nothing at all frightening about that. We are the fourth largest economy in the world, with which we trade in surplus, while we trade in deficit with the European Union.
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Leaving the European Union would be a thoroughly positive thing for the United Kingdom and for the British people. We could adopt the Swiss model, which is highly successful. We could, perhaps, look at a new North Atlantic free trade area. It is, in that respect, gratifying that the existing NAFTA (North American Free Trade Area) is already negotiating with Norway and Iceland; or, we could simply opt for complete independence under the World Trade Organisation, which has, in any case, brought international tariff barriers down to below 4 per cent. That means that the EU is redundant, if we leave out its sinister aim of political unification, which is also denied by this Government as it was by the Conservatives.
I know that leaving the European Union is a little way off and this is not the time to consider the sunlit uplands of the United Kingdom unburdened by the shackles of the incompetent, fraudulent and hopeless European Union. So, in the meantime, I support this excellent Bill. I hope that it can be drawn widely enough to show the British people the true nature of the quicksand into which their political leaders have so blindly led them, and which I hope, before long, they will have the clarity and the courage to leave.
Baroness Amos: My Lords, before the next speaker, perhaps I may remind your Lordships that we have two further debates this afternoon. The Companion suggests that your Lordships might wish to keep within a 15-minute limit for your speeches.
Lord Pearson of Rannoch: My Lords, I apologise to the House if I went three minutes over that time. I think it was occasioned by my diversion into the detail of the directive, for which I was asked.
1.25 p.m.
Lord Stoddart of Swindon: My Lords, I congratulate the noble Lord, Lord Willoughby de Broke, on bringing the Bill forward. It deserves support and I sincerely hope it will get a Second Reading today. I should also like to thank the noble Lord, Lord Pearson of Rannoch, for his explanation of the condoms directive, which shows quite clearly how officials, and indeed presumably Ministers, are engaged extensively with such ridiculously small items. As far as I know, condoms have been produced satisfactorily and safely in this country and throughout Europe over a very long period of time, long before the Treaty of Rome was signed in 1957. So, a great deal of money is wasted.
I should also like to support the noble Lord, Lord Pearson, in believing that we would be far better out of the European Union than we are in it. As one who opposed our entry into the Common Market, as chairman of the Campaign for Independent Britain and as one who still believes we should come out—and the sooner the better—I can tell the noble Lord, Lord Pearson, that he and I are in unison.
I appreciate the comments about the Bill made by the noble Lord, Lord Bruce of Donington. We really should have the assessments before things happen. However, that is not the way of the world at present. I believe that the provisions of the Bill will help to concentrate the

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minds of Ministers and civil servants, who will have to produce this information before they start making regulations and directives, especially as they will be required to report to Parliament and the various devolved assemblies. One flaw in the Bill is that it does not require the Government to find time to debate the reports in Parliament. Of course, they can just report but they never provide government time for those reports to be debated. So, we shall have to consider that in Committee.
The Government may say that there is adequate scrutiny at present. Clearly there is not because so many absurdities—some of which we have heard this afternoon—which often destroy businesses and cost jobs get through the net. A flood of regulations goes through Parliament, as has been mentioned, without any debate, and many important directives receive only a cursory glance by Parliament, both in the House of Commons and in this place.
Community legislation tends to have a greater and more serious impact on smaller businesses. They are not properly consulted about Euro-measures even though they are the ones the hardest hit by such measures. A recent publication entitled Inspector at the Door, issued by the Federation of Small Businesses, is well worth reading. It was published this year. I hope that my noble friend will obtain a copy. He will then perhaps realise just exactly how the system impinges so badly on the work of small businesses. They are plagued by a big raft of inspectorates, including some from the European Community. That distracts them from the real job of running those businesses and adds to their cost. I believe that that is recommended reading not only for Ministers but for civil servants.
It is not only small businesses that are worried. Even the New Labour-friendly CBI is worried by the seemingly unstoppable flow of regulations and legislation from the European Union. On pages 18 to 20 of the June issue of CBI News, an article warns firms to watch out for the "next wave" referring to a new raft of labour law in prospect. So even big business, as well as small businesses, is now becoming worried about what is happening in the European Union.
The horror story of European legislation and intrusion is told in stark detail by Christopher Booker and Richard North in their excellent book, The Castle of Lies. It was first published in 1996 but it is still relevant today. That, too, should be compulsory reading for Ministers. It shows how the bureaucrats have undermined democracy by bamboozling Ministers and sidelining Parliament.
Only yesterday an article appeared in the Daily Telegraph, written by Anthony Jay, whom we all know as the creator of "Yes Minister", which blew the gaffe on how government is carried on in this country. I cannot go into detail and quote from his article at length, but I believe that it should be read in full by Ministers, MPs and Members of your Lordships' House.
Mr. Jay said that all bureaucracies are bad, but the EC is a federal behemoth—I like that phrase. He also said,
"If Brussels bureaucrats succeed in getting every country to join a single currency, they will be unstoppable".
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How I agree with that. How I have noted over the years that power after power has been ratcheted away from Parliament and from our own elected government to the unelected bureaucrats sitting in Brussels. So, good for Mr. Jay. Let him write more about that because I am sure his views will be welcomed.
The Maastricht Treaty was supposed to stop the flow of measures from Brussels through subsidiarity. But what happened? As many in this House predicted when we fought the Maastricht Treaty and the official Opposition refused to fight the Maastricht Treaty, the Commission treats subsidiarity as a joke. It continues to interfere in the nooks and crannies of our national life, which the noble Lord, Lord Hurd, when he was Foreign Secretary, deplored in such trenchant tones.
Just to illustrate how the tide of such legislation is still flowing in, Christopher Booker's column in last week's Sunday Telegraph tells how the rebirth of some of our great steam railway engines, like the Flying Scotsman, which have been lovingly rebuilt at great cost. could be at risk. They may not be able to operate in the future due to the imposition of expensive testing regimes for vital components built on a one-off basis. So even our steam engines, so loved by the British people and used by them when they are on holiday, are now at risk.
Christopher Booker referred also to some of the foreign vets working in our abattoirs, but I do not have time to go into that. Indeed, one could spend the rest of the day quoting cases of bureaucratic interference and misbehaviour, including the fraud about which we heard this year.
I will not detain the House any longer, except to reiterate my support for the Bill, which I hope will receive a Second Reading today and indeed be passed in its entirety by this House and another place.
1.33 p.m.
Viscount Trenchard: My Lords, I congratulate my noble friend Lord Willoughby de Broke on introducing this Bill, which should command support from all sides of the House.
The flood of legislation from Brussels continues to increase and, as your Lordships are well aware, much of it receives at best inadequate scrutiny here at Westminster. Members of your Lordships Select Committee on the European Communities and of the European Legislation Committee in another place have repeatedly complained about this. Even directives are rarely debated and are often introduced as statutory instruments. It is often unclear how many Orders in Council will be required to put a Bill fully into effect, as your Lordships may well have noted in the case of the Pollution Prevention and Control Bill and the Employment Relations Bill.
It is clear that small and medium-sized businesses are particularly ill-equipped to understand, let alone implement, much of the vast myriad of detailed regulations emanating from the Commission. As a director of a company operating a small country house hotel in Devon, I am well aware of the enormous

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unwarranted costs we were required to incur in the refurbishment of the kitchens, re-siting the ovens, replacing the fine old wooden cupboards and shelves with stainless steel ones, and so forth. I understand that many small hotels have had to close because they are unable to bear the costs of implementing regulations of this kind.
The Working Time Directive is another case in point. As the Institute of Directors stated in its European manifesto,
"Rogue employers will continue to thrive in the informal economy whilst their law-abiding counterparts struggle with the voluminous (but not quite 'definitive') guidance from the DTI on, for example, the Working Time Directive".
This measure will, according to the DTI, cost British business some £1.9 million. It seems that we in this country are much more conscientious in implementing EU regulations than are our continental neighbours. I would certainly not advocate that we should compromise our standards of observation of the law; indeed, rather the reverse. We should exhort the other European countries to raise their standards to ours. If they did, their governments would surely be more likely to join us in calling on Brussels for much more restraint in the introduction of new legislation. A law that is unenforceable is a bad law. A law which imposes obligations or restrictions on businesses or citizens which are disproportionate to the benefits it provides is a bad law.
In spite of the excellent work undertaken by noble Lords serving on the European Select Committee and its sub-committees, the achievements of which are rightly recognised in the country at large and which do much to enhance the reputation of your Lordships' House, the problem seems to be getting worse. It is of course frustrating that neither this House nor another place has any power to amend European legislation. The effect of my noble friend's Bill would be to increase the accountability of Ministers to Parliament in their representation of British interests in the Council of Ministers.
The power of member states to veto proposals has diminished and there has been a significant move towards a system of qualified majority voting as a result of the ratification of the Maastricht Treaty. There are unfortunately moves afoot to extend this system to other areas, such as tax policy. In that connection I also warmly welcome the introduction of the Bill of my noble friend Lord Waddington to restrict Ministers' powers to agree to tax harmonisation measures which at present seriously threaten employment in and the prosperity of the City of London.
I cannot understand why the Government are still seeking a compromise solution to the Commission's withholding tax proposals which will still cause this country much more relative damage than it will to other member states. The Government should, without further delay, declare their firm intention to veto this measure, the threat of which has already affected confidence in the City.
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In these circumstances it is absolutely necessary to increase the role of the British Parliament in the framing of Community legislation. Requiring the Secretary of State to consult with representatives of business, the trade unions, the professions and other interested parties, and then compile an annual report to Parliament is an excellent suggestion and should increase the obligation on Ministers to negotiate effectively on our behalf with their counterparts. The very sensible provision in the Bill to require Ministers to make an impact statement on British legislation required to give effect to European legislation will also serve the same purpose. I suggest that such impact statements should be required to be included on the face of a Bill in the same way as statements of compliance with the European Convention on Human Rights are now included.
Paradoxically, as power moves from the Council of Ministers to the European Parliament, the power of member states' parliaments will diminish. It is not encouraging that in spite of the wishes of your Lordships' House we have instituted a system of choosing our representatives in the European Parliament which provides for the least degree of democratic accountability and it seems that people have given their verdict on that system. For that reason also the Bill would serve the useful purpose of increasing public awareness of what is going on in Europe, both here at Westminster and in the country at large.
There are several industries and activities where we are world leaders but where we face particular threats. As regards the art market in this country, my noble friend Lord Hindlip has told the House on other occasions about the loss of jobs and damage to the market resulting from the Government's failure to prevent the droit de suite from being applied in this country.
I strongly welcome the Conservative Party's seven-point plan to cut red tape from Europe announced by my right honourable friend Mr John Redwood on 25th May. Among the seven points, I think that the point requiring the costs to affected countries of every piece of legislation introduced to be considered by the Commission and that requiring an assessment of the extent of compliance with existing legislation before the introduction of new proposals are especially important.
What I think the Government do not realise is the fact that we have a world market today, not a European market. Ring-fencing the European market by European red tape inhibits the competitive advantages of European players on the world stage. The opportunities available to British industry and commerce as a whole outside the EU are obviously greater than those inside the EU, especially given the respective expected future economic growth rates. For Europe and its member states to be strong and achieve their full potential and prosperity for their peoples, we need to restrict the continuing increase in bureaucratic regulations emanating from the Continent.
The noble Lord, Lord Bruce of Donington, said that the Bill only had effect after the event, after the European legislation had been introduced. I agree with

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him that it would be highly desirable for all European legislation to be subjected to an impact assessment by the Government before it is introduced. However, the effect of my noble friend's Bill would indeed be that Ministers would actually have to carry out an impact assessment prior to the introduction of legislation, because they will be uncomfortably aware of the need to report to Parliament afterwards.
I am grateful for having had the opportunity to speak in this debate and look forward to hearing the Minister's reply. I have also enjoyed listening to the contributions of other noble Lords.
1.41 p.m.
Lord Nunburnholme: My Lords, perhaps I may congratulate the noble Lord, Lord Willoughby de Broke, on bringing this very necessary Bill before us. I should also like to congratulate the noble Lord, Lord Pearson, on his insight and foresight. He covered his subjects totally and completely comprehensively. I thought that he made a magnificent speech. As for the noble Lord, Lord Bruce of Donington, I should point out to him that a man who is a little bit wiser than I am, whose name, I believe, is Solzhenitsyn—although I stand to be corrected—said:
"A man who looks backward, looks forward with one eye closed; a man who never looks backward, looks forward with both eyes firmly shut".
I have many points to speak of the coming debate. The noble Viscount, Lord Trenchard, touched upon tax harmonisation and I have some hard guns to fire on that matter. However, if the noble Viscount does not mind, I will leave that for the next debate. Nevertheless, he got the point and was smack on. I thank him very much for that.
1.43 p.m.
Lord Taverne: My Lords, during the last debate I thought that I saw the noble Lord, Lord. Willoughby de Broke, nodding his head with approval at some of my remarks. If that was a correct interpretation, I must apologise to him because I cannot quite reciprocate on the occasion of this Bill. I cannot return the compliment because I cannot support his Bill, although I could perhaps support Clause 3 with its idea of an impact statement on legislation.
Why? It is true that there is a substantial body of legislation coming out of Brussels which places burdens on companies. To my mind, that is an inevitable consequence of our membership of the single market. As our political and economic integration with Europe proceeds, as our exports are more and more oriented and our trade is more and more intertwined with that of Europe, of course we are affected by a host of European pieces of legislation. It is also true to say that in the past much of this has been oppressive, but there has been an improvement. For example, there is less concern now from Brussels with the harmonisation of, say, bottle-tops than there used to be.
However. even if this legislation places considerable burdens on companies, that does not justify the Bill. Indeed, it is a non sequitur. I find myself in the unusual
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position of agreeing with the noble Lord, Lord Bruce of Donington—at least as regards part of his remarks. I am not sure whether he welcomes my support, but on this occasion we do agree on one point; namely, that the effect of the Bill would not necessarily be helpful in any event because it would be retrospective and it would also be extremely onerous. It would not only be Ministers' time that would be consumed in trying to find out what the direct and indirect effects would he; there would also have to be a great army of civil servants. Is the noble Lord really suggesting that we should have a vast increase in the number of civil servants engaged in collecting statistics on something as vague as the direct and indirect impact on business of the various pieces of legislation? It would be a very difficult task to identify exactly what the impact was. What good would it do? At this point I differ from the noble Lord, Lord Bruce of Donington, because I think that it would be even more difficult if it related to future legislation when the impact would be even more uncertain.
There is another question that arises. If this is necessary in the case of legislation from Brussels, why should it not be necessary for legislation from the UK? There is no reason why we should not have the same sort of impact statement because that, too, can be extremely burdensome to industry. Let us imagine, for example, the Bill on which the noble Viscount, Lord Trenchard, and I were engaged earlier in the pre-legislation committee on the financial markets and services. It would be very difficult to assess what the exact impact, whether direct or indirect, is going to he. How could we ask a Minister to make a. full statement on the subject? With great respect, I am afraid that the Bill is not practicable.
The latter raises the question as to why it has been brought forward. I do not think that it is necessarily the intention of the noble Lord, Lord Willoughby de Broke, but certainly there are others who welcome this as offering an opportunity to try to create more trouble in our relations with Brussels. It seems to be part of a sort of guerrilla campaign in which more and more impossible demands are made whereby power is sought to be restored to the UK Parliament. That is something which is perfectly logical from the point of view of the noble Lords, Lord Pearson of Rannoch, Lord Bruce of Donington and Lord Stoddart. They want us out of the European Community. But what is interesting is that that seems to be more and more the direction in which the Conservative leadership is travelling. This business about "in Europe but not run by Europe" is slowly beginning to edge us into moving out of Europe altogether. I give way to the noble Lord.
Lord Bruce of Donington: My Lords, I am grateful to the noble Lord for giving way. Will he give me one instance in the course of any speech that I have made either in this place or outside where I have said that we want to get out of Europe? If he cannot do so, would he kindly withdraw his remark?
Lord Taverne: My Lords, I cannot give an instance and I am very happy to withdraw it. I am sorry. I identified the noble Lord, Lord Bruce of Donington,

