HL Deb 17 March 2000 vol 610 cc1805-85

11.6 a.m.

Lord Pearson of Rannoch

My Lords, I beg to move that this Bill be now read a second time.

It is an enormous privilege to introduce this debate, in which so many distinguished speakers are to take part. But it is also a heavy responsibility, because millions of British people now want to leave the emerging superstate of the European Union and can find no voice to speak for them. They grow daily more frustrated as, without their consent, they see their hard-won independence being steadily devoured by the octopus in Brussels. Not only have they not given their consent; they have not even been consulted; and they have been manipulated and misled—a fact of which they are not yet fully aware.

I trust that it is common ground that there has been no serious national debate as to whether the United Kingdom should stay in the European Union, or whether it should leave. This Bill, if enacted, would stimulate such a debate, which I submit is long overdue.

The Bill may not be perfectly worded, but I trust its intentions are clear. It would require the Treasury to set up an independent committee of inquiry into what life might be like outside the European Union for our economy, defence and constitution. The committee would have to report by 1st November, so that its findings could receive some public attention and debate before the Government's final negotiations at the current Intergovernmental Conference and at the Nice summit in December.

I have said that millions of British people now want to leave the European Union, and that they do so in the absence of any serious national debate as to whether we should stay in or get out.

To justify the first contention, that millions want to leave, I fear I have to rely on an analysis of recent opinion polls, however unreliable they may be and however much their results may depend on the questions asked.

There is only one pollster, MORI, which has asked the same question 20 times since 1977. That question is: "If there were a referendum now on whether Britain should stay in or get out of the European Union, how would you vote?". It may surprise noble Lords to learn that, in reply to this consistent question, the "get out" vote has not dropped below 41 per cent since 1987 and has averaged 46 per cent since 1977. The last poll, in October last year, gave 42 per cent "stay in" and 45 per cent "get out". I shall put a detailed analysis of all 20 polls in the Library.

There have, of course, been other polls. The Social Attitudes Survey last November found 53 per cent in favour of getting out; there was an ICM poll for the BBC in January; and Gallup's poll this week for the Daily Telegraph indicated 39 per cent in favour of either leaving or of staying in a less integrated Europe than now, with the EU amounting to little more than a free trade area.Of course I agree with noble Lords who may say that these are only opinion polls and cannot be relied upon. I merely claim that they show that a substantial proportion of the British people want either to withdraw from the European Union completely or to reduce our relationship with it to that of a free trade area, which comes to much the same thing.

The last serious debate about our relationship with the Treaty of Rome took place during the referendum campaign of 1975 when we voted to stay in what was then the Common Market—a very different animal from the European Union that we see before us today. Furthermore, in 1975 we were promised that we would suffer no loss of sovereignty if we did vote to stay in. The Labour Prime Minister, Harold Wilson, misled every household in the land by sending the following two statements through their letterboxes. First: Through membership of the Market we are better able to advance and protect our national interests. This is the essence of sovereignty". Secondly, and worse: There was a threat to employment in Britain from the movement in the Common Market towards an economic and monetary union. This could have forced us to accept fixed exchange rates for the pound, restricting industrial growth and so putting jobs at risk. This threat has been removed". We all know that that threat had not been removed, but the Prime Minister's assurance must have done quite a bit for the "yes" vote to stay in the Common Market. The "yes" campaign was very much better funded and organised than the "no" campaign.

It is here that the behaviour of the previous Conservative Prime Minister, Sir Edward Heath, and other leading Europhiles was very much more deceitful. We have just learnt from a chilling Radio 4 programme, which went out at 8 p.m. on 3rd February this year, that, through their influence over the media, those Europhiles softened up and manipulated British public opinion in the early 1970s, before Sir Edward took us into the Community in 1972. He appears to have authorised the active support of the Foreign Office and, believe it or not, the -yes" campaign seems to have received substantial funding from the CIA, channelled through the European Movement. This funding supported, among much else, a series of breakfasts at the Connaught Hotel where the "yes" campaign was co-ordinated. Those breakfasts appear, for example, to have engineered the removal of Mr Jack De Manio from the "Today" programme because he was regarded as too Euro-sceptic.

In this context, it is interesting that still today our Government pretend that economic and monetary union is an economic project. Everybody else in Europe admits that it is a political project which is designed to cement the building of a superstate. That makes nonsense of the Chancellor's five economic tests and is misleading the people, perhaps—I do not know—intentionally. Just in case any noble Lord is about to accuse me of being a conspiracy theorist, I shall put the full text of the programme to which I have referred in your Lordships' Library. I would be happy to debate this disgraceful episode at greater length when noble Lords have had the opportunity to read it. In the meantime, I contend that the British people have been manipulated, misled, ignored and taken for granted as their politicians have foolishly led them into the quicksand of the Treaty of Rome. When government and opposition agree, the people are disfranchised. So it is a great credit to the British people that, despite being told by all three political parties and all our political media for 28 years that our growing subservience to Brussels is vital to the national interest, so many of them do not believe it and want to get out. The inquiry and national debate which this Bill would set in train would make sure that if we go on to further, and even full, integration with the EU, we would at least do so with our eyes open. I would hope, too, that even the most ardent Euro-enthusiasts would be so confident of their position that they would welcome such a debate and therefore support the Bill, but I fear that the next few hours may disappoint me.

I suppose that I should touch on some of the main Euro-realist arguments in favour of withdrawal which I hope the committee of inquiry will consider. Before I do so, let me reassure the House that we Euro-realists regard ourselves as good Europeans. One of our big problems is that the word "Europe" has become sharply ambiguous. It means both the continent of different nations and the emerging superstate. So, when a Euro-realist is rude about "Europe"—referring to a product of the treaty and Brussels—he is easily cast as Euro-phobic, a little Englander or a dangerous nationalist. So, let me at least be clear where I stand: I love Europe but I loathe and fear the Treaty of Rome and all its works.

At its most simple, our position is that we believe the emerging EU superstate to be dangerous for peace in Europe, and negative for our prosperity.

Let me deal briefly with peace. I suppose that the most important claim made by the Euro-enthusiasts is that the EU is essential to keep the peace in Europe. We do not agree. We say, instead—and history bears us out—that, on the whole, democracies do not provoke wars, whereas forced or premature conglomerations of disparate nations often end in conflict, especially when the ties which bind them unnaturally together are loosened. We point to Yugoslavia, the Caucasus and much of Africa. So, we say that our vision of Europe's democracies retaining their identities and freely trading together under NATO is less likely to end in conflict than is an undemocratic EU superstate. We also note, for good measure, that the post-war ideas which inspired the Treaty of Rome—to stop Germany going to war again and to resist the growing menace of the Soviet Union—are now redundant. So, we believe that democracy and NATO are the guarantors of peace in Europe, not the power-crazed bureaucrats in Brussels.

More specifically, we do not like the fact that we do not have an independent foreign policy any more, because most of our decisions have to be cleared with 28 policy groups sitting in Brussels. And we fear that the new European defence initiative, or "army" as Mr Prodi insists it will be, will undermine NATO and encourage US isolationism. We regret that France seems driven to go on biting the hand that freed her and has therefore insisted that the new army should be capable of autonomous action outside NATO. I hope that other noble Lords far better qualified than me will expand on these defence issues.

As to the constitution, it is clear that we stand at another very important fork in the road to the European superstate. The Government intend to cede more of our power of veto at the IGC into which the defence initiative I have mentioned will probably be "folded".

But there are other areas where the octopus is gently putting its tentacles round our unsuspecting constitution. Our new regional development agencies encompass areas agreed in Brussels, and are the blueprint for the regional assemblies designed to make Westminster eventually redundant. The emerging EU legal system corpus juris threatens habeas corpus and trial by jury. The Charter of Fundamental Rights is the fledgling EU constitution, justiciable in the Luxembourg Court and designed to take precedence over all our legislation. There are nasty directives on the way which will put us straight about racial discrimination, and so on; the juggernaut rolls relentlessly on.

I said that our membership of the EU is also negative for our prosperity. The most worrying prospect here is that the Commission may start to bring forward tax harmonisation, which is Euro-speak for forcing up our taxes by as much as 25 per cent, if we were fully harmonised, as a single market measure. We have had a foretaste of this with the imposition of droit de suite—not quite a tax, just a little levy on modern art which, together with VAT imposed by Brussels, threatens our great international art market. We can also see the shape of things to come in the saga of the withholding tax, thoughtfully designed by the Commission and our good partners to drive our vitally important Eurobond market back to New York and Zurich. So far, even our Euro-enthusiastic Government have said that they will veto this if necessary, which it can do because the Commission has proposed it as a tax measure, which of course it is. But if the Commission were to bring it forward as a single market measure it would be subject to the dreaded qualified majority vote and we could be forced to accept it anyway.

Generally speaking, the single market is not turning out to be the simple free market exercise that we thought it was when we signed the Single European Act in 1985. Its voting system is also being used against our mergers and acquisitions industry at the moment through the imposition of the Takeover Directive; and there are dozens of other British interests which have been threatened or damaged by the bureaucrats' harmonising craziness.

There is much misleading propaganda about our trading relationship with the single market. A wonderful example is to be found on page 6 of the Government's White Paper on the IGC, where Mr Keith Vaz, the Minister for Europe, says: The Single Market allows our companies to operate in a home market of over 370 million people. Nearly 60 per cent of our trade is within the EU, and that business represents 3.5 million British jobs". To demolish that statement entirely would take another whole day's debate in your Lordships' House. Today I only have time to place some doubt in your Lordships' minds. If we were to leave the EU and negotiate a bilateral free trade agreement with the single market we would be very much better off than we are at the moment. Switzerland has such an agreement, and exports more per capita to the EU than we do. Even Mexico has just concluded such an agreement. The EU trades in substantial surplus with us, which means that it has many more jobs dependent on its trade with us than we do on our trade with it. If we were to say that we wanted to leave the EU, it would actually want us to have a free trade agreement with it.

Even without such an agreement, Mr Vaz's statement is very misleading. At the moment the dues we pay to the EU outweigh the tariff advantages we get from the single market by about £2,000 million a year. So our present terms of access to Mr Vaz's home market are actually slightly negative. It simply is not true to say that 60 per cent of our trade is with the EU. What Mr Vaz means is that 58 per cent of our exports of goods goes to the EU, but goods now represent less than half our total exports. If services and income are taken into account, only some 40 per cent of our exports goes to the European Union, and they are declining and in deficit. Sixty per cent of our exports goes to the rest of the world, increasing and in surplus. But that is not the whole picture either, because Brussels' absurd diktats and over-regulation are visited upon the whole British population, and so the European content of our trade should be seen against our gross domestic product and not just our exports. Then we get the picture into perspective, which is that only some 9 per cent of our GDP is exported to the EU, some 11 per cent to the rest of the world, and the remaining 80 per cent stays right here in our domestic economy. So the mangy, corrupt, bureaucratic 9 per cent tail is wagging our healthy 91 per cent dog.

Mr Vaz and others are also very misleading when they suggest that we might lose 3.5 million jobs if we left the EU. Of course we would not. The trade would continue. It would be in the EU's interest for it to continue, and so would the jobs. If you do not believe that, perhaps I may suggest that you read the report by the respected National Institute of Economic and Social Research on the macroeconomic impact of British withdrawal from the European Union. The delightful thing about this report is that it was commissioned by the Government's Europhile front organisation, Britain in Europe, to which its findings must have come as a nasty shock. The NIESR estimates that only 2.7 million jobs are linked to exports to the European Union, and it states unequivocally that, There is no reason to suppose many of these, if any, would be lost permanently if Britain were to leave the EU". I will put a one-page summary of that in your Lordships' Library.

The Institute of Directors came out with an even more damning report about our commercial relationship with the European Union only yesterday. Quite simply, it puts the nett cost of our belonging to the European Union at a very conservative £15,000 million per year. If the UK were to join the euro, the costs could escalate colossally, perhaps reaching £50 billion per annum, equivalent to 6 per cent of our GDP or more than our entire NHS and personal social services budget. I can but recommend that noble Lords and the Government read this whole report, but I will put a two-page summary in your Lordships' Library.

It is interesting that in their recent book, Britain and Europe: Choices for Change, Messrs Minford and Jamieson reach the same devastating conclusions by different routes. I will put that in the Library, too, and will be happy to supply any noble Lord who wants one with a copy, free of charge.

Finally, there is research out today which shows that our membership of the European Union has little or nothing to do with inward investment. I will put a two-page summary of that in the Library as well.

So over recent years our Euro-realist camp has put out several well-researched analyses from respectable economists of our economic relationship with the European Union, all of which show that we could be very much better off outside the EU than in it. We have sent them to the Government. We even sent some of the earlier ones to the last government—such as Better off out by the Institute of Economic Affairs, and we never receive a reply. There is no disagreement, just silence. It is rather like pumping high velocity bullets into a sack of sand. There are just slogans from the other side, but no possibility of debate. Yet the Government say that they do want a debate on all these issues. If they are telling the truth, may I suggest that they support this helpful little Bill?

Moved, That the Bill be now read a second time.—(Lord Pearson al Rannoch.)

11.25 a.m.

Lord Harrison

My Lords, while welcoming the opportunity given by the noble Lord, Lord Pearson of Rannoch, to debate this issue, I believe that the supporters of the Bill are guilty of relegating Britain to the sin-bin of Europe. Withdrawal from the EU would condemn us to leaving the open playing field of the single European market to other players; to clapping from the sidelines when Team Europe scores a goal; and, after cooling our heels in the dug-out of history, returning to the fray only to find that the game and the goalposts have been moved on.

But enough of hyperbole, my Lords. Let me temper my rhetoric with some facts and analysis. According to this week's Gallup poll, fewer than one in five Britons favour retreating from the European Union. Most conclude that Britain's standard of living would fall. And, indeed, the public's perceptions are confirmed by the recent report already quoted by the noble Lord, Lord Pearson of Rannoch, drawn up by Pain and Young on behalf of the National Institute of Economic and Social Research. Although most of the 3.2 million jobs associated with Britain's engagement with the single European market would not be lost, the authors nevertheless claim—it was omitted by the noble Lord—that wages would be slashed to offset the deflationary shock of a 2 per cent cut in United Kingdom output as a consequence of withdrawal. And household consumption would tumble by a further 2.5 percentage points—hardly a ringing endorsement for withdrawal.

In the light of that analysis, I invite the sponsors of the Bill to respond to these questions. First, why is it that no one ever leaves the European Union? Indeed, countries only ever want to join. Queues longer than for the successful Dome line up to enter the tent of Europe. Everyone wants to join the party, except certain members of the party opposite. Everyone wants to bring a bottle, except those who have lost the bottle to fight Britain's corner in Europe. Do the sponsors believe all these EU countries are collectively mad, and that we alone are the rich repository of reason?

Secondly, who do we think Britain's friends will be outside on the doorstep? Who will take us in when we are in the cold? I hear siren voices opine that we should join NAFTA, hitching our fortunes to the Mexican economy among others—the noble Lord, Lord Pearson, has already shown today his admiration for the Mexican economy—or that we should aspire to "dollarise" our economy in the fashion proposed by Argentina last year. Indeed, the impetuous rush to become a client state of the USA proposed by some commentators has always struck me as an abject surrender of Britain's sovereignty and independence. Not only is the idea wrong-headed, it squarely contradicts American foreign policy which encourages Britain to be a full and athletic member of the European Union, not a non-combatant.

Paradoxically, rushing to America's side will hardly stave off our European Union destiny. The free trade area between the European Union and the USA which will be established in the next 20 years would find Britain re-entering the EU, brought in through the front door by our American allies. How ironic!

Perhaps the sponsors of the Bill harp back to colonial times and Commonwealth ties, failing to grasp that countries such as Australia can never be near neighbours, just good friends. Indeed, the very act of posing Britain's future as a choice between the EU, the United States and the Commonwealth marvellously misunderstands Britain's true interests. Blest as we are with a unique history and language, we are splendidly positioned when it comes to sticking British thumbs in global pies. Our membership of the EU, the Commonwealth and the special relationship with the States provides us with an unparalleled platform to promote Britain's interests. Let us play to our strengths, not highlight our hesitations.

Thirdly, why do the sponsors want to remove us from the world's biggest marketplace of 370 million consumers, soon to be 500 million strong when the applicant countries join? Why, as a nation of shopkeepers, do we want to shut up shop? The idea that we could withdraw from the EU without undermining our membership of the market is fanciful. Why do we, the most clubbable of nations, want to leave the club?

Some commentators dispute the importance of the single European market, as the noble Lord, Lord Pearson of Rannoch, did this morning, suggesting that Britain's trade with its neighbours is in deficit, in default and indefinite. But it matters little whether the percentage of trade is 47 per cent or 60 per cent; the European Union is our biggest trading post. After all, we trade more with Holland than with China. Our ambition should not be to rebalance the percentages, but to swell and grow our trade worldwide. And to fulfil that ambition, our active participation in the single market, the super market of Europe, provides the forcing house to make British business lean, mean and keen in all the other markets of the world. The European Union is the backyard of British business success.

Only this week, government patience and persistence paid off in securing the single market for Britain in the domains of artists' resale rights and family milk chocolate. Or let us take the car industry. Do our colleagues opposite really believe that in the midst of the current trials and tribulations withdrawal from the EU would enhance the prospects for Rover, Rolls-Royce or other automobile manufacturers sited here? Excluded from the market-place, we would decline into the makers of spare parts. We would become the wing-mirrors of Europe—always looking back, never forward. At present, of course, we are the wing makers of Europe. BAE's Airbus, whose wings are made in my home town of Chester, illustrates admirably European collaboration at its finest. Would that survive the flight from reality?

I make one further point in relation to the current interest in the success or otherwise of British industry. I wonder whether other noble Lords share my anxiety that Euro-scepticism is bad for British business. After all, if we constantly carp that Europe is a difficult place to do business, a market where only the Brits play to the rules, a region where they are adopting a new currency just to bamboozle the poor Brits, we cannot be surprised if the net effect of this pall of scepticism dilutes, diminishes and dampens the enthusiasm of any but the most assiduous British entrepreneur. If we remain semi-detached about Europe, can we blame our business people for staying in the suburbs, eschewing the centre of Europe and its single market? My Lords, loose talk costs jobs.

As the world's markets become global, so have regional groups sprouted—NAFTA, ASEAN, AFTA, Mercosur and the EU itself. Were we to secede, would Britain's voice be heard in these courts'? Of course not. We throw away our friendships at peril.

Finally, the Bill's sponsors focus on Britain's security status as well as its economic well-being. Here, exit from the European Union would be problematic. It would certainly be deplored by our NATO partners. As the Prime Minister recently asserted, the European Union has already helped make Britain safer than at any time in our history. So familiar have we become with peace within the European Union borders that we are in danger of forgetting its source and inspiration; the European Union.

Withdrawal from the EU is not an option; it is an opt-out. It is an opt-out of responsibility that we owe to our continental partners, our Commonwealth colleagues, our transatlantic cousins and, most of all, to our own citizens who want and are getting a sensible nation sensibly led.

11.34 a.m.

Baroness Williams of Crosby

My Lords, I, too, thank the noble Lord, Lord Pearson of Rannoch, for having instituted the debate through the introduction of his Bill. There is one point—and it may be the only point—on which I agree with him. This country deserves to have the fullest possible debate about an issue that will affect its future more than anything else we discuss in Parliament. We on these Benches are delighted to see the noble Baroness, Lady Thatcher, in the Chamber. She brings both standing and honour to the debate. I may not agree with her on many issues, but I speak with respect.

I turn to the Bill and comment briefly on the proposed committee. The Bill is a recipe for what one might describe as "total stalemate". I am not against a committee to consider the implications of withdrawal. That will largely benefit those of us who strongly argue for staying in the EU. However, I fear that the Bill as it stands would introduce a procedure which could go no further.

One of the points which the noble Lord, Lord Harrison, strongly underlined in his excellent speech—and I could not agree with him more—is that the issue is about whether the United Kingdom is part of a globalised world, influencing it, helping to lead it and bringing its best traditions to bear upon it. I fear that withdrawal from the EU would constitute a decision to stop the world and try to get off. It is wholly unrealistic in today's world—a world in which we see time and again countries agreeing to allow a part of their sovereignty to be pooled in an international body.

We frequently speak about the EU as though it were unique in that respect. But, unquestionably, some pooling of sovereignty is involved in NATO, an organisation which is supported by Members in all parts of the House. Unquestionably, a considerable sacrifice of sovereignty is involved in the World Trade Organisation, of which this country is a member and which many other countries seek to join. Unquestionably, there is some sacrifice of sovereignty in support for the International Criminal Court, which, as regards crimes against humanity, is set above all other national courts. And there is obviously some sacrifice of sovereignty in trying to establish a world of human rights, which I believe most Members of this House and of another place powerfully support. You cannot establish a world of law, human respect and civilisation unless you are prepared to accept the existence and strengthening of global institutions.

I turn to the specific issue of the EU. I want to pick up a comment made by the noble Lord, Lord Pearson of Rannoch, which I found utterly surprising. He said that the EU was dangerous for peace and went on to extol the importance of democracy. Let us be quite precise: the European Community and its successor, the European Union, has been one of the major forces for democratisation in Europe. Spain, Greece and Portugal were all dictatorships but entered the European Community specifically saying that they did so because they believed it would be a great support for democracy. Greece knew that it could join only if it got rid of the colonels—and it got rid of the colonels.

There is no question but that enlargement is about stabilising the fragile democracies of central and eastern Europe. As the noble Lord, Lord Harrison, so eloquently said, a queue of countries throughout central and eastern Europe is attempting to join the EU. In that queue are countries such as Russia and the Ukraine, each talking of its ultimate goal being to join the EU. How strange that, at a time when countries which desperately need stability and peace wish to join the Union, some in this country are talking about leaving it as if we somehow want to put our responsibility behind us and live in a world that has gone.

I turn from that to say a few words about the economic situation and perhaps to mention that the alternative offered to us—the North Atlantic Free Trade Association—is, of course, a single currency area. It has a currency called the dollar. Were we to join it, we would be in a single currency area just as certainly as we would in the European Union by voting for the euro. However, that sacrifice of sovereignty does not seem to trouble our Euro-sceptics.

