European Union (Implications of Withdrawal) Bill [H.L.]

HL Deb 27 June 2003 vol 650 cc535-90

11.6 a.m.

Lord Pearson of Rannoch

My Lords, I beg to move that this Bill be now read a second time. I start by thanking all noble Lords who are to speak today, a Friday in June, on the Second Reading of this simple but important Bill. A number of other noble Lords have asked me to say that they support the Bill but are not speaking because they are unable to be present or to stay until the end of the debate. They include the noble Lord, Lord Weatherill, a former Speaker of the House of Commons, my noble friend Lord Biffen, the noble Lord, Lord Chalfont, and my noble friends Lord Tebbit and Lord Waddington, all former Ministers of the Crown.

The Bill's object is clear. It requires the Government to set up an independent inquiry into what life might really be like outside the European Union, especially for our economy, defence and constitution. It requires the result to be made public, together with the financial cost of our membership of the EU.

I introduced a similar Bill three years ago. The strategy behind the Bill then was that the findings of its inquiry would have been available for public debate before the Government signed up to the Treaty of Nice. There can be little doubt that that would have been helpful, but its purpose has now become much more important; vital, in fact, to the national interest. It is to secure public enlightenment and debate before the Government sign up to the constitutional treaty which will emerge from M. Giscard d'Estaing's recent Convention on the Future of Europe and from the forthcoming intergovernmental conference.

I am aware that the Government pretend that that eventual treaty will merely be an exercise