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too closely perhaps with the views expressed by the noble Lords, Lord Stoddart and Lord Pearson. I certainly apologise to the noble Lord if he is not with them on that goal.
I do not think that this is a matter which really needs any long speeches or intricate analysis. In my view it is an impractical Bill and I certainly do not think that it will do any good whatever to our relations with the European Union.
Lord Pearson of Rannoch: My Lords, before the noble Lord sits down, is he really not going to answer any of the analysis which has been offered so far, and which cannot be called intricate, or is he simply saying that he wants to be in the European Union however awful it is, and that is that, and he will not answer the criticisms of those of us who want to leave?
Lord Taverne: My Lords, I shall not debate the whole question of British membership of the European Union at this moment. It is going to be a long day anyway. I am concerned only to deal with the particular provisions of this Bill which in my view are quite impracticable.
1.49 p.m.
Earl Attlee: My Lords, I am grateful to my noble friend Lord Willoughby de Broke for introducing his Bill this afternoon. His list of EU directives was certainly extensive but it is also perhaps a measure of the co-operation and scope of EU activity.
The noble Lord, Lord Taverne, said that he could not support the Bill. I can understand some of the reasons for not wanting to support the Bill. But then he also expressed interest and support for Clause 3. However, all noble Lords are aware of the interest of the noble Lord, Lord Taverne, in these matters and we are grateful for his analysis. I say to the noble Lord, Lord Taverne, with regard to the Conservative Party's attitude to the EU that we on these Benches have absolutely no interest at all in leaving the EU.
All three items of European business today cover similar issues of concern. Not surprisingly the list of speakers is also similar in all three cases. We have touched on the issue of tax harmonisation. In the next debate I intend to consider the withholding tax, although some noble Lords have touched on it already. It would be interesting to see an impact statement on the withholding tax and also a Section 1 report on the withholding tax, if it ever came into being.
I found the contribution of my noble friend Lord Pearson of Rannoch interesting and detailed. I have no information but I suspect that the directive he quotes from is based on the British standard for condoms. I can understand the EU's reluctance to quote a British standard in an EU directive, but it is a little hard to understand why the directive could not refer to an ISO standard, even if the ISO standard was derived from our own British standard.
Noble Lords will be aware that we on these Benches are quite clear that we want to be in Europe but not run by Europe. That point was noted by most of those who
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voted in the recent European elections. Clause 3 applies only to primary legislation. Your Lordships will be aware that most EU legislation is made under the European Communities Act as secondary legislation. If my noble friend is minded to take this Bill a further stage, he might like to consider amending Clause 3 to catch secondary legislation too.
On that point, I meet many ordinary people of all kinds and conditions outside this House. They often complain to me about new laws and regulations. These new laws and regulations often implement EU directives. By and large, they are desirable but I have to explain to these people that there is little I can do in Parliament because, as I have mentioned, all this legislation is implemented under the 1972 Act.
The noble Lord, Lord Stoddart, who sadly is not present at the moment, referred to the unstoppable flow of regulation, as he put it, and the effect on small businesses. One example that he mentioned was the threat to preserved steam engines. Some time ago we debated the hot surfaces directive in your Lordships' House, I believe, in the form of a Starred Question. This issue of new regulations for boilers and steam vessels will be of serious concern to many steam enthusiasts. However, I am not aware of any steam vessel failure with preserved steam equipment. The Minister will not have the answer available but will he write to me and tell me exactly what the Government's policy is with regard to steam boilers in preserved equipment?
One major concern about EU regulations is that government departments have a bad habit of "gold plating" EU regulations. I well recall the debates we had in the previous Parliament concerning new eyesight standards for drivers of commercial vehicles. The Minister at the time pleaded that he was only implementing EU directions. However, later the Minister found that he could water down the regulations. I am sure that an impact statement would have concentrated the Minister's mind at that time. I do not know what my noble friend plans to do with his Bill. It is, however, vital that Ministers consider the impact at least as carefully as whether the Bill complies with the ECHR.
Lord Pearson of Rannoch: My Lords, before my noble friend sits down, can he explain to the House how this country will be in Europe but not run by Europe when we remain bound by the Treaty of Rome? As he himself said—he may or may not be right as to whether this applies to Clause 3 of the Bill—most European legislation now comprises secondary regulations which do not even pass through national Parliaments. It is an expression which I know has been put about by the Conservative Party often recently, but how can we possibly not be run by Europe when we are bound by the Treaty of Rome, the Single European Act, the Maastricht Treaty and the Amsterdam Treaty? It is just not possible, is it?
Earl Attlee: My Lords, we have the Council of Ministers and we have the European Parliament.
1.56 p.m.
The Minister of State, Cabinet Office (Lord Falconer of Thoroton): My Lords, I hope that noble Lords will forgive me for not participating in the internal debate of the Conservative Party as to whether or not the Conservative Party should support a policy of withdrawing altogether from the European Union. If I may, I shall restrict myself to the Bill spoken to this morning by the noble Lord, Lord Willoughby de Broke. In all sincerity I congratulate the noble Lord on his clear and helpful exposition both of the purpose of the Bill and its detail. I am afraid that the Government cannot support the Bill. I shall briefly explain why that is.
First of all, the Government believe that the existing arrangements provide sufficient information for the impact of Community legislation to be understood in advance of the passage of that legislation. As the noble Lord, Lord Willoughby de Broke, is aware, at present the Government prepare explanatory memoranda for Community legislation on a case-by-case basis. Significant impacts are identified in these documents, including significant financial impacts on business both large and small.
In addition, where the Government propose measures to implement Community legislation which is likely to have a significant impact, a regulatory impact assessment, including a small business litmus test, is prepared and published. As the noble Lord, Lord Bruce of Donington, pointed out, the Government have recently indicated that they intend to strengthen these arrangements so that in future it will clearly be the case that when regulations are introduced giving effect to European legislation there will be a clear regulatory impact assessment.
I entirely agree with the assessment of the noble Lord, Lord Bruce of Donington, that the right and practical approach is that both Houses of Parliament and the wider public should be made aware in advance of any impact of Community legislation on business and beyond before it is introduced. With the greatest of respect, what the Bill of the noble Lord, Lord Willoughby de Broke, proposes is frankly absurd in its scope. As I understand the position, what he envisages is that a report should be prepared each year by the relevant Secretary of State dealing with what the impact has been in the previous year of all Community legislation. That is not just the legislation that is passed in the course of that year, but, I assume, that which has been passed throughout the previous 26 years.
The noble Lord envisages that the Secretary of State would first of all consult a wide range of bodies: businesses, trade unions, companies providing financial services and, no doubt, lawyers and accountants of every kind. As I understand it, the noble Lord envisages that public meetings should be arranged throughout the country to enable people to discuss various regulations and their effect. I do not know whether he envisages
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such a public meeting in every area of the country. He nods enthusiastically. Therefore I assume that throughout the country—
Lord Stoddart of Swindon: My Lords, it is called democracy.
Lord Falconer of Thoroton: My Lords, my noble friend Lord Stoddart says that that is called democracy. However, the picture I have of the Bill of the noble Lord, Lord Willoughby de Broke, is of public meetings being arranged for most of the year, throughout most of the country, at which regulations such as the Dairy Products Hygiene Regulations would be discussed. I agree with the noble Lords, Lord Bruce of Donington, and Lord Taverne, that this process would lead to most of the civil servants and most of the Government indulging in a huge consultation process, the effect of which would be to place a very much larger burden on both business and the Government than any regulations produced by the European Union.
We believe that we have sensible arrangements in place which permit a proper giving of information before legislation is passed. That is only right and proper. We believe that the proposals of the noble Lord, Lord Willoughby de Broke, are not thoroughly thought out; they would place much too heavy a burden on Ministers, civil servants and the people consulted. I do not believe that anyone looking at them would think that they are sensible proposals for the giving or obtaining of information. For those reasons we cannot support the Bill.
Perhaps I may deal with a number of the specific points that have been raised in the debate. The noble Lord, Lord Willoughby de Broke, asked me specifically—and very kindly he said he would restrict himself to one question—to what extent we consult with interested parties, in particular with business. The guidance on the regulatory impact assessments which apply to Community legislation requires departments to consult with interested parties, including with small firms and their representatives in particular. I hope that answers the noble Lord's specific question.
The noble Lord, Lord Pearson of Rannoch, asked specific questions about the figures on water quality expenditure and related issues. Unfortunately I do not have those figures at my fingertips. Perhaps I may deal with the matter by way of writing to the noble Lord.
So far as concerns compliance information, the Commission publishes its reports annually, which include compliance and infraction information. The Government have not themselves examined compliance by other member states. However, a study prepared in 1994 considered compliance by other nations. I believe that it is available in the Library of the House.
The noble Lord, Lord Stoddart, referred to the volume of regulations coming from Europe. It is perhaps not without interest that the total number of Commission proposals at the end of 1998 was the lowest since 1990 at least. In the 12 months to the end of November 1998, the Commission presented only 34 proposals for new legislation.

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It is perhaps worth mentioning that business and the UK Government have been actively supporting the pilot business test panel, which consults directly with business in participating member states on proposals for legislation. We hope that a successful pilot such as that will help give a broader picture of the effects of legislation.
The noble Earl, Lord Attlee, referred to the "steam boiler" position. Again I am not in a position to provide an answer today. Perhaps I may write to him with the answer.
For the reasons I have given, the Government cannot support the Bill.
Lord Pearson of Rannoch: My Lords, before the Minister sits down, when he comes to answer the questions about the water costs, will he put a copy in the Library? I am, of course, aware of the study which took place in 1994—I was a member of your Lordships' Select Committee at the time—and we found that it was entirely inconclusive. Not only did we not have the faintest idea what any other country was doing at the time, but the Commission refused to answer the British Government. I do not know whether the new Government's charm offensive in Brussels has been so successful as to encourage the Commission perhaps to give an answer about what other countries are up to with these incredibly expensive water directives.
If the Government are to resist this worthy Bill, can they explain why they continue to resist sponsoring an objective cost benefit analysis of our membership of the Treaty of Rome?
Lord Falconer of Thoroton: My Lords, as to the first point, of course I will place the answer in the Library. As to the second point, Members can read the report for themselves and form a judgment as to what its effect would be. As to the third point, the idea of a cost benefit analysis would lead to such contention that it would be extremely difficult to produce something that would command widespread support.
Lord Pearson of Rannoch: My Lords, a 1994 report is a 1994 report; it is therefore completely out of date. Most of the expenditure we are contemplating under the water directives will take place after that date. Can we not find out what the other countries are doing? If we do not know the scale and effect of these directives they fall under Article 5 of the Treaty of Rome, as amended by Amsterdam; and if the European Union has not put out a cost benefit analysis on all these water directives, it falls under what used to be Article 130R. So we need not carry out these wretched things if we do not want to.
Lord Willoughby de Broke: My Lords, I am most grateful for the contributions of all noble Lords who have taken part in the debate. Perhaps I may deal with one or two of the points that have been raised. The noble Lord, Lord Bruce of Donington, the noble Lord, Lord Taverne, and the Minister made the point that it would be impractical to ask businesses, the consultees, to
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provide the costs; that it would be too onerous for them. As my noble friend Lord Trenchard made quite clear, individual businesses are only too conscious of the extra costs involved if a regulation is anti their business. They will know how damaging the regulation is and have the answers ready for the consultation process that I hope will be pursued. I think businesses would welcome it rather than dislike it if they were required to provide figures for the Government. So that is a non-point.
I was very impressed by the foresight of my noble friend Lord Pearson of Rannoch in bringing the condom directive with him. Being a Friday, it is probably something for the weekend. The noble Lord, Lord Stoddart of Swindon, referred to an error or a failing in my Bill. I hope that we can amend it. We should, of course, have time to debate the impact statements when they are produced in Parliament. We will have the opportunity to amend that when we come to the Committee stage. I will have to take advice as to whether Clause 3 should include secondary legislation.
I am sorry that the noble Lord, Lord Taverne, did not think that I talked as much sense in my Bill as I thought he talked sense in his speech in the genetically modified crops debate; I very much agree with what he said then.
Despite the opposition of the Government, which I quite understand—they do not want to do any more work or expose the shortcomings in some of the legislation they have pushed through under European directives and regulations—the Bill is worth while. I believe that such shortcomings should be exposed, as do many businesses, particularly small ones.
I repeat my thanks to all noble Lords and to the Minister for the courtesy with which he replied. I hope that the House will give the Bill a Second Reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

European Tax Harmonisation (Veto) Bill [H.L.]
2.8 p.m.
Lord Waddington: My Lords, I beg to move that this Bill be now read a second time. The purpose of this Bill is to require this and any future government to obtain the approval of Parliament and the public before agreeing to any proposal to limit further our right in Britain to decide on our own taxes and our own tax rates. That does not seem to me to be a very unreasonable requirement.
Not so many years ago it would have been thought unthinkable that any independent sovereign country would give up its right to levy whatever taxes it thought appropriate. A country's freedom to decide what to tax, and how much, is the bedrock of national sovereignty, one of the hallmarks of a free independent nation. The power of our elected representatives to decide what tax the voters should pay is a fundamental part of our democracy; and if this or any future government really are persuaded that there would be some advantage for the British people in our agreeing in some particular area to accept further inroads into our sovereignty, and

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into our democratic rights, they should come before the country to explain why and try to convince the public of their case.
The Bill comes before the House only a few days after the European elections. If the results show anything, they show that in Britain there is a deep-seated hostility to our giving up the pound, and that the brainwashing—the public money spent to convince people of the inevitability of our joining the euro—has had only limited effect, that people see nothing extreme or anti-European in keeping our own currency and something very extreme in the ambitions of others to surrender our national currency and monetary institutions. They certainly see that there is something terribly defeatist and absurd in the notion that the world's fifth largest economy, a country with membership of the European Union and free access for its goods into the European Union but with worldwide interests, cannot keep its own currency, while countries like Canada, New Zealand and Australia can keep theirs.
Most people can see that although it is perfectly possible to have a single currency and still have different tax levels—just as, for that matter, it would be possible for us to keep the pound and have the same taxes as others—the single currency in Europe is but a step to full economic and monetary union. There can be no disguising that fact, and if noble Lords want evidence of that, they need only look at the words of the president of the Bundesbank when he said recently,
"The European Currency will lead to member nations transferring their sovereignty over financial and wages policies as well as in monetary affairs. It is an illusion to think that States can hold on to their autonomy over taxation policies".
But I think that many people do not yet realise that even outside the single currency our right to pursue our own tax policies is under threat from the plans within the European Union to harmonise taxes throughout the Community and from the Government's pathetic failure to respond firmly to this threat. In fact, while the Government have protested their opposition to tax harmonisation. their actions have belied their words; and they have completely undermined what they say is their own position not just by their preparations to take us into the euro, but by their twists over the Commission's draft directive on a withholding tax, which is already threatening to drive the London eurobond market to Switzerland, by their leading role in the Code of Conduct Group on Business Taxation and their hearty endorsement of the EU's plans to do away with so-called unfair tax competition, and by their support for the federalist designs of their socialist partners on the Continent.
First, the withholding tax, where almost every day a new spin is being put on the Chancellor's step-by-step approach towards what looks like being an abject surrender. Let us go over the history. At first the Chancellor told us:
"The United Kingdom will not accept a directive that requires every member state to impose a withholding tax".
A few weeks went by and then we were told that the Treasury was in discussion with the industry on a compromise which would limit the directive's effect to holdings of less than 40,000 euros. By the 25th May
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there seemed to be better news, with Alastair Campbell letting it be known that there was a growing optimism in Whitehall that the withholding tax would slip off the agenda at the ECOFIN meeting of that date. But for once Mr Campbell was not very successful in his spinning, and the very next day the newspapers were reporting that Germany was satisfied that Britain was not fundamentally opposed to the directive, and would soon strike a compromise. Mr Eichel, who had presided at the ECOFIN meeting, was saying:
"My feeling is that in principle there is a willingness to compromise".
How could Mr Eichel have got that impression if Mr Brown had done and said nothing to warrant it? The answer is that he could not, and that Mr Brown had done something to warrant it. It turns out that he agreed to draw up a paper detailing ways in which a directive could be altered not to remove but to limit its impact on the London market. That was only a week or so after he had told the House of Commons that Britain would not accept any directive requiring member states to introduce a withholding tax.
It is about time that there was less of this business of telling one story in Westminster, and another in Brussels. It is about time that Mr Brown backed up his statement to Parliament, that he would accept no directive, with a clear indication, which he has not given, that the veto will be used.
Let us look at the plans to do away with so-called unfair tax competition. Unfair tax competition, which of course has nothing to do with tax evasion or illegal activities such as money laundering, is a concept beloved by those whose own improvidence and profligacy prevents them from matching the tax incentives offered by their neighbours to businesses looking for a congenial environment in which to operate. In the European context, it has been invented by Germany as a device to staunch the investment flight from Germany to states with lower labour costs and more friendly tax regimes.
Our rates of tax are below the European average. so when a country such as Germany talks of unfair tax competition, it is looking at Britain not as a fellow victim of unfair competition but as the villain of the piece. In short, Germany looks upon tax harmonisation as a way of undermining the advantage we now have as a result of lower tax and lower social security contributions, which allow us to attract business that it cannot.
The chosen instrument to bring about this harmonisation is the European Union Code of Conduct Group, chaired by Dawn Primarola, and set up in May last year to decide whether any business taxes or reliefs in member states constituted harmful tax competition.
Well, we know how Jacques Santer described the British decision to sign up to the code. He said, last November, that Britain's signing up to the code had the effect of nullifying the British veto and was a device to side-step the European Union treaties that require unanimity before tax harmonisation can be legally enforced. Perhaps the Minister will tell us in due course whether Jacques Santer was right or wrong on that, but