Similarly, it does not seem to trouble our Eurosceptics that some members of a body called the International Trade Commission have been sent to the UK by the United States Senate's finance committee to investigate whether or not Britain should join NAFTA and leave the European Union. Its terms of reference do not mention even a single basic truth: that to join NAFTA one has to leave the European Union. With great respect to the noble Lord, Lord Pearson of Rannoch, I have in front of me the statistics from the Office for National Statistics pink book for 1999, which gives the figure for the EU share of total trade in goods and services as 52.7 per cent against 15.5 per cent for the United States. The noble Lord, Lord Pearson of Rannoch, suddenly and rather unexpectedly threw investment into his equation, which, of course, made the figures look rather different from those broadly published by all official sources.

I say one other word about this because we on these Benches are not frightened of mentioning the euro. We believe that the euro would assist this country very greatly were we to join it by reducing interest rates and by bringing about stability of exchange rates. We do not fail to recognise that the over-valued pound, to which Euro-sceptics pay such colossal attention on a symbolic basis, goes a very long way to make the lives of British farmers and British manufacturing exporters increasingly difficult. Some of our firms simply cannot compete on the basis of the present level of sterling, which is itself a false level in terms of representing economic strength.

I turn to the economy. We now lecture the European Union about adopting a more flexible and more adaptable economy. Yes, those are the right words: more flexible and more adaptable. However, at the Lisbon summit at the weekend where we shall be lecturing other European countries about flexibility and adaptability, they will have some right to lecture us on two other aspects of our economy. The first is the major shortage of intermediate skills. In its study of the European economy, Business, Britain and Europe, Andersen Consulting points out as one of our greatest weaknesses the fact that our workforce has a consistently lower level of skills than almost all our European competitors.

The other great weakness to which it draws attention is that the productivity of the United Kingdom consistently remains below that of France and Germany. One never hears the Euro-sceptics mention that. They present Germany as a totally sclerotic, out-of-date, unfashionable economy, and France as a ludicrously state-controlled one. Again, it is worth pointing out that in both those countries productivity and the level of skills considerably exceed our own.

I conclude by looking at the broad argument about comparative models of society between what the right of the Conservative Party now refer to as the so-called "Anglo-Saxon model" by which they mean the United Kingdom and the United States, and, on the other hand, the depressed, gloomy, backward model of the European Union. Of course, there are ways in which the European Union should change and we should encourage it to do so.

Perhaps I may also point out that on a day when your Lordships debate this Bill, the Independent has published an article headed: UK is now worst place in Europe to be growing up". It points out that one in five children in the United States live in poverty compared to one in three in the United Kingdom, that our pensions represent one-third of average wages compared with 70 per cent in Germany and 50 per cent in France, and that the opportunities for children growing up in our society are less than in most other advanced European countries. On such a day, I believe that one should ask what kind of model we want. On these Benches we want a model of an efficient, free market economy, coupled with a society which is fair and just, which does not accept vast inequalities in opportunity and in social provision, and which we believe is very well represented by the European model.

I beg to say that we would have no objection to setting up a committee, but a very different one from that suggested by the noble Lord, Lord Pearson of Rannoch. As does the noble Lord, Lord Harrison, we believe that leaving the European Union would be an utter disaster for this country and would represent an attempt to escape from our future for the sake of our history.

11.45 a.m.

Lord Monson

My Lords, it is always daunting to follow the noble Baroness, Lady Williams of Crosby. I do not always agree with what she says and, for the most part, I did not on this occasion. However, she always says it quite brilliantly.

This is a modest Bill. If enacted, it would not in itself have any effect on Britain's external relations. Yet, at the same time, I submit that it is a vitally necessary Bill. It was revealed in the Daily Telegraph on Tuesday that the European Commission now tacitly regards joining EMU and adopting the euro as a compulsory component of EU membership. That was confirmed the following day by Commissioner Pedro Solbes, who told Danish journalists in Strasbourg that: Part-time membership of the EU is not good enough", and that: In the longer term it's not possible to be in the Union and outside EMU". Over the next two or three years, we can expect this particular gauntlet to be flung down with increasing frequency and decreasing dissimulation. That has profound implications for Britain, given that the British electorate seem fairly certain to reject scrapping the pound in the referendum which we have been promised. It would be totally irresponsible for any government to fail to make contingency plans in the event of such a rejection. However, it would be even more irresponsible, as well as thoroughly dishonest, to try to influence the result of the referendum by running a last minute scare campaign to try to panic the public into switching round and voting "yes". However, if this Bill is enacted, such a scare campaign could never succeed: the measured, balanced, undramatic truth would already be on record.

As the noble Lord, Lord Harrison, reminded us, polls consistently show that the British public do not want to join a single currency but they do want to stay in the EU. Why? Not because they approve of the EU's destruction of our fishing industry, the ruination of our dairy farmers, slaughter houses and the London art market or the constant interference in the nooks and crannies of our everyday life, as the noble Lord, Lord Hurd, put it so well when he was Minister in another place. No; it is because of a vague and unfocused fear of the consequences of regaining national independence—a fear which is cynically encouraged and fostered by the integrationists.

Two big lies are employed. The first is the one successfully employed in 1975: that withdrawal would lead to mass unemployment and poverty. Today, we are told that 3 million jobs depend on our remaining in "Europe", by which I believe is meant the EU. That is about as economical with the truth as it is possible to be. I believe that the true figure is approximately 15,000 jobs, but other noble Lords will doubtless return to that point. I give one small example: Norway and Switzerland export almost exactly the same proportion of their output to the other 14 EU countries as we do, yet, of course, neither of those two countries is within the Union.

The second and worse big lie is that only the EU saved us from a third world war, that the EEC, with NATO nowhere to be seen, saved western Europe from Soviet aggression, and that the success of the EU alone prevents democratic European countries invading one another today. What utter rubbish, and historically ignorant rubbish at that!

Historically, most wars are either conflicts between empires and grand alliances at one extreme or civil wars at the other extreme. Millions and millions of people have died horribly in civil wars all over the world in the 20th century. Wars between younger nation states, such as that between Iran and Iraq, are a relative rarity, and wars between middle-aged, middle-class democracies are almost non-existent.

Even 30 or 40 years ago, when western Europe was both younger statistically and less bourgeois than it is today, that still held good. What sort of conflict do the scaremongers envisage—a repetition of the Icelandic cod war, perhaps?

Let us take one specific example. There was considerable tension between Austria and Italy between 1956 and about 1963 over the alleged maltreatment of the German- speaking minority in Alto Aldige, otherwise known as the Sad Tirol. This led to fierce words and fierce actions: electricity pylons were blown up, and so on, and there were impassioned debates at the United Nations. The problem was solved by traditional, conventional, diplomacy with compromises made on both sides over a period of years, without any assistance from the embryonic EEC.

Incidentally, Gibraltar and the Gibraltarians are scarcely treated any better by Spain today than they were before Spain was admitted to the EEC. So much for the harmony and friendship that the organisation was meant to engender between its members!

While I am on the subject of the Iberian peninsula, may I tell the noble Baroness, Lady Williams, that democracy arrived in Portugal not because Portugal wanted to join the EEC, as it was then, but because the Portuguese were fed up with paying the massive costs of the wars in Angola and Mozambique, and overthrew the government for that reason. Similarly, Spain did not get rid of Franco over a longer period of time specifically because it wanted to join the EU. Greece may be different; I do not know about Greece. But certainly I think the noble Baroness has it slightly wrong with regard to the two Iberian countries.

There is one more Euro-myth that needs to be knocked on the head. It is not a big lie, because I think it arises from a genuine misapprehension. It concerns the common agricultural policy, recently described by one noble Lord, who is not in his place, Lord Inglewood—a distinguished MEP and by no means a Euro-sceptic—as notorious and an economic nonsense. The myth is that if the United Kingdom had joined the EEC at the outset, the CAP would have been utterly different, that far from being economic nonsense it would have been benign and economically prudent.

That is to misunderstand the whole purpose of the CAP. It had practically nothing to do with the attainment of agricultural efficiency. France's hidden agenda was to prevent its millions of peasant farmers becoming impoverished and bankrupt, being driven off their smallholdings and drifting, destitute and embittered, into the large cities, where they would have been easy recruits for the Communist Party, which at that time was extremely successful, attracting almost 40 per cent of the French vote.

In that objective the CAP was extremely successful. About 83 per cent of French farmers have indeed left the land, but they have done so over a 40-year period, giving plenty of time for those dispossessed to find jobs elsewhere. Meanwhile, the Communist vote in France was successfully contained. So the CAP was extremely successful from the French point of view. But this French imperative ensured that British interests could never have been accommodated.

I agree with the noble Baroness to this extent: there are advantages in being part of a larger grouping when, for example, negotiating trade agreements with the hard men of the United States. My ideal, the ideal of millions of people in this country and I suspect millions of ordinary people on the continent of Europe, as distinct from the continental establishments, is to remain in a looser, more relaxed, less interfering, less regulated, less control-freakish EU, with the frontiers of the iniquitous acquis communautaire rolled back. But if that ideal is frustrated by the unrepresentative continental elites, as one suspects it will be, and the UK decides that withdrawal is for us—not necessarily for the others—the least bad option, can the noble Baroness, Lady Scotland of Asthal, confirm in winding up that that will in no way affect our membership of the EEA, from which we shall continue to benefit for as long as we choose?

11.55 a.m.

Lord Howe of Aberavon

My Lords, I hope that I shall be forgiven if I start by apologising for the probability that I shall be unable to stay for the end of the debate, which seems likely to run for some time. I have to be on the Any Questions programme in Birmingham this evening, but I shall stay as long as I can.

It is a pleasure for me also to be speaking alongside my noble friend Lady Thatcher on an issue on which for 15 years we were together—if not always in close partnership, certainly in partnership. Our views may now have diverged rather further apart than they were then, but I nevertheless welcome the opportunity.

I proceed from that to question the wisdom of the proposal underlying the Bill, eloquently presented by my noble friend Lord Pearson of Rannoch, of investing even a modest amount of public money in the search for an objective conclusion within three or four months to an issue that has been the subject not of no debate, but of intense and active debate almost throughout my political life. The debate may never have matched our aspirations, but that it has taken place is beyond doubt.

I would argue against the wisdom of putting even a modest amount of public money into the pursuit of my noble friend's well argued private prejudice, because not one of the major parties in this country is not in favour of continued membership of the European Union. The Conservative Party may appeal to some people because it appears to stand for something different; the position of my party is "In Europe, but not run by Europe". We can argue about what "run by Europe" means, but "In Europe" is beyond doubt and has been reaffirmed many times by the leader of our party. We all agree on that, with the exception of the much smaller number on whose behalf my noble friend speaks.

The question is: Why are we in Europe, and why should we stay in Europe? Virtually everyone agrees that we need to be there, and benefit from being there because of the existence of the single market. If one looks at that for just one second, and goes back to the original structure of the union, one sees that, to make that market effective, it needs a set of common rules, commonly administered, and commonly adjudicated. I have quoted more than once in the House the Institute of International Freedom pamphlet, with an eloquent foreword by the noble Lord, Lord Harris of High Cross, setting out exactly why we need, in the view of that pamphlet, not just to have a legal system, but a stronger, more effective competition policy adjudicated upon by a more effective court.

If one needs further evidence, one can look at the way in which the BSE argument has gone. People tend to overlook that, although British beef has been excluded from the European Union, it is the only part of the world in which we can reverse and redress that pattern. The last figure that I have is that 47 countries outside the European Union will not accept British beef. They include Canada, Australia, New Zealand, South Africa and the United States, in respect of which there is nothing that we can invoke. In the European Union, though the wheels of the law are grinding slowly, we have European Community law, with which 13 out of 15 member states are now complying, and with which Germany may well comply today. The pressure is on, and that is because we are part of a single enforceable market, which we cannot have elsewhere.

Moreover, it is a market in which we have ourselves deliberately extended our ability to influence the rules made there. When my noble friend Lady Thatcher and I committed ourselves in 1985 to the Single European Act, we did so in order to make the single market come into existence more quickly. We needed to extend majority voting to areas such as, for example, insurance, where other partners were not accepting the consequences. Of course, there was a hazard that in some areas it would not always work to our advantage. Let us look at the number of times in the last year, where records are available, that we were outvoted by qualified majority voting. In 1998 Italy was outvoted 13 times; the Netherlands were outvoted 15 times; Germany was outvoted 18 times; and we were outvoted only twice because we did not need to exercise our opposition. More often than not, we were on the side of the qualified majority which was prevailing. That is a sensible way to run it.

Other noble Lords have already mentioned the extent to which our membership of the Union is crucial to our influence on world trade policy. We exercise influence, not, perhaps, as much as we should like, in achieving a liberal trading policy for the European Union itself and in persuading our less liberal partners to accept our arguments in the direction of a free trade world. We are able to mobilise the authority of the group of countries which comprises the Union in curbing illiberalism in other countries. When my noble friend Lord Brittan was vice-president of the Union, he went many times, representing not just Europe but ourselves, to seek better results in the United States in relation to the trade negotiations then taking place.

We also respect our friendship and partnership with the United States, but there are occasions when we need to challenge its economic power. If one looks, for example, at the sanctions still being imposed in relation to European countries seeking to trade with Cuba, we had to challenge that legislation and we should not have been able to do that and secure the changes which we did had it not been for the support of a wider European Union.

And the same is true in relation to aid policies for ACP countries and the extent to which we have been able to argue, although not as successfully as I should like, for the banana producers of the Caribbean region. Our strength there was not sufficient. But our management of the ACP programme more widely has depended upon our membership of the European Union.

And so it is true in the broader foreign policy field as well. Noble Lords have already mentioned the case for enlargement and the case for consolidating democracy in the still emergent democracies of eastern and central Europe beyond what has already happened in the Iberian Peninsula. There too we benefit politically from our influence through the Union in that respect. If one looks at Russia as it is today, it may be too soon to reach the conclusion that our relations with that still large neighbour can safely be left to relations outside the European Union. We need to be able to mobilise the political influence of the European Union in presenting a sensible policy towards the difficult problems of the former Soviet Union.

Finally, on a wider scale, let us look at the Pacific and the relations between our European continent, the emerging economy of China and the existing economy of Japan. The most important observation that I have heard from any Japanese statesman was made to me by Prime Minister Kaifu some years ago when he said, "You must understand that Japan regards her relationship with Britain as the keystone of her relationship with the European arch". Our influence depends upon our participation in that organisation.

And so too likewise is the case in respect of the automobile industry. Despite the tragedy now likely to overtake Rover—what we used to call British Leyland—our car production is higher now than in any year since 1973 and it is reaching those levels because, thanks to the attractiveness of our economy to Japanese investors, we have been able to benefit from that inward investment. We are able to boast that Nissan in Sunderland is the most productive automobile plant in Europe. So in all those ways, we have greater influence for the benefit of the British people inside rather than outside.

One factor that I just touch on—I echo what the noble Baroness, Lady Williams said—is the issue of the euro. One of the hazards that has been threatening the prosperity of BMW's investment in Rover has certainly been the divergence in exchange rates since that time. Some people talk about control of one's currency as being the most sovereign aspect of a nation's self-governance. But my noble friend Lady Thatcher will remember that during our time together, the pound sterling fluctuated from about 2.45 against the dollar to near parity with the dollar. We could not buck the market in those days any more than we can now, and we suffered from that instability of our exchange rate with the rest of the world. We shall continue to do so in relation to Europe as long as we decline the opportunity of joining the euro.

Finally, if those are the advantages which we have gained from our membership of the European Union, what would be the message that it would give to the world and to our own people if we were to get up and quit, which is the objective of my noble friend's proposition? It would look like a withdrawal from all those areas in which Britain for centuries has sought to influence foreign, trade and economic policy around the world. It would not look like an enhancement and enlargement of our aspirations for the sake of this country. It would look like an abdication from the roles which we are well qualified to play—and better qualified to play within the European Union.

12.5 p.m.

Lord Bruce of Donington

My Lords, it is a great pleasure for me to follow the noble and learned Lord, Lord Howe of Aberavon. I venture to say that he is living in a different world from most of us. He is an optimist, and there can be no reproach for that. There is enough pessimism in the world, so his very upbeat address to us was extremely refreshing.

The whole trouble is that he assumed a priori that it was possible for any British government of any political persuasion to do what they want anyway. If the British Government had the power to do some of the things that have been talked about this morning, there would be very little problem for any of us, but the trouble is they do not have that power. The major part of decision-making in this country has now been abdicated to Brussels. The role that we can play is very limited indeed.

In due course, I hope to be able to persuade my noble friend Lord Harrison of some of the wisdom that I shall venture to inflict upon your Lordships, but in the meantime, we must deal with what we have. The debate last week proved beyond all reasonable doubt that the common agricultural policy, which is the largest budgetary item in the European budget of 1,801 pages, is no good.

I want to address myself to the practicalities of the situation. We can either go on bandying opinions as to who is responsible for what or we can do something about it. I have a few suggestions to make to your Lordships about the way in which we should proceed in the current circumstances.

The first thing we should do, which we can still do, is to repatriate the common agricultural policy into the United Kingdom and make the United Kingdom responsible for its own people. It must not do that without regard to our colleagues on the Continent, or our friends on the Continent, whoever they may be. I can envisage a repatriation of farm support to the United Kingdom. I can also envisage conversations taking place with our colleagues in the European Union as to the way in which we could possibly give them financial support if they would suffer unduly from our repatriation policy. After all, that would be consistent with the British attitude towards friends.

It is not as though we are without funds. Every year we pay £2 billion net into the European Union after taking into account all the receipts and taking fully into account our abatement. So if we are to ease the passage of transferring the common agricultural policy back to the United Kingdom—and I assure your Lordships that very few farmers will argue with me about that—we can do it in terms of the utmost friendship and co-operation with Europe. We are quite capable, out of the net sum which we already pay into Europe, to find the funds necessary for us to arrive at a fair settlement for what, after all, would be a rupture of policy. I consider that to be a practical proposition.

There are, of course, a number of other things we can do. We can stop completely the flood of regulations, directives, decisions and so on from the Commission itself. Let us not be under any illusion about the results of the plan. I have before me a document published by the European Scrutiny Committee of the other place, dated 9th March. That committee is thoroughly congested. It cannot deal with all the matters coming to it. Altogether, some 95 items which have already been considered by the committee require further information from the Government—information going back to questions raised by the committee from 1995–99, the overwhelming mass of which were from 1999. They have not yet been able to deal with them. That is not a sign of a smooth working machine.

But of course that is the oldest dodge in the world by unelected civil servants. My noble friend Lord Harrison will appreciate that if one wants to rule, one floods those ultimately responsible with documents one knows they will be unable to read. That is exactly what has happened in the United Kingdom. Regulation after regulation has come out of the unelected Commission. There is no sign of any abatement. But there is no sign either that Ministers—even the Ministers in my party, who are of course all geniuses—have mastered them either. They cannot; the flood is too great. The result is that the matter goes by default and regulation after regulation—including the treaty of 1972—goes straight into British law without any effective scrutiny by either this House or the other place in particular.

It is not generally realised that the European budget, which amounts to billions of pounds, at one time used to undergo scrutiny in the other place. It even used to receive constructive scrutiny—I often say more constructive scrutiny—in this House. What happened to the last budget? It received no scrutiny at all. It went through without any real debate. We are not talking of small sums, but of a budget to which, as I said, Britain contributes between £2 billion and £3 billion every year net after all receipts.

But the matter is even worse than that. Under whose control is the money when it is sent from this country? It is under the control of the Commission. I have not heard anyone this afternoon in favour of an abject subservience to the Commission in Brussels. I have not heard any reference to the inquiry into its activities last year. All that has passed away as though we are in the presence of a Commission governing Europe—and, to a large extent, ourselves—whose reputation lies in the dust as being corrupt to the core.

Do not let anyone doubt my sincerity. During the war I spent much of six years—a large portion of my adult life—in France to liberate people who behaved so disgracefully. But from the recent press reports outlining the activities of Herr Kohl and Monsieur Mitterrand, it is quite clear that not only have there been corrupt dealings by the Commission itself, but also by the French and German Governments in the way in which they have raised party funds.

Are we going to lie down and take that? I do not know what has happened to people in the United Kingdom, uttering pious platitudes concerning those very bodies, holding them up to be the last word in conventional wisdom. That is no good; it will not do. We are not in any hurry—the war took six years, after all—except that the Commission wants to railroad us into one impasse after another in order to increase its own power. It has done so by a progressive application of qualified majority voting. I always believed that cooperation between member states was an extremely good thing. Anyone who considers the problem of pollution in Europe as a whole knows perfectly well that such matters—there are many others—must be dealt with across all boundaries. There are many more issues: certain sections of transport, communications and so on. There is of course a role for the countries of Europe acting in concert by co-operation with one another, not by orders from the European Commission.

I do not know whether any of your Lordships followed the Maastricht Treaty negotiations. The then Prime Minister came back claiming that he had won game, set and match. It was only when we came to the Edinburgh conference which followed almost immediately thereafter that we knew exactly what the score was. In the communiqué inserted by the Commission itself—council communiqués are probably all written by the Commission originally—appeared the following words: In more general terms the Commission is intending to use its monopoly of the right of initiative by declining to accept requests made by the Council at informal meetings that it make proposals for Directives. In the same spirit it will be tougher about rejecting amendments proposed by the Council and Parliament that run counter to the proportionality rule or would unnecessarily complicate Directives or Recommendations that are in fact justified under the need-for-action criterion". That is the Commission defying the Council of Ministers, largely unnoticed. Only people who read the documents knew that that communiqué existed. My noble friend Lord Harrison probably has not yet seen the document. I shall provide him with a copy. It shows the degree to which the Commission has taken control and intends to take even more control.

To be fair to the Government, the Cabinet Office has taken certain actions which have been extremely welcome to me. It has brought out The Guide to Better European Regulation. It has no reference number, so it is difficult to reorder, and no date. Nevertheless, I am persuaded that it is an authentic document. It tells civil servants the way in which they should go about dealing with proposed European legislation. I shall commend it to those of your Lordships who have a sense of humour. But since all of your Lordships have a sense of humour, I presume that the demand on the Printed Paper Office will be considerable. Noble Lords should read it. It advocates that in all cases where proposed regulations have an effect on the UK, civil servants should prepare a regulatory impact assessment. I believe there have been 64 so far. I do not know how many have been placed in the Library. All that the noble Lord, Lord Pearson of Rannoch, asks for is an impact assessment of the present situation. That should not be too much strain.