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surely we can all agree that the fact that he, in his capacity as President of the Commission, looked upon it as a device to bring about tax harmonisation is a very good reason why we should treat it as such, and not as the innocent exercise that the Government would have us believe that it is.
So where have we got to with this exercise? We may well ask. For the Government, which are for ever telling us of their dedication to open government, did their level best to conceal what was going on from the British people. Despite constant questioning in Parliament, the Government refused to disclose the list of taxes and reliefs under consideration by the Code of Conduct Group. The full extent of the exercise became public only after someone went to a Dutch Government website, and we then learnt that 185 tax measures and reliefs had been singled out for possible harmonisation or elimination.
We discovered that the ground was being prepared for British surrenders on capital allowances for small and medium-sized businesses in Northern Ireland; incentives for the film industry; roll-over relief on the disposal of ships; regional incentives such as enterprise zones; and various measures affecting the Channel Islands, the Isle of Man and the Dependent Territories. And now I read that we are in the ludicrous position of the EU committee chaired by a UK Treasury Minister also having in its sights some of the flagship measures recently introduced by Mr. Brown, which he said were measures necessary to boost Britain's productivity. I refer to 100 per cent capital allowances for scientific research and 40 per cent first-year capital allowances for small businesses.
What has finally given the lie to the Government's claims that they are against tax harmonisation has been their unstinting support for the declared federalist and tax harmonisation designs of their comrades in the socialist parties in Europe. Mr. Blair did not merely give token support for the socialist manifesto for Europe, The New European Way; the Chancellor's own adviser, Mr. Ed Balls, drafted it—including the commitment to deeper European integration, including tax harmonisation. Mr. Robin Cook, the Foreign Secretary, was the co-author with the leader of the French socialists of the European Socialist manifesto in the European elections. Mr Cook and his friends called for,
"co-ordination of economic policy, and a reduction in the use of the veto to block new European policies".
I do not want to weary the House with too many quotations, but it is quite ridiculous to argue that tax harmonisation is not high on the list of priorities of most key figures in the European Union and the Commission. When the former commissioner of the single currency was asked, "Will tax harmonisation eventually extend to VAT and personal taxes?", he replied, "Why not?". The Italian Prime Minister announced last November,
"In the age of the Euro, harmonisation of taxes is a necessity".
I see that M Jospin, in his manifesto in the European elections, calling for EU-wide tax harmonisation, said:
"we want a tax harmonisation plan covering capital [dividends, capital gains, withholding tax] and corporation tax, with the abolition of the national veto in the Council of Ministers".
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As for Sr Prodi, he told assembled MEPs after his endorsement as president of the Commission that,
"The single market was the theme of the 80s, the single currency was the theme of the 90s, and we must now face the difficult task of moving towards a single economy and a single political union".
Finally, we come to Chancellor Schroeder. Mr. Blair said the other day that Chancellor Schroeder was not one of these muddled-headed federalists, he did not want a single Europe; and that he had never met anyone who wanted anything of the sort. Chancellor Schroeder, who has talked of the single currency as a stepping-stone to political union, said that doing away with qualified majority voting on tax issues was the official position of the German Government. When he says that, he is pursuing an agenda which in his eyes flows remorselessly and inevitably from the goal of ever-closer union enshrined in the Treaty of Rome, but which is also of particular and immediate interest to a Germany determined to protect itself from the consequences of its own foolish taxation policies.
It is absolutely plain that the abandonment of the right to set our own taxes—the harmonisation for which these leaders in Europe and the European Commission yearn—can only mean that our taxes overall will rise to European levels rather than that European taxes will come down to ours. That means our taxes rising by at least one sixth and our business and top rates of income tax going up. Incidentally, if experience is anything to go by, as our taxes as a proportion of GDP rose to European levels our growth rate would fall and everyone would be the poorer. The message could not be plainer: if Britain wants to keep low taxes and continue to prosper it must stay outside Euroland, oppose the single currency and resist further attempts to transfer the power to tax from Westminster to Brussels.
I have no doubt that in reply the Minister will repeat what he said in this House:
"I do not believe that the threat … of tax harmonisation exists".—[Official Report, 20/1/99: col. 662.]
He will say that the Bill is unnecessary and that the Government have either no intention of giving up the veto on tax matters or will give up the veto only when it is clearly in the country's interests to do so; and that it ill-behoves me to complain about tax harmonisation measures because the previous government agreed to some, as if the follies of the past justify equal foolishness in the future. While the Conservative government agreed to certain minimum rates of VAT, it is only under this Government that European tax harmonisation has extended to direct taxes; and it is only under this Government that harmonisation is being advanced as a move towards (to quote Sr Prodi)
"a single economy and a single political union".
If the public want it, well and good, but it should be their choice. I commend the Bill to the House.
Moved. That the Bill be now read a second time.—(Lord Waddington.)
2.27 p.m.
Lord Stoddart of Swindon: My Lords, I congratulate the noble Lord, Lord Waddington, on bringing forward this Bill, although I do not agree with

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it entirely as I shall show. I also congratulate him on his speech. It is quite clear that, possibly for the first time, the noble Lord has listened to what people like myself have been saying for a very long time.
Lord Waddington: My Lords, I can assure the noble Lord that I have been listening to him for a very long time. I have been coming round to the view that the noble Lord was right long before I realised it.
Lord Stoddart of Swindon: My Lords, I thank the noble Lord for that admission. I am very pleased to have taken part in his tutoring as to the real meaning of the European Union. I and other noble Lords, for example my noble friend Lord Bruce of Donington and the noble Lord, Lord Pearson, have given warnings every time we have signed a new treaty, from the Treaty of Rome to the Single European Act. My noble friend Lord Bruce of Donington and I opposed that Act on behalf of the Labour Party. We warned that it would lead to huge increases in the power of Europe and the European Commission. but our warnings were ignored. We were also firmly opposed to the Treaty of Maastricht because we knew that that was the foundation of what we now have; namely, tax measures relating to economic and monetary union to build a country called Europe, which I and the noble Lord, Lord Waddington, do not want. I do not believe that the people of this country want it either.
I do not agree with that part of the Bill which calls for a referendum. I believe that that would undermine the position of Parliament; and that is precisely what I would not wish to do. The referendums would be expensive nightmares and would undermine the basic power which gives Parliament its sovereignty: that is, the power to raise taxes. We have to be careful that we do not undermine the power of the House of Commons to raise taxes and to withhold supply.
It is clear from Answers to my Written Questions on the subject of the withholding tax which was mentioned by the noble Lord, Lord Waddington, that Ministers now have a device whereby they, and not Parliament, decide on the taxes we pay. That is altogether reprehensible.
I must weary the House with my Questions which were answered on 27th May. I asked,
"(a) whether parliamentary scrutiny arrangements can prevent [the Government] from agreeing to any proposal by the European Council for a withholding tax; (b) whether, following such an agreement, there would be a breach of European Community law if the necessary tax legislation was not enacted in the United Kingdom; and (c) whether such a breach would undermine both Parliament's control of supply and the constitutional principle that one Parliament cannot bind its successors".
This was the Answer from my noble friend who will reply to this debate. My noble friend Lord McIntosh of Haringey stated:
"There are long-standing government undertakings to both Houses of Parliament that they will not normally vote in favour of (or in some cases abstain from voting on) proposals in the Council of Ministers which are still subject to the established parliamentary scrutiny arrangements. The undertakings are embodied in a 30 October 1980 Resolution of the House of Commons (updated on October 1990).
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A failure to give effect to an obligation to transpose the provisions of an EC Directive would he a breach of our obligations under the EC Treaty, and would render the United Kingdom liable to infraction proceedings under Article 226 (ex-Aricle 169).
The European Communities Act 1972 provides for effect to be given in our domestic law to obligations of the United Kingdom under the EC law, including, where necessary, for those obligations to override inconsistent provisions of our domestic law" —[Official Report, 27/5/99; col. WA 100.]
That Answer indicates clearly, first, that without the consent of Parliament Ministers can agree to measures which then become binding on Parliament unless they repeal the European Communities Act 1972. That is the position we have.
Members of the House of Commons should be hopping mad about it. They should be having another civil war about it. The civil war was fought about whether the executive, the king, would be able to raise and levy taxes which had not been agreed by Parliament. The king was beheaded. But now we have the European Commission and the European Union.
What that means is that Ministers, despite the undertaking in 1990 not to vote in favour or abstain if EU proposals are still subject to parliamentary scrutiny arrangements, can, once scrutiny is completed, go ahead and agree to taxation proposals in the EU which Parliament could not undo at any time without being in breach of European law.
Thus, two basic tenets of our constitution are set aside at one fell swoop: first, that Parliament can withhold supply; and, secondly, that one Parliament cannot bind its successor unless it first repeals the European Communities Act 1972. I would love it to do that because it would set this country free to pursue its goals in the global environment, free from the depressive and depraved regulations which emanate from Europe and impose on this country a situation which does not suit its people, history, institutions or heritage.
If we are to remain in the European Community—and I do not believe that we should—and at the same time protect the power of Parliament, a constraint must be put on Ministers to ensure that they do not usurp the power of Parliament over granting supply and raising taxation.
My noble friend will no doubt protest that Ministers would not dream of trying to usurp Parliament's powers. Of course I would believe him. I respect him and I know that he would not want to mislead me at all. But, of course, some of us, perhaps including my noble friend, remember the sixth directive on indirect taxation which still hangs over British taxpayers like a financial sword of Damocles, agreed to by a Labour Government
Then, of course, there was the agreement by the previous Conservative government, in addition to modification of the rules relating to VAT, to abolish duty free goods, which could not be saved by either the Prime Minister, despite his best efforts, or Parliament. The British Parliament could not repeal the directive; it could not tell British people that they could continue to have duty free goods. They will be phased out at the end of this month. So Parliament has lost its right to give a tax concession to its own taxpayers.

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Therefore, we can see that the Government cannot be trusted on this subject—I trust my noble friend, but I do not trust governments—because they have already taken action either by design or shear stupidity to undermine the position of Parliament. What I find very worrying, and I hate to say it, is that Mr Blair appears to believe that Labour MPs should act as ambassadors for the Government rather than as representatives of the people checking the excesses of the Government and holding them to account, especially in regard to expenditure and the raising of taxes.
MPs are servants of their constituents; they are not ambassadors for governments, whether they be Tory, Labour or any other kind. The very freedoms of this country depend on Members of Parliament being prepared to defy governments—their own government if necessary—to ensure that the rights and duties and sovereignty of Parliament are upheld. I hope that will be remembered and that my right honourable friend the Prime Minister will reconsider his strictures on Labour MPs that they should be ambassadors for his Government.
For the reasons I have mentioned, I cannot support the Bill in its entirety. However, I believe that it should be given a fair wind today; it should be given a Second Reading and, if necessary, amendments can be made at later stages.
2.39 p.m.
The Earl of Dartmouth: My Lords, I thank very much the noble Lord, Lord Waddington, for bringing forward this very important and interesting Bill. I have just been presenting myself to the electorate on a platform of "In Europe, Not Run by Europe", a phrase which some noble Lords may have heard a few times before. The reason why that phrase was successful is because to a very large extent we find ourselves in the present situation of being in Europe and run by Europe. There is perhaps no better example than the continuing pressure from the European Union for what it terms tax harmonisation. The Council of European Finance Ministers, chaired by our very own Gordon Brown, has already called for an end to what they call harmful tax competition.
There is a very good example not very far from these doors of what happens when we acquiesce in that. About six months ago 2.5 per cent VAT on art imports and exports was levied on the London art market. The effect of that has been the near termination of the London art market as an international entrepot and trading centre. Far from the business going to France or to Germany, which is probably what they would have liked, the business has been driven, and is being driven, outside the European Union entirely to Geneva, Monte Carlo and New York.
The imposition of the tax, which is droit de suite, will kill off what is left of the international element of the London art market almost entirely. Unfortunately, that is what happens when we allow taxes to be imposed on us from Europe.
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The noble Lord, Lord Waddington, has drawn attention to the European Union code of conduct group chaired by a British Treasury Minister, Dawn Primarolo. The group has been called into being to review some 200 tax breaks, all of which are designed to lower taxes. The code of conduct group is there to stop what is called harmful tax competition. It is apparent from a Parliamentary Question and a reply dated 14th June—therefore it is fairly hot off the press—that eight of the tax breaks being examined are specifically British.
My noble friend enumerated them himself, so I will spare noble Lords the full list. But I make the very important point that four of those tax reliefs were introduced by the Government. They are—I stand to be corrected—100 per cent capital allowances for films; for scientific research; 100 per cent capital allowances for small and medium enterprises in Northern Ireland; and 40 per cent capital allowances for small and medium enterprises in the rest of the United Kingdom.
The decisions of the code of conduct group are not binding. However, the Government have said that they will abide by the conclusions of the group. In effect, therefore, the decisions of that group are binding. In terms of our national sovereignty that is an example of our present situation, which is being in Europe and run by Europe.
We have the bizarre paradox that a group chaired by a Treasury Minister will very likely have to negate tax concessions made just a few months earlier by the Government of which he is a member. I look forward to the Minister responding to that point.
Another example of action over which we have had no influence at all is the abolition of duty free. That was touched on with customary eloquence by the noble Lord, Lord Stoddart. Britain needs to have tax competition. That means low taxes and, in consequence, low unemployment. What brings international investment to our country is principally, among other factors, low taxes. It is not the Government's ability to get the German Chancellor over to a campaign meeting, nor is it the Government's commitment in principle to abolish the pound. It is low taxes and costs which bring investment here.
I turn now to the matter of indirect taxes, which is an area where we do have control. Indirect taxes, taken as a whole, are much higher here than in continental Europe. There is a strong argument for tax harmonisation, but it is to harmonise the levels of indirect taxes here and in continental Europe. In fact, the Government are busy deharmonising indirect taxes with the level of indirect taxes in the euro-zone. Specifically, they have increased taxes on cigarettes and petrol and they have failed to reduce taxes on whisky.
There is a free market to some extent, which has resulted in widespread smuggling and much lower revenue for the Exchequer. If there is a desire to harmonise taxes it is concentrated on indirect taxes, not on direct taxes. Furthermore, the heavy impost of indirect taxes on diesel fuel has placed heavy burdens on the road haulage industry. That has placed British road hauliers at a specific cost disadvantage to their competitors in continental Europe. Many hauliers will

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be driven out of business as a direct consequence of the Government's commitment to deharmonise indirect taxes; that is, to raise taxes here in relation to the level in continental Europe.
The British Parliament's ability to set its taxes at its own rate is a fundamental tenet of sovereignty. Indeed, that is what the English Civil War was fought over. I have some slight embarrassment in making this point, as my direct ancestor, the first Baron Dartmouth, was military governor of Oxford, the Royalist capital in the Civil War. So I am arguably estopped from making this point, but that does not make it any the less valid.
In conclusion, I make the point that tax harmonisation removes our competitive advantage in world markets. Should we adopt euro-zone levels of taxes, it would result in this country having euro-zone levels of unemployment. We must retain at all costs our low tax, low cost, low regulation, high employment, high growth economy. That means not succumbing to tax harmonisation, and, to coin a phrase which your Lordships may have heard before, being in Europe and not being run by Europe.
2.47 p.m.
Lord Nunburnholme: My Lords, once more I offer my congratulations to the noble Earl, Lord Dartmouth, on making good, hard points which he rammed home, and that is what must be done.
Once again, I must ask your Lordships to concentrate, as I did some six months ago, on the 20 per cent withholding tax. We should not forget also that the late departed Lord Denning warned strongly against the perils of the European Union. There is no doubt that Lord Denning will go down in history at the same level as F.E. Smith, the first Earl of Birkenhead and Marshall-Hall. He was in that category.
That tax harmonisation is seemingly to placate Germany which wishes to put a stop to money flooding across its border into tax havens such as Switzerland and Luxemburg. It will be an entirely fruitless exercise as the avoiders will simply send their money to Jamaica, the Caribbean or any other untouchable tax haven.
But no. That is not what it is about. That is not the purpose. The purpose is to weaken the City of London, the financial centre of Europe, and its eminence as a global financial centre. Germany wants that to be in Frankfurt. The USA would not be exactly displeased either. It knows that no sensibly minded investment adviser will tie his monetary assets into the euro, with its ever-changing bureaucracy and social chapter after social chapter, apart from its instability.
Have we any reason to believe that this Government, or any other future Europhile government, will not give way on tax harmonisation? They have surrendered on everything else, for example the fishing industry and the heavy art market, which has gone to New York, setaside, totally contrary to the interests of this nation—we are net food importers. Why set aside 15 or 17 per cent? What is the point? The list goes on and on. What will come next? North Sea oil?
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The directly apparent earnings of the international bond market are £2.1 billion sterling per annum. That will be heading across the big pond and 'with it a further estimated £4 to £6 billion ancillary earnings; it may even be higher. That alone will double our cost of being in the EU. It is but one facet of the harmonisation and with it the 100,000 jobs which will go.
The incumbent of 11 Downing Street is known as the Chancellor of the Exchequer. He will always retain the title "Chancellor" but he will have to drop "of the Exchequer"; there will not be one. I could ask how long is this charade going on, but I do not have to. Clause 4 of the Communist Party manifesto and Clause 4 of the Labour Party manifesto are, as the Portuguese say, igual; that is, they are equal.
It is the intention of our dearly beloved president to tie his country into a seemingly socialist authoritarian state using the word "inevitable" as a propaganda tool. We can come out tomorrow and, with Europe's credit trade balance with us, there is nothing they can do about it. Apart from that, at present we pay the piper. The pro-Euros are being discourteous, to say the least, to the sovereignty of this nation. I could use a stronger word. This is farcical fiscal ineptitude.
2.53 p.m.
Lord Monson: My Lords, I am sorry that my name appeared on the wrong speakers' list. Nobody seems to know quite how that happened. In any event, there has been some chopping and changing today, but it all seems to have worked out all right in the end.
This Bill, so well introduced by the noble Lord, Lord Waddington, is surely sound and desirable in principle. Whatever may be the case in other countries, traditionally in the United Kingdom, as the noble Lord, Lord Stoddart of Swindon, reminded us, only the House of Commons can tax, notwithstanding that certain taxation powers may be delegated to regional parliaments or assemblies or, in the case of rates, to local authorities.
This principle applies both when a tax-raising proposal originates in a government which is formed from the current majority in the House of Commons and also when such a proposal comes from an outside source such as the European Commission via the Council of Ministers.
However, the idea that the electorate's endorsement of the tax harmonisation proposal be sought by means of a referendum is a rather different matter. I have never been opposed to referendums in theory, but in this taxation sphere the time, trouble and substantial costs involved would rarely be justified. In this small respect I differ from the noble Lord, Lord Stoddart; I believe that there might be rare instances where the implications of a tax harmonisation proposal were so grave—for example, if we were being pressed to raise the standard rate of income tax to the continental levels of 30 per cent or thereabouts—that it would indeed justify the expense of a referendum. Exactly how one could amend the Bill to provide for that hopefully unlikely contingency I am not sure, but I am sure it is not beyond the wit of man to do so.