My time is up. I commend to my colleagues, as I have pleasure in commending to the House, a philosophical dictum pronounced by the leader of my party, whom I entirely support in this matter. At a meeting of the Scottish Parliament he enunciated the principle, with which I am in full agreement, that; Scepticism is healthy. Cynicism is corrosive". As regards my own part in this matter, I trust that your Lordships may be constrained to find that my leader and I are in complete accord on that philosophy.

12.21 p.m.

Lord Ezra

My Lords, in my contribution to this important debate, so vigorously introduced by the noble Lord, Lord Pearson of Rannoch, I wish to concentrate on the single market with particular regard to the ways in which it has developed over the years and the British contribution to that development. At the end of my remarks I shall compare the single market as it now exists with the proposal for a loose free-trade arrangement, such as proposed by certain noble Lords.

My connections with the European Union, as it is now known, go back a long way. I was a member of the UK delegation to the High Authority of the European Coal & Steel Community (ECSC) from 1952 to 1956. Subsequently, I was president of the Consultative Committee of the ECSC and, in later years, took part in many discussions on energy and industrial policy.

The single market as we now know it was originally set up under the terms of the Treaty of Paris 1951 and applied to coal and steel. It was a customs union. Within that customs union, the impediments, and particularly any tariffs affecting those products, were intended to be removed and a common external tariff established. That was broadened under the Treaty of Rome 1957 when the European Economic Community was set up and this concept was applied to all goods, services and the movement of people.

The first step was to establish the common external tariff and to remove internal tariffs. That was relatively easy to do. The external tariff around the single market has much diminished over the years as a result of world trade negotiations. What emerged, however, and has been much more difficult to deal with, in order to enable trade to move freely within the area—goods, services, people and capital—was the multiplicity of non-tariff barriers. As the tariff barriers were removed, the natural instinct of countries, which always tend to be protective of their own interests, was to establish non-tariff barriers. Those took a variety of forms: health regulations; standards regulations; technical regulations; statistical requirements and bureaucratic delays at frontiers. So, although the tariffs were removed, the trade was not moving very freely. That situation became increasingly apparent.

In 1985 an important initiative was taken to prepare a White Paper which set out all the non-tariff impediments. The noble Lord, Lord Cockfield, as the Commissioner then responsible for trade, set that up and vigorously undertook the work. That was a major British contribution to the way in which the single market developed.

The problem about removing the non-tariff barriers was that with the unanimity rule, the right of veto, it was virtually impossible, on a large scale, to get countries to agree to eliminate the barriers which they had erected. That was the reason for the Single European Act; namely, to introduce in connection with the single market the qualified majority voting principle.

From that point on, progress was vigorous. The objective was to achieve all the detailed tasks set out in the report of the noble Lord, Lord Cockfield, by the end of 1992. By that date, about 90 per cent of the regulations had been passed by the European Council. What remained to be done was for those rules to be converted into state regulations: the transposition of the European regulations into state regulations. That was largely achieved by 1998.

We now have a situation in which, as a result of many years' effort, there is in the European Union a single market which goes beyond just the removal of tariff barriers, which have reduced in importance because of world trade negotiations. It has carefully analysed what other impediments to trade exist and progressively removed them. That is a unique development.

In the course of those developments, two areas of great importance were left out for special treatment; namely, telecommunications and energy. In the case of telecommunications, with the one exception of Britain, which had established an open market, the rest of the European Union had a closed market with national monopolies regulating the whole operation.

A consultative document was introduced in 1987 leading to effective deregulation by 1998. We now have a much freer telecommunications market within the European Union which coincidentally came about at the same time as the enormous development of the Internet. As a result of that, many cross-border mergers have been made. We now have, throughout the whole of that single market, a free, competitive market in telecommunications which is totally different from that which existed a few years ago.

As regards energy, particularly gas and electricity, apart from Britain the other markets were very much controlled by state monopolies. The British example led to a consultative document being prepared in each case and eventually the start of deregulation in the other member countries. Within the next few years, at least one-third of those markets will be deregulated. It has taken longer to get that moving than in the case of telecommunications, but as a result of the initial steps taken in both gas and electricity, it is generally felt that the process will move quicker than the legislation proposes.

So we can see that the development of the concept of a single market, which was started by the elimination of tariff barriers, has led to the careful analysis of other ways in which trade can be impeded, has worked out a system—largely under British initiatives—which could eliminate those barriers and has tackled two prime areas where national monopolies prevented a free market; namely, telecommunications and energy.

I should like to compare this situation, in which British thought and British experience have played such a large part, with the concept of the loose, free trade area referred to by certain noble Lords as an alternative. Some 40 years ago, we had experience of a free trade area. That had to be abandoned because it was felt that the single market concept—the Common Market, as it was then known—tackled the problem of trade interchanges and the freedom of movement of capital and people more effectively. One by one, the members of EFTA joined the common market and the European Community, as they were then known.

I do not see how, as a nation, we could conceivably benefit from withdrawing from the single market, which is now a highly sophisticated market to which we have substantially contributed. It has reached down to the roots of how to secure really free trade between countries on a fair basis. We could not replace that with the kind of arrangement—the loose, free trade area—which we attempted some 40 years ago. That really would be putting the clock back.

12.31 p.m.

Baroness Park of Monmouth

My Lords, we owe much to my noble friend Lord Pearson of Rannoch for this timely debate. I should like to echo others in saying how very pleased I am to see that we have the noble Baroness, Lady Thatcher, with us today.

When President Coolidge was asked what he thought of sin, he replied, "I am against it". That is my position on the way the European Union operates today, though not the Union itself. I recognise that it is impossible for us to withdraw, but I believe that we should not go one step further towards integration and that we should use every effort to secure a serious increase in subsidiarity. Above all, we should resist being drawn into a supranational federal union, though we must go on being active members of the inter-governmental Union as it is today. It must not move further in the supranational direction.

What advantage is there in becoming neutered politically, as we should be if we joined the euro and gave up control over our own power to decide how to spend our money and what resources we need to commit to defence and foreign policy? I am concerned about the developing powers of the common foreign and security policy. It is a foreign policy based on the principle of the lowest common denominator and would not be of much use. I would not dream of discussing the details of foreign policy in the presence of my noble and learned friend Lord Howe of Aberavon, but it seems to me that foreign policy is essentially an individual, discrete affair, resting on good diplomacy, conducted largely in private and on good intelligence of the undisclosed intentions of the countries, friend or foe, with whom we must negotiate. That cannot be done in concert with 20 other countries whose vital national interests could be quite different.

Of course it is possible to reach common positions—though rather rarely—but it can often be against our national interest. Our recognition of Croatia, expressly to please the Germans and the EU, was a classic example which eventually led to the involvement of Europe in the Bosnian conflict. By our own national criteria for recognition, Croatia simply did not qualify.

If and when a referendum is held on joining the euro, it will be extremely important to have a balanced and well-researched statement on both the advantages and disadvantages. To that extent, I strongly support my noble friend Lord Pearson. But I do not believe that the alternatives for us are either to join the euro or to withdraw from the Union. We should spend the next two or three years exerting all the influence the Government claim we possess to secure more subsidiarity and more transparency and to stop the EU creating any more groups, common strategies, action plans, special programmes, bench-marking schemes, European social law, new paradigms and dimensions, high-level fora, monitoring panels and Cologne, Cardiff and now Lisbon processes. I entirely agree with the noble Lord who I still determinedly call "my noble friend", Lord Bruce of Donington.

Far from doing less and doing it better, every Council seems to create more new bodies and more tasks best left at national level. The members of the EU are, after all, very different peoples, and with enlargement there will be yet greater variation. The strength of the Union ought to lie in diversity, not uniformity.

However, others, including the noble Lord, Lord Bruce, have delivered devastating attacks on fiscal management, so I shall not say anything about that. Unfortunately, neither insistence on subsidiarity nor measures intended to ensure that our money is better spent will work unless there is adequate scrutiny by national parliaments. The sheer weight of paper coming out of Brussels has made it impossible to keep an effective check and, no doubt, to brief Ministers in time before they make disastrous decisions. This is another reason for telling the Commission that it must stop, consolidate and apply subsidiarity. Even a little benign neglect would be very welcome.

But my chief concern is the new defence initiative. It was agreed at Helsinki that by 2003 the member states should be able to deploy and sustain operations in peacekeeping, conflict prevention and crisis management in operations involving up to 60,000 men, all within 60 days and some much earlier. These operations are to be self-sustaining, with the necessary command, control and intelligence capabilities, logistics and, where necessary, naval and air support. All this has to be sustainable for at least a year, and there is to be capability in command and control, intelligence and strategic transport. There are plans for a European air transport command, strategic sea lift capacity, harmonisation of military requirements and the restructuring of European defence industries.

Decision-making will be by the Council. The objective is for the Union to have an autonomous capacity to take decisions and to launch and then conduct EU-led military operations in response to international crises. All these measures will be in support of the common foreign and security policy and will, it has been said, reinforce and extend the Union's comprehensive external role. As the first step, new political and military bodies are to be established within the Council—more committees!—to enable the Union to take decisions on operations and to ensure the necessary political control and strategic direction. The Union is to have decision-making autonomy, a standing political and security committee, a military committee and military staff. When the Union launches an operation, there will be—wait for this—an ad hoc committee of contributors who will be set up for the day-to-day conduct of the operation. I wonder how many of our soldiers are having nightmares at the thought of that idea. Meanwhile, there is to be an inventory of national and collective resources, a database on assets and capabilities, a study of targets, a co-ordinating mechanism and the setting up of a rapid reaction fund.

According to the Government, from the Secretary of State for Foreign Affairs no less, we are not setting up a standing European army or military organisation but merely mechanisms by which the EU, in crisis management, can call on assets which member states have committed to NATO. At the same time, we will not duplicate or decouple from NATO. I shall be interested to see how that will be managed.

The European nations are setting a target of being able to put a corps in the field in 60 days and to sustain it for a year. According to Mr Cook, it all depends on access to NATO and WEU assets, and no one is focusing on money for defence. The Secretary of State has said that there will be none for our own Armed Forces. The important thing, according to what he said, is not what you are putting in, but what you are getting out. That is an extraordinarily good description of the present Government's attitude to defence. On the same occasion he admitted that Her Majesty's Government might at any time simultaneously receive a request for men and resources for a UN operation anywhere in the world. We are committed to that through the UN Memorandum of Understanding.

If the objective of all this is to ensure that the European nations, as well as Britain and France, do their fair share in future crisis management—which, on the face of it, seems a very good idea—surely, since it is admitted that it is NATO assets which are to be used, we could have conducted an audit through NATO without any of the vast infrastructure now being set up. There could have been a separate arrangement to cover the non-NATO EU members, none of them large countries.

Mr. Cook gave one most telling statistic. Although there were more than 2 million men and women in uniform in Europe at the time of Kosovo, it was a struggle to get 2 per cent of that figure into Kosovo—and, incidentally, 700,000 of the 2 million are conscripts and therefore wholly unsuitable and probably unavailable. We also know that without US strategic air lift (let alone air power), no one could get those famous EU troops, other than ours and perhaps the French, to any crisis area. Finally, what could suit the Russians better than to probe NATO, for instance on the Balkan states, just when our double-hatted troops are known to be drawn off and bogged down in some EU adventure being run by a committee?

We must never forget that the prime task of our forces is defence. We must do nothing to weaken NATO's power to deter. To open the possibility that NATO troops could be involved in this sort of ridiculous charade is extremely frightening and extremely irresponsible.

The truth is that the EU has conned us into allowing what it always intended; that is, autonomy for the Union in the field of foreign and defence policy on the pretext that an audit would produce—instead of the usual two admirals and a stretcher-bearer each from everyone but ourselves and the French—a real serious military force. Even if it did, it would soon disappear under the weight of the EU committees running the war. That is why we must call a halt to the Union's strategy of emasculating nationhood. If ever there were two areas for subsidiarity and nothing but, it is in defence and foreign policy and in their essential weapon of intelligence.

There is reference in the papers on the Lisbon Council and on Helsinki suggesting the possible need for treaty amendment. That is slipped in very much at the last in a quiet little paragraph. We should ensure that any such amendments are fully debated in both Houses before any commitment is made. What I greatly fear is that, although we retain a veto on defence, we shall be trapped for political reasons into committing our over-stretched and under-resourced troops to a hopelessly badly run EU enterprise. For that reason, though I fully accept that we are in the Union to stay, by God we have got to make it better.

12.42 p.m.

Lord Shore of Stepney

My Lords, I begin by saying how pleased I am to be able to follow such an excellent and perceptive speech. We have heard something which is well worth studying, and I am sure we all will when we read Hansard. Also, I congratulate the noble Lord, Lord Pearson, on giving us this opportunity for a wide-ranging debate.

My attitude is that I am not at present in withdrawal mode. At present I am in favour of a committee of distinguished, independent people looking at where we are as a country. Where are we going at the beginning of this new century in terms of maximising our influence in the world in relation to defence, diplomatic influence, foreign policy and economic prosperity, not forgetting the preservation of our democracy? All those matters should be studied. We should not exclude withdrawal from the European Union if that is thought to be the best way to proceed. However, I would not begin at that point.

We have a serious year ahead of us and it is helpful to have this debate at the beginning. Europe may look very different by the end of this year. The important issue of enlargement will arise. I have no doubt that applications will proceed and the whole nature of the European Union will be in for profound change. It will be faced with a challenge so great that it may not be able to meet it.

So far we have had what I can only describe as trivial debate in relation to enlargement, in the sense that the only thing that has been seriously considered is the possible enlargement of the first five. What happened at the last Heads of Government Council was that the five became 11. This year the European Union will be considering the application not of the five but of the 11. As the noble Baroness, Lady Williams, said of course others will come after, maybe even Russia itself; certainly the Ukraine; certainly the Caucasian CIS states; and certainly the remnants of old Yugoslavia. So we are not talking about an addition of five or six; not even of 11; but something of the order of 20. We must let that sink in and not allow the Government to bring forward the kind of trivial White Paper which they did on the IGC; one which looks at certain constitutional changes; which offers little niceties of touch such as perhaps sacrificing our second Commissioner or changing the weighted voting system in the Council of Ministers.

The real point of this issue is this. We have an opportunity of refashioning our relationships with Europe in a way that suits us and a large number of both applicants and members that we have not had before. We are uncomfortable in the European Union. We know that. Everyone who has had dealings with it has become increasingly aware that it does not quite fit us, perhaps because of our history and our connections way outside the European Continent. When I hear all this grovelling about what will happen to us, about shivering, shuddering Britain kept outside the European gate, I laugh. There are six continents in the world, not just one. We have now and always will have a considerable influence on the Continent across the Channel as long as we wish to exercise it. That should be the framework of thinking which should inform us.

Frankly, we have not begun to prepare for the enlargement process. We have not thought through the implications. To impose upon the applicant states the kind of rigidities which have developed over the past 20 years in Europe, including commitments to economic and monetary Union, is impossible. They cannot meet it. Because the costs are so great, they cannot even be included in the guaranteed prices of the common agricultural policy. We know that. Therefore, the whole approach has been dishonest and the costing in Agenda 2000 is irrelevant and absurd.

That is one point. The other is this. I am in favour of opening up trade with all those other countries and gradually incorporating as many of them as is possible, but the impact on existing members would be profoundly disquieting; and not merely the economic impact: the CAP would become impossible; the poor four would cease to be the poor four overnight. All those changes are bound to take place and the voting patterns would be intolerable. To be one of 21 or perhaps 30 states in the Council of Ministers having issues basic to our people and our democracy taken by majority vote is nonsense, and we know it is. We must make it clear that we will not have that.

When I say that it is a great opportunity, I mean just this. Two things have been absolutely fundamental to the whole post-war European drive. First, the federal dream of Mr. Monnet and the general loss of confidence in the nation state by the defeated, occupied, nearly ruined nations of Europe; secondly, the French national decision, both pre and post-De Gaulle, that it will create a cage for Germany so that it will never again be able to assault and defeat its neighbours. Those are the drives. It is fascinating that the Maastricht Treaty was preceded by, and, indeed, is largely the product of, the collapse of the Berlin Wall. The reunification of Germany sent a shudder through France in particular and in Brussels where Jacques Delors was ruling the roost. Kohl—the last German leader who had every reason to know about and to hate the past of his country—agreed with Mitterrand (perhaps, as we have heard, there was an exchange of other things as well) and with Delors to take this giant leap forward towards an integrated Europe. It was always there because that was part of the federal dream. That was what drove them forward.

I am sure that I do not just speak for myself when I say that, as far as we are concerned, if that is the will and the wish of the peoples of continental Europe, let them come together in however close an arrangement they wish to achieve. However, it is not the will and wish of the British people—we shall never accept this—who have their own history, dreams, connections and interests. However, we have the opportunity—goodness knows, the Amsterdam Treaty has given us this opportunity—of closer cooperation and flexibility. That is written into the treaty. Under that treaty some can go further forward than the rest, provided they do not damage the others. Let those who wish to do so use that provision and let us rejoice in that, but let us put these matters before our own people in a serious debate about how we can achieve at last satisfactory, permanent relations with our continental neighbours.

12.51 p.m.

Lord Moran

My Lords, I apologise to the Minister and to the House. I may have to leave before the end of the debate as I have a long-standing engagement in the country.

Determination to put all our eggs in the European basket may have unfortunate results. As I came in on the Tube this morning I could not help reflecting that if Rover, instead of selling out to BMW, had stuck to its highly successful association with Honda, drawing on the Japanese habit of taking the long view in business, it might have avoided the disaster we are witnessing today.

I welcome the Bill introduced by the noble Lord, Lord Pearson of Rannoch, and the eloquent and clear way in which he introduced it. Once again we have to thank him for giving us an opportunity to discuss one of the most important questions which face us—our relationship with the European Union.

This Bill, which requires an inquiry into the implications of our withdrawal from the European Union, is eminently sensible and, indeed, long overdue. My only feeling is that the Government ought to be doing such studies anyway without needing a Bill to prompt them to do so. Good staff work and administration require careful and thorough planning for all contingencies. My experience in the Foreign Office, now long ago, was that too often there was no plan B. Whatever ruled the roost, whether the Commonwealth or Europe, seemed to require total dedication. There was no fall-back position. I believe that that was, and always is, a mistake. We ought certainly to have a thorough study of the implications of withdrawal and of continued membership, and the studies should in due course be made public.

We need to know the full implications, not only of withdrawal, but of our being, in effect, ejected or asked to leave by the Commission and our partners. My noble friend Lord Monson referred to the remarks of Pedro Solbes, the commissioner in charge of economic and monetary union, that, in the longer term it is not possible to be in the Union and outside EMU". It sounded as though, if the referendum on joining the euro resulted in a no vote, Mr Solbes and his colleagues might actually welcome getting rid of the ugly duckling.

I am always uneasy when the three main political parties agree, so snuffing out any organised opposition or thorough scrutiny. This happened repeatedly on Northern Ireland, so that we had a deeply flawed Good Friday agreement, with more than 300 terrorists released but no matching concessions required from the IRA. On Europe, the parties all seem to agree that leaving the EU is unthinkable. But none of them has been able to suggest how we can effectively resist being dragged into a single European state, which our people clearly do not want, or how to secure a more satisfactory relationship with Europe.

The fact is that our membership brings us little in the way of real benefits and many serious disadvantages. Bashing Britain seems to be the preferred option for most of our partners and certainly for the Commission. Let us consider for a moment the issue of the withholding tax. We know that this proposal came about because the Germans were unable to tackle their own tax evaders. So a tax was devised which would do serious harm to the City of London and, if applied, drive valuable trade out of the EU altogether. It is a clearly idiotic idea, yet all our partners put great pressure on us to agree to it.

In November, in the debate on the Address, I spoke of the outrageous attitude of the French Government in refusing to admit British beef after the EU and its scientific advisers had pronounced it safe. Four months on we are still no further on and the Germans have joined in, although it now looks as if they may be having second thoughts. Our beef farmers continue to suffer. I hope we can ensure that if we win the legal case, they can be given massive compensation by the French Government. Yesterday we learned that even when our partners do vote with us on a compromise, as they did over droit de suite, the Commission is still attempting to put a spoke in the wheel. Its animosity to this country is extraordinary.

Noble Lords may have seen in the January issue of the House Magazine an article by Mr Titford, a UK Independence Party MEP, who has joined the Budget Committee in Europe. His article was interesting against the background—as he points out—that, the EU's auditors have refused to approve the EU's accounts for four years in a row". He said of the Budget Committee: The voting procedures are bizarre. Usually, our assistants are only able to provide us with details about what we are to vote on a mere hour before each session starts, having had to translate them from French! Then we are often asked to vote on more than 60 matters within an hour. On one recent occasion I had to vote on no fewer than 360 items in the space of two hours 15 minutes—a new record, I am told! Most MEPs tell me they have no idea what they are voting for". I believe that that goes a long way to endorse what the noble Lord, Lord Bruce of Donington, has told us today and on many previous occasions.

Yet our membership of this extraordinarily unsatisfactory organisation is enormously costly. As the noble Lord, Lord Pearson of Rannoch, pointed out, the Institute of Directors has worked out that in financial terms the costs exceed the benefits by around 15 billion a year. Why, then, do the Eurofanatics, as I call them, who include notable figures in all the political parties, continue to bang the drum for European integration? It is mysterious. I suppose that politicians and civil servants have invested so much hope and belief in this project that they cannot bear to see it fail. Despite the disgrace of the last Commission, the vast incidence of fraud, the resolute determination not to reform the CAP and the insults and humiliations to which our country is routinely subjected, they support it doggedly through thick and thin.

They cannot even bring themselves to tell the plain truth about the manifest aim of the Commission and the governments of continental countries: to create one country composed of numerous regions—not nation states—with national governments reduced to ciphers, with its capital at Brussels and the highest possible degree of centralisation, harmonisation and bureaucratic interference.

There is of course the argument about inevitability, that it is hopeless to resist the advance of the juggernaut. But one can never tell. No one foresaw the sudden collapse of the regime in South Africa, or of the Soviet empire, or of the collapse of the previous Commission. All seemed rock solid. The great integration project may be similarly fragile.

In my time at the Foreign Office, the guiding principle that directed all my days was the protection of British interests. Nowadays, that seems to be a rather old-fashioned concept. The EU has done enormous damage to British interests and appears to go on trying to undermine them. One has to think only of the CAP, the common fisheries policy, the withholding tax and the absurd level of bureaucratic regulation. Those of your Lordships who farm will know of the amazing proliferation of instructions sent out by Brussels, MAFF being today little more than a post office. In our small herd of cattle, we have had, on Brussels' instructions, to replace all the ear tags in the cows three times in a very short space, at considerable expense.

Once before there was this sort of meddlesome interference in Europe in the bad old days of the 16th century papacy: the result was the Reformation. I think that we may have to part company with the European Union, especially if our people reject the abolition of the pound, as I hope they will. I repeat what I said in November. We should begin working out positive alternatives to membership of the single European state, preserving the common market but opting out of the common agricultural policy—here I agree entirely with the noble Lord, Lord Bruce of Donington—of the common fisheries policy, and of the jurisdiction of the Court. We should have no part in the drive to create a single state.

Although I have the greatest respect for the noble Baroness, Lady Park of Monmouth, I do not believe that it would be possible for us to prevent the drive towards a single state while remaining as we are as full members of the Union. I do not think that that would be practicable.

But a new relationship—perhaps not unlike those that Norway and Switzerland have at the moment with the European Union—could well result in a much better relationship with our European neighbours. I believe that such a course would be far more in tune with what our own people want and would be an exciting new chapter in our history.

1.2 p.m.

Lord McNally

My Lords, like all other participants, I very much welcome this debate. There is a certain warm glow of nostalgia about it. I think that I first heard the speech of the noble Lord, Lord Shore, nearly 40 years ago—like good wine, it has got better with age. However, I still maintain that his claim to have a finger on the pulse of British public opinion was wrong in the past and will be proved wrong in the future.

I am also pleased to see the noble Baroness, Lady Thatcher, in her seat. As the noble and learned Lord, Lord Howe, reminded us, our relations with Europe were more deeply cemented during her watch than even during the watch of Sir Edward Heath. There is a paradox here. We were reminded earlier in the week that the noble Baroness, when Minister of Education, abolished more grammar schools than any other Minister of Education. I am not making a cheap point; I make the point that office brings its own realities.

Opposition brings out the worst in politicians. Between 1966 and 1970, Labour would not take no for an answer; between 1970 and 1974, it was "No to Europe on Tory terms". Once back in office, it was able to recommend yes to a referendum; by 1981 it was arguing for withdrawal; and sometime during the 1980s—I can never pinpoint when—it returned to the European fold.

In the 50s the Conservative Party missed out on Messina—probably the biggest foreign policy mistake of the immediate post-war world—and then took us into Europe in 1973. It built on our membership in the 1980s and signed up for Maastricht. But now, in opposition, as again we have been reminded, it is "in Europe but not run by Europe". Successively in opposition, the main parties have chosen to appease their Eurosceptics with weasel words.

I very much welcome the honesty and openness of the noble Lord, Lord Pearson, in bringing forward this Bill and the way he has put it to us. It is honest in its ambitions—he wants us out of Europe. He argued with his usual charming combination of xenophobia, conspiracy theory and paranoia which have been a hallmark of his interventions. We have had the power-crazed bureaucrats, the CIA financing, the secret breakfasts and, in the end, who shot Jack de Mannio. All good stuff.

I cannot understand why the noble Lord did not complain about the massive campaign of disinformation on Europe which is currently being mounted by the foreign-owned British media. That is something that could well have been put in his lists of bogeymen and dangers.

When warning about the peace and prosperity that the noble Lord is so eager to demand, we have to pass over the fact—to put it at its most simple—that running parallel with this period of European cooperation and integration has been the most peaceful and prosperous period in European history. I do not claim that is all down to the European common market, but it is worth noting.

Basically, however, I agree with the noble Lord that we need a full, thorough and deep political debate. However, I do not think that this Bill provides the basis for it. I can tell him that a committee of inquiry such as he proposes will produce a split report. Why? QED this debate today. We can analyse and stack up figures as we may—goodness knows, he has now lodged so many papers in the Library that noble Lords have their reading for the Easter Recess already laid out for them—but this debate is like a science fiction programme I once saw which contained a time-warp television. In that programme, when one switched on the television one was back in whatever age one wanted to be in. It seems to me that the European debate—particularly in this House—is locked where it was when I first came into it in the early 60s, with a group of people arguing the "in" or "out" case. One still hears people saying, "I do not think we should join the Common Market", even when they are talking about the euro.

I looked today at a speech I made in March 1997—I am probably the only one of your Lordships who looks at my old speeches—and I said then: I do not believe that the Conservative Party is now capable of making the decisions that need to be made in the national interest on Europe". I went on to say: Even more disturbing. I fear a failure of nerve by the Labour Party". I think that is something which has worried me since the general election. Having gone into that election with very clear commitments on Europe, what we have had since are individual Ministers making carefully flagged-up pro-European speeches but no full-throttle campaign. The truth is that decisions on Europe have been put on the back burner in rather the same way as the future of British manufacturing industries. They have been sacrificed to that all-important objective, the second term.

Today's Bill is a distraction. I agree with the noble Lord, Lord Shore, that the Community is at a very important point of decision-making. The European Union has set itself tough targets. The launch of the euro and enlargement force challenges which are as great as any faced in Europe in half a century of cooperation; yet they are only part of the agenda for change. We on these Benches want change in Europe but this never-ending "in or out" debate debilitates the thrust for reform.

We believe that the commitment to enlargement is meaningless unless we envisage root-and-branch reform of the common agricultural policy. We cannot drive forward on economic and monetary union and ignore challenges such as organised crime, drug trafficking, terrorism and other issues covered by the Third Pillar of the Maastricht Treaty. There can be no single market that does not take account of trans-frontier issues threatening our environment.

Perhaps most importantly of all, Europe cannot continue to plan its foreign policy and its defence on the assumption that the United States will always pull our chestnuts out of the fire. I could not follow the logic of the noble Baroness, Lady Park of Monmouth. Is she really satisfied with the way that Europe responded to the disintegration of Yugoslavia? I thought that the hesitancy of political will—

Baroness Park of Monmouth

My Lords, I actually said that I was dissatisfied with that.

Lord McNally

My Lords, if the noble Baroness is dissatisfied, she has got to will the ends as well as the means. The fact is that Yugoslavia is not just a problem on our doorstep but literally in our backyard, and over that problem Europe proved itself incapable, either individually or collectively, to respond to the threat. If one is raising hobgoblins about a united foreign policy and a united defence force, one has to say what the alternatives are. The alternative, quite frankly, is to close our eyes and pray that the Americans will come and bail us out. I do not think that is a strategy for Europe in the 21st century.

I remain optimistic—the noble Lord, Lord Bruce of Donington, talked about optimists—and I think that Europeans are optimists. The noble Lord, Lord Shore, mentioned Jean Monnet. I had the honour of working with Jean Monnet 25 years ago. In his memoirs he wrote: It is impossible to foresee today the decisions that could be taken in a new context tomorrow. The essential thing is to hold fast to the few fixed principles that have guided us since the beginning, gradually to create among Europeans the broadest common interest served by common democratic institutions to which the necessary sovereignty has been delegated". Note the key words: "common interest", "democratic institutions" and "necessary sovereignty". Those who raise false fears of a bureaucratic superstate miss the intent of the Monnet dream, for he went on to write: Like our provinces in the past, our nations today must learn to live together under common rules and institutions freely arrived at I believe that in the last half of the last century we in western Europe settled the great issues of our time by speeches and majority resolutions, not by blood and iron. In so doing we set an example to the world of how we can become good neighbours to each other in meeting shared challenges. Just as important, that cooperation has enabled us to extend our democratic institutions to other parts of Europe. I would say to the noble Lord, Lord Monson, that I was in the Foreign Office in the mid-70s when Spain, Portugal and Greece returned to democracy. I tell him quite frankly—and the papers, when they are published, will show this—that it was the offer of membership of the EU that made the ruling elites in those countries put aside any thought that there could be a possibility of return to authoritarianism. At key points during the Portuguese and Spanish return to democracy, when democracy wobbled, it was the European Union which went in strong and firm and delivered democracy in Iberia. I believe that we have that opportunity—

Lord Bruce of Donington

My Lords, I am most grateful to the noble Lord for giving way. He has been expatiating on the virtues of democracy. Do we take it that it is his view that the European Commission is a democratic organisation, or a democratic institution?

Lord McNally

My Lords, rather like this place, it draws its strength from the will of democratic institutions, but, believe me, if anyone wants to join these Benches in making good the democratic deficit in Europe, they will find strong supporters here concerning the accountability and openness of the European Commission. As I said before, reformers will find strong support; destroyers will be opposed from these Benches. That is the difference. We are not afraid to say where the European Union has weaknesses and we want to see those reformed.

However, just as in Iberia, and as I think we can do in eastern Europe and in connection with our other backyard problem, the Mediterranean, the Europe that we are building can be an influence for peace, prosperity and good. My noble friend put it correctly. The policy that the other side has been putting today is not a case of, "Out of Europe to the open sea" but "Stop the world, we want to get off".

I am sorry that we shall not, by convention, have an opportunity to vote on this Bill today because I would have opposed it. However, I think that soon, as was indicated by the noble Lord, Lord Shore, we need to have a proper debate in this country. The truth is that since 1975, when the country decisively voted for Europe, things have changed—

A noble Lord

My Lords, it was for a common market.

Lord McNally

My Lords, Germany has reunited; the Soviet Empire has disintegrated; the world of globalisation and advanced technology has moved us into new challenges. All that convinces me that we need Europe more now than we did 25 years ago and, what is more, Europe needs us.

1.17 p.m.

Lord Boardman

My Lords, first perhaps I may pay tribute to my noble friend Lord Pearson of Rannoch for introducing this Bill. It is quite right that we should be debating these subjects in this House at this time. The definition of democracy put forward by the noble Lord, Lord McNally, I found difficult to follow. I shall read his speech to see what he actually said, but it struck me as a strange definition of democracy, coming from those Benches.

On the Bill itself, it is not a question of whether we should stay in or get out. Of course that is an important decision we shall have to make, but it is really asking the question: what are the implications of pulling out? The Bill proposes the setting up of an inquiry into what would be the consequences if we pulled out. I am somewhat surprised that the noble Lord, Lord McNally, said that if the Bill was voted upon he would oppose it. I would have hoped that those Benches would have wished as much as the rest of the House to know the facts before we make a decision as to what we are to do.

The Bill is concerned with the implications if we should withdraw; for our economy, for our defence and for the constitution of the United Kingdom. Some suggest that those consequences might be severe; others that the consequences would be beneficial. I think it is important that we should try to get a balanced view of those alternatives before the electorate have to make an informed choice. There is far too much speculation—indeed we have heard some of it already today—as to what the consequences would be. Let us have a proper forum and an inquiry. If we should decide to commit ourselves further and irrevocably to Europe there is no exit. A decision to go further than we have already done or to withdraw is an important matter on which we should get all the information we can.

No one would want to make blind such a vital choice to stay in or pull out, although, apparently, the noble Lord, Lord McNally, does not want to have this type of inquiry. I feel convinced that those who oppose the Bill would nevertheless wish to know what possible impact there would be on our economy, our national security and our constitution should we adopt the very real alternative of withdrawing altogether from Europe. That is what the Bill proposes.

It may be felt—indeed, it has been suggested already—that the committee referred to in the Bill might be rather antagonistic, with three from one side, three from another and the hope that it would come to a unanimous view. The Committee stage of the Bill may be an opportunity to present something rather more realistic and to make sure that we get it right.

The statements that are being made from the Government Benches in support of the euro are extremely misleading. For example, in a debate on agriculture the other day the Minister replying said that the agri-monetary compensation could be 50 per cent and that in another case it would be 29 per cent—with 71 per cent from us. She then concluded that, nevertheless, the agri-monetary compensation would amount to 85 per cent from us and 15 per cent from Europe. I tried various sources to get some lead on these figures but have been unable to do so. With the misleading information that is put around, I do wonder how any poor farmer should be required to cast his vote. He no doubt suspects, not unnaturally, that he will get nothing in any case and that the money will go to the French; and the French will have the benefit of keeping out his beef. But those are irrelevances to this Bill.

I want to ensure that we make decisions on Europe in the light of information. Do not let people go round kidding us, one day saying that we are lucky in the case of the farmers as 50 per cent of their compensation comes from Europe, and the next moment saying, "We are sorry. We were wrong about that. Only 15 per cent comes from Europe". It would also be nice if Ministers referring to farmers and their compensation would bring in the fact that we could have £166 million of agri-compensation without any matching grant being required. But that plus has not been mentioned. It is important that the committee set up under the Bill should inquire into such matters so that we can have presented to the House and to the public—the electorate in particular—what the consequences would be of a withdrawal from Europe.

In 1970, in the other place, I voted to join the Common Market, as it was then called. I relied on assurances then given that it would not lead us into a federal Europe, that it would not be any form of superstate, that we would not give up the setting of our own rates of taxation and that we would not have to accept other people's laws in preference to our own. Had an independent inquiry of the kind that is proposed in the Bill been launched at that time, it might have produced quite different projections. If the inquiry had then projected many of the features that are today exposed, some of us might have taken a different view on voting to join the common market, as it was then called.

My personal and no doubt ill-informed view is that the implications of withdrawal are somewhat frightening. Equally so—certainly no less so—are the implications of becoming part of a federal Europe, with its currency, its laws and with a whole mixture of universal taxation affecting us. Those are the threats which stand. The Bill is aimed at the consequences of withdrawal. We can then look at what the consequences would be compared with getting into Europe on a more central basis.

I want the consequences to be carefully examined. That is what the Bill is designed to do. I am sure my noble friend Lord Pearson would accept that improvements could be made to it in Committee. But to proceed, as eventually we must, to decide our fate in Europe without a preliminary impartial assessment of what is involved would be a highly irresponsible act. Whatever view we have about the decision we will have to take, let us not be in the position in the years ahead of having to say, "If only I had known". The Bill is designed to ensure that the facts can be known. I support it.

1.25 p.m.

Lord Hooson

My Lords, in the second half of the 20th century the concept of sovereignty needed more adjustment and amendment than at any other time in history. We are now in the next century—the next millennium—and Europe is more settled, more prosperous and more secure than at any other time in the past two centuries. We have to consider how we arrived at this state.

When there is reference to the global society—there has been much reference to it today—we have to acknowledge that institutions have grown up; for example, the great international companies. They have more influence and more political power than many states. The only way in which politicians—democratically elected politicians—can begin to control, modify or influence the great power of these capitalist institutions is by building themselves a very much larger edifice. We have to think of sovereignty by sphere. We needed a secure umbrella above us, so we had NATO and the Atlantic alliance. President Kennedy often referred to the two pillars of NATO. We should face the fact that the north American pillar has been there, but we have failed so far to build an effective European pillar. That is a bad thing for America, a bad thing for us, a bad thing for Europe, and a bad thing for the world.

We have needed an economic umbrella. We talk about a free trade area in Europe. That has been tried. What was EFTA but a hopeless attempt to have a free trade area? It was different. When people talk of leaving the European Community and perhaps having a free trade arrangement in Europe, they do not pay attention to what the other partners in Europe would think of that. It is obvious that they would not accept it. Therefore, if we left the European Community the only alternative—we have to consider alternatives—would be to try to become the 51st state of the United States of America.

The noble Lord, Lord Pearson, made a good deal of reference to the funds that have been available for the "yes" campaign. Has he considered the enormous power of the funds of Sir Conrad Black and Mr Murdoch in their control of much of the British media? The whole of the influence of their newspapers has been anti-European. Conrad Black has made no bones about it. He has extolled the virtues of the North American Free Trade Agreement. Although I do not think that he has suggested it for Canada, he has at least implied that Britain could become the 51st state.

Let us examine how we have arrived at this debate today. The mistakes of timing, and therefore of opportunity, made by the United Kingdom in relation to the development of the European Community have cost this country dearly. The presentation of what I regard as a ludicrous Bill at this time merely serves to remind us that the craven spirit that has cost the UK its position at the heart of Europe is still very much alive—and wrongly. The way to minimise our influence within Europe, and indeed in the world, which increasingly affects and determines our security, prosperity and the safe survival of future generations in this country, is to follow the spirit of Euroscepticism as exemplified, I am sorry to say, in the spirit of the speech of the noble Lord who introduced the Bill. He has always been quite open about his views and I respect them, as he will respect mine. We have had these exchanges before.

The common agricultural policy has been mentioned a great deal. It is very much in need of reform, as we on these Benches have always maintained. But why did we exclude ourselves from Europe when the common agricultural policy was being formed? It was a self-exclusion. We could have been there, yet we chose not to be. The policy was formulated and adopted, and part of its purpose, as mentioned by one speaker, was probably to prevent the movement of population from rural to urban areas. The threat certainly existed that France, Italy and other parts of Europe could have gone communist had it not been for the effect of the common agricultural policy. We chose not to be there.

Let us put the matter into perspective as it affects our country today. The recent survey by the National Institute for Economic and Social Research indicates that 143,000 agricultural jobs in the UK are attributable to exports to the European Union. It receives 64 per cent of the United Kingdom's food exports. For example, Spain imports more British food than does the United States of America. Many years before the BSE crisis, the United States banned British beef; and it still does so. One would have thought that there is so much advocacy, as it were, of our relationship with America that the Euro-sceptics should be concerned not so much about our being able to argue our position in Europe as about arguing our position with the United States, and Australia. Eighty-nine other countries in the world have banned British beef. We had no influence over them; but we have great influence over the countries within the common market.

Incidentally, the European Union has provided 70 per cent of the compensation costs of slaughtering older cattle to take that beef out of the food chain to help what was really a national problem for this country. It was not a European problem as such; it was a British problem. The compensation that had to be paid for the slaughter of those older beef cattle was an enormous sum—and the EU provided 70 per cent.

I have a total revulsion against the idea of returning to the age of total national economic independence. I remind the House of the period in the 1920s and 1930s when parts of the landscape of England and Wales resembled a dust bowl. As a student in my teens, I went to the Henry Ford agricultural institute in Essex. The story of the Henry Ford estate is interesting. Henry Ford, the great manufacturer, was passing through Essex on a train on his way to Harwich when he saw what reminded him of the Dust Bowl of the central United States. When he returned, he decided to buy an estate there. He later purchased an estate for which I am told he paid on average £18 an acre. He invested capital and eventually, because it was not possible to grow corn effectively on the estate, brought in smallholders from Worcestershire who transformed the situation with the help of the Henry Ford capital. It became an enormously successful co-operative business. The point I want to make is that in those days, when there was no protection for agriculture, much of Wales, England, Scotland and Ireland were effectively agricultural deserts, with the various environmental effects that stemmed from that.

To leave the European Union now would be a disaster for the rural areas of Wales, Scotland, England and Northern Ireland. It would be equally disastrous for the industrial areas. Perhaps I may take my own country, Wales, as an example. I have the statistics for Wales, but the same must be true of much of the remainder of the United Kingdom. Thirty per cent of jobs in Wales are linked directly or indirectly with our 14 European partners. The South Bank University's European Institute estimated in its recent report, published only last month, that if the United Kingdom were to leave the European Union, 155,246 jobs would face the axe in Wales out of a total of 3 million for the United Kingdom as a whole. The estimates are based on each parliamentary constituency affected. The figures indicate that industrial areas, as well as rural areas, would be greatly affected.

I have visited the Republic of Ireland several times over the past year or two and have been amazed at the transformation in the Irish economy. It has benefited enormously in the same way as other depressed areas in the European Union have been greatly improved by wealthier countries, particularly Germany and this country. We have been subsidising developments in the poorer parts of Europe.

I have been tremendously impressed by the amount of inward investment coming to Ireland, not from within Europe but from outside. It is the European Community that has brought the Irish Republic to the state where it has become an attractive proposition. It is interesting to talk to some of those who have moved to the Irish Republic from the United States, the Far East and so on, and find out their reasoning for going to the Republic; namely, that Ireland is an English-speaking country. Let us not forget that one of the great benefits for our country within Europe is that the English language is the commercial language of Europe. A form of English is becoming the commercial global language. That is an enormous help. Those from the United States and the Far East who want to settle in Europe or have their headquarters there are very attracted by the Republic of Ireland as an alternative to the UK. It has become an even more attractive alternative to them because the Republic of Ireland is within the euro and we are outside it. In the next two or three years we may see an acceleration of inward investment from outside the European Union. Companies which want to operate within the EU have their headquarters in the Republic of Ireland.

Whatever our problems with the EU—there is scope for reforming it—this country in particular has a great gift for organising government and democracy, and it has a good deal to contribute. We should not think simply of what we can get out of Europe—we have already had a great deal out of it—but what we can give to it. We have the opportunity to provide leadership in Europe. It is no use thinking that we shall lead Europe; we must co-operate with others in doing this. We could have a much more positive policy towards the European Union. That is why the younger generation needs the leadership that has been so lacking in the present Government as well as their predecessors.

1.41 p.m.

Lord Vivian

My Lords, I should like to thank my noble friend Lord Pearson for introducing this Bill today. From the outset, I feel strongly that the general public should be made aware of the implications if this country withdrew from the European Union and did not accept the euro. Likewise, the people of this country should be made aware of the serious consequences which would result from remaining within the European Union. The public have not been informed about the steps that the Government are taking, and that is unacceptable. Surely it is the responsibility of Parliament to ensure that everyone is given the opportunity to be reliably informed about the implications if we were to withdraw from the EU. The proposed committee of inquiry would achieve those aims and if it was not established the Government's policy of open government should be critically examined.

Generally speaking, it can be argued that the EU is not a democratic union as enormous power is concentrated in three unelected bureaucracies: the European Commission, the Court of Justice and now the Central European Bank. Furthermore, it has been demonstrated that the European Parliament has little power to bring these bureaucracies to account due to the statutes on which they were founded, even though there has been fraud amounting to some £6 billion. This begs the question: does the UK really wish to continue to be involved in such an inefficient and fraudulent organisation? We should examine the option of withdrawal from the European Union. If we did not join EMU and abolish the pound we would be able to run our own affairs and would no longer be dictated to by Brussels.