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The necessity of obtaining parliamentary approval for more mundane run-of-the-mill taxation changes would concentrate governments' minds wonderfully—that is governments of all political persuasions. Above all, it would encourage them to use the veto more whenever our national interest is threatened, just like other countries do. In employing the veto there is no need for stridency or table thumping, the alleged prospect of which always alarms fastidious bien-pensants; a quiet but firm "No"; a single unrepeated "No" is all that is needed, and nobody can reasonably be offended by such a courteous response.
After all, nobody in government or establishment circles is publicly nor, I suspect, privately, raging against the one or two Benelux countries for insisting upon the abolition of duty-free—mentioned several times this afternoon—after 30th June, against the wishes of the other 13 or 14 countries. Almost nobody—this is both surprising and significant—castigated Spain for threatening to veto the accession of Finland, Austria and so forth unless the Spanish were awarded more structural funds, more extensive fishing rights and so on; in other words it was accepted as normal and proper for Spain to act out of pure self-interest. What is right for Spain must be right for all other EU countries, including our own.
On the more specific issue of tax harmonisation, one cannot see Greece ever agreeing to modify the extremely favourable tax treatment accorded to the Dodecanese Islands to compensate them for their relative remoteness from Athens—favourable treatment which sits ill with single market principles. Yet it is difficult to imagine the French, Germans and Belgians seriously criticising the Greeks for sticking to their guns on this matter.
Apart from being good for Britain, this Bill, shorn perhaps of all or most of its referendum provisions, would actually make the Government more popular with the electorate. In this week of all weeks, such a prospect must be enticing to them. For that, and for more disinterested reasons, one hopes that they will give it serious consideration.
2.57 p.m.
Lord Pearson of Rannoch: My Lords, I, too, believe this to be an excellent Bill. I hope it will be given a fair wind.
I also find myself somewhat in agreement with the noble Lord, Lord Monson, and somewhat doubtful of the strictures of the noble Lord, Lord Stoddart, against the referendum in this case. That is because—I am sure the Minister will want to confirm this when he replies—the House of Commons has already lost the power to tax. That is to say, if the executive agrees to a tax modification or a new tax in the Council of Ministers, then it is illegal under European law for the House of Commons to disagree with it.
Apart from that regrettable fact of European law under the Treaty of Rome, it must be unlikely that if the executive agreed to a tax change in the Council of Ministers in Brussels, the House of Commons would
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throw it out. If we look at how the House of Commons is composed at the moment, it would not be a line of defence for the people if the executive agreed, for instance, the withholding tax in Brussels. So, in those circumstances, I do think that a referendum would be justifiable, especially as we are not just looking at the withholding tax which is very much on the stocks at the moment; we are also looking at tax harmonisation over a very large area, and massive tax increases will be proposed before long by Brussels.
Lord Monson: My Lords, perhaps I may just correct the noble Lord, Lord Pearson. I did try to make the point that I believe that the referendum should only be used in extreme circumstances.
Lord Pearson of Rannoch: My Lords, I agree with the noble Lord. I am simply saying that the withholding tax would, in itself, to me be an extreme circumstance, given the massive damage it would do to the City of London. Certainly the sort of tax hikes that are on the way if we were to join economic and monetary union, which have been estimated at a minimum of 25 per cent, would, I should have thought, be a matter of sufficient national interest to justify a referendum or, indeed, referenda.
The trouble is that, unfortunately, and thanks to the factual detail and working of the Treaty of Rome, to which successive governments have so foolishly committed us, we are much more committed to running our economy, including our tax policy, on communautaire lines than most people and perhaps the Government realise. For example, we do not actually have an opt-out from EMU. Our long-term ability to avoid tax harmonisation must be in doubt. One ploy which the European Union is contemplating at the moment is to simply make tax harmonisation a requirement of the single market. We have already been told that the single market cannot work without tax harmonisation. If the British Government were not strong enough to veto that development, then tax harmonisation would be subject to qualified majority voting under single market legislation; and that would be the end of that.
I say that we are much more committed to tax harmonisation than we think and that we probably do not even have an opt-out from EMU, against the background that there are at least six articles which were not included in Protocol 11 of the Maastricht amendments to the Treaty of Rome, which has become the new Protocol 25 under the Amsterdam amendments. So even if the United Kingdom continues to exercise its opt-out from EMU, which is contained in that protocol, these six articles would remain in force and their combined effect allows the UK to be taken to the Luxembourg court for unlimited fines if we do not run our economy on communautaire lines. I have no doubt—indeed, I am sure that we will eventually, if we have not left this wretched treaty—that we will be taken to the Luxembourg court for such anti-communautaire activities as exporting unemployment, competitive devaluation or, in the example covered specifically by this Bill, unfair taxation.

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It is useful to bear in mind the decision of the Luxembourg court against what my right honourable friend John Major, when he was Prime Minister, thought was our opt-out from the 48-hour week. When one looks at that, one must realise that the value of our opt-out from EMU and from tax harmonisation is extremely 2010questionable. Perhaps I may very briefly quote three paragraphs of a letter which my right honourable friend sent to Monsieur Santer, the President of the Commission, on 12th November 1996, after he thought he had obtained an opt-out from the working time directive when he had insisted on an opt-out from the ELT's social policy, but the Luxembourg court showed that he was wrong. He wrote as follows:
"Dear Jacques,
My intention in agreeing to the protocol on social policy at Maastricht was to ensure that social legislation which placed unnecessary burdens on businesses and damaged competitiveness could not be imposed on the United Kingdom. The other heads of state and governments also agreed that arrangement, without which there would have been no agreement at Maastricht".
That is quite an important statement. The letter continues,
"However, in its judgement today the European Court of Justice has ruled that the scope of Article 118A is much broader than the United Kingdom envisaged when the article was originally agreed as part of the Single European Act. This appears to mean that legislation which the United Kingdom had expected would be dealt with under that protocol can be adopted under Article 118A. That is contrary to the clear and expressed wishes of the United Kingdom Government and goes directly counter to the spirit of what we agreed at Maastricht. It is unacceptable and must be remedied".
My right honourable friend and the previous government then said that they would block everything to do with the Amsterdam Treaty if he was not satisfied on this point. However, he then lost the election and the new Labour Government regrettably signed up to the social chapter, the Amsterdam Treaty and all the rest of it.
I do not propose to weary the House with a full quotation of the articles concerned, but there are a few extracts which I think should be placed on the record to show exactly how serious this situation is for the United Kingdom. The first article I have chosen—which has not been excluded by Protocol 25 under the Amsterdam amendments—is Article 2 of the consolidated treaty on the European Union, loosely referred to as Maastricht. I refer particularly to the first indent thereof. The United Kingdom is committed to this. The article states,
"to promote economic and social progress which is balanced and sustainable through the strengthening of economic and social cohesion and through the establishment of economic and monetary union, ultimately including a single currency in accordance with the provisions of this treaty".
That could not be clearer. We are committed to economic and monetary union in Article 2 of the Maastricht Treaty. Actually that article goes back to the original Treaty of Rome.
I suggest that "the strengthening of economic and social cohesion" must put strong pressure on our tax policies. Article 3 of the same Maastricht Treaty states,
"The Union shall in particular ensure the consistency of its external activities as a whole and in the context of its external relations, security, economic and development policies".
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There we are; once again we are committed to communautaire economic policies. However, the position becomes worse and more specific. Article 2 of the treaty establishing the European Community—known as the TEC—states,
"The Community shall have as its task by establishing a common market and economic and monetary union to promote throughout the Community a harmonious and balanced development of economic activities and economic and social cohesion and solidarity among the member states".
There it is again; it is a case of economic and monetary union absolutely with knobs on, but I should have thought that tax policy was included in that.
Article 4 of the TEC states,
"For the purposes set out in Article 2 the activities of the member states and the Community shall include the adoption of an economic policy which is based on the close collaboration of member states' economic policies".
I should have thought that it i s difficult to have al t entirely independent tax policy under that provision.
Article 98 of the TEC states,
"Member states shall conduct their economic policies with a view to contributing to the achievement of the objectives of the Community as defined in Article 2".
The provision in Article 99.1 of the TEC is, I think, inescapable. It states,
"Member states shall regard their economic policies as a matter of common concern and shall co-ordinate them within the Council in accordance with the provisions of Article 98".
I shall not weary the House with the penalties for falling out with this communautaire economic policy, as they are contained in Articles 226–229 of the TEC. They are draconian and allow for unlimited fines in the Luxembourg court, against which of course, in true Euro style, there is no appeal.
I welcome this Bill, but in this matter, as in every other matter concerning the Treaty of Rome, this country is much more bogged down than people think in the quagmire of the treaty into which governments of all hues have so foolishly led us over the past 25 years. I think that this Bill, if passed, would at least give the people a say. which at the moment they no longer have except through an extremely esoteric representation in the Council of Ministers by the executive and not by the House of Commons. It would at least give the people a say in whether they want to suffer the undoubtedly enormous tax increases which this country faces if we are to stay in the Treaty of Rome.
3.10 p.m.
Lord Bruce of Donington: My Lords, I am most grateful to the noble Lord, Lord Waddington, for introducing the Bill, if only as it enables us to refer to the question of the veto—which, I observe from the face of the Bill, does not appear anywhere except in the Title. The Bill is entitled European Tax Harmonisation (Veto) Bill but the term "veto" does not appear elsewhere. However, it affords us the opportunity of discussing the principle beyond it.
Lord Waddington: My Lords, perhaps I may refer the noble Lord to Clause 3 and "tax harmonisation proposal". Subsection (b) states:
"requires adoption by unanimity in the Council of Ministers".
Therefore one is talking only of a tax harmonisation proposal where the Minister has a veto.
Lord Bruce of Donington: My Lords, I accept the noble Lord's further elucidation of the veto because it of course gives me the opportunity to raise the matter.
I well recall the occasion when my noble friend Lord Stoddart and myself had the opportunity from the Benches opposite—with the full approval of the Leader of the Labour Party, now a Commissioner in Europe, and of a parliamentary candidate who, sometime later, became exalted to a rather higher rank—of opposing the Single European Bill 1986, as it then was. My noble friend and I fought the Bill with some resolution and were opposed by the Conservative Party, which formed the Government at that time.
I also recall—as I hope your Lordships will recall—that my noble friend Lord Stoddart, myself and others were faced in the Maastricht Treaty deliberations with a rather different situation. My own party, the Labour Party, in effect, formed a coalition with the Conservative government at that time in order to get through the Maastricht Treaty legislation.
I say this because I hope that the House will realise that the attitude of myself and my noble friend towards the question of the veto has not been arrived at by some caprice or some gust of emotion that has arisen over the past two or three months or perhaps even years but was put before this House as a result of a very deeply held conviction that we were quite right in insisting on the veto. That received an affirmative response from the then Leader of the House, who said that the veto still remained intact.
We queried it then from the Opposition Benches because we recalled a situation in May 1982 when the British Government in Council tried to veto a settlement in that year of the price review. The Government at that time, through the then Minister, proceeded to try to exercise their veto. A difficult situation then arose because the Council declined to accept the veto on the ground that in its opinion Britain's national interest was not involved. Our opinion of course was that it was involved, otherwise we would not have tried to use our veto. In the end the Council's decision not to accept the British veto and to refuse to acknowledge it won the day. This put doubt in the minds of my noble friend Lord Stoddart and myself when it came to the debate on the Single European Act as to whether the veto was valid. I had the honour of reciting to the then Conservative Benches the events of May 1982. Notwithstanding that, an undertaking was given in the most specific terms that the British right of veto on matters affecting national interest would be retained.
My noble friend and I raised exactly the same point in relation to the Maastricht Treaty. We asked whether the British right of veto still remained. We were given the most equivocal undertakings, which appear in Hansard, that it did. The House will recall that in recent
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months, following the raising of the tax harmonisation proposals, I asked exactly the same question. I was given the unequivocal answer—as a matter of honour of course—that the veto still remained.
Before I conclude, I shall repeat that question. If I am told that the British right of veto is still exactly the same as it was when I was given that affirmative answer two or three months ago— I shall not bother to produce the quotation from Hansard, which I can obtain quite easily—I shall immediately accept that. However, I shall accept with some misgiving. I shall do so not because I in any way mistrust my noble friend the Minister or the Government but because I know the way that the Commission works. I have had long experience of it not by remote control in London but personally in Brussels. I know the way it works.
We have seen the Commission documents. There was an initial proposal for a code of conduct over tax harmonisation but it was not to be binding. I remember the words well. Over the months, the term "binding" seems to have disappeared. There has been an insidious process of trying to modify the code of conduct and to remove the British veto.
The Commission produced a memorandum a few months ago on own resources in which it made it clear that it wanted to tax itself in order to augment its own resources. At the same time it advocated that the British rebate should be cancelled. The Commission has never made its position clear. It wants to levy its own taxes outside the scope of the British Government, among others. I shall be glad if my noble friend the Minister can repudiate what I have said. As a matter of honour, I would immediately accept and welcome his repudiation.
There is much talk about the necessity of Britain being at the heart of Europe. I wonder what that means. It cannot be said that we are not at the heart of Europe in defence matters as we have recently dominated military proceedings. It cannot be argued that our language is unknown in Europe and that we do not have any claim to be heard. The fact is that English is generally accepted as being the language not only of Europe but of most of the world.
I ask my noble friend this question. Is it really right, for the sake of perhaps personal friendly contacts, which I agree are extremely important, that every time we want something different from what may be wanted in other countries we should be accused of being anti-communautaire? Is there any real obligation on the British Government to agree with everything that the other states want? Is that up to us? What means do we have to do anything other than state our minds? We are a nation, a country, and we have a history. Some of us may say that it is distinguished, others less distinguished, but nevertheless we have a history of our own. I plead with my noble friends that for the sake of being highly regarded in Europe in personal, political and technical terms it is not necessary to agree with everything or to believe that, because we disagree, there is something reprehensible about that and that we need to be cast into the outer darkness of European affairs. That is a lot of nonsense.

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If there is a future for us in Europe, a proper future, it is a future in which Europe respects us too. It is one in which the Commission is not seen as a commission of bureaucrats and as the only body in Europe that really matters, particularly when we consider its recent record which has been so miserably revealed over the past few months. That is not exactly the kind of ideal administration to which respect should be given as of right.
Lord Pearson of Rannoch: My Lords, before the noble Lord sits down, does he agree that even if his noble friend the Minister were to agree on the points that are being put to him, the fact that we still have the veto—I hope that the Luxemburg compromise, as it is known in the jargon, goes slightly wider than the veto on tax matters—does not really help us and does not obviate the need for the Bill? If the Executive go ahead and agree to tax harmonisation in Brussels, the House of Commons and the people will still be stuck with the results. As I understand it, the purpose of the Bill is to ensure that no Minister can agree to any tax harmonisation proposal without the express instruction of Parliament through a vote and of the people through a referendum. In other words, if the Bill were to become law, a nod from the relevant scrutiny committee would be insufficient. No Minister would be able to go ahead and agree, as Ministers have done in the past, if that nod was not forthcoming.
Lord Bruce of Donington: My Lords, the noble Lord has asked me a question. I was concerned with establishing a principle—that there is either a valid veto or there is not. Whether or not the Government decide to exercise a veto can be argued about as and when the occasion arises; and I shall argue my corner. I merely want to be satisfied that the Government themselves consider that they still have the right of veto and still maintain that right.
3.24 p.m.
Lord Taverne: My Lords, time is getting on and hope that noble Lords will not make two speeches in every debate. First, I wish to address myself to the Bill, which seems to be unworkable. We cannot possibly have a. referendum on every tax change that may take place. There would not be many tax changes as a result of harmonisation in Europe, but there may well be some. I hope that the Commission's proposals on the harmonisation of pension taxes will go through. That would be greatly beneficial to fund managers and others in the City of London and elsewhere. If they do, is that the kind of issue that should be brought to a referendum? Even those who are in sympathy with the general tenor of the remarks of the noble Lord, Lord Waddington, recognise that the Bill itself is unworkable and that we cannot have referenda on all these changes.
I want to turn briefly to the general questions that have been raised about tax harmonisation. The case for tax harmonisation in Europe is a somewhat limited one. In so far as it exists, it flows from the existence of the single market, although the arguments might be strengthened, and even more so if we are members of
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monetary union. The case is strongest, and is only really acceptable, where the subject to be taxed is mobile. Otherwise, taxes can be left to subsidiarity. That is true in the case of indirect taxes, as we see with cross-border shopping. The noble Earl, Lord Dartmouth, seemed to accept that in regard to indirect tax there was a case for harmonisation. That is why we have a common system—
The Earl of Dartmouth: My Lords, I accepted a case for harmonisation only because it would result in lower taxes. What we are seeing is continual disharmonisation, which is resulting in higher taxes.
Lord Taverne: My Lords, the case in which the noble Earl believed it was likely to apply was that of indirect taxes, and we certainly see that in cross-border shopping. There would be great benefit if some of the excise duties on the Continent went up. It obviously makes sense that we have a single system of VAT, which was agreed by a Conservative government in the past, within broad ranges. There is presently no proposal that the ranges of corporation tax should be narrowed or changed.
The case is at its weakest in relation to income tax. There are no present proposals for the harmonisation of income tax. There is currently very little mobility. Some people move from one country to another, but they do not on the whole move for tax reasons. There are all kinds of other considerations that matter more than tax.
On the question of corporation tax, one should always distinguish between the rhetoric and the reality. It is true that Lafontaine, when he was Finance Minister, called for the harmonisation of income tax at a common level. There is a case for a common tax base. It would have considerable merits in a single market. However, it is a rather academic case, because it is practically impossible to achieve any agreement on the harmonisation of a tax base. The Ruding Committee examined that possibility and made complicated proposals which have totally withered on the vine.
Harmonising tax rates is totally irrelevant. One has only to look at the difference between Britain and Germany. Germany has much higher nominal tax rates—they average something like 45 per cent—while the UK has much lower tax rates, at 30 per cent. Our corporate tax burden is much heavier. Our corporate taxes yield something like 3.6 per cent of GDP; German corporate taxes yield 1.9 per cent of GDP. It indicates how irrelevant are proposals for a common rate if we do not have harmonisation of a tax base, which is an academic question.
As regards labour taxes, there is not a great deal of mobility of labour, and all the pressures in Europe are presently for downward pressure on labour taxes. Most countries now recognise—it is recognised in, among other things, the new agreement with Chancellor Schroeder—that labour taxes in Europe are too high and that it is one of the many causes of unemployment. A recent study by the World Bank has underlined what an adverse effect high labour taxes in Europe have had on employment.