Some of your Lordships today have focused on the fact that the introduction of the euro would not be harmful to the UK and that we would be better off if we were part of the single currency. I do not agree with this. I believe that it would lead to dire consequences for our constitution, national security and the economy. There is little doubt that if we were to join the single currency our economy and our country would suffer as we would lose our sovereignty, flexibility and ability to be able to make our own decisions and impose our own regulations on our economy. The implications of not joining the EMU would probably be our withdrawal from the European Union, thereby retaining our own independence.

It is a frightening thought to reflect that the Government seem intent on the destruction of our constitution, which has provided some 600 years of well-being for our nation. All these matters are of grave concern and do not bode well for the UK. I ask noble Lords not to be under any misapprehension that monetary union establishes political integration and that the creation of a common currency is a means to a political end. This political agenda is openly agreed and admitted by Ministers in Europe and by the President of the ECB. We would cede control over interest rates and the economy to institutions which are not transparent and over which we would have little influence. Too much has been ceded to Brussels. With the loss of our currency, our economy and freedom of action would be deeply compromised. Such a transfer would be permanent and irrevocable.

To join the single currency would involve a common EU tax policy. It would prejudice our competitive position and impinge on our sovereignty. If we join the euro and abolish the pound we shall lose our sovereignty and be powerless to stand up to Brussels. No longer will our own legal and parliamentary systems be in place to protect our freedom. It would be harmful and not in the best interests of the British people and the economy to join such a single currency. The ECB will set the interest rates for all countries in the EU and will bring about tax harmonisation, almost certainly at higher rates than exist in the UK today. Currently, we have the lowest income tax and corporation tax and no VAT is paid on food, children's clothing, newspapers, books, travel and new houses.

The United Kingdom should remain outside the single currency. After all, we are a global trader and have the fourth largest economy in the world after the US, Japan and Germany. We retain a seat on the UN Security Council; we are head of the Commonwealth; and our language is spoken by 1 billion people. We are a member of the Group of Seven industrial nations, the IMF and the World Bank. Britain's trade with the non-EU world is the highest of any EU country as a percentage of total trade; and our trade in goods with the other 14 European countries accounts for only about 9 per cent of GDP, not the 60 per cent of exports as reported by the Government. To join the euro would harm our world trade and affect our economy.

The matters related to the European security and defence initiative should really be part of a separate debate, but from my knowledge of the present state of ESDI I am not supportive of it, for the following reasons. The creation of a European army goes some way towards the creation of a European superstate to rival America. Rivalry between the USA and Europe should be avoided at all costs as it would only play into the hands of the Russians. The EU cannot be separated from the US for many years to come because a European army would not have the necessary capability to deploy operationally on its own. The US is the only country in possession of the required assets, logistical support, strategic lift and intelligence to deploy a force rapidly and sustain it. The US Deputy Secretary of State, Mr Strobe Talbott, has said that the US Government would not want to see a European army, first within NATO, then growing out of it and finally growing away from it, which in any event would lead to duplication of effort.

Any real threat from Russia to the west in the future would require a genuine response from NATO and not from an inexperienced European army within a weak and complex Europe. I remind your Lordships that Russia has increased her defence expenditure and still retains over 20,000 nuclear weapons. Soon there will be a new president who is likely to be a strong leader and nationalist with a dangerous background. There will be no counterweight to Russia in Europe without a continued American security presence in NATO. A proper and well trained European army will require substantially increased budgets in percentages of GNP.

On examination it appears highly unlikely that any European country will increase its defence spending because of the acute restraining effects of EMU. That is another good reason why this country should not be drawn into EMU. Since the St Malo announcement in December of last year I believe that no European Union country has yet increased its defence budget.

One can be forgiven for thinking that ESDI is only rhetoric. ESDI can lead only to more over-commitment for our Armed Forces, which in turn will result in further overstretch. Furthermore, political pressures may develop to ensure that Britain, as a strong member of ESDI, should always take part in any European operation. Even worse, political and diplomatic pressures could be exercised to prevent us from taking part in our own national operations, such as the Falklands, Northern Ireland, Iraq and the Gulf. I see the ESDI as a dangerous road to be avoided.

I have tried to make it as clear as possible to your Lordships that the loss of sovereignty and the grave threats to our economy are not in the interests of our country. The European single currency is designed to bring about political as well as economic union in Europe. Abolishing the pound and taking up the euro would mean that interest rates, exchange rates and ultimately tax rates would be set by institutions that are not accountable to the British public. Britain's growth depends on her ability to set economic policy according to her needs and that economic and monetary union would jeopardise both Britain's democracy and her prosperity.

Some of the implications of withdrawing from the EU are that we should retain our sovereignty and strengthen the constitution. We would not become a federated state of Europe, but would remain in a European free trade area retaining the pound. The nation would avoid tax harmonisation and higher taxes and the economy would prosper. It seems to me that many people wish to leave the European Union while even more are against the EMU and the abolition of the pound. I believe that it is the duty of the Government to establish this committee of inquiry in accordance with their policy of open government to ensure that the general public are aware of the true facts about the European Union.

1.51 p.m.

Lord Avebury

My Lords, I agree with the noble Lord, Lord Vivian, on only one thing: that there should be a wider debate on the European Union, our future within it and the alternatives that he discussed. However, I disagree that such a debate should be undertaken on the premises of this Motion. I believe that the noble Lord, Lord Pearson of Rannoch, has done the House and the nation a disservice, bearing in mind that his idiotic and mischievous proposal might be taken seriously by some people here and overseas as an indication of the possible course of events if we were ever unlucky enough to see the Conservatives back in power—greatly reinforced, as they would be, by the Europhobes whom they are now adopting in the constituencies that they think they are able to win.

There would be disastrous consequences for Britain if outsiders even think that we are contemplating walking the plank into the Atlantic, or if we show that we are looking for excuses to justify turning our back on the great ideal of European unity. There would be catastrophic implications not only from withdrawal from the European Union but also if the noble Lord's Bill got onto the statute book, and I suspect that the noble Lord knows that perfectly well in one part of his mind. However, another part of the noble Lord behaves like a member of some bizarre religious sect, contradicting things that are obvious to all normal people.

I want to concentrate on some aspects of cooperating with Europe that are not even mentioned in the Bill, perhaps because the noble Lord did not think that they were sufficiently important. I refer, first, to the European Court of Justice. It has been mentioned briefly and was described by the noble Lord, Lord Vivian, as one of the pieces of bureaucracy which he wants to get rid of but which ensures that Community law is applied uniformly throughout the whole area of the EU. I draw noble Lords' attention to the fact that the Court of Justice and the Court of First Instance have been dealing with a steadily increasing volume of cases; and that is bound to have accelerated since the third stage of monetary union and the Treaty of Amsterdam which came into force in 1999. In 1998 485 cases were commenced before the Court of Justice and 238 before the Court of First Instance. They disposed of 768 cases in that year. Among the matters expected to give rise to an even larger volume of cases in the future are Title IV of the treaty which deals with visas, asylum, immigration and other policies relating to the free movement of persons, and Title VI dealing with police and judicial co-operation in criminal matters. I shall say a word about each of those later. But meanwhile I draw your Lordships' attention to a few important cases which have been decided by the Court in the area of gender discrimination.

In the case of Dr Pamela Enderby, the question was whether speech therapists, who are almost entirely female, should be paid less than pharmacists, who are almost predominantly male, assuming that the two jobs were of equal value, and despite the fact that the pay scales for the two professions were arrived at by separate collective bargaining processes in which there was no element of discrimination. The Court ruled that in the circumstances described it was for the employer to show that the difference was based on objectively justified factors, unrelated to any discrimination on the ground of sex.

In the Coloroll Pensions case, the employees of the firm had pension rights that were gender specific, providing for pensions to be paid at the normal retirement ages of 60 for women and 65 for men, and other rights such as the payment of a lump sum in lieu of pension, and additional benefits in return for voluntary contributions which were again gender specific. The company went into receivership and the trustees were not sure whether the rules for the disposal of the pension fund's assets were compatible with the "equal pay for equal work" provisions of the treaty. The European Court found that the trustees were bound to use all means available to them under domestic law to eliminate discrimination, if necessary reducing the advantages which the favoured employees would otherwise have enjoyed.

I am not sure whether the noble Lord, Lord Pearson, and his Europhobe allies, believe in equal pay for equal work, and in equal treatment of men and women as regards access to employment, vocational training, promotion and working conditions. If we were able to withdraw from the treaties, that would mean also renouncing the jurisdiction of the Court and, in order to maintain these principles, we would have to enact domestic legislation bringing the relevant provisions of the treaty and the Council directives back into force in our domestic law. But Parliament would always have the right to amend any Bills for that purpose and discrepancies on gender equality at work between our law and that of Europe would be bound to develop. But even if by some miracle, Parliament decided to enact those provisions without amendment, we could not guarantee that our courts would always rule in exactly the same sense as the European Court and there would be a gradual divergence of case law between this country and Europe which would be harmful to our interests. I have used gender equality as an example, but the same reasoning applies to every other area of European legislation.

A few weeks ago the noble Lord, Lord Lea of Crondall, initiated a debate on employment in which he said that under this Government women's issues had been given greater priority, and he pointed to the implementation of EU directives on part-time workers, fixed term contracts and parental leave, all of which had been important in improving the quality of women's employment. These directives had been agreed in Brussels over the past three or four years at the instigation of the trade unions, and, after the debate, the noble Lord was good enough to send me a copy of the TUC's annual report detailing the impressive work that it is doing under the social chapter of the Maastricht Treaty. Does the noble Lord want to throw all that away?

One of the many useful advances made for working people was the Working Time Directive which deals with maximum hours worked in a day or a week. The Europhobes who are so fond of telling us how iniquitous it is that we should be "ruled by the bureaucrats in Brussels" (as they put it) may be glad to get back to the good old days when employers had the power to compel workers to slave away for 80 or 90 hours a week. Alternatively, they may say that they do like workers to have one rest day in a week, a break in any day's work longer than six hours, four weeks' holiday and so on, but in the future we in Britain must have the right to be different in these matters from everybody else in Europe.

When notice is given to the rest of the world that this is a popular viewpoint here, investors who are in it for the long term will look for somewhere else to spend their money and to create new jobs. In the avalanche of redundancies that would follow, it might be some small consolation that employers are under a duty to consult trade unions about large-scale redundancies under another ruling of the ECJ.

The noble Lord apparently does not think that we need to bother about implications for co-operation in the field of justice and home affairs, dealt with in the Maastricht Treaty. Let me mention three areas in which I say that more co-operation is needed. They are asylum, drug trafficking and organised crime. On asylum, we need common policies so that refugees do not flock to countries where they believe they may receive preferential treatment. When people come to Europe partly for economic and partly for political reasons, Europe must deal with the problem collectively rather than individually. Clearly, the present movements of the Roma from Romania are of that nature. The Roma leave their country because of their desperate poverty, as well as discrimination and ill-treatment.

Romania is of course a candidate for entry to the EU in the second round of enlargement and as such it has to put its house in order by conforming to the Copenhagen European Council criteria, which include respect for and protection of minorities. Thus, the EU has some leverage over Romania. Although the Commission had already concluded in November 1998 that it had met the criteria, it would still be open to the Commission or the Parliament to conduct a more comprehensive inquiry into the treatment of the Roma. Perhaps it could look at ways of assisting the Roma community to improve its economic status at home so as to diminish the incentive to look for betterment abroad. If Britain were no longer a member state, we would have no say in any of those matters.

On organised crime and drug trafficking, cooperation is essential because the criminal networks are international. Europol, the European Police Office based in the Hague, is developing a system for information to be collected, analysed and exchanged at European level. The European Drugs Unit, which is already operational, facilitates exchange of information between two or more member states on drug trafficking, crimes linked to clandestine immigration networks and trafficking in human beings. Were all those matters so unimportant that the implications for them of withdrawal could be ignored?

As the former Prime Minister, John Major, put it on 24th April 1996: The idea that if we were outside the EU we could somehow become a trading haven on the edge of Europe with all the benefits of that vital market of 370 million—while others fix the rules without any regard at all to our national self interest—is cloud cuckoo land". I do not blame John Major for retiring. The right honourable gentleman must be downhearted, as he comes to the end of his distinguished political career, to see the Conservative Party being taken over by the aliens of cloud-cuckoo land. As in the "Invasion of the Body Snatchers", the humans among the Tories are gradually being weeded out and replaced by creatures who look perfectly normal, but are actually engaged in a plan to detach all the rest of us from reality. They must be stopped, and the sane world outside must know that their antics on a Friday in the House of Lords are not going to make an iota of difference to the UK's full and enthusiastic co-operation with the developing European project.

2.2 p.m.

Lord Willoughby de Broke

My Lords, I am most grateful to my noble friend Lord Pearson for introducing this Bill. After all, it will give us a few facts about the European Union. The noble Lord, Lord Avebury, chastised it as idiotic and mischievous. His view seems to be, "Don't confuse me with the facts. My mind is already made up". That is the idiotic view. Whatever view we may take of Britain's relationship with the European Union, at least my noble friend's Bill has given us the opportunity—otherwise denied to us because there is to be no debate on the current IGC—to discuss the matter. The Bill will require the Government to give some factual answers to the points raised today and go a little beyond the empty rhetoric, which we always hear, that Britain's destiny lies in Europe. From the study that is proposed in the Bill, the Government may have second thoughts about where Britain's interests really lie.

The world has moved on since we voted in 1975 to stay in the Common Market. The noble Lord, Lord McNally, said that in 1975 we voted for what he called "Europe". We did not vote for Europe; we voted to stay in the Common Market. We did not vote for the EEC, we did not vote for the EC, we did not even vote for the European Union; we voted for the Common Market. We did not vote for a common fisheries policy; we did not vote for a common security and defence policy; we did not vote to criminalise our trade as though things were sold in pounds rather than in kilos; and we certainly did not vote for qualified majority voting or the European Court of Justice.

Lord McNally

My Lords, would the noble Lord concede that in 1975 we voted to join an organisation whose first clause and objective was the ever-closer union of the European people? Why the Europhobes continue to claim that they were fooled in 1975 I fail to understand. What we were voting for was clear and the British people, by two to one, overwhelmingly voted, "Yes, please".

Lord Willoughby de Broke

My Lords, we can have different views on what they voted for. The question was whether we wanted to stay in the Common Market. However, let me move on. The Common Market is dead and buried. We are now in a rigid customs union called "the single market". We are facing strong pressure to abandon the pound and hand over control of our economic destiny to an unelected, supra-national organisation whose remit specifically excludes it from considering British interests.

From EMU inevitably flows political union and it is only in this country that the political flat-earthers have tried to deny that the sun rises in the east. Again, the noble Lord, Lord McNally, spoke of weasel words. I believe that we can debate the issue for as long as we like, but I have never heard anyone in favour of EMU either on these Benches, the Benches opposite or on the Liberal Democrat Benches make the inevitable corollary by saying, "Yes, I am in favour of EMU, but it means political union". If they would at least swallow that, we could really get into a proper debate.

I was pleased that the noble Lords, Lord Moran and Lord Monson, spotted Mr Solbes at it yesterday when he stated in the Daily Telegraph: In the longer term, it is not possible to be in the Union and outside EMU". Do we accept that view or not? He is a commissioner, so he must know what he is talking about. Therefore, I agree with the noble Baroness, Lady Williams, that it does not make much sense to continue to have a semidetached attitude to the European Union. She said that we should be pooling sovereignty and went on, perhaps inadvertently, to say that we would be sacrificing sovereignty and handing it over. I do not think that you can pool sovereignty. You can hand it over—you can sacrifice it—but I do not believe you can pool it.

It seems that if we vote for economic and monetary union, we shall be on an irreversible track towards political union. It is a track down which this Government seem to want to lead us, but they cannot quite do it because at the moment the voters will not have it. Therefore, I believe that we should be grateful not only to Commissioner Solbes but to my noble friend Lord Pearson for making the point so clearly that EMU means that, absolutely inevitably, political union will come in its train.

Therefore, I believe that if we are likely to be kicked out of the Union because our voters will not swallow economic and monetary union, surely it is at least sensible to look at the alternatives that may be available to us. That is all we are doing. The alternatives are what someone—I believe it was the noble Lord, Lord Moran, when he was in the Foreign Office—called "plan B". We are simply considering what plan B might be. When we do so, we may surprise ourselves because there is very little evidence to support the view that there is no alternative to EU membership.

In fact, I believe that Britain's interests are badly served by our membership of the European Union. Outside the euro, as we are now, we have a dynamic economy. I believe that everyone agrees with that. As my noble friend Lord Vivian said, we are now the fourth largest economy in the world, thanks largely, I believe, to the weakness of the euro. We are ranked eighth in the world in terms of global competitiveness. We are ranked eighth out of 59 nations by the World Economic Forum in terms of future economic growth. The closest EU economy is Denmark, which ranks 27th.

We are by far the preferred target for inward investment in the European Union. The noble Lord, Lord Hooson, says that inward investment to Ireland is increasing. That is a very good thing. If that increase were due to Ireland's membership of the European Union and EMU, it would be marvellous. We are outside EMU, and our investment amounts to more than half the total inward investment into the European Union. We should therefore ask ourselves why we are receiving this massive, lion's share in inward investment into the European Union. Is it because we are like the other economies? Or is it because we are different? It must be because we are different. If we were like them, we would not get the lion's share; it would be spread out around the other economies. However, it is not; it is coming to us. I believe that that is because we are outside the economic and monetary union. At present, we are not going to join the single currency and we have a very different economy. We have lower taxes, lower wage costs, more flexibility and we are—at least for the moment, but I do not know for how long—less tightly regulated.

The unpalatable fact for the sack cloth and ashes brigade is that we are attracting this inward investment in spite of the fact that we are not in the euro, in spite of the fact that 70 per cent of the people of this country have already shown that they do not want the euro, and in spite of the fact that the head of the ECB has made it clear that the prospect of Britain joining the euro, even in the medium term, is about as likely as England winning a cricket match.

So much for inward investment. However, the story of our foreign direct investment is even more remarkable. As foreign investors, world-wide we are second only to the United States. We now generate more income from our foreign direct investment than we do from all our visible and invisible exports put together. Thirty-four per cent of our foreign direct investment is in the United States; 30 per cent is in the Commonwealth; and only 18 per cent in Europe.

Therefore, when it is clear that Britain is a major global trading investment nation, why do we believe that it is so important to converge at any cost with the outdated and failing continental model? The EU share of world trade has fallen 15 per cent over the past 10 years, the euro is falling, and job creation is falling. The only things in Euroland which are going up at the moment are taxes, unemployment and regulation. What magic is there in being at the heart of this suboptimal performer, particularly when, as my noble friend Lord Pearson said, only 10 per cent of our gross domestic product is involved in export to Europe?

If the best comes to the best and we find it impossible to remain in the European Union for whatever reason, there will be very serious consequences, as has been pointed out. I can tell my noble friend Lord Pearson that we have some hard decisions to make. For example, we would have to decide our spending priorities for the £11 billion which we pay into the European budget. We would have to make serious decisions about the common agricultural policy and the common fisheries policy and how to spend the money that we would otherwise be giving to Europe. We shall be forced to consider how to shape our own farming, our own fisheries and our own environment. And, of course, we would have to endure the almost unbearable burden of controlling our own affairs without the benefit of those helpful directives from Brussels.

Who knows? With the information that the Bill would require the Government to gather, they may no longer consider that Britain's interests and destiny lie in Europe. There is a respectable precedent for that. After all, Mr Blair himself campaigned on a "Get out of Europe" ticket in 1983. He has changed his mind. John Maynard Keynes once said, when criticised for changing his mind, "When the facts change, I change my mind. What do you do?" Perhaps it is time for the Government to consider his words.

2.14 p.m.

Lord Sharman

My Lords, I welcome the opportunity to follow the noble Lord, Lord Willoughby de Broke, and perhaps help him a little in understanding some of the business views that he so graphically misrepresented.

I am deeply concerned about the effect the Bill might have on business and the business community. The risks for business of withdrawal are very significant. Even the risks of a threat of withdrawal are very significant. For the past 30 years I have spent the best part of my career dealing with investment, both inward and outward, in many countries. There has been a trend that some people have described of late as "globalisation". That has been going on for some time. The result is that we see some very large corporate entities around the world, hugely powerful machines, and they will get bigger; they will not get smaller. We need large entities to control them. It is encouraging that at this stage in the development of society there is a general acceptance that it is business that creates the wealth and government that create the environment in which that wealth can be created.

I should like to begin by dealing with what I regard as the teenage love affair with NAFTA. There is a suggestion that membership of NAFTA is a viable alternative. First, those who are wedded to keeping the pound at all costs, whatever it may do to us, need to understand that NAFTA is essentially a single currency market. One will not be successful in a single currency market from the outside unless one joins that currency.

More than that, I should like to quote what Mr Workman of the United States Chamber of Commerce says: If the UK pulled out of the EU, a lot of US investors would say, 'Have you been smoking funny tobacco? Why do you want to do that?' US investment in the UK would become less attractive because companies would not have preferential access to the European market. The UK would go from being a first tier player in capital markets to being a second tier player". It is not just US business that is concerned. We should listen hard to those businessmen who are out in the market-place every day fighting to develop their businesses. One of the more successful in Britain is Sir Clive Thompson, president of the CBI, who says: The European Union represents the world's largest consumer market. For any business looking to grow and expand in Europe it is essential that Britain remains a key player within the EU. In short, Britain should take a leading role in helping shape the way in which the European market develops". I said that I wanted to concentrate on business and on the benefits of EU membership. I want to deal with businesses large and small. I also want to comment on telecoms and the development of e-commerce, web-based businesses and how I see them as important as well.

Whether we like it or not—and we can argue about the statistics—the European Union in business terms is our major trading partner. More important, it provides the largest access to the largest consumer market in the world, a market of over 370 million people. I stress that it is the aspect of a single market, not a free trade area, that is important, a single market operating within a set of rules.

It is true that foreign investment is responsible for over a million jobs. I do not think that anybody disputes that figure. We can argue about all sorts of other jobs, but certainly over a million jobs in the UK are dependent on foreign investment. The UK has been remarkably successful in attracting it. I have worked in that field for many years. One of the key marketing planks in attracting foreign investment into this country is access to the single European market. This country is seen to have the attractions of the English language and of what is often called the Anglo-Saxon model. But it is access to the single European market that is important.

It is worth listening to the chairman of the Japanese Chamber of Commerce and Industry (UK). He said: Britain will be attractive to foreign investors for the foreseeable future because it is seen as a 'pre-in' country of the single currency, with a commitment to entry in principle". I know that the issue of European monetary union raises the temperature and blood pressure of many people. But from a business perspective it is a critical factor in attracting investment into the UK.

Investment continues to be high, but I remind noble Lords that decisions about investment today were probably made two to three years ago. That is the time scale with which one deals when looking at inward foreign investment.

I underline also what my noble friend Lord Hooson said; namely, that the competitive nature of that market-place is changing. Whereas in the past Britain was able to promote itself as a home for foreign investment, as a key gateway to the European Union, the Irish Republic now promotes itself very actively as the only English-speaking territory of the Eurozone.

Lord Bruce of Donington

My Lords, will the noble Lord emphasise the importance which he attaches to the English language itself?

Lord Sharman

My Lords, I am happy to do that. The English language is a critical part of that mix, but it is only one part.

Membership has also led to the scrapping of certain bureaucracies. I know that it is popular to point to Brussels and the excess of forms. But it is certainly clear that the Customs Union has resulted in major savings, probably in the order of £135 million to £140 million.

In summing up the attitude of big business towards the European Union I refer to two opinions from very different businessmen. Niall Fitzgerald, the chairman of Unilever, describes ruling out the single currency as not being in Britain's interest. He said: To do so would be to jeopardise the strength of British companies". But more important, one of Britain's great entrepreneurs, James Dyson, said: In an increasingly global marketplace it is vital that the UK remains at the heart of Europe. To distance ourselves from the worlds largest consumer market would be folly". Those opinions of leading businessmen demonstrate that rather than withdraw or have the notion of withdrawal, we should be increasingly at the heart of Europe and at the heart of events.

I turn now to small and medium-sized enterprises. According to figures from the Treasury, some 30 to 40 per cent of all small and medium-sized enterprises in this country do business within the European Union. Some 750,000 entities are involved with trade. We already export more than £3 billion to those first five new applicants which have been talked about.

I can do no better than return to the comment made by the noble Lord, Lord Harrison, about the wing mirrors of Europe and refer him to the view of a manufacturer of wing mirrors, Chris Haley, the managing director of Car Consumables Limited. He said: Out of the EU it would be much harder for Britain's small exporters like ourselves to get export business in Europe. British jobs need EU membership more than ever before". A further factor in this is the development of electronic commerce and e-business, or the web as it is commonly known. In effect, it removes distance as a factor in business. Why has the web and e-commerce taken off so quickly in the United States? Apart from the take-up of access, you also have a single market with a single currency within which the delivery of items ordered and sold can take place. Withdrawal from the EU would be detrimental to the growth of e-commerce because e-commerce, like mail order, is hampered by the customs barriers which the single market helps to overcome. That is why it has been so successful in the United States and why, if we were to withdraw, it would be an impediment to us.

Currency fluctuations will remain as much a barrier to trade over the Internet as to most other forms of trade. The single currency and e-commerce are in fact two forces pushing in the same direction. A survey by Andersen Consulting in June 1999 found that 63 per cent of European firms agreed that the euro stimulated e-currency. Only 18 per cent disagreed. The same survey found that 49 per cent of US firms agreed.

I turn to the means by which e-commerce is developed—the telecommunications industry. Membership of the EU and the single market has enhanced that growth. It has directly benefited British consumers. To leave Europe would be throwing that away. It means that British firms now have access to telecommunications markets throughout the EU. The opening up of those markets to non-national operators has produced competition. It has increased and prices have been driven down, to the benefit of the consumer. Competition in the liberalised EU market has led in some places to approximately 50 per cent cheaper call prices. For example, a three-minute call to Italy today costs 91p. Ten years ago it cost £1.86. Had Britain been outside the European Union—I return to the issue of British business investing overseas—it is highly unlikely that Vodafone would have been able to take over Mannesman. Again, a major British company built its way across Europe by using the European Union.

In conclusion, the business lobby—for which I do not claim to speak but of which I am part—is appalled at the prospect of the Bill. Even talk of withdrawal damages its prospects.

2.27 p.m.

Lord Stoddart of Swindon

My Lords, I too thank the noble Lord, Lord Pearson, for bringing forward the Bill. It has enabled us to have quite a good debate. In his defence of why we should grow closer to Europe, the noble Lord, Lord Sharman, quoted Mr Dyson, who I believe makes vacuum cleaners. Did I not read somewhere that he was relocating his production from Malmesbury to elsewhere outside the European Union? If I am right, the gentleman should put his money where his mouth is, not elsewhere.

I turn to the question of whether the British people have given their consent for going into the European Union and an integrated European state. The British people were never asked whether or not they wanted to go in. They were consulted only in 1975—and the noble Lord, Lord McNally, knows this well—as to whether we should remain in a common market. It is no use him saying that the British people were not misled, because Mr Heath in his 1971 White Paper said quite clearly that there was no question of the loss of essential British sovereignty. The British people were misled at that time. They have not been asked since whether they want further integration.

Indeed, the Liberal Democrats, who have been so vociferous today and who claim to be such democrats, failed to support some of us, including the noble Lord, Lord Pearson, when we demanded a referendum and put down a Motion for a referendum in this House before we agreed to ratify the Maastricht Treaty. They voted against such consultation when we wanted it. They are trying today to pour scorn on the idea that we should discuss the pros and cons of our membership of the European Union. Let us get that straight.

Lord McNally

My Lords, I am grateful to the noble Lord for giving way. Does the noble Lord, Lord Stoddart, recall the 1983 general election when, for a change, quite rightly, there was a difference between the manifestos of the three political parties. The Labour Party fought a general election specifically on withdrawal and had the biggest rejection in the whole of its history. Does not the noble Lord think that that was the British people being consulted?

Lord Stoddart of Swindon

My Lords, the noble Lord has his history wrong. The reason that the Labour Party lost that election had little to do with the common market. It concerned defence and what was happening in the Labour Party at that time. I was probably closer to the ground then than the noble Lord. Mr Kinnock believed that this issue was losing him the general election. He therefore changed the Labour Party's mind in 1985 but nevertheless went down to a big defeat in 1987 and, indeed, again in 1992. We only won the election in 1997 because the Tories lost it. One of the reasons they lost it was because they entered the disastrous ERM which everyone knows cost millions of jobs and thousands of businesses. That is the history. I know my history well.

The noble Lord, Lord Avebury, in praising the work of the European Union—every bit of which could have been done through Acts of Parliament in this Parliament—mentioned the consultative process in Europe. What consultation was there with the Rover workers or the British Government before Rover was closed down by BMW? So much for the consultative process which is supposed to be so good for us.

It is difficult to know why anybody would want to oppose the Bill. It is about time we had a proper assessment of what is happening and of whether we derive any benefits from being a member of this organisation. We are often insulted by Ministers, when we dare to ask questions about the benefits or disbenefits. I have asked questions. I have asked the Government to conduct a cost-benefit analysis of our membership. The answer comes back, "The benefits are self-evident". Perhaps I may say to the Government that the benefits are not self-evident to me nor to the people in this country, particularly farmers and fishermen. So, it is no good giving that sort of answer.

I would have thought that my right honourable friend the Prime Minister would be pleased to support the Bill. He has demanded a full-ranging debate on Europe. This is one of the opportunities for such a debate. I hope, therefore, that when my noble friend replies, she will be able to say that she welcomes the Bill and will ensure that it has a good and fast passage through this House and another place so that we can get down to the business in hand before, if possible, the IGC at the end of this year.

People like me have always opposed our entry into the common market because we knew the implications. However, those who are sceptical about the whole business are slandered and labelled with all kinds of names. We are extremists or we are on the extreme Right wing. This morning, the noble Lord, Lord Avebury, threw out another insult. We are aliens. However, as far as I am concerned, I have always been against it.

In the 1970s I was accused of being a Left-wing extremist because I was opposed to going in. However, I now find that I am labelled as a Right-wing extremist because I want to come out. All that I have done is to stand exactly where I always have, but the argument has, of course, moved on. However, I am still convinced that it would be in our interest to withdraw from the European Union, and to do so as soon as possible.

But I am a reasonable man. I like argument. Noble Lords will be aware that I will engage in argument on as many occasions as I feel able, bearing in mind that these days I am so often not in favour of government policy. Nevertheless, I am prepared to see this argument pursued in all areas of government policy, but in a way in which rancour is eliminated. That is why I believe that we should agree to this Bill.

We shall need to discuss a wide range of issues. As the noble Lord, Lord Willoughby de Broke, mentioned, we need to talk about the damage that has been done to our farming and fishing industries and to discuss how we can put right that damage for the future. There are far better ways of dealing with the farming industry than through the common agricultural policy. Indeed, both the common agricultural policy and the common fisheries policy have been disastrous for this country. Why on earth we should want to have any more common policies, I simply do not know.

Lord Hooson

My Lords, I thank the noble Lord for giving way. How does he reconcile his view with that of the president of the National Farmers Union, who said recently that membership of the EU is vital to the interests of British farmers?

Lord Stoddart of Swindon

My Lords, the National Farmers Union is traditionally wrong about everything. It was wrong when it promised the farmers of this country a good and continuing high standard of living. A great many of those farmers—in particular those who have now been forced out of farming—know how wrong the NFU was then. It is likely to be wrong now as well. I shall not go into detail on that argument because I am not sufficiently knowledgeable about farming. However, I probably know as much about the subject as does the noble Lord, Lord Hooson.

Many other matters need to be discussed. We need to discuss the effects on manufacturing industry. Since we entered the common market, our manufacturing industry, which was supposed to have benefited from our membership, has declined by 33 per cent. After Rover, it will decline even further. We must examine the effects of membership on manufacturing industry.

We also need to consider the regulatory problems that both big and small businesses have to bear as a result of regulations issued by the EU. Higher food prices would greatly help wages and business if we were not paying £1,000 more per family for our food than we need be.

We want to know, and we ought to know, whether we are getting good value for the £9.5 billion which the taxpayers of this country pay every year. Or would that money be better spent helping farming and fishing, rather than going into the European Union coffers to be laundered by the corrupt European institutions?

The committee of inquiry would also need to consider the constitutional aspects of our continued integration with Europe; for example, the reduced status of Parliament and the Union's power of decision over a wide-ranging and increasing number of issues. What is the destination for our Parliament, which has been around for almost 1,000 years? We need to consider how the law has changed and is continuing to be changed, and how the increasingly intrusive European police force will operate in the future. Those are all issues which the committee of inquiry will need to consider.

As the noble Baroness, Lady Park, said, we ought to consider our foreign policy. It is an important part of our institutions. If it were outside the EU, would it regain its dynamic influence in the world, unfettered by the shifting sands of continental interests? Will our Armed Forces be increasingly hampered and weakened within a European defence policy and defence force or could they develop properly outside that to defend Britain and play a proper and independent role in the world?

We need to consider the effect on political parties. They are being neutralised in their effect and in their self-government. The involvement of ordinary electors in the governance of their country is involved. We should perhaps consider within the committee of inquiry whether, as a result of our membership of the EU, people are being alienated from politics and its institutions which have been built up over a long period of time.

I believe this Bill would be a useful Bill. It would give us an opportunity really to inquire into our membership of the EU: whether it is good for us; whether it is bad for us; and whether it would be in our interests to withdraw. People should have confidence in this country. Remember, we are the fourth largest economy in the world. It is not necessary for us to become the 51st state of America, or any other country for that matter. We are just as capable as Taiwan or Japan of standing on our own two feet, making our own way in the world and making our influence felt in the world, as we have done for the past 500 years.

2.43 p.m.

Lord Williamson of Horton

My Lords, I should like to concentrate on a number of points which may seem almost self-evident, but which may be overlooked or obscured in the exchanges between Europhiles and Europhobes—I do not use the word "Euro-sceptic", which is a rather dishonest word.

First, the European Community—now the European Union—is one of the longer lasting as well as one of the most important associations of sovereign states this century. It is 43 years since the original agreement was incorporated in the Treaty of Rome, and United Kingdom membership, since the British people voted in the referendum to participate, is also long-standing. There are no children in our schools and virtually no students in our universities who have known a time when the UK was not a member of the European Union. With NATO, the Commonwealth and our friendly relations with the United States, it is the principal bulwark of our economic policy and of our role in the world. It would, indeed, be a serious matter to seek to overturn the will of the British people clearly expressed in the referendum on membership. For myself, I find it rather insulting to the British people to claim that they did not know what they were voting for.

Lord Pearson of Rannoch

My Lords, the noble Lord really cannot be allowed to get away with that one. I quoted the letter that the Prime Minister of the time sent to every household in the land. It was absolutely clear to everyone that we were voting to stay in a common market and we were not voting in 1975 for what we now see in front of us.

Lord Williamson of Horton

My Lords, I do not agree at all with what the noble Lord has said. I think that the British public knew quite clearly what they were doing. We were voting that the British Government should sign the Treaty of Rome. The Treaty of Rome was quite explicit and I think that this piece of rewriting of history is not satisfactory.

Lord Pearson of Rannoch

My Lords, the facts are that we were voting to stay in the Common Market; we had already signed the Treaty of Rome.

Lord Williamson of Horton

My Lords, that is true and the Treaty of Rome was quite clear about where the European Economic Community was headed.

Lord Stoddart of Swindon

My Lords, the noble Lord denies the fact that the British people were asked to go into a common market; that was all they were asked. I was very much concerned with that referendum; I took part in the referendum; and, indeed, know exactly what was said in the referendum; namely, that we were joining a common market, no more and no less. It was denied that we were going into an integrated European system.

Lord Williamson of Horton

My Lords, once again, I disagree. I have been interrupted but I repeat my point that I think that the British public knew quite clearly what they were doing on that occasion.

Secondly, we can assess how well we have done in this community of sovereign nations on the two principal counts: first of all, peace and the support for the democratic values in which we believe on our continent; and, secondly, prosperity and the growth and better distribution of wealth among our people and the improvement in consumer choice. I believe that it would be a great mistake to underrate the value of the continued peace, stability and democratic way of life that has prevailed in western Europe since the founding of the European Community. Outside the Community's frontiers we have seen violent conflict in Bosnia, Kosovo and Chechnya, but within the EU such conflict has been made unthinkable by the close working together of its members over long years.

The existence of the European Union and its attractiveness to the people of central and eastern Europe was one of the most important reasons for the ending of Soviet control over those countries and the establishment of freedom and democratic regimes there. The first choice of the 108 million people in the countries of central and eastern Europe was to apply for membership of the EU. That is known as a vote of confidence which will be implemented soon by the enlargement of the European Union to include those countries, thus extending the assurance of a peaceful and stable Continent, which is clearly in the United Kingdom's interest.

The prosperity of its members is also a principal objective of the Union. Decades of economic growth have seen a surge in the wealth of the member states and in the buying power of their citizens. You do not need to be an economist to see that; a brief visit to our neighbouring countries in western Europe will demonstrate the high standards of living and the quality of life, including the substantial investment that those countries have made in health, education, transport and the services which directly improve the citizen's way of life, as well as the fantastic choice of goods and services available to consumers.

Outside Europe in recent years there has been a well managed economy and strong growth in the United States, which is good for us. The UK economy itself has been well managed, although the strength of the pound outside the eurozone is a serious threat to some sectors of manufacturing industry and to British farming. However, the good performance in the USA and at home should not mistakenly lead us to believe that the EU economy as a whole is stagnant. That is, of course, quite untrue. According to the figures issued at the end of 1999, the gross product of the EU grew by 2.5 per cent in 1997; by 2.6 per cent in 1998; by 2.1 per cent in 1999; and will probably grow by 3 per cent in 2000.

Even when the tiger economies of south-east Asia were running at full tilt, in money terms the EU economy grew by more than the economies of all those member states and China together. EU businesses are clearly very competitive in export markets and inflation is at low levels. Of course unemployment is too high in some member states—not all, perhaps, because last year five member states had a lower level of unemployment than the United Kingdom—but a large number of jobs are being created in areas such as telecoms, audio-visual services, information technology and so on. This is more than off-setting the fall in jobs in the older industries.

The noble Lord, Lord Willoughby de Broke, referred to the great increase in unemployment which is occurring in Europe. That is not correct of course. Over a period of four years—including the estimate for this year—for four years in a row, continuously, unemployment fell in Germany, France, the United Kingdom, Belgium, Denmark, the Netherlands, Greece, Spain, Ireland, Austria, Portugal, Finland and Sweden. So unemployment is clearly moving down as the economies are doing relatively well.

As has been stressed, the economic performance has been underpinned by the single market—a creation of the European Community strongly supported by Britain—and this has been at a time when there has been a very difficult challenge to change towards a greater information economy. But let us recall that the good UK performance is not independent of the European Union. It is within the European Union that we are doing well.

Thirdly, it is sometimes asserted—it has been asserted here quite often today—that the European Union is moving towards a superstate. As a British parliamentarian, I do not want a European superstate, and I can be fully confident that I am not going to get it.

There are two principal reasons for this. The first reason is evident—namely, that it is not what the people of Europe want. If the people do not want it, it will not happen. In my view, those who believe in a superstate are walking with dinosaurs. The second reason is, of course, that there is no government structure for a superstate in Europe. Obviously the European Commission is not such a structure. It does not even have the power of decision except in some specific areas such as competition. Much of the confusion stems from a misunderstanding of the way in which decisions are taken in the European Union. All the important legislative decisions in the European Union—except, perhaps, for some relating to competition and state aids—are taken by the Ministers of the member states in the Council, increasingly in co-decision with the European Parliament.

I am quite baffled by the many references to decisions by the Commission. Of course the Commission, under delegated authority, presents quite a lot of secondary legislation, that is quite clear—too much, in my opinion—but it is not bureaucrats who take the important decisions in the Community. It is not even the commissioners. They have a role, but they certainly do not take the vital decisions; they are taken by the Ministers of the member states. I note that there are one or two former British commissioners present today.

If there were a move towards a superstate, we could expect to see that in an inter-governmental conference, when member states can of course decide, by unanimity, to change the treaty. But what is the agenda of the current IGC? It is elegantly described by our diplomats as "the left-overs from Amsterdam". It is certainly not a move towards a superstate. If it were, the UK—and no doubt other member states—would simply refuse it.

On the contrary, the trend in Europe recently has been towards inter-governmental action, as shown by the foreign policy and, under strong impulsion from Britain, the steps towards more co-operation in defence, particularly for tasks like peacekeeping. These are not of course Community policies as under the Treaty of Rome. In any event, at least in regard to defence issues, they are also subject to unanimity.

In my view, the agenda of the European Union is not hidden at all; it is on the table. It is the enlargement of the Union, supported by the UK—I agree with the noble Lord, Lord Shore, that there will be huge changes and that the European Union will look quite different some years ahead—it is the implementation of the Amsterdam Treaty to improve our position on issues such as asylum, immigration and the fight against drugs and organised crime; it is the economic and monetary union, the single currency, on which the United Kingdom has an opt out. The British people—not the grandees nor, indeed, your Lordships—will decide in a referendum whether they wish to opt into the single currency. There is plenty of time and no need to panic. If the British people decide against it, the great big world will keep on turning and the current advantages of UK membership of the Union will continue.

For myself, I think that the European Union is now at cruising speed. It does not need great initiatives; it does not need much new legislation; the volume of Commission proposals is in any event falling; the volume of regulations and directives enacted by the Council and Parliament, compared with last year, was also down. Between 1997 and 1999 the average number of regulations and directives enacted each year by the Council and Parliament in co-decision was 24. As regards regulations and directives enacted by the Council alone, it is often forgotten how many are repealed or which expire each year. Between 1997 and 1999 the average number of legislative Acts repealed or expired each year was 45 higher than the number of new enactments. Over the three years the number of enactments from this source was down by 135. Sometimes in Britain we could learn a little from that!

Finally, I should like to say a brief word on trade. I do not want to enter into the argument of how many jobs depend on our membership of the European Union, but of course it is true that our exports of goods and services to the rest of Europe in 1999 were worth about £135 billion, of which £117 billion went to the European Union, and our exports to the USA, an important market, were worth £36 billion. The total value of our trade in goods and services, exports and imports, to the rest of the European Union was about £240 billion. I do not know how important this is in all parts of the United Kingdom, but certainly in my region workers in factories such as those at BAe Systems in Bristol need withdrawal from Europe like a hole in the head.

I have spoken directly on the implications as defined in Clause 1 of this Bill. Of course there are matters on which we must continue to fight for a better deal for the United Kingdom. As a percentage of our GNP, we are the fifth largest net contributor, and we should try to adjust policies to bring this down. It would be even higher had we not had a brilliant negotiation by the noble Baroness, Lady Thatcher, which brought about the rebate and which was a magnificent effort. Overall, I hope that the noble Lord will actively study not the implications of withdrawal from the European Union but the implications of the possible withdrawal of this Bill.

2.57 p.m.

The Earl of Liverpool

My Lords, I join with other noble Lords in thanking my noble friend Lord Pearson of Rannoch for introducing this Bill today. In doing so, I also congratulate him on the clear way in which he explained the objectives of the Bill.

The noble Lord, Lord Monson, in a supportive speech, said that this was a modest Bill. Modest it may be but I believe that the service it will perform, if passed, cannot be overestimated. To my knowledge, no parliamentary committee has ever been charged with the task of examining the implications of withdrawal by the United Kingdom from the European Union. In itself I find that rather extraordinary, because here we are, being led along in a sort of trance towards the cementing in of the last building block of the European Union superstate ideal—namely, monetary union—from which there will be no escape if we join. We may well be asked to do this without having the benefit of a committee set up by Parliament to consider the implications of that withdrawal.