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We then come to the more controversial areas, where there are proposals for harmonisation. First, there is the code of conduct to deal with unfair tax competition. It has been accepted by the Government. It is almost self-evident that there can be cases of unfair tax competition. That no longer applies to whether our labour taxes are unfair—that is not what the code of conduct is about—or whether we should harmonise corporate tax rates. It is about individual cases of harmful tax competition.
We all accept that there are cases of harmful state subsidies that distort competition and are unfair. In principle, there is no great difference between a state subsidy and a tax incentive. There is some difference—
The Earl of Dartmouth: My Lords, I find it absolutely astonishing that the noble Lord sees no difference in principle between a subsidy and a tax allowance.
Lord Taverne: My Lords, there is a considerable difference. Certainly, there is a difference in the impact on total spending. There are also considerable similarities. A particular tax incentive can have exactly the same effect as a particular state subsidy. If one has unlimited tax incentives so that instead of giving a state subsidy to a particular company one gives it a special tax incentive, one can achieve exactly the same effect, which can constitute unfair tax competition.
Individual cases have been looked at. I do not believe that we have a great deal to fear. For example, I believe that the Commission has approved the special arrangements for the film industry. There are other cases where we have a great deal to gain. I believe that this must be looked at case by case, as has been done. In some cases action will be justified; in others not.
That brings me to the question of the withholding tax. I believe that these proposals are deeply flawed. This concerns not just the bond market, although that is of considerable importance to the City of London. There is concern about the whole idea of a withholding tax on interest which does not extend to the whole of the OECD but is limited to the European Union. The Germans tried a withholding tax and it was a disaster. Billions of deutschmarks flowed into Luxembourg. They had a second go because of a ruling of the constitutional court in Karlsruhe. Again, the yield was very disappointing because there was a great outflow of savings. Now the Germans, the Commission and a number of other member states want to see an EU-wide withholding tax. It would make no sense. There could be easy withdrawal of savings to Switzerland, the United States or other various tax havens.
The proposal has been criticised not only by people in Britain but by a very prestigious French institute. The most devastating criticism that I have seen of the withholding tax is contained in a report prepared for the Edmond Israel Foundation by the Promethée Institute which is one of the foremost institutes in Paris. To my mind, those arguments are overwhelmingly persuasive.
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I believe that this is a deeply mistaken proposal, and I am glad that the British Government are beginning to win allies in opposition to it.
Finally, I deal with the perpetual refrain about the coming of a European superstate. There is a lot of rhetoric about this. We must distinguish the rhetoric from the reality. There are many German politicians who always talk about a federal superstate. Their actions tend to contradict their words. One cannot have a federal superstate if one has a veto. It is very interesting that at Amsterdam it was the German Government who opposed the extension of qualified majority voting which the British Government supported because of the pressure of the Lander who have no enthusiasm for a federal superstate.
Of even greater importance is the question of taxation. One cannot have a strong federal superstate without substantial central revenues. Who are the great opponents of central revenues? The Germans. They are not alone in their opposition. They are just as opposed to a greater contribution to the centre as are we and other countries. It is clear that 1.27 per cent of total GDP resources—half of which at least is spent on agricultural policy—is no basis for a federal superstate. The Germans insist not only that that should apply until the year 2006 but that after that the budget should be frozen altogether. The rhetoric is totally contradicted by their actions. This great federal superstate is a wonderful bogeyman with which to frighten children, but it is not a realistic prospect.
3.33 p.m.
Earl Attlee: My Lords, I am extremely grateful to my noble friend Lord Waddington for introducing the Bill this afternoon. I warmly welcome it. My noble friend is to be congratulated on the measured way in which he introduced it. It was in the 1970s that the British electorate saw the advantages of a free trade area, which we have now developed into a single market. The recent Euro elections, despite the low turnout, amply demonstrate that we on these Benches are right to be extremely cautious about the single currency.
I believe that tax competition is highly desirable. We need to have the most favourable tax environment possible. We look at the high non-wage costs of employing workers of our continental friends and then notice that they also have high unemployment. I do not believe that we want to follow their example. We exist in a global competitive environment, as mentioned by the noble Lord, Lord Stoddart. (I see that he is not now in his seat, but I am sure that he will return to hear the Minister.) It is no use having a cosy EU tax cartel, if I may put it that way. when we would be at the mercy of overseas competition. Does the Minister agree with Professor Tim Congdon of Lombard Street Research who has calculated that taxes in Britain would have to rise by at least one sixth to bring them into line with other EU member states? I do not know whether the noble Lord agrees with him on that point. But that works out at £2,000 per taxpayer.

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If all our taxes were harmonised in full economic and monetary union, how could we be sure that we still had a sound fiscal policy? How could we be sure that we still have the best policy in order to maximise employment across the Community?
My noble friend Lord Waddington and others made the point that if one has a single currency, tax harmonisation has to follow—I would say as surely as night follows day. My noble friend's point is that Parliament and the British public should formally agree to any tax harmonisation policies after public debate. My noble friend Lord Waddington and many other noble Lords mentioned the spectre of the withholding tax and the threat of financial markets moving their business outside the EU. The noble Lord, Lord Taverne, covered that point well.
Like the Minister's right honourable friend the Deputy Prime Minister, I am confused as to how the tax will work. However, my confusion relates to why the tax will not severely damage UK business. The tax may be complicated but the outcome is simple. Thousands of jobs in the City of London will be lost to Switzerland and New York.
In the EU we do not have significant labour mobility—and certainly not when compared with the United States. In any case, work undertaken and paid for in Germany is taxed under German tax arrangements. If the same work is carried out and paid for in the UK, it is taxed under our arrangements. But when we look at road Fuel duties we see that the Government have widened the differential in duty between ourselves and other EU members. Your Lordships will be aware of the difficulties created for road hauliers—a point raised by my noble friend Lord Dartmouth—and the opportunity for large-scale smuggling between the Republic of Ireland and Northern Ireland. The Minister will no doubt point to the higher non-wage costs, to which I have already adversely referred. What is crucial to road hauliers is the marginal cost per mile. Fuel is a major component of marginal costs of road transportation.
It seems to me that we should retain full control of our tax system but at the same time avoid diverging EU tax and duty on goods when it encourages smuggling and other illegal activities.
I am sure that the Minister will draw attention to the annual Budget and the accompanying Finance Act. Can he assure the House that it is not possible to vary UK tax or duty rates by means of secondary legislation in particular under the European Communities Act 1972.
In conclusion, we on these Benches are not in favour of tax harmonisation. We are in favour of tax competition even where that means that our Government may have to cut taxes. We believe in low taxation. The principle of my noble friend's Bill would help to maintain our current competitive position in the world and our relatively low unemployment—surely a commendable objective. That is why I support the principle of the Bill.
We on these Benches want to be in Europe but not run by Europe. If we agree to tax harmonisation we really would be run by Europe.
3.38 p.m.
Lord McIntosh of Haringey: My Lords, I am grateful to the noble Lord, Lord Waddington, for introducing the Bill which gives us an opportunity to place on record yet again the Government's position on taxation within the European Union. I say "yet again"' because when I make absolutely clear and unequivocal statements I find noble Lords behaving as though they had not been made, or, more importantly, as though the Chancellor, Chancellor Schröder and former President Santer had not made clear statements. Noble Lords simply brush them aside and say, "We don't believe that so we'll go on regardless".
I congratulate the noble Lord, Lord Waddington, on rounding up the usual suspects. He has got together virtually the full gang of Europhobes to whom we listen. I have the battle honours, too—
Lord Stoddart of Swindon: My Lords, my noble friend described us as Europhobes. We are not—at least I am not. However, I am an Anglophile and I believe that we should conduct our own affairs through our own elected Government and our own Parliament. That is not Europhobic. What I fear about some people who accuse us of being xenophobes and Europhobes is that they are Anglophobes.
Lord Pearson of Rannoch: My Lords, before the Minister replies—
Lord McIntosh of Haringey: My Lords, no, I must reply to my noble friend first. Please, we must have some semblance of order in this House. I once accused my noble friend Lord Stoddart of being a xenophobe. He repudiated it and he was right. I apologised to him for it. However, I still believe that his words and his record over the years show that he is what I would call a Europhobe, but I use it as a descriptive term rather than as a term of abuse.
Lord Waddington: My Lords, the Minister ought not to be allowed to get away with that. Does he not realise what offence is caused? We make a perfectly reasonable proposition that we are a proud, independent country. with strong links with the EU; that we want to maintain those links and have free entry for our goods into Europe; but that we are also a country looking outwards to the rest of the world with which we have most important links and many great interests. To stigmatise any of us as being anti-European because we wish that relationship to prosper but we do not want a federal Europe, frankly, I find insulting. We hear it every time.
Lord Pearson of Rannoch: My Lords, perhaps I may point out to the Minister that in the earlier debate I mentioned that one of the most important points in the whole debate about the Treaty of Rome is the ambiguity of the word "Europe". Those of us who some people on his side of the argument describe as Europhobes, little Englanders, dangerous nationalists and so on, love the Europe of nation states which should be freely trading together. What we are phobic about and what we dislike

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is the Treaty of Rome and everything that that makes possible for Brussels to inflict upon us. That is an enormous difference and we are the better Europeans.
Lord McIntosh of Haringey: My Lords, if anything I say causes offence, I withdraw it. I have no intention of insulting anyone or of causing offence. But I believe that noble Lords know exactly what I mean. I object to using the weasel phrase "Euro-sceptic" because I do not believe that it describes the position of noble Lords.
I was congratulating the noble Lord, Lord Waddington, on rounding up the usual suspects. I was about to say that I have the battle honours, too. I spoke in the debates on the Single European Bill and on the Maastricht and Amsterdam Bills. I have heard it all before and it is almost nostalgic for me. Almost, but not quite.
During the time I have to reply to the debate, I want to set out the principles which underpin the Government's approach to European Union tax issues and apply them to a number of specific cases which have been raised today and in the recent past. I shall then turn to some particular difficulties that we have with this Bill.
When we first address the phrase at the heart of the Bill, "tax harmonisation", which we have heard so often, let us he clear about the fundamental issue. The priority for Europe is the promotion of employment, economic reforms and competitive markets, not tax harmonisation. The Government have made it clear that they will not support any action at European level which will threaten jobs or the competitive position of British business. We start from clear principles. In particular, we believe in the benefits of fair tax competition. The noble Earl, Lord Attlee, said that he believed in the virtues of tax competition and that in principle it is desirable. It is desirable, but at the same time it has to be fair tax competition.
We also wish to see concerted action to deal with unfair tax practices that distort real competition. We wish for the cessation of unfair state aid. Whether subsidies are the same or fundamentally different from unfair tax measures does not seem to be important. They have the same effect. I am on the side of the noble Lord, Lord Taverne, in that respect.
Lord Taverne: My Lords, does the noble Lord agree that sometimes they are very different? Tax can be much more general than a state subsidy. Sometimes they are very similar if the tax incentive is a particular one.
Lord McIntosh of Haringey: My Lords, indeed. We need to co-operate with our European partners to make progress in these areas. Britain is not alone in thinking in that way. At the Cologne European Council earlier this month the conclusions on tax policy were that the Council of Ministers,
"emphasises the need to make tax systems in Europe more employment-friendly and to combat harmful tax competition".
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That confirmed the conclusions of the Vienna European Council six months earlier which said,
"Co-operation in the tax policy area is not aiming at uniform tax rates and is not inconsistent with fair tax competition, but is called for to reduce the continuing distortions in the single market, to prevent excessive losses of tax revenue or to get tax structures to develop in a more employment-friendly way".
Germany has held the EU presidency for almost six months. It was made clear in the joint statement made by the Prime Minister and Chancellor SchrÖder last December that there was no case for the harmonisation of tax rates. I understand that officials in the German Finance Ministry, in oral evidence to the current inquiry by the European Communities Committee of this House into taxes in the EU, made the same point.
The Government believe that EU taxation should continue to be based on the principles of national competence whereby policy is wholly a matter for member states if the European Community does not have competence under the EC Treaty, and unanimity whereby EU-wide taxation measures can only be adopted by a unanimous vote of member states.
We are not alone in insisting that direct taxation is a matter for the national state. There is no proposal and no prospect of one, for the harmonisation of income tax in the European Union. No member state believes that there is a case for a European rate of corporation tax. Even the former president of the Commission, M Santer, who has been quoted so often, said,
"income tax and corporation tax are sovereign national matters and will remain so".
The noble Lord, Lord Pearson, seems to believe that tax harmonisation can be agreed under single market rules and thereby avoid unanimity. The single market rules only apply to indirect taxation. Under Article 99 they do not affect the unanimity rule. There is no diminution of unanimity. As tax matters require unanimity, there is no question of tax changes that are not in Britain's national interest being imposed on us from Brussels.
Lord Pearson of Rannoch: My Lords, the Minister has represented the position exactly as it is at the moment. I mentioned in my speech what the plans are in Brussels to change that. There is a movement afoot in Brussels to make tax harmonisation part of single market legislation which the Government could veto. As I said in my speech, the Government are not mad keen on vetoes in Brussels.
Lord McIntosh of Haringey: My Lords, there is nothing I can do. I have tried to convince the noble Lord that the Government's position is clear and that of the European Commission is clear. There are no proposals to make any changes. The noble Lord is marvellous at conspiracy theories —not the conspiracy theory of history but that of the future. He has somebody plotting something wicked which will somehow be imposed on us despite the unanimity rules and all the powers that we have to maintain our national status.

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The point is that not only is that the case now but that is the way it will stay. The Chancellor of the Exchequer has been absolutely clear on that point. He said last December:
"Everybody knows that EU tax proposals require unanimity and a change to that requires a treaty change which requires unanimity and that is simply not going to happen".
I say to my noble friend Lord Bruce that we shall retain the veto on tax issues. I have said it before and I shall say it as often as I have to. It does not become any more or less true with repetition. The Bellman only went up to three times. I am now on five or six. Perhaps it will eventually sink in.
Having outlined the principles which apply, let us consider the areas which have been the subject of speculation; for example, value added tax —and I was going to mention corporation tax but the noble Lord, Lord Taverne, has dealt with that point adequately —withholding tax and the codes of conduct.
On VAT, there are no detailed proposals to change the existing rate. We were elected on a clear pledge to maintain zero rates of VAT on food, children's clothes, books. newspapers and public transport fares. Our zero rates are fully safeguarded under existing arrangements.
The noble Lord, Lord Waddington, said that only under this Government were changes being brought forward. I cannot remember exactly when he left the previous government, but between 1992 and 1997 there were 30 VAT or excise harmonisation measures proposed by the Council of Ministers and adopted by this country. In addition, there were two direct harmonisation measures —the mergers directive and the parent and subsidiary companies directive.
If the noble Lord's Bill had been in operation, we should have had 32 referenda between 1992 and 1997. We should have had hardly any since 1997. The noble Lord should reflect on that.
All European Community VAT matters are subject to agreement by all member states. We shall stick to our pledge" I remind the House that the Conservatives introduced VAT on domestic fuel and sought to increase it from 8 to 17.5 per cent.
I turn now to the withholding tax; that is, the draft Commission directive on the taxation of savings. The motive behind the measure is one which I hope all noble Lords will be able to support; that is, the prevention of tax evasion. It is aimed chiefly at citizens of the European Union who place accounts in member states with highly secretive banking systems, such as Luxembourg, and then do not make a declaration to their own tax authorities. That is tax evasion, not avoidance.
The Government support effective action against tax evasion but we do not believe that the directive is likely to be effective. We agree with the noble Lord, Lord Taverne, that the draft directive on withholding tax is fundamentally flawed. In particular, it will be very damaging to the Euro-bond industry. We have made an oft-stated commitment to protect the European Union financial markets. Instead, we believe that member states with banking secrecy laws should reform their laws as soon as possible to make possible the exchange of information.
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There are clear signs that we are winning the argument. The Council working group discussions have resulted in an acknowledgement by the Commission in the conclusions agreed to at ECOFIN on 25th May that the draft directive poses real problems for the financial sector. Our case was accepted. A further review was agreed as regards the treatment of international bonds. The UK was asked to submit proposals for excluding the Euro-bond market. That is what we have been asked to do and that is what we agreed to do.
We shall continue to negotiate in good faith and on a realistic timescale to see whether a workable solution can be found. Ultimately, if the flaws in the directive are not addressed, we shall take whatever action is necessary to protect the financial markets in the City of London. If necessary, as the Prime Minister has made clear, we shall not hesitate to use our veto to block the directive.
I turn to the issue of the code of conduct. First, I make it clear that the group is working to produce a code of conduct. When it is produced, it will be a political compact which explicitly preserves the national competence of member states on taxation.
It is certainly not the case, as the noble Lord, Lord Waddington, seemed to think, that we have signed away any of our rights. However, as I said earlier, we think that there are potentially harmful tax measures where the effective level of taxation is lower than the general level of taxation. For a measure to be harmful it has significantly to affect the location of business activity. It could be argued, for example, that the differential taxation of small businesses is not harmful.
We have made public, and I made public last year, the five tax measures which we submitted to the code of conduct working group. That has been confirmed in a Written Answer within the past month. We maintain, and we will defend the position stoutly, that these are not harmful tax measures. We will continue to negotiate on that basis.
I turn to the Bill as we have it before us. I find it astonishing that the noble Lord should be proposing that no tax harmonisation proposal should be agreed to unless the House of Commons has approved it and a referendum has been held on the matter, and that a majority of those voting, including the abstentions on one side, which is a remarkable procedure, should be in favour of the proposal.
The Conservative Party has been against a referendum all its political life. When we introduced the narrow range of constitutional referendums on the Scottish Parliament, the Welsh Assembly and the mayor for London, the Conservative Party bitterly opposed them on the grounds that they would derogate from the authority of Parliament. I am amazed that the Conservative Front Bench should give even the general welcome which the noble Earl, Lord Attlee, gave. I am sorry, but this is not a sensible Bill in the terms in which it is drafted, nor is it effective in the terms in which it

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is drafted. It seeks to remedy problems which simply do not exist. Of course we shall not oppose the Bill, but we must be clear that we cannot support it.
Earl Attlee: My Lords, perhaps I may briefly intervene. The Minister referred to "the usual suspects". I plead not guilty to that. I welcome the principle of the Bill, but I am not sure that I would like to see it on the statute book. I raised the point about the single currency inevitably leading to tax harmonisation; that if the single currency did not work we would have to go to tax harmonisation to make it work. Does the Minister have anything to say on that?
Lord McIntosh of Haringey: My Lords, I acquit the noble Earl from being among the usual suspects, with great pleasure. The answer to the noble Earl's question can be given by looking at the United States. They have had a single currency for more than 200 years. They do not have tax harmonisation; it does not follow.
3.57 p.m.
Lord Waddington: My Lords, that is a completely bogus point, for a start. Eighty per cent of the revenue raised in the United States is raised by the federal government and only 20 per cent by the states, so there is tax harmonisation. By far the largest slice of all taxes is taxed by the federal government. I have to say to the Minister that he may have made some good points today but that is a particular bad one.
I shall have mercy on the Minister and all noble Lords present because time is getting on. I thank all who have taken part in the debate. I am very flattered indeed that such acknowledged experts as the noble Lords, Lord Bruce of Donington and Lord Stoddart of Swindon, should come along. I occupy a room not very far from the room which, until recently at any rate, was occupied by the noble Lord, Lord Bruce. I always marvelled at his ability to get into the room because the whole place was full of Community documents. So nobody can pretend that he is not an expert in this field. All those who have spoken today feel strongly about these matters.
I do not accept for one moment the argument that the Bill could not work because we would be having referendums every second day. The object of the Bill is to prevent a Minister going to Brussels and signing up to tax harmonisation because we do not think that it is right and we do not think that it is necessary.
I noted the comments of the noble Lord, Lord Taverne. He said that the Germans tried a withholding tax and that tax was a disaster. Indeed, he is right. My understanding is that the directive on the withholding tax was actually formulated at the behest of Germany following its mistaken decision to introduce a 10 per cent withholding tax on domestic interest payments. That led to a massive shift of funds out of German domestic bonds by foreign investors to Luxembourg. It is beyond my comprehension why we should now be spending so much time trying to protect Germany from the consequences of its own folly.
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We were told by the noble Lord, Lord Taverne, that the continual refrain of the "superstate" caused him much irritation and all this rhetoric must be entirely discounted. I ask noble Lords to look at the quotations I gave today. They do not come only from Germans. They come from throughout the Community, from statesmen from almost every country in the Community and also from presidents of the Commission.
The noble Lord, Lord McIntosh, did not reply to one of the most important questions I put to him. He will remember that I said that Jacques Santer described the British decision to sign up to the code as a decision which had the effect of nullifying the veto and was a device to side-step the EU treaties that require unanimity before tax harmonisation can legally be enforced. Does he agree that Jacques Santer said that? If he said it, was he right? If he was wrong, does the Minister agree that we would be very foolish if we did not look upon the code of conduct exercise as an exercise in tax harmonisation if that is what a former President of the Commission thought it was?
Lord McIntosh of Haringey: My Lords, I do not know that he said it; I do not have the source in front of me. If he did say it, he was wrong. When the code of conduct is finally signed it will be a political contract which specifically reserves member states' national competence on tax.
Lord Waddington: My Lords, I am grateful for that reply so far as it goes. I note that there is no denial that that is what the President of the Commission said. We should take note of that. I shall not weary the House further. I thank all noble Lords who took part in the debate. It has been a useful exercise and I hope the Bill will be given a Second Reading.
Bill read a Second time, and committed to a Committee of the Whole House.

Comitology: ECC Report
4.2 p.m.
Lord Hope of Craighead Lord Hope of Craighead rose to move, That this House take note of the report of the European Communities Committee on Delegation of Powers to the Commission: Reforming Comitology (3rd Report, HL Paper 23).
The noble Lord said: My Lords, the Select Committee on the European Communities reported to the House on a proposal which relates to procedures. There is a view that matters of procedure are even more contentious than matters of substance, but we shall see as I develop the background to this report.
The procedures with which the report is concerned are those for the exercise of implementing powers conferred by the Council on the Commission. This is not the first time that the committee has visited this subject. In previous reports it has expressed concern about the arrangements for adequate scrutiny and the need for greater transparency. But on this occasion it took the opportunity to examine the whole subject in much greater detail.
To the uninitiated—those who are not well versed in the workings of the institutions of the European Communities—the system of procedures known within the Community as "comitology" is almost unknown. To those to whom that word means anything at all, it remains for the most part a mystery. This is not a satisfactory state of affairs. The exercise by the Commission of its implementing powers has at least the potential to affect the everyday lives of people at all levels throughout the Community. The system is an indispensable part of the Community's law-making machinery; it is at the heart of the constitutional structure of the EU. It does not seem to be right, therefore that, due to the complexity of the system and the fact that it is subject to so little public scrutiny, the process should be so obscure and so difficult to understand.
The occasion for this study of the system, and for the report which the European Communities Committee has now placed before the House, was the proposal by the Commission for a Council decision on the implementing procedures which is printed at pages 39 to 43 of the report. In simple terms, the proposal seeks to simplify and improve the present system. It seeks to do this in five main ways: the first, by setting criteria to guide the choice of implementing procedures; the second, by reducing the number of types of committee, which at present is complicated by the availability of several variants; the third, by ensuring that proposals which have legislative character, in contrast to those designed merely to implement, go to the legislative authority; the fourth, by enhancing the monitoring of the exercise of implementing powers by the Parliament; and the fifth, which is a matter of alignment, by aligning the existing procedures—those in existing committees—with those set out in the proposals.
The first task which we in the committee set ourselves was to investigate and to try to understand the present system. One of the points which came to the committee's attention as soon as it began to work was that so little information about the system was available. It is a remarkable fact, but it is the case that there is no definitive list of the comitology committees, their functions, their activities and their membership. So a substantial part of the committee's report has been devoted to setting out this background. We have traced the history of the system through its various stages of development.
We were particularly grateful to the Government for providing us, at our request, with a list compiled from departmental records of all the comitology committees of which they are aware which fall within the scope of the proposal. This list sets out the name of each committee, its legal basis, its type—using the existing system of numbering—and a summary of the activities in 1997 of those committees which were active during that year. It so happens that a number of them were not active at all. So far as we are aware, nothing like this has previously been made available anywhere within the European Union by anyone. It seemed to us that the list with which we were provided was so valuable that we should take the opportunity of publishing it as an appendix to this report. It runs to more than 50 pages.
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As the report itself runs to only 35, it has certainly added greatly to the substance and, we hope, also to the usefulness of this document.
In the course of our inquiry we took evidence from, among others, the Principal Legal Adviser in the Legal Service of the Commission and one of its Deputy Administrators—the people largely responsible for the proposal. They provided us with some useful insight into the thinking behind it and the practical considerations in the light of which it should be used. But, in order to subject their evidence and their explanatory memorandum to critical analysis, we took evidence from senior officials in the three departments of the United Kingdom Government most intimately connected with the practical operation of the system and from two members of the European Parliament. We also had the assistance of the Minister of State at the Foreign and Commonwealth Office, who was good enough to give up time to provide us with her oral evidence. In addition, we were in the receipt of a quantity of written material from other interested parties. We are grateful to all those who contributed to our inquiry.
In the light of that information, we felt able to take a view on the proposal. As I have already indicated, our starting point was our appreciation of the fact that comitology is as contentious as it is important and as opaque as it is complex. With that in view, it seemed to us that the new comitology decision should have three main objectives, which, broadly speaking, are those which the Commission has explained in a memorandum.
First, what was proposed should enhance the role of the European Parliament. Secondly, it should simplify comitology procedures; and, thirdly, it should inject greater transparency. We had in mind that there were three main interests that needed to be safeguarded. These were the major national interests of the member states; the interests of those people within the member states most likely to be affected by the measures which were being implemented; and the general public interest, which we all share, in securing democratic legitimacy and accountability.
Our conclusions are set out in the report under three main headings which perhaps I can touch on briefly in order to set the scene for this debate. First, there is the question of a greater role for the European Parliament. Everyone was agreed that it should have a. greater role The Commission made this clear in its explanatory memorandum and it was common ground among all our witnesses. But there was quite a division of view as to how this might best be achieved, and in particular how far the greater role should extend. On the one hand there was a desire on the part of the Parliament that it should be entitled not only to scrutinise but, in its own words, "to blow the whistle"—in this context the analogy was simply that of the referee in a game of football—on implementing measures which it did not like. On the other hand there was a much more modest proposal by the Commission to improve the position of the Parliament in two ways; namely, by formalising some of the aspects of the present procedures, and by making a few changes in the default procedure under the regulatory committee procedure.

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As a committee, we have always been sympathetic, at least to some degree, to the Parliament's wish to be more involved in the comitology process. There is clearly a case to be made for this. However, we feel bound to point out that there are some limits as to what is practicable and what is desirable. A balance has to be struck. Regard has to be paid to the fact that oversight of implementing legislation is a matter for the member states as well; to the interests of speed, where this is necessary; and above all to effective law making.
What we have recommended comes down somewhere in the middle of the two extremes which I have sought to identify. We recommend that the role of the Parliament should be formally recognised; it should have a right to be consulted, not merely to have that done as a matter of practice. In particular it should have the right—subject to exceptions for urgent cases—to receive every proposal to be submitted to a comitology committee in sufficient time for it to be able to offer an informed opinion to which the Commission would be bound to have regard. We also recommend that the Parliament should be given an enhanced role in the regulatory committee procedure in those cases where co-decision legislation has been referred to the Council following a negative opinion by the relevant comitology committee. We believe that these changes, which are outlined in more detail in the report, would be a substantial improvement on the present position. But we have made it clear that we do not favour giving a power of veto to the Parliament.
Secondly, there is the issue of simplification of procedures. The Commission has made it clear in its explanatory memorandum that this is one of its prime objectives, and the draft decision has gone to quite some lengths to meet this objective. I do not wish to dwell on this matter as it is rather complex. It is perhaps enough for me to say that we were not entirely satisfied with the solutions which the Commission has proposed for simplifying the procedures, especially relating to the choice of the type of committee in the implementation process. They bore the hallmarks perhaps of a degree of overworking in an attempt to define various situations. That attempt at definition seemed to us to give rise to a number of practical difficulties which might best be avoided. What we have done in the report is to make some suggestions as to how the proposal might be improved. Our main suggestion concerns the use of guidelines for the choice of committee type, rather than the laying down in advance of precise criteria.
Thirdly and lastly, there is the issue of greater transparency. There was no difference in view among the witnesses about the need for this and I have already drawn attention to the list of comitology committees provided to us by the Government. As we mention in the report, the Government have quite rightly told us that they cannot guarantee that the list is absolutely complete and accurate, but it certainly is a valuable step in the right direction. We should like to see that initiative built upon.
We have recommended that steps should now be taken—making use of modern electronic technology, where appropriate—to make available to the public a
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complete and authoritative list of the committees, and above all of their functions and activities. We have mentioned that steps should be taken to improve the procedures for scrutiny by your Lordships' select committee in various respects which we have set out at the end of our report.
It would not be right for me to end without paying tribute to the assistance which all Members of the Committee have received from its legal adviser, Dr. Kerse. His contribution to the work of Sub-Committee E, not only in this investigation but throughout its work, deserves special thanks. In this case his initiative and expertise was invaluable to us as we explored a very difficult and highly complicated subject, both in the investigation stage and at the stage of the preparation of the report.
In commending the report to the House I should like to underline the role which we see in this matter for the national Parliament, which is part of the reason why we seek an improved scrutiny role for the select committee and, through that committee, your Lordships' House. It is for that reason that it seemed to all of us important that there should be an opportunity for the report to be debated. I commend the motion to the House.
Moved, That this House take note of the Report of the European Communities Committee on Delegation of Powers to the Commission: Reforming Comitology (3rd Report, HL Paper 23). — (Lord Hope of Craighead.)
4.17 p.m.
Lord Borrie: My Lords, as a member of Sub-Committee E of the European Communities Select Committee I am happy to support the recommendations of the report, which have been outlined by the noble and learned Lord, Lord Hope of Craighead. As our chairman he has been courteous, thorough and fair—not only with the witnesses but, if I may say so, with the members of the committee as well. We are extremely fortunate to have him as our chairman. I think it is important that we have a continuing convention that this particular sub-committee, which deals with law and institutions, should have a current Law Lord as its chairman. There are some in the House who wish to pursue to extremes the doctrine of the separation of powers so that Law Lords holding current judicial office should not have any involvement in the work of the House except for its judicial work. It would be a great loss if Law Lords could no longer be chairmen of sub-committees such as this and presumably not eligible to be a member either.
As my noble and learned friend has said, this report, like others before it, owes much to its legal adviser, Dr. Christopher Kerse, who on this occasion, perhaps sensing that to some of us comitology was not the most gripping and exciting of our projects, sought to humour us with an excursus on the spelling, derivation and meaning of the somewhat unappetising word.
The system of committees we examined is the system of committees created by the Council of Ministers to assist the Commission in the exercise of its implementing powers. The committee consists of national civil servants from the member states, chaired by an official of the

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Commission. Your Lordships will gather from my remarks about allowing Law Lords to take part in the legislative work of this House that I believe in adopting a pragmatic and flexible approach to the doctrine of the separation of powers. Hence I see no objection in principle, nor does our report, to delegation by the Council of Ministers to the Commission of the implementation of legislative powers.
In the 1920s, the Lord Chief Justice of England, Lord Hewert, inveighed against the delegation of the United Kingdom Parliament's legislative powers to civil servants in a book entitled polemically, The New Despotism. But in the modern world this parliament, other national parliaments and the European Parliament all need to concentrate their attention on important matters of policy and principle and to allow at least some of the details to be filled in by others. The vital conditions are surely that such delegated legislation is transparent, de-limited, overseen and accounted for. In the United Kingdom we have over more than half a century developed a controlling web of publicity, of scrutiny and of parliamentary and judicial supervision.
What our sub-committee found in the web of committees in the European Union was the opposite of transparency. We found a system that was opaque, with not even a definitive list available of the committees that do the work of reviewing the implementation of legislative powers. If we have done nothing else, we have put a search light on those committees and published details about them in an appendix that takes up a major part of the report.
Secrecy and complexity breed suspicion, especially as the powers of the European Parliament are not as strong as many of us think they should or might be. The Parliament and others are naturally suspicious that the distinction between legislation and implementation is not always maintained in the European Union. So, in addition to seeking more transparency, our report seeks two other principal objectives: simplification of the committee system so that it can be better understood and an increase in the involvement of the European Parliament, elected by people throughout the European Union.
I want to refer to just one of the report's proposals that goes towards that objective of greater involvement on the part of the European Parliament. Paragraph 18 contains the proposal that the European Parliament should have the right to receive every proposal submitted to a comitology committee, so that it can offer an opinion to which the Commission would be bound to have regard. That is what the committee has proposed. We were not happy with Article 7 of the proposed Council decision because, while requiring Parliament to be informed of proposals, it does not explicitly give Parliament the right to offer an opinion to which the Commission must have regard.
Yet such a provision has been part of the so-called modus vivendi of 1994 which was agreed between the Council, the Commission and the Parliament. When I had the opportunity to ask a question on this matter on 14th October 1998, Madame Durend, Principal Legal Adviser to the Commission, said that the legal text of
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the decision did not preclude "other inter-institutional agreements". That can be found on page 9 of the minutes of evidence. We would much rather have such things in the official legal text of the decision than have them left to some further agreement between the different institutions. I commend the report to the House.
4.24 p.m.
Lord Shaw of Northstead: My Lords,
"Delegation of detailed rule-making and individual decision-taking is a common feature of the relationship between the legislature and the executive in Western democracies. That delegation is usually subject to some form of supervision or control and of accountability".
Such are the opening words of the report we are today considering. In the light of current experiences and the future hopes for the expansion of the European Union, this Third Report of the Select Committee is greatly to be welcomed. I, too, should like to thank the noble and learned Lord, Lord Hope of Craighead, and his committee for bringing the report before us today.
Before I discuss some of the details of the report, I should like to look at the wider perspective in which it must be set, as indeed previous speakers have done as well. In an earlier debate on 22nd March. I stressed that the opportunity should now be taken to look in depth at the manning and scope of the Commission's activities. In broad terms, I would wish to see the Council of Ministers playing more of a cabinet role; the Commission more of a purely executive role; and the European Parliament, among its other duties, a greater scrutinising role. It is against that background that I have studied this report.
The report says that the treaties do not provide that all law making is vested in the Council and that in practice the Commission is frequently given implementing powers. It goes on to say that the exercise of those powers is overseen by committees, which are composed of national representatives—usually civil servants—who are able to exert influence on behalf of the Council of Ministers. The first point I want to make is one that I have often made before. If in any organisation the board of directors does not give a clear lead, the managers will tend to take over—and I do not blame them. Clear leadership has too often been lacking from the Council and the Commission has become too powerful.
Secondly, the views of national parliaments and of the European Parliament itself have not been properly taken into account. Various reasons for that have been given and they are spelt out in the report—time has been too short; confidentiality has been regarded as essential. the workings of national parliaments and of the European Parliament itself have been too slow and cumbersome. However, the fact is that, whatever the reasons, the present situation is unacceptable and changes must be made.
Our own procedures for dealing with UK secondary legislation are at present under scrutiny. Greater flexibility in parliamentary procedures and greater chances for the views of interested parties to be heard are both required. Yet such greater national scrutiny is