How can we expect to have a balanced and well-informed debate without such a report? I fully support everything that my noble friend Lord Boardman said in this regard. Not so long ago I received a fax—some of your Lordships may well have received a similar one—which invited me to vote on whether I would like to keep the pound or join the euro. There were two big boxes on this fax and your Lordships may not be surprised to know that I put my tick in the box to keep the pound. About a month later I received another fax from the same organisation, giving me the result of the poll. It showed that 90 per cent were in favour of keeping the pound and just 10 per cent were in favour of joining the euro.

Other national opinion polls that can be read in the newspapers show slightly less spectacular results, but similar ones. There can be no doubt that the public are not behind this project; so how is it that this Government, by their own admission, spent £6.3 million pounds last year, making Whitehall's computers compatible with the single currency? This year the figure will be £20 million, and goodness knows how much money will be thrown into the project next year.

The Daily Mail reported these facts on Friday, 10th March. It went on to say: There is one curious omission in New Labour's plans for a brave new future in the eurozone. Not a single detailed argument has yet been advanced for abolishing the pound. No White Paper, no official analysis of the pros and cons. Indeed, on this most crucial of issues, the Government seems to have taken a trappist vow of silence. Instead, it uses our money to edge ever closer to the euro, hoping that by the time of the referendum voters will consider the whole issue a fait accompli. Welcome to democracy New Labour style". I could not have put it better myself.

I believe that the days of a nervous and inward-looking post-war Europe are over. Almost 50 years have passed since European integration appeared to be the Continent's only salvation and a lot of things have changed in that time. I hesitate to give your Lordships even an elementary history lesson, but Germany has become an unequivocally democratic state and the Soviet Union is no longer a threat and is seeking to adopt democracy. Against that backdrop, the United States Government, or at least many members of it and of the Congress, have become rightly concerned that European integration and the development of a common foreign and security policy as well as the idea of the European security and defence initiative will undermine rather than strengthen the Western alliance. My noble friend Lord Vivian, with far greater knowledge on these matters than I, spoke most strongly on that point.

Above all, the world economy has become in the truest sense of the word global. Who would have predicted in those dark post-war days that by the end of the century business would be conducted on the Internet and money transferred around the world by the touch of a button? As has already been said, we are now the fourth largest economy in the world. It is absurd to say that we could not survive on our own. All our history down the years shows us that we have always been an outward-looking nation on the world stage. With the enormous opportunities which e-commerce now offers, surely this is not the moment to be tying ourselves irrevocably to the over-regulated and outdated Euroland project. Instead, we could negotiate a bilateral free trade agreement with the EU, such as those enjoyed by Switzerland and Norway. Incidentally, both countries export more per capita to the EU under these agreements than we currently do. Mexico, a NAFTA member—my noble friend Lord Pearson of Rannoch referred to that—has just negotiated a comprehensive FTA with the EU. We should bear very much in mind that the World Trade Organisation has brought average international tariffs down to 3.5 per cent and is aiming for zero.

My final point, and for me the most important, is the conveyor belt of EU-appointed committees which seem set on producing a never ending stream of unimaginative, protectionist and inward-looking papers which give birth to ever more rules and regulations. This is where we really suffer, because we have never really properly understood the rules of the club. Our European allies know that rules were made to be broken, or at least massaged in such a way as to make them more acceptable to their people. Above all, they do not set up mighty regulatory bodies to ensure that they are assiduously observed to the letter, often persecuting their own entrepreneurial countrymen. That is all too often the unfortunate result of the way we react to EU directives.

If one takes all these factors together, there must be an irresistible argument for at least looking at the possibility of withdrawing from the European Union. This is a crystallising moment in our history. We must take control of our destiny. The only way we can do this is by encouraging debate and having the facts and the arguments at our disposal. This Bill, if passed, will provide us with an invaluable source of authoritative material. That is all I am asking for. I therefore give my wholehearted support to the Bill and wish it well on its passage through Parliament and, it is to be hoped, onto to the statute book.

3.5 p.m.

Lord Watson of Richmond

My Lords, the House is indebted to the noble Lord, Lord Pearson of Rannoch, for providing the opportunity for this debate. It has been revealing. It has demonstrated clearly the depth of conviction with which people hold certain views. It has demonstrated also the range of expertise and knowledge and the particular focus that individual Members bring to the subject. It has been a debate worth having.

It has also shown a critical aspect, which has come through as a kind of leitmotiv. We are all concerned, not merely with our own attitudes towards membership of the European Union, but with the attitudes that are taken towards that membership by the United States and the attitudes that we take to the United States. It is an important background factor. I should like to draw to your Lordships' attention two recent statements from Americans which have caught my attention and which illustrate the depth of the argument.

Speaking in February 1998 during the Prime Minister's visit, the President of the United States said of the alliance between Britain and the United States, as it moves into the 21st century: Our … alliance embraces the idea of a Europe strong, prosperous, democratic, and undivided for the first time in history. So as Britain maintains its friendship with America, it is playing a leading role in shaping that new Europe: a healthy European Union, reaching out to new members". That is an optimistic description of the situation. But we should be foolish indeed to ignore that perception in the White House and that standpoint of the US administration.

I should like to refer also to a remark made recently by an American, Madeleine Albright, earlier this year. She quoted another American official, who said that, the relationship between the United States [the American Union] and the European Union may be the most important, influential and prosperous bilateral relationship of modern times"; and went on to say: The United States and Europe enjoy the largest economic relationship in the world". She gave the figure that it represents and expressed the position graphically by saying, Half of the goods and services produced in the world are made in the US or the EU". So, although the debate has focused on the narrower question of our membership of the European Union and whether it should be re-examined, we must all be acutely conscious that we do not examine that relationship in isolation. It must be seen in the perspective of the transatlantic alliance and, indeed, the future of the Western world.

The debate has been enlivened throughout by vivid phrases. Some particularly caught my attention. I enjoyed the attempt by the noble Lord, Lord Pearson of Rannoch, to combine the "octopus" and the "juggernaut" into a single fearsome picture. We then had the "wing mirrors of Europe", which is an enjoyable phrase, and "walking the plank into the Atlantic" from my noble friend Lord Avebury. And, interestingly, we heard from the noble Lord, Lord Williamson, speaking with all the authority of his experience, that the European Union is "cruising"—an interesting term—and that it does not require any great new initiatives. Clearly, from the perspective of the noble Lord, Lord Williamson, there is no secret agenda to the European Union, conspiratorial or beneficent. The fact is, if you want to know what is there, read it. That is still my view on the referendum in 1975. We were asked, not whether we wanted to join—that decision had been taken by Parliament—but whether we wanted to stay in Europe. I participated in some of the debates and I remember them well. From the frequency with which the opening paragraph of the Treaty of Rome was quoted, I do not think that anybody could have been in any doubt that, on its own treaty, it was at least the ambition of the European Union to enter into ever-closer union. What that meant, how it would be defined and what the constitutional implications would be, and are, still remain matters of great dispute. On the one hand, the noble Lord, Lord Williamson, makes it quite clear that there is no secret agenda; on the other hand, many noble Lords in this debate have indicated that they believe there is.

Lord Willoughby de Broke

My Lords, I am grateful to the noble Lord for giving way. It may well be that those in Parliament were able to look at the first paragraph of the Treaty of Rome, but the British public at large were unable to do that; they were simply asked whether they wished to remain in the Common Market.

Lord Watson of Richmond

My Lords, all I can say in response is that at the time I was a broadcaster involved in many BBC programmes. I recall frequently putting up on a screen the opening clause of the Treaty of Rome. On the whole, I believe that BBC viewers and the voters of this country were well able to read and understand something of such obvious clarity. Whether they agreed with it is another matter, but I am sure that they were able to understand it.

On these Benches our position is that if the true implications of withdrawal from the European Union are assessed in terms of the economy, national security and the constitution—the three criteria in the Bill—the consequences are deeply worrying and in some cases disastrous. I should like to focus briefly on one aspect of the economic consequence. In this debate many noble Lords have referred to the economic dimension. One factor that is worth looking at closely is the implication for foreign direct investment flows (FDIs). It has been said on both sides of the argument this afternoon with some satisfaction—we are all very pleased about it—that the United Kingdom remains the top destination inside the European Union for FDIs from outside the EU. The UK accounts for 28 per cent of the total, which is a very high figure. However, one startling factor appears if one looks at the figure more closely. Of Britain's top 20 exporters, 10 are foreign owned. Of those 10, 60 per cent of their exports go from the UK to other parts of the European Union. That is a highly significant factor.

A number of my noble friends have quoted from the report by Andersen Consulting entitled Business, Britain and Europe: the First 25 Years, with which I had some involvement. The report states that the companies which I have just described, have not invested solely to get access to the UK but have instead seen the UK as a valuable entry point to the wider EU market". Whatever else is to be examined by the body proposed by the noble Lord, it would certainly need to listen very carefully to those 10 companies and to others as to the actual impact.

Lying behind this debate is the question which some have made explicit but all noble Lords recognise as being implicit: if Britain withdrew from the European Union what would its position be? Would we retire into splendid isolation? Would we become, as I believe the noble Lord, Lord Lamont, once said, an offshore island—in effect, the independent merchant venturers of the 21st century—with the same privileged status in world trade as Singapore and other such places? That is one possibility. The other possibility is perhaps that the UK would seek to negotiate some kind of free trade association with the European Union; and it might also seek to negotiate an arrangement with the North Atlantic Free Trade Association.

As to all those options, if we look at the risk and price of staying within the EU how much more so must we rigorously examine the risk and price of the alternatives? The risk of the North American Free Trade Agreement is of extraordinary proportions.

The team in the United Kingdom at present—I believe that there are over 30 members—will report to Congress on the implications of UK withdrawal from the EU and possible membership of NAFTA. I checked yesterday with the United States Embassy on the detailed terms of reference. They specifically disallow the team, first, from examining the feasibility of either of these two courses of action being in practice negotiable; and, secondly, they explicitly exclude the geopolitical dimension of either course of action. Both those issues need to be well considered. I think that the chances of successfully negotiating a relationship with NAFTA which would give us a degree of influence in NAFTA commensurate with the degree of influence we have within the European Union in shaping the future are unimaginable.

I turn to national security. I have noted in recent months that one of the gentlemen most frequently quoted in this House is Mr Strobe Talbott. I wonder whether he knows the compliment that we continue to pay him. We all quote slightly different paragraphs of the same speech. Nevertheless, as the noble Lord, Lord Vivian, quoted the unfortunate Mr Strobe Talbott, perhaps I may have a go at him again. It is worth listening to him on the question of the ESDI. He said: As for ESDI, I think I should repeat what I said … There should be no confusion about America's position on the need for a stronger Europe. We are not against; we are not ambivalent; we are not anxious; we are for it. We want to see a Europe that can act effectively through the Alliance —and this is the key part of the quotation— or, if NATO is not engaged, on its own. Period, end of debate". That is one man's view. It is the view of the Administration at this point. But to fool ourselves when talking about the national security dimension that somehow the clear American position is that we move would be quite wrong. As the new Secretary-General of NATO, the noble Lord, Lord Robertson, said in a significant article some weeks ago, the position post-Kosovo where Europe does not play its full and equivalent part, where we do not have an identity in defence terms, is not sustainable politically.

I was in the United States only a week ago. I mentioned this matter when I returned. If one talks widely to Americans on the issue, it is not top of their agenda—certainly not in their election year. But they are irritated by the inequality of contribution that is made. They will not always be willing to bail us out. They will not always be willing to make up the logistical gap. It is perfectly true that at this point we cannot fill that logistical gap. The satellite systems are not there; the lift capacity is not in place. There are many factors which are not in place. But for us to say, "Well, even to talk of doing anything about this would call into doubt the American alliance", is self-delusion.

The final part of the Bill goes to the heart of the emotion of the debate; it is important to recognise that emotion. It is about the constitution, democracy and sovereignty. There are clearly differing views in the House about sovereignty. I believe, as I think do these Benches, that for sovereignty to be real today it has to be pooled and shared. In the interdependent globalised world it is unreal to try to hold on to the idea that on your own you will be able to shape key elements. After all, sovereignty is not only a defensive concept; it is a pro-active concept. It is not only that we can say no; it is also that we can say, "We would like to. We can. We want to shape things. We want to change things". Pooling sovereignty to that end has had enormous effect.

It is an honour to us that the noble Baroness, Lady Thatcher, is in the Chamber listening to the debate. Surely it is an important factor of her premiership that the decision to proceed with the single market, with all that that involved, meant that in that dimension of the construction of Europe Britain had an enormous influence. We shaped, altered and set the pace. We would never have done so had we not been playing a full part.

As regards democracy, many factors were present in the Iberian peninsular and now in eastern Europe to bring forward its cause. But we would be wrong to discount the impact of the EU. The fact is that no country is able to join the EU unless it can demonstrate that it is a genuine multi-party democracy. I remember well the period when Greece's negotiations for membership were suspended because the junta took over in a coup. I remember the fury and disbelief on the part of that ghastly regime in Athens that that had happened and that the door had been closed. But, most certainly, the door had been closed and that was an important pressure.

I believe that when the history of what is happening in eastern and central Europe becomes more clearly know, the great magnet and pull of democracy as part of EU membership, the confirmation that in belonging to the EU they belong to a modern, pluralistic, forward-looking international community, will have exerted great influence.

A question in the debate is: from what do we draw our confidence? There are those who would say—and the noble Lord, Lord Shore, expressed it as eloquently as only he could—that at the end of the day the confidence with which we face the future should be born of our history. We should draw from the well of our national experience and achievement. Given that history, we do not need the buttress, the support, of belonging to this or that. That is one view.

Another view is that Europe is a great risk, a juggernaut and an octopus and it is at our throats because it is not at our feet. It is also that we do not win the arguments in Europe; that somehow, if this great thing rolls forward yet again, we shall not be there leading it and steering it; that we may not be able to influence it; and that we probably will not be able to break it. We are losers and therefore we should get as far away from this as possible.

It is my powerfully held conviction that we are in an incredibly fortunate position inside the EU. That is not to revert to the old theory of the three circles in its original Churchillian form, but there was a great truth in it. Our language has become the language of the world. It has also become the majority language of the European institutions. Interestingly, it is increasingly the language of the European construction. It gives us a huge advantage and it is a major reason why we have huge direct investment flows. So let us use it.

The special relationship with the United States is a real factor, but it is not an alternative. In the language of corporate strategy, we should "lever" it in order to maximise our position in the EU; so, too, our friendship and traditional links with the Commonwealth. The moment that we start to see those things as alternatives to the European Union and not as the means for our great success within the European Union, the pessimism that underlies the Bill will be justified. I believe profoundly that it is not.

3.24 p.m.

Lord Moynihan

My Lords, our commitment to membership of the European Union does not relieve us of the task of discussing and debating legitimate questions about the future ambit, the purpose and the running of the European Union; nor should it. Therefore, today I welcome the many contributions that have been made. I welcome the presence of my noble friend Lady Thatcher, who, characteristically, has been in her place throughout the debate. My noble friend gave me my first job on the Front Bench some 14 years ago, among other things, to introduce football membership cards throughout the 1992 league grounds. I feel that I face a similar challenge this afternoon in winding up the debate from these Benches.

The European Union is a work in progress which must constantly debate its directions, its speed and its geometry, and which must soon change its rules to accommodate the applicants at its door. Its political and economic order are by no means settled. Throughout its history it has constantly outgrown its old treaties as it has added new members and new functions. The model of enlargement for a reformed and reunited Europe is one such legitimate question. Britain's membership of the single currency is another, and remains to be decided, a debate which the disingenuous campaign, "Out of Europe, out of work", regrettably obscures.

As the noble Lord, Lord Bruce of Donington, calmly reflected, the European Union and its institutions are not above criticism. That was made all too clear by the crisis in the Commission a year ago when the report of the committee of independent experts revealed widespread fraud and mismanagement as well as a culture of complacency, a lack of accountability, incompetence, arrogance and favouritism in the Commission. Therefore, I welcome this opportunity for debate.

Yesterday, in another place, we called for a debate on the IGC. We need one. Indeed, there is much that should be debated and all too little opportunity to do so: the strengthening of the principle of subsidiarity; the reform of the powers of the European Court; the reform of the European Union budget; an examination of the European aid programme; our approach to the common fisheries policy; the reform, as we have heard today, of the common agricultural policy, which we are all agreed is simply not sustainable in its present form, let alone in an enlarged Europe; and the need to prevent billions of pounds of public money being squandered—at the last count, £3 billion—through fraud and mismanagement. We could spend time profitably discussing any one of those examples.

Likewise, as my noble friend Lady Park of Monmouth highlighted, there are many legitimate questions to be raised with regard to the European defence and security identity and the EU common foreign and security policy. With regard to the ESDI, I shall restrict myself to saying simply that this is a deeply complex subject which, if handled ineptly, could impact disastrously on NATO, particularly in the light of possible ramifications from the recent NATO spy allegations and the reports of disagreements between the French and the United States during Operation Allied Force.

In terms of the CFSP, we have already seen cracks appearing. The statements of Javier Solana, as high representative for the CFSP, on the desirability of an EU representation on the UN Security Council as part of what he calls, the integration project for the next decade". as well as President Prodi's statements on the need for a European army, raise questions over the extent to which an enlarged Europe of eventually perhaps 30 nations can effectively develop a consensus on foreign and security policy without impairing national foreign policy decision-making.

As my noble friend Lord Pearson, to whom I am grateful for securing time today, has made clear, his Bill seeks to establish a committee of inquiry into the implications of withdrawal by the United Kingdom from the European Union. I shall have a large number of additional papers to read in the Library and, along with a number of my noble colleagues in this House, I shall study the Bill carefully. I note that possibly my noble friend considers himself eligible as chairman and as representative of the constitution of the United Kingdom. I note also that under Clause 1(4) the person nominated under subsection (2)(c), which refers to the constitution of the United Kingdom, should be nominated as chairman of the committee. I believe that there is a typographical error and that that should refer to (3)(c). Maybe it was meant to be slipped under our noses in order that my noble friend would be well positioned to claim chairmanship of the committee.

My noble friend has done us a great favour. It is important that from these Benches we state very clearly where the Conservative Party stands. I very much welcome this debate, not least because it gives me an opportunity to reject the argument that we should withdraw from the European Union. Indeed, the Conservative Party has always understood not only how important Britain is to Europe, but also how important Europe is to Britain.

We are committed not only to our membership of the European Union but to making a success of that membership. That is why we made the application to join the then Common Market in the 1960s. That is why a Conservative government took the United Kingdom into Europe a decade later. That is why we were the architects of perhaps Europe's most successful project, the internal market, in the 1980s.

We are committed to Europe as a force for good, enhancing prosperity, creating the conditions in which businesses can flourish and jobs can be created. Our membership is crucial to our trade, our wealth and our quality of life.

It is the Government's view, however, that once in each generation, the case for Europe needs to be made from first principles". I do not agree. Of course, if as Prime Minister one has entered Parliament on a platform of withdrawal one may need to return to first principles, but not us.

As we have seen today, political parties are broad churches and encompass many shades of opinion, which in a democracy is a welcome thing, nurturing and encouraging debate and discussion as it does. I have no wish to trade insults about whose party contains more Europhiles, Eurosceptics or Eurorealists. But I would ask the Minister why Britain in Europe's most recent campaign is "Out of Europe, out of work" when, to my knowledge—a point echoed by a number of your Lordships—withdrawal from Europe is not the official policy of a single mainstream party in this country.

Can the Minister also explain why the director of the National Institute of Economic and Social Research was forced to describe Britain in Europe's portrayal of its support in the campaign as a wilful distortion of the facts? As The Economist put it last month: Quitting the EU is not on the agenda, unless Mr Blair unwittingly puts it there by his exaggerations. What Britons are discussing is whether, while staying in the EU, they should also join the single currency. Instead of taking part in this debate, Mr Blair pretends that the question itself is illegitimate. It is no way to remake the case for Europe". The central point, which I share with the noble Lord, Lord Shore of Stepney, is that this year is critically important for the European Union. For the European Union today stands at a crossroads. I firmly believe that the way in which we respond to all and any of the issues I have just raised will be shaped by the way in which we choose to manage two key challenges.

The first is the imminent historic enlargement of Europe. The second is the reality of new technology and the new knowledge-based global economy. Europhiles and Eurosceptics alike are all agreed on the need for change. The question is not whether Europe needs to change, but, rather, how it will change. Standing still is not an option.

As the noble Lord, Lord Shore, stated, we have the opportunity to refashion our relationship with Europe. Enlargement means that membership of the European Union will almost double. The candidate countries account for 170 million people. If all the candidates join, the European Union will comprise nearly 550 million inhabitants of staggering diversity—from Finland to Malta, from Ireland to Lithuania. From these Benches, we have always been passionate and vigorous supporters of EU enlargement on a basis that is fair and affordable. Such enlargement will serve to enhance European security and is critical for European trade.

Enlargement is also a historic opportunity to advance the principles for which we believe Europe should stand—free trade, free markets, deregulation and co-operation. Yet enlargement is also a watershed. It is a time to assess the Europe which those new members will be joining. An enlarged European Union cannot conceivably continue to operate with procedures designed for 15 members or fewer.

It is not a time to determine whether far-reaching and visionary changes will be required for we know that they will be. Indeed, it is a time to ensure that those new members find themselves in a wider, flexible Europe which has adapted to the needs of a much more disparate group of member states, rather than in a regulatory, interventionist, deeper Europe.

The recognition of the need for Europe to change is wholly compatible with support for enlargement. That need for change is predicated on the realities of a diverse and enlarged Europe within a fast-changing world. We know that one size will not fit all. It is therefore critical to find a way in which the diversities inherent in a Europe of certainly 20 new member states, and perhaps 25 or 26, including the diversities of national interest, can be accommodated without undermining the spirit of the European project but at the same time without attempting to shoe-horn Europe into a rigid straitjacket of uniformity.

The crucial intergovernmental conference this year will present the European Union with a stark choice between two visions and Europe will not be able to shy away from the question of how to develop an effective decision-making process for the newly enlarged European Union, without which it will be paralysed by gridlock.

At the crossroads at which Europe stands, one direction leads to the creation of a modern, flexible Europe of nation states through the introduction of flexibility provisions. Those provisions would provide a basis for a different approach by different member states, reflecting the divergences which inevitably arise as a result of different national circumstances and would provide an effective response to the challenges of the global economy and a reality of a Europe strengthened by its diversity.