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equally needed for European secondary legislation. After all, the results of such legislation have usually to be administered by the national governments and we are similarly subject to its consequences. It is only right, therefore, that it should be subjected to the same type of scrutiny as that given to national secondary legislation.
My third point is a simple one. There are now too many Commissioners. They all have to be staffed and they all have to appear to have important work to do. Clearly the whole matter of the numbers of the Commissioners and the methods of their selection, their staff and duties will have to be reviewed before further enlargement takes place. In my view, such a review should take place now.
So what decisions should the Council of Ministers now be taking in these matters? First, it is important that it gives a firm lead so that its proposals are adopted and will allow future procedures to be exercised with efficiency and fairness in the years ahead. The size of the Commission should be reduced. The amount of legislation delegated to it should also be substantially reduced.
We are told that there are about 250 committees all beavering away at secondary legislation of one sort or another. I congratulate the committee on getting those figures out of the authorities. While UK attendance at these meetings is, I am sure, doing much to help ensure the success of Eurotunnel, the Council must, nonetheless, insist on a reduction in the numbers of these committees and the return of a substantial part of their work back to where it properly belongs; namely, with the national governments.
Too often, complaints regarding secondary legislation are answered with the reply that nothing can be done, since the regulation was made in Brussels and the Government are bound by it. Yet is it often the case that the responsibility should properly lie with the national governments, who ought themselves to have drawn up the legislation within their own procedures, including adequate public consultation. It is a fact well realised in all bureaucracies that the more you can dissipate decision-making, the more difficult it becomes to control it—and the more difficult it becomes to put the blame on anyone when anything goes wrong. Responsibility is too easily ducked.
Of course there will rightly be much that must still be left in the hands of these European committees. But their work will then, it is to be hoped, be less overwhelming and consequently better scrutinised. It has been said, indeed it was stated in the report, that the European Parliament has been snowed under with paper. Parliament has expressed a determination to handle the committee reports more carefully and speedily. A reduction in the number of reports coming through to it for scrutiny would clearly help it to achieve those objectives.
Finally, since the detection of fraud, corruption and mismanagement cannot be disregarded in whatever aspect of European activity is under scrutiny, I feel that I must voice my strong reservations about the Government's recent Statement on the appointment of the new European Anti-Fraud Office.
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Once again, the Council has shown a clear lack of leadership. At Maastricht, the Court of Auditors was given full independent status. As a result of its subsequent reports, the Commission was eventually forced to resign. Without those reports, that subsequent resignation would never have happened.
I have noticed that, ever since the investigations of the Court of Auditors began to embarrass the Commission, the gossip began to grow that the court was not perhaps the most distinguished of bodies, and that perhaps no one should pay too much attention to it. It is quite obvious that the last thing that the Commission would want would be for a truly independent anti-fraud office to be centred outside the Commission.
I fear that this lame duck Commission will now be laughing all the way to its overdue retirement, having ensured that the new body is to be placed within the Commission itself. The Council should have insisted that the full independence of this new office was secured by its attachment to the Court of Auditors.
4.33 p.m.
Lord Taverne: My Lords, I agree strongly with the remarks of the noble Lord, Lord Shaw, about the need to reorganise the Commission. It gives me a certain sense of nostalgia. In 1979, I was a member of the Spierenburg Committee, a five-man committee which looked at the workings of the Commission and decided that it should be radically overhauled and that the directorates should be reorganised. But of course that proposal sank almost without trace, except that the same ideas are now being revived.
I do not have a lot to say on the subject, and I shall not take a long time to say it. Delegated legislation always presents a problem; the implementation of laws always does. In the UK we have the Select Committee on Delegated Powers and Deregulation and the Joint Committee on Statutory Instruments. The public know nothing about the work of those committees. I believe that they do their work quite well, but it is at least being looked at again.
In the European Union the organisation is far more obscure. I am very grateful to the noble Lord not only for the manner in which he introduced the debate but for the report itself. It means that once again I am subject to a moment of clarity and understanding of the term "comitology" and the comitology committees. Five years ago I did a study on the future of capital markets in Europe and I thought that I understood "comitology", but as soon as the report was completed I forgot all about it. I suspect that by next Monday I shall have again forgotten how the comitology committees work.
The matter is nevertheless important, as shown by the list of 250 separate committees in the appendix. I note that one of the witnesses thought that there were 399 committees, so perhaps the list should be even longer than it is. There is one difference between delegated legislation in the European Union and in the UK. Quite a lot of draft directives are in rather general terms because they are the result of political compromise. Therefore, more is left to the

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implementation committees that must cross the t's and dot the i's. The need for simplification, clarity and transparency is self-evident. Given co-decision, the involvement of the European Parliament is also important. However, I am not sure how effective the recommendations will be. It appears that the European Parliament has not made full use, or even good use, of the rights given to it under the 1987 agreement.
The report is a very good one, and I hope that it will have influence. The reports on Europe by Select Committees of this House have a good deal of influence in Europe. On the occasions that I go to Brussels I am amazed by how much importance is attached to the reports. They enjoy a far higher reputation in Brussels than in this country, where nobody is aware of them. I hope that this report will be treated with respect and implemented.
I raise only one question on the report. I do not know whether it is a matter for the Government or the committee. I am not sure that the recommendations on simplification are very strong. I believe that recommendations 20 and 21 pull their punches compared with the proposals being put forward by the Commission itself. As the recommendations emerge they appear to result in less simplification than the Commission seeks. There may be good reasons for that; indeed, some are given in the report. Does the Minister agree with that? Generally speaking, will the Government give their full support to implementation of the recommendations of the committee?
4.39 p.m.
Lord Bruce of Donington: My Lords, I too should like to thank the noble and learned Lord, Lord Hope of Craighead, for the committee's report. I found it most interesting, so much so that I had to read it through at least three times and document it in some detail. Owing to the fact that there is racing at Ascot and it is late on Friday afternoon, I do not propose to make a very long speech on the subject, much as I would love to.
Going through the report, I am struck by how much it endorses the findings of a previous Select Committee report on genetic modification in agriculture which also carries a section on comitology. Your Lordships will be aware that "comitology" is not a word that is acknowledged in the English language. I understand that Oxford University Press does not envisage in the foreseeable future incorporating it in any new dictionary. According to the European jargon, the phrase is reckoned to be "the science of committees"; and that indeed it is. The difficulty about these committees—it is brought out clearly in the report and incorporated in the recommendations—is, first, that no one knows how many there are. The evidence given by the Commission was approximately 250 but it did not know. The version produced by the diligent work of the sub-committee was 258. A further estimate was made—it is incorporated at the end of the report—which says that there are some 390 different comitology committees.
The characteristic of these committees is that they are appointed. How they are appointed we do not know. The committee itself did not know despite its examinations
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of Ministers who appeared before it. The Commission is always in the chair, which one would expect when one deals with European legislation. No one knew the identities of the people concerned—at least except in a few instances, enlivened by occasional interspersions by the Sunday Times. No one knew how their finances were provided—under which budget head the expenditure incurred by these committees came. Some of the members were naturally expert civil servants and some were brought in from outside. Those who were brought in from outside were not identified in any way. And their interests, if any, were not disclosed. And it is not known to whom the committees are finally accountable. So the position about these committees is not exactly satisfactory. One can see scope for a certain amount of abuse.
One thing is quite certain. Unless he is exceptionally industrious and does nothing else but peruse those committees' reports, no Minister of the Crown sees the results of these effusions. Ministers may think that they have final responsibility for Community legislation which becomes enforceable in this country. They may think that: but they do not. Large numbers of regulations passed by these comitology committees go directly into enforcement without any intervention from any Minister and without scrutiny by the parliamentary scrutiny committees.
One needs no profound political convictions to know that that is a very unsatisfactory state of affairs and involves enormous difficulties. One solution suggested by the noble and learned Lord's committee is that there should be greater supervision by the European Parliament. It makes that almost a principal solution. I venture to differ. If any noble Lord wishes to read the proceedings of the European Parliament—they become available in the English translation in this country some eight or nine months later than the date to which they relate—I do not think he will be frightfully impressed, whatever his or her political persuasion or inclinations with regard to the European Union, by the nature of the contributions that are made on the Floor of that Chamber. It is sometimes difficult to discern what contributions the individual committees of the European Parliament make. I have in front of me a report which was published more than a year ago containing a constructive contribution from Mr Kenneth Bowman of the European PPE. He makes some excellent observations on the subject, but apart from that little else appears.
Sometimes we think that everything goes as smoothly as it ought to go in theory; for example, that there is proper scrutiny before anything becomes enforceable in legislation in this country. That is not true and it can easily be checked. Every week there is published a document entitled Progress of Scrutiny and it is available in the Vote Offices of this and the other place. It lists the various documents, including regulations and so forth, received from the EU. It indicates their disposition, stating which have gone to a committee or sub-committee of the EU Scrutiny Committee and which are not considered necessary for further attention. They are listed and there should be no difficulty in finding them.

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Another document, a report, is issued only in the other place. It lists the outstanding queries on explanatory memorandums. From what some Ministers say, one would think that all the scrutiny committee had to do was to send a query to the government department originating the explanatory memorandum in order to receive a reply within a reasonable time. That is not so. Only a few weeks ago I received a report from the Commons' scrutiny committee, which reported that in 84 cases it was awaiting replies from Ministers, with queries going back to 1996 and 1995. Those are listed every week and can be seen. There must be a breakdown in the system somewhere.
Time does not permit me to go further. I have spoken to your Lordships too many times today, but I felt compelled to do so in the circumstances. The situation cannot be satisfactory. There must be a root and branch overhaul not only of the machinery at the Commission end but also at our end. We must ensure that what we assume happens does in fact happen, rather than being overlooked due to pressure of work or possibly lack of inclination.
Quite clearly, the situation cannot continue. The veil of confidentiality in regard to the activities of these committees must be lifted. Their origins and purposes must be revealed, as must their grade: advisory, regulatory or management. There are also sub-categories. We must know exactly why they exist and exactly what they do. We must know the result of their deliberations and, above all, the circumstances in which legislation is passed for enforcement without Council control or, I should guess, direct ministerial control.
These observations are not made out of sheer cussedness on my part. I have had to study these matters for many years. Something has to be done about them. In particular I would like to pay tribute to the speech of the noble Lord, Lord Shaw of Northstead. I had the honour of working with him for four years in the European Parliament. I agree entirely with everything he said. When we were in the parliament together we rarely disagreed anyway.
4.50 p.m.
Baroness Elles: My Lords, I regret that I shall be unable to follow entirely down the road taken by the noble Lord, Lord Bruce of Donington. I shall confine my remarks to the report which is before the House this afternoon. I agree very much with what he said and his criticisms both of the Commission and of the national parliaments and their conduct. The House should be grateful to the noble and learned Lord, Lord Hope of Craighead, for introducing today's debate on delegating and implementing provisions to the European Commission. Thanks are also due to our legal adviser who always serves us so well. They are also due to his assistant legal adviser. Both have played a major role in the preparation of the documentation before your Lordships today.
As regards the inquiry into the draft version of the Council's decision adopted in July 1987, it may be helpful to make brief recall to the Commission's
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position before that year. It was only after the direct elections to the European Parliament in 1979 that members recognised the existence of a plethora of committees chaired by Commission officials with civil servants from national governments. They were taking decisions on implementing legislation. Many of the committees had originated during the 1960s. Very little was known about them at all and certainly not by the European Parliament.
Debates raised in the European Parliament contributed to the adoption of the 1987 decision which recognised the right of information to the Parliament provided by the so-called comitology committees. Twelve years later—last year—a draft Council decision was considered to replace the 1987 version. It is designed to meet the objectives of the European Parliament and to legalise the three inter-institutional agreements which have been adopted in order to mitigate at least some of Parliament's objections.
Evidence before the committee showed that the European Parliament is still not satisfied with the draft decision and rightly so. Although Parliament does not seek further powers it demands full recognition of its supervisory role in relation to the comitology committees. The number of those committees has not been provided by the Commission and many noble Lords have commented on that fact. Her Majesty's Government have provided a list which is known to Whitehall departments. As I understand it—and it is mentioned in the report—there are about 250.
It is known that there are probably many more committees which are not set out in the list. There are probably at least 350. The Commission should be obliged to publish a complete list, whether the committees meet frequently or not. Some will meet regularly; for instance, the management committees dealing with agricultural matters will meet weekly concerning the prices of agricultural products and so forth. Other comitology committees probably have not met for a whole year. They may meet twice only over a long period. There is a vast difference between the committees, although for the time being they come under the heading of comitology which we are considering today.
The approach of the Commission has been to simplify the terms of the 1987 decision. At least it is said that it is simplifying them, and that is a laudable objective. But in so doing, it deletes reference to obligations imposed upon it. That could give rise to discussion—I use a mild word—between the institutions as to the role of the Commission. Therefore, it would be preferable to state clearly the tasks of the Commission, even though that may mean a slightly longer text. I maintain strongly that brevity does not necessarily mean clarity.
Reflecting a long-term objective of giving more general powers to the Commission, for some years the European Parliament has proposed the elimination of the regulatory committee, retaining only the management and advisory committees. The sub-committee does not accept that proposal, and rightly so. It is essential to retain the regulatory committee. Provided that the European Parliament is kept informed of its activities, the retention of that committee is to be supported.

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Other issues raised concerning the drafting of the decision, including in particular Articles 2 and 7, give cause for concern. It is hoped that the sub-committee will be kept informed of progress before a final decision is adopted and that its views will be taken into account.
We have already looked at the issue twice and this is the third occasion. The report gives a view on the most recent proposal. However, in view of the drafting with which we have been presented by the Commission, there may well be a fourth report. I hope that once again we shall have the pleasure of the noble and learned Lord, Lord Hope of Craighead, chairing the committee in relation to that.
4.57 p.m.
Earl Attlee: My Lords, I too congratulate the noble and learned Lord, Lord Hope of Craighead, on his chairmanship of the committee which produced that very important and comprehensive report. I thank him also for introducing today's debate on reforming comitology.
On these Benches, we warmly welcome the committee's report and many of the recommendations which it contains in response to the Commission's proposal on reforming comitology. The report sheds much light on what may be described as one of the more secretive and mysterious procedures employed by the European Community in its law-making. Certainly, it is relatively new to me. The report provides a useful first step in demystifying the subject of the work and functions of comitology committees as well as raising important questions about the reform of the comitology process which I hope the Minister will be able to answer today.
I support the comments of the noble Lord, Lord Borne, regarding the role of the current Law Lords. Of course it is necessary to have regard to the separation of powers, but who better to determine where the separation should lie than a Law Lord?
In his interesting comment on statutory instruments and the relevant committees, the noble Lord, Lord Taverne, suggested that the general public are ignorant of how statutory instruments come into being. He is probably right about that. On the other hand, trade associations and consumer groups are well aware of how statutory instruments are devised. In fact, they have a major part to play. On the other hand, the noble Lord, Lord Bruce of Donington, referred to some of the difficulties in scrutinising secondary legislation. But there is the advantage that it is easy to challenge a Minister, especially in your Lordships' House, with regard to secondary legislation, and particularly if there is lack of consultation. For example, my trade association is involved closely with the DETR in the development of new secondary legislation.
As the report makes clear, there is little to be gained from the veil of secrecy surrounding the system of delegated decision-making. Moreover, if the low turnout in last week's European parliamentary elections has demonstrated one thing beyond the apparent dislike for
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the closed list system, it is surely that there is a high level of public apathy and general lack of interest in what goes on in Europe. That cannot be desirable.
That is doubly a matter for concern when one takes into account the fact that some of the decisions made under that system of delegated decision-making have a direct effect on European Union citizens; for example, in terms of the safety of foodstuffs. That is particularly pertinent today in the light of the current food scares in Belgium and the continuing debate on the safety of GM foods. My noble friend Lady Miller of Hendon introduced a Bill today to address that very issue.
I turn to the conclusions reached in the report. The report makes clear that no one disputes the fact that the European Community must have a system of delegated decision-making powers without which the wheels of the Community law-making would rapidly grind to a halt. However, that system must have the correct checks and balances built in in order to ensure that democratic accountability, transparency and legitimacy are maintained. Nor is there any dispute over the need for reform of the current system of comitology. That is a question that the committee has sought to answer: what should be contained within a new decision on comitology so that it meets its objectives while respecting the institutional balance as set out in the treaties and contributing to better and more efficient law-making at Community level?
Does the Minister agree with the view of the committee that the Commission's proposal for the new comitology decision falls short of meeting the three main objectives essential to such a decision as identified by the committee; namely, to enhance the involvement of the European Parliament, to simplify the comitology procedures and to inject greater transparency?
I should like to comment briefly on the three objectives of the new decision. I refer first to the role of the European Parliament. The House will be aware that at present the European Parliament receives prior notice of and information concerning proposed measures, and has the opportunity to express its views, but it has no rights under the present comitology arrangements and cannot block implementing measures.
Controversy over the role that the European Parliament should play in the exercise of the Commission's implementing powers has provided much of the impetus for the current discussions over reform of the comitology process.
The committee's report concluded that the Commission's proposal concerning the role of the European Parliament fails to meet the Parliament's demands for equality, is short on detail and imposes few obligations on the commission or the council. Does the Minister share the view of the committee?
We on these Benches firmly believe that member states who are responsible for applying legislation must retain primary supervision over its implementation. Will the Minister give an assurance that the Government will not support any proposals that would undermine the role of member states and national parliaments in the oversight of the implementation of such legislation?

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Secondly, I refer to the simplification of procedures. Although the types of procedure to be used in comitology committees were limited following the Single European Act and the Council decision of 1987, the position as regards the numbers and types of committees remains somewhat complicated. It is clear that a system by which there are no objective criteria to determine which committee procedure should be used must be rejected as a priority. However, there is a danger that an overly prescriptive and inflexible approach to simplification may have the counter-productive effect of undermining implementation instead of improving it. It appears that in its proposal the Commission may have fallen into that particular trap.
Does the Minister agree with the committee's conclusion that the criteria suggested in the Commission's proposals are unclear and may be difficult to apply, in particular the proposal to remove the variants? Does the Minister agree with the committee in opposing the European Parliament's proposal to abolish the regulatory committee procedure and to simplify the comitology procedure? What steps have the Government taken to express that view? What action do the Government intend to take in line with the committee's recommendation to seek political agreement on a set of guidelines to assist in the choice of type of committee guidelines?
The third issue is that of transparency. One of the strongest criticisms of the system of comitology is its lack of transparency. Many noble Lords have referred to that; for example, it is remarkable that there is no list of the 250 or so comitology committees that is publicly available, nor an authoritative account of the functions and memberships of each. There is no doubt that such a lack of openness conflicts entirely with the principles of democratic accountability and legitimacy.
On the subject of transparency, the committee's report criticises the lack of systematic parliamentary scrutiny at either a national or Community level and the confusion over rights of access to comitology documents. Can the Minister give an assurance that the Government will take action to seek the implementation of the committee's recommendations to enhance transparency?
The committee also concluded that it should see all comitology documents which are likely to require Council decision or are of such political or practical significance that they might cause Ministers to be concerned if they were to learn of them first in the newspapers. Does the Minister agree that that is a sensible way forward?
In conclusion, the task of reforming comitology is far from the dry, abstract, esoteric and remote process that it would first appear to the layman. The decisions made as a result of implementing powers vested in comitology committees can, and do, have far-reaching implications which affect every citizen of the EU. It is critical therefore that this process is transparent, accessible and scrutinised appropriately by member states. The Minister's words will be listened to very carefully and I look forward to her response.
5.6 p.m.
The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean): My Lords, I too thank the noble and learned Lord, Lord Hope of Craighead, and his committee for their work in producing the report, and the noble and learned Lord for introducing this debate today. The committee's work produced an excellent report and as the Government made clear in our written response, it is one with which we overwhelmingly agree.
I offer my thanks too to the other members of the noble and learned Lord's committee—my noble friend Lord Borrie and the noble Baroness, Lady Elles—for their hard work in drawing together the committee report. Perhaps I may also congratulate the noble Earl, Lord Attlee, on his sterling performance at the Dispatch Box over three debates this afternoon, and my noble friend Lord Bruce of Donington whose expertise and commitment to all issues European draw the admiration of the whole House.
I shall respond to the detailed points in a moment, but I should first like to contextualise some of those points. As a number of noble Lords remarked, comitology is indeed a complex and technical subject. It is one of those obscure terms known only to a few people closely involved in the system. I believe that even Commissioner Kinnock, when in another place, once said that comitology sounded as though it should be a disease of the lower intestine. And when I was asked about comitology it was suggested to me that it was more closely allied with the Question we had earlier this week from the noble Lord, Lord Tanlaw, on asteroids and the Spaceguard Programme.
As to what comitology actually is, I can think of no better definition than that given in paragraph 2 of the committee's report; that is,
"'Comitology' is established Community shorthand for the system of procedures involving committees, made up of representatives from Member States and chaired by the Commission, whereby the Member States can exercise some control over implementing powers delegated to the Commission by the Council".
For the most part that means issues which do not make the headlines, such as the detailed implementation and the day-to-day market management issues. Yet as the noble and learned Lord, Lord Hope, said, comitology is very important. The committee made that very clear in its report. As in most national systems, secondary legislation in the European Union makes up the vast majority of legislative Acts passed, as the noble Lord, Lord Shaw of Northstead, reminded us.
The Council and the European Parliament cannot take all the decisions themselves; there would simply not be time for them to do so. It is quite right, therefore, that implementation of basic Acts is delegated to the Commission. I agree with my noble friend Lord Borrie in that regard. But it is also right that the Commission should be monitored in how it carries out that role. That is why committees of member states oversee what the Commission does.
The recent dioxin case shows how important it is to have such procedures in place. If there is a crisis in one member state, the freedom of the single market makes

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it vital that the Community as a whole should be able to respond quickly. Comitology provides a mechanism for the Commission to summon experts from all the member states to assess the available evidence and approve, or otherwise, the Commission's proposals.
Once a decision has been made, it can be implemented right away. Hence the Commission's ban on the export of Belgian eggs, which was taken within one or two days of the issue being brought to public attention. I am sure that all noble Lords will think that that is the right sort of time-phase, if I may put it that way, in which such decisions should be taken. However, as a number of noble Lords have said, notably my noble friend Lord Bruce of Donington, the comitology system is not perfect; it is far too complex and it could be simplified. Moreover, the fact that virtually no one in the general public is aware of it simply demonstrates that it is far too opaque. Of course it is not the only aspect of the Community's work which could be made more open, as my noble friend Lord Brace of Donington said when he talked about the secretive nature—as I believe he put it—of much that went. on in Brussels, particularly in the Commission.
However, as I am sure this House is aware, the Government agree that the functioning of the Community's institutions can be improved. We would like to make their work more efficient, more effective and more open to the outside world. That can be seen in our reaction to the Commission' s resignation in March. The Prime Minister was quick then to call for reform of the Commission. The United Kingdom put forward specific proposals for improving not only the Commission's financial control but also its internal management system.
I assure the noble Lord, Lord Shaw of Northstead, that that approach is now bearing fruit. The nomination of Mr Prodi as Commission President was a step in the right direction in the Government's view. Mr Prodi has now clearly displayed his reform credentials with the ideas that he presented to the Cologne European Council. Like us, he would like to see far-reaching changes and we will support him in those efforts.
The forthcoming IGC on institutional reform which was agreed at the Cologne European Council will be another opportunity for change. That will help the Union prepare for the challenges of enlargement by looking at the size of the Commission College and the decision-making processes within the Council. We welcome the well-defined agenda which was agreed at Cologne. This should help to ensure that member states can take the necessary decisions to prepare for the enlargement. Revision of the comitology decision has been another opportunity to push for a more effective and more open decision-making structure. It is with this in mind that member states at Amsterdam asked the Commission to come forward with a new draft decision; it is also this which guided our approach to the negotiations.
Perhaps I may now turn to the detail of the committee's report. As I have already said, the Government believe that this is an excellent report and one with which we very much agree. As the noble and
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learned Lord, Lord Hope, will be aware, negotiations in the Council have been proceeding rapidly since the committee issued its report. I can now inform the House that these negotiations appear to be approaching their conclusion. On Monday, the General Affairs Council will be asked to give its approval to a text that has already been discussed at working group and at Coreper level.
The members of the noble and learned Lord's committee will, I hope, be pleased to know that very many of their recommendations have been taken on board. Of course, I cannot guarantee that the text going to the GAC will not be changed before it is adopted. I should be grateful if the House could bear that in mind as regards what I am saying here today. However, I will do my best to highlight the relevant points as I go through the conclusions of the committee's report.
If noble Lords will permit me, I should like to start with the general objectives of the decision. I believe that the committee rightly identified three of these as follows: first, greater recognition has to he given to the position of the European Parliament; secondly, there should be further simplification of the procedures, but only in so far as this is practically and politically feasible. Thirdly, the whole comitology system needs to be made far more transparent. The noble Earl, Lord Attlee, asked me to comment on all three points and I intend to do so.
First, I turn to the role of the European Parliament. In its opinion the committee notes that the European Parliament has asked for the right to "blow the whistle" on implementing measures with which it does not agree. In other words, it would like to be able to veto some measures. As the noble and learned Lord, Lord Hope, said, the committee concludes that this would be neither practicable nor necessary, and Her Majesty 's Government agree.
The Commission's proposal gave the European Parliament an effective veto over measures which were not approved by the regulatory committee. Instead of a proposal related to the proposed measures then being passed to the Council, as at present, the Commission would have had the option only of coming forward with a full legislative proposal. The noble Earl, Lord Attlee, asked me what the Government thought of that. The Government believe that this could have seriously delayed comitology decisions being taken, and that would have been unacceptable. The regulatory procedure in particular has to deal with subjects which need to be resolved quickly, such as matters of public health, or indeed animal safety.
Instead of a veto over implementing measures, the committee recommended that the European Parliament be able to scrutinise implementing measures and have an opportunity to give its opinion. My noble friend Lord Borne concentrated particularly on this proposal in his address to us. The Government again agree, and so do other member states. It is important to recognise the increased legislative role which the European Parliament is now playing. Co-decision makes the EP co-legislator with the Council. Now that the Amsterdam Treaty has come into force, co-decision has been

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extended to a significant number of new areas. This should of course be reflected as far as possible in the comitology system. After all, comitology is there to implement legislative acts.
But at the same time the Council has to keep within the limits of the treaty. Article 202—that is, the old Article 145—of the treaty establishing the European Community gives the European Parliament no formal role in the comitology system. As a result, the current draft of the decision tries to involve the European Parliament but not put it in the driving seat. It contains a new article which specifically gives the European Parliament the right to receive and scrutinise all draft measures implementing co-decided acts. The Commission will be able to take account of any opinion the European Parliament may give before it comes to a final decision.
However, the new article does not amount to a veto, nor can it legally do so under the treaty. In addition, the European Parliament will be able to comment on all draft measures implementing co-decided acts which are submitted to the Council under the regulatory procedure. Again this is something which the committee of the noble and learned Lord wanted to see.
The committee also addressed the question of information passed to the European Parliament. It recommended that decisions should go further on this than the Commission's proposal. This should be possible. Under the draft decision the European Parliament would now receive not only all measures implementing co-decided acts, but also summary records of meetings and lists of those present, or at least the organisations to which they belong.
The United Kingdom would have liked to have gone slightly further than this. Like the committee, we saw little reason why the European Parliament should not receive all draft implementing measures as long as those implementing non-co-decided acts were simply for information purposes. However, sadly, there was no consensus for this in the Council and in the end it was necessary to reach a compromise.
I turn now to the question of simplification. The committee first addressed the question of criteria to determine the choice of comitology committee. The noble Lord, Lord Taverne—who is not present now—asked me to address this issue in particular. As noble Lords will be aware, the Commission's proposal contains an article setting out the circumstances in which the legislative authority should select a particular type of comitology committee. This was designed to prevent disputes between the Council and the European Parliament when the type of committee was being chosen. The noble and learned Lord's committee felt that it would be difficult to define all the circumstances in which a particular committee type might be chosen. As a result, binding criteria of the type preferred by the Commission might give rise to more time-consuming debate between the Council and the European Parliament. The majority of member states within the Council agreed with this approach. There was a consensus that criteria could be helpful to guide an institution, but they would have to be non-binding.
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The other key question in relation to simplification is the removal of the variants. There are currently seven possible procedural types in the comitology system. That is too many. It makes the secondary legislative process even harder to understand for those on the outside. The Commission's proposal therefore reduced the number to four. That is how it has remained, although the two safeguard procedures have now been combined into one variant. As the Committee's report pointed out, the one variant chosen by the Commission would have shifted the balance too far in the direction of protectionism.
Finally, the Committee addressed the question of transparency. Here noble Lords will, I hope, be pleased to know that we have good news and good stories to tell. I began my remarks by saying that the Government were consistently looking to increase transparency in the Community's institutions. That is exactly what we have sought to do during these negotiations. As the noble and learned Lord, Lord Hope, reminded us, there is currently not even a publicly available list of all the comitology committees and their activities. As noble Lords will know, the public perception of comitology is, therefore, probably rather less than nil. I think most members of the public do not know that such committees exist, nor indeed what comitology is. I hope that the list of committees published by the noble and learned Lord, if not absolutely guaranteed as a full list of committees or to be 100 per cent accurate, will be of considerable help. I thank the noble and learned Lord for ensuring that it has got into the public domain.
The new decision should now go some way to remedying this. As it currently stands, it makes a number of significant advances. First, within six months of the entry into force of the decision, the Commission will be required to publish in the official journal a list of all comitology committees, along with the basic instruments under which they have been established. Secondly, from 2000 onwards the Commission will have to publish an annual report on the workings of the comitology system. Thirdly, all documents sent to the European Parliament will be listed in a public register to be set up in 2001. Fourthly, there will be public access to all comitology documents on the same basis as Commission documents.
I hope that this is exactly the kind of success which the committee hoped for when it wrote its report. I trust that if the decision is finally adopted in this form, it will at least go some way towards improving the public's perception, such as it is, of the comitology system.
The noble Lord, Lord Shaw of Northstead, mentioned the issue of fraud. We can only welcome the decision of 25th May of ECOFIN and the European Parliament to set up the new independent European anti-fraud office within the Commission. That is something for which we have pushed for a very long time. I should say to the noble Lord that the Government believe the fact that the office will be able to work within the Commission, with access to papers and people, is very much a strength, not a weakness. The important issue is that it will be able to manage its own investigations independently. I stress that to the noble Lord because I rather gained the impression from the remarks that he made that he

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has a great deal of doubt about its independence. We would be very unhappy if there was not independence. I assure the noble Lord that we will be keeping our eye on that matter. The office will be looking at all institutions, not only the Commission.
Lord Shaw of Northstead: My Lords, I am grateful to the Minister. It might be of assurance if one knew who is to appoint the members of this new office and to whom they will report.
Baroness Symons of Vernham Dean: My Lords, I shall write to the noble Lord and give him those details, and I shall put a copy in the Library.
I hope that noble Lords taking part in the debate will see that the Government agree with almost everything in the report. Moreover, negotiations in the Council are also heading very much in the same direction. I hope that I speak for all of your Lordships when I say that I commend the committee's work. It has provided a much needed expert input into the negotiations and was very much appreciated not only by the Government but by many others as well.
We entered this negotiation with the intention of taking another step towards improving the functioning of the Community decision-taking process. The decision that is emerging represents a very successful outcome. It should make comitology both simpler to understand and more transparent and we all hope effective in the way that it works.
5.26 p.m.
Lord Hope of Craighead: My Lords, I am grateful to all noble Lords who have contributed to the debate. I am particularly grateful to the two members of the sub-committee, the noble Lord, Lord Borne, and the noble Baroness, Lady Elles, for their support. I should also like to echo the words of kindness expressed about the work of the assistant legal adviser, who made a
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substantial contribution. I thank, too, the noble Earl, Lord Attlee, and the Minister for their kind words and for the obvious care that they have taken to study this complex and detailed report.
I thank the Minister for bringing us up to date with such encouraging words on the progress that has been made since the date of our report. We are greatly pleased that the report has achieved some success, and her words are much to be welcomed. The noble Lord, Lord Taverne, spoke about some lack of strength in the recommendations about simplification, and the Minister hit the point in her reply. It has all to do with the problem of definition and with the risk that if it is imprecise it may give rise to litigation. When we tried to think of better words to express the various options, we found that the risks were too great and we thought that it was precisely the non-binding quality of the guidance that was crucial. We are, therefore, particularly encouraged by the way in which that problem has been resolved, as it fits exactly with our views.
The noble Lords, Lord Taverne, Lord Shaw of Northstead and Lord Bruce of Donington, have contributed greatly to the debate by drawing on their great experience and providing us with the context against which the report should be read. I was impressed by what the noble Lord, Lord Bruce of Donington, said about ensuring that things that should happen do happen. The progress of scrutiny, which occupies much of our reading time, is designed to achieve precisely that. Our powers are not unlimited, but we follow that philosophy as far as we can, and I am glad to draw on his encouragement.
I renew my thanks to all those who have taken part in the debate and who have formed part of the sub-committee, and I commend the Motion to the House.
On Question, Motion agreed to.
House adjourned at twenty-nine minutes past five o'clock.