In the other direction lies an alternative vision: where there is talk of the Commission, step by step, behaving like a growing government; where there is talk of a European army, a European government, a single legal area with outline plans for a corpus juris and a European prosecutor and no role for the national veto; where there is talk of deeper integration and harmonisation, more majority voting; where there is talk of one tax policy, one employment policy, one defence policy and one foreign policy.

The latter risks leading to an uncompetitive, inward-looking, protectionist Europe in which a majority of European Union states could override the wishes of a minority through a large extension of QMV. Yet each member state will have different interests, different views, different perspectives. While every member state must accept the rights and responsibilities of the single market and the core elements of an open, free-trading and competitive Europe, can the Minister explain why, outside the core areas, the provision could not be incorporated into the treaty which would allow countries not to participate in new legislative actions at a European level which they wished to handle at a national level?

There is precedent for such flexibility. The Maastricht Treaty calls for subsidiarity. The Amsterdam Treaty, as has been noted in the debate, allows some flexibility. It allows groups of members to proceed at different speeds and allows some to proceed to establish further co-operation among themselves, subject to the provisions of the treaty.

The principle of flexibility should be allowed to work both ways. It would not block some countries from going ahead with new legislation if they wished to do so. We cannot expect to be allowed to opt out of integration in our own interests without them recognising the corresponding rights of other countries to opt in if they perceive it to be in theirs. The model is already in place. It is already used for the single currency and for the Schengen agreement on borders. It would not affect existing legislation at all. It would enable European Union institutions and procedures to cope with a much larger membership. It would safeguard the European Union's future viability and provide genuine accountability, via national governments, for decisions adopted. It would stop non-essential new legislation from being forced upon any other country against its will.

On Wednesday, your Lordships' House discussed the need for policies of free enterprise and deregulation to ensure that European businesses can compete in an increasingly competitive world. A new economy is emerging; an economy which is intrinsically global. Electronic commerce is, and will continue, breaking down national barriers to trade. In such a world, it is precisely the wrong approach for Europe to concentrate on looking inwards, creating new centralised political structures.

We want to see an open, internationalist, outward-looking Europe. That involves seizing the historic opportunity presented by enlargement to set the seal on the principles of free trade and free enterprise in the former communist dictatorships. It involves Europe pioneering the idea of international free trade, starting with its immediate neighbours, proceeding with an alliance between the European Union and NAFTA, to extend the free trade zone across the Atlantic—that is what we should be talking about with NAFTA—and moving from there to tackle the challenge of global free trade by 2020. It involves Europe completing the internal market, including electronic commerce and financial services; bringing more choice and lower prices to Europe's consumers. It involves Europe concentrating on the enforcement of competition rules and on a programme of deregulation.

Europe should be realising its full potential and becoming a driving force for greater prosperity. Britain has an historic opportunity to chart such a route and to lead Europe along it so that it is outward looking, low regulation, low tax, free enterprise and flexible.

3.42 p.m.

The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Scotland of Asthal)

My Lords, I have listened with great interest to this important debate. A wide range of views has been expressed and many points raised. We have heard some extremely fine speeches; a veritable feast. Some might describe it as "a battle of the Titans". We have had the vigour and rigour of my noble friend Lord Harrison; the skilful and rapier-like erudition of the noble Baroness, Lady Williams, and the noble and learned Lord, Lord Howe; the siren call of my noble friend Lord Bruce of Donington; the passion of my noble friend Lord Shore and the acidity of my noble friend Lord Stoddart; the humour and sagacity of the noble Lords, Lord McNally and Lord Avebury; and the sound commercial good sense of the noble Lord, Lord Sharman. We have been treated also to the calm cogency of the noble Lords, Lord Williamson of Horton and Lord Watson.

We have watched a delightful sight indeed: the delicate tightrope walked by the noble Lord, Lord Moynihan, who had to try to reconcile the irreconcilable difficulties in his party's position towards Europe and clarify its commitment to Europe. That is its official policy. But as Michael Heseltine wrote, in an Independent on Sunday article entitled, "They won't say it but they want us out" on 27th February this year, its unofficial policy is otherwise. Last, but by no means least, I mention the entertaining cynicism of the noble Lord, Lord Pearson, whom I thank for the opportunity to enjoy such richness, although I am not entirely sure that it all suits my digestion. I am pleased to say that the balance of speeches was such as to ensure that the concerns raised by one noble Lord were answered almost immediately by the noble Lord who followed. Thus I am in the happy position of not having to respond to the minutiae of each excellent speech. We have been tempted and delighted by the excellent speeches of all noble Lords today.

I shall try to be brief and focus on the key themes raised by noble Lords and at the same time make clear the Government's position. There will inevitably be a number of smaller points to which I shall have to respond in writing. However, at this stage perhaps I may reassure my noble friend Lord Bruce of Donington that Sub-Committee A has retained its scrutiny powers and will protect this function jealousy.

In its first incarnation, the Bill laid before this House called for Sections 2 and 3 of the European Communities Act 1972 to be repealed. That would put us in clear breach of our international obligations under the European Treaties and precipitate our withdrawal from the European Union. The Bill now calls for the Chancellor of the Exchequer to set up a committee of inquiry to examine the question of withdrawal.

Lord Pearson of Rannoch

My Lords, I am grateful to the Minister for giving way. There are two separate Bills. The first Bill to which she referred is still "in the queue" and probably will not go forward. However, it is the Bill we debated on 31st January 1997 in your Lordships' House when we passed it by 52 votes to 51 because its Second Reading was challenged. This Bill is an altogether more innocent creature. I believe it has produced the debate which we all wanted.

Baroness Scotland of Asthal

My Lords, we have all been delighted by its innocence so far and perhaps can see it for what it is.

For this Government, the question to be asked in this debate is: what would be in the best interests of the United Kingdom? The benefits of EU membership are evident. Many noble Lords have commented upon that. Put simply, we are convinced that membership is in our political and economic interests. To pretend anything else would be to make a historic miscalculation.

The European Union always has been, and must remain, more than just a free trade area. It is directly relevant to our prosperity and because of that is directly relevant to jobs. It improves the quality of life both here and abroad. It gives us peace and security and increases our influence on the world stage.

The scale of those benefits will increase still further in the enlarged union which we shall see in the next decade. The single market now comprises 372 million customers or 38 per cent of the world trade. It is based on fundamental principles of free movement of goods, services, people and capital. Fifty-eight per cent of UK trade in goods is with our EU partners. That business represents 3.5 million British jobs. The UK not only has access to the single market; it shapes it too. If we were to withdraw from the EU, the majority of the benefits that accrue would at least be severely curtailed and, in some cases, entirely removed.

The single market benefits customers as well as businesses. To give only two examples: it has helped to halve prices on European telephone calls and European flights. We have had mention of that today. Perhaps I may give one example. A flight to Rome in 1989 cost £222 but by 1999 it was reduced to £118.

An EU, enlarged to include the 12 candidates currently in negotiations, will create the largest single market for trade and investment in the world, with a total population of over 480 million. Enlargement is opening up new markets for British business. Britain already exports over £3,000 million worth of goods and services to the first five applicants from central Europe.

Hundreds of thousands of jobs have been created by investments in companies that see Britain as the best gateway into the single market. The UK receives 27 per cent of all investment into the EU. There are 5,700 American and 1,000 Japanese companies based in the UK. In the past year alone, more than 44,000 new jobs have been created by foreign investment. These international companies are manufacturing from the UK for the whole of Europe, not only the UK market.

Perhaps of more specific interest to the noble Lord, Lord Pearson, are the particular benefits enjoyed by Scotland. Inward investment because of membership of the EU has caused the "Silicon Glen" phenomena. Scotland has only 1 per cent of Europe's population, but it has 15 per cent of the total EU semi-conductor capacity. It provides 32 per cent of branded PCs in Europe, 65 per cent of Europe's automated teller machines, and 80 per cent of Europe's workstations. Let us be frank: withdrawal would decimate these markets. Is that really what noble Lords would like to see? Although we have talked about examination of withdrawal from Europe, it is important to acknowledge what lies behind such a removal. I believe that the noble Lord, Lord Pearson, was brave and candid enough to make that clear.

The EU has also opened up new opportunities for ordinary people to live, work, study and retire abroad. One hundred thousand British people now work across Europe, while 200,000 have retired to other EU countries. Without agreement between EU member states, this freedom would not be possible.

Free movement of goods legislation protects British producers. It stops other member states from preventing the import of British goods legally marketed or produced in the UK. Nor can other EU countries shut British firms out of public contracts. If they do, they can be taken to the European Court of Justice.

Some would argue that we could reap these benefits simply by concluding a free trade agreement with the rest of Europe. A number of noble Lords mentioned this in their contributions. The noble Lord, Lord Monson, asked specifically if we could continue to benefit from the EEA. We are not members of the EEA; we are members of the EU. That gives us greater and wider benefits. We might be able to join the EEA, but this would by no means be automatic. This is to miss the point completely. I agree with the noble Lord, Lord Hooson, when he said that we have tried free trade agreements in the past and they failed.

Our access to the single market would be guaranteed only for so long as it suited others to allow it. Noble Lords can be sure that if, for whatever reason, we enjoyed a significant competitive advantage, the EU would seek to restrict access. Moreover, we would have no say over how rules for the single market would develop. The interests of UK producers would no longer be protected and we would have a myriad of regulations growing up that discriminated against us.

There has been much merriment about the fact that it has taken almost 30 years to agree a chocolate directive. However, let us be absolutely clear: if we had been outside the EU, there would be have been a directive years ago, and it would have excluded UK products from the European market. So we must forget about the chimera of a free trade area. To suppose that we could negotiate terms to our advantage is naïve in the extreme. The UK, a great trading nation, would be disengaging from the world's biggest market.

Our place in the EU is equally relevant to a wider interest in stability and security in Europe and beyond. I agree wholeheartedly with all that has been said by a number of noble Lords in that regard. For the past five decades, together with NATO, the EU has helped to ensure an unprecedented period of peace among the nations of Western Europe. As several noble Lords have pointed out, EU membership has made war between partners inconceivable. In 1998 Britain and France took the initiative to strengthen Europe's common defences in a way that also strengthens NATO. Member states are now looking at ways of enhancing their military capabilities against headline goals. That gives us an opportunity to allow Europe to act as a force for good in the world.

Today the EU is one of the most effective mechanisms for forming a common front against drugs and organised crime. To give an example of the success this is producing, £57 million of drugs were seized in Operation Harry, a joint operation with Belgium and the Netherlands in 1998. Only last week the Prime Minister put forward some ideas for a step change in the EU Action Against Drugs. It is increasingly clear that cross-border crime requires cross-border solutions.

Protecting the environment is another challenge that manifestly requires cross-border solutions. A series of EU action programmes gives Britain a cleaner environment, better air quality, cleaner beaches and wildlife protection. Over the next five years, emissions from cars, light vans and lorries will be substantially reduced, in some cases by over 70 per cent. With enlargement, EU programmes will extend to countries where previously we had no influence.

The common foreign and security policy offers an important additional dimension to the UK's foreign policy by ensuring that European partners pursue shared objectives. This led to the package of sanctions against Milosevic, including an oil embargo, which helped accelerate Belgrade's acceptance of the international community's demands on Kosovo.

Our own trading influence is enhanced by EU membership. Lomé and EU/South Africa trade agreements are able to open the European market for Commonwealth countries, which would otherwise have faced protective barriers. We remember how passionately the noble and learned Lord, Lord Howe, dealt with that matter in his speech. It strengthened our position in trade negotiations. We are able to negotiate as a block on equal terms with, for example, the United States of America.

A number of noble Lords raised the issue of our relationship with our friends the Americans. Britain has close ties with America. But, as the Prime Minister pointed out a few weeks ago, America wants Britain to be a strong ally in a strong Europe. I was delighted to hear the poor Mr. Strobe Talbott quoted yet again. The stronger we are in Europe, the stronger our relationship with America.

Lord Boardman

My Lords, I am grateful to the noble Baroness for giving way. This Bill does not propose withdrawal from Europe. It seeks to set up an inquiry, for which much of the speech of the noble Baroness would be powerful evidence. Is she opposed to an inquiry into what the consequences may be?

Baroness Scotland of Asthal

My Lords, I make it plain that we are. If I can again adopt the words of the noble and learned Lord, Lord Howe—he said it so elegantly and eloquently—the Government are not minded to pursue a well-argued private prejudice. We have other things in which to invest money at this stage. We do not feel that investigation of this nature would be merited.

I recognise that many people sometimes feel a sense of frustration with the functioning of the EU and our relations with it. My noble friend Lord Bruce of Donington has been a champion of such concerns for many years, and his anxieties were echoed by other noble Lords—the noble Earl, Lord Liverpool, the noble Baroness, Lady Park of Monmouth, the noble Lords, Lord Moran, Lord Boardman, Lord Vivian and Lord Willoughby. However, I was rather alarmed to hear the slur on our cricketers. I believe that we have had a fine team in the past and can still win a few games.

Partly that concern reflects a justified dissatisfaction with specific policies, such as the common agricultural policy or the common fisheries policy. Partly it reflects anxiety at the direction the Union may take in the future. It also reflects unhappiness with the lack of effectiveness and efficiency demonstrated by the Union's key institutions.

The Government cannot and do not ignore such concerns. That is why we are actively working to improve the situation. Reform is necessary. It is being tackled by the parallel processes of non-treaty change and treaty change at the intergovernmental conference. We are playing a full role in support of both.

At the Lisbon European Council later this month we shall tackle economic reform. Britain is driving the debate, promoting economic dynamism and social justice. We have a chance to push our own goals—liberalisation, enforced by strong, independent institutions.

It is appropriate that the first European Council of the new millennium will focus on jobs. This matches the priorities of our citizens. It is appropriate that we focus on it now because Europe is falling behind—the EU as a whole has created virtually no net jobs since 1990. Unemployment averages 10 per cent. That is unacceptable.

The EU faces challenges ahead. We must consider how to face a rapidly globalising world—a world increasingly based on innovation and knowledge, while retaining the essential features of our societies. I think that we can do that. But we shall have to adopt a new approach to building our economies so that we can provide full employment in Europe. If we do it correctly, Lisbon will be seen 10 years hence as the moment when Europe collectively decided to modernise to face the challenges of the new millennium.

Baroness Williams of Crosby

My Lords, while I very much agree with what the noble Baroness has said about employment, does she accept that with regard to poverty, to which I referred, there are quite a lot of lessons which the European Union could teach us?

Baroness Scotland of Asthal

My Lords, I am happy to accept that there are many things that we can learn from our European partners, and that together we have a much better chance of doing well.

Lord Boardman

My Lords, I am most grateful to the noble Baroness for giving way. I asked her view on an inquiry. If I understood her reply correctly, she objected to the cost of such an inquiry. If I have understood that correctly, would it help to overcome that problem if, at Committee stage of the Bill, we introduced an amendment to state that the cost of an inquiry would not fall upon the Treasury?

Baroness Amos

My Lords, I remind noble Lords that the Companion states that frequent interventions, even with the consent of the noble Lord who is speaking, are undesirable.

Baroness Scotland of Asthal

My Lords, the short answer to the question is no. Our primary reason for saying that is that we believe that such an inquiry is not necessary. If we believed that it was necessary, costs would not feature in that decision.

We have put forward several suggestions for concrete outcomes for the Council, which we think would show that Europe is ready to compete with the best in the world and that we intend to make sure that there is opportunity for everyone in our societies. We are pushing three essential components. The first is an innovation and knowledge-based economy—for example, we need to remove barriers to e-commerce and make the Internet as fast and cheap as anywhere. The second component is economic reform. We need a fully functioning single market. Thirdly, we want to renew the European social model, laying the foundations for full employment.

Change has already taken place in the Commission. Following the resignation of the Santer Commission last year, it was clear that root and branch reform of working practices was needed. Since taking office in September 1999, Romano Prodi and Neil Kinnock have already implemented a number of reforms in the Commission. Mr Kinnock announced a comprehensive package of reform proposals, which were confirmed on 1st March.

We welcome these proposals. They represent an important programme which is an ambitious attempt to modernise the way the Commission is run. They focus on an overhaul of financial management, a much improved human resources policy, and a new system for setting priorities, allocating resources accordingly and evaluating the results. All these are objectives that we have long shared. We recognise that these reforms will take time to deliver. We look forward to regular updates on progress on the targets that the Commission has set itself and welcome the commitment to have the full programme in place by the end of 2002.

The Council of Ministers is also discussing its future. It is vital that, as enlargement proceeds, it remains effective and coherent. The Helsinki European Council in December 1999 endorsed a package of reforms designed to improve working practices, including a reduction in the number of Council formations.

The European Parliament is considering its own reforms. Negotiations are ongoing on the terms of a statute setting out terms and conditions for all MEPs. We attach particular importance to reform of the European Parliament's expenses system so that MEPs are reimbursed for the actual costs incurred in the performance of their duties. The Government hope that agreement will soon be reached.

The main reform project this year is the intergovernmental conference. Heads of state and government have already made clear that it should be relatively short and focused clearly on the institutional changes necessary for the next enlargement. It will focus on three issues discussed but not resolved at the Amsterdam European Council in June 1997: the size and composition of the Commission; the reweighting of votes in the Council of Ministers; and the possible extension of qualified majority voting. Provision was made for the inclusion of a few related and additional items. One noble Lord referred to this as the Amsterdam left-overs. There is no grand federal vision coming from the member states; nor is the UK isolated in any part of its approach to the conference. On the contrary, we have a positive agenda and are shaping the debate.

Concern has been expressed about the direction in which the Union is heading. What kind of Europe do we want to see? Do we want to see a Europe without any British presence or influence? I am sure that this would jeopardise not only the enlargement process but also the Union as it currently exists.

Is the answer the Conservative Party's interpretation of flexibility, as outlined by the noble Lord, Lord Moynihan? Again, I think not. Its suggestion is that individual member states should be allowed to opt out of specific pieces of legislation. This à la carte model would not be accepted by our European partners. Indeed, it would not work.

Allowing opt-outs would lead to the break-up of the single market. France, for example, would have opted out of the decision to lift the ban on UK beef. As it is, they are being taken before the European Court of Justice by the Commission for flouting their obligations. Were it otherwise, it would have been to our detriment, as the noble and learned Lord, Lord Howe, made clear. I am pleased to be able to tell the House that the Bundestag has voted to lift the ban on beef in Germany. That would not have been achieved without our being in Europe.

The Government would like to see the UK continuing with its constructive role, on the front foot in pursuing our positive agenda for reform and enlargement. We are not isolated in Europe. On the contrary, we are positively engaging in the debate. There is not complete agreement—others push their visions as we push ours—but we need to be part of the debate to argue our corner.

What is in Britain's best interests? The Government feel there is only one possible answer to that question. It is not to withdraw from the European Union but to remain a full and leading member. That is the only way successfully to protect and promote Britain's interests.

The Government do not feel that it is necessary to set up an inquiry to reiterate this point, but it is not the Government's practice to oppose a Private Member's Bill at Second Reading in this House.

4.8 p.m.

Lord Pearson of Rannoch

My Lords, I am grateful to all noble Lords who have spoken, even those who do not agree that an inquiry might be helpful. I am sure that much of what has been said will repay study in the columns of Hansard. I therefore do not intend to delay the House—although of course I am strongly tempted to return to the fray—but I do wish to refer to two points.

I shall even resist the temptation to complain to the noble Lords, Lord McNally and Lord Avebury, one of whom referred to me as a xenophobe and the other who referred to me as a Europhobe. I thought I had made clear that I am a Europhile but that I am phobic about the Treaty of Rome.

The first of the two points that are so important that they bear comment was mentioned by the noble Lord, Lord Sharman, and picked up by the noble Lord, Lord Watson of Richmond, and indeed the Minister. It concerns the huge importance to this country of inward investment or foreign direct investment which they believe the single market attracts, or at least our membership of the European Union attracts. I think I mentioned earlier that new research out today casts doubt on this assumption. Indeed the Department of Trade and Industry regularly asks foreign investors why they invest in the United Kingdom and publishes the answers in its papers on British competitiveness. I have to say that neither membership of the European Union nor access to the single market has ever figured in the 10 most frequently cited reasons for investing in the United Kingdom, according to the department's circulars. Overseas investors say that they like our workforce, our infrastructure, the absence of corruption, our language, the business-friendly climate and our low taxes. No doubt they also like the cosmopolitan nature of London and our golf courses, but they do not mention our membership of the European Union or access to the single market through our membership of the European Union as one of the reasons for coming here.

The second point I shall touch on very briefly. It was mentioned by the noble Lord, Lord Watson of Richmond, in what I thought a quite excellent speech. It is that our attitude to the European Union is very important to the United States and its attitude towards us. The noble Lord quoted President Clinton and Madeleine Albright, who appear to have a rather rosy view of this connection with the European Union and the world generally. I would only comment that a very different view was put in London by the chairman of the Senate's Foreign Relations European Committee, Senator Gordon Smith, last December. Senator Smith is clearly very worried that the new European defence initiative will undermine NATO, and he counselled heavily against it.

I agree that the Bill is not perfectly drafted and I am afraid it certainly contains one typographical error. My noble friend Lord Moynihan was right to spot that. I can see also that Clause 1(3) of the Bill, where the people who should form part of this committee are drawn up, might be thought to produce a committee too much like this debate today: one side taking one view and the other side taking entirely the opposite view so that the chairman might have an impossible job in bringing the committee to a sensible conclusion.

The point remains, however, that most speakers have supported the concept that more debate is necessary. Most speakers have supported the idea that an inquiry of this nature, even perhaps with a different composition—the Bill could, of course, be amended in Committee—would be very helpful to the national debate, which many of us feel has not yet taken place.

I am disappointed that the noble Baroness the Minister is unable to support the Bill as it stands. I think she was a little rough when she accused it of being the product of private prejudice. Certainly, she was quoting my noble and learned friend Lord Howe, but she did so with such approval that, especially as my noble and learned friend unfortunately is no longer here, I feel I can reprove her for repeating what he said. If the noble Baroness does not want to support the Bill and if other noble Lords do not want to support it, then I think they are running away from an inquiry and what the result might be. I would just say to them "Cowardy, cowardy, custard!" I commend the Bill to the House.

On Question, Bill read a second time, and committed to a Committee of the Whole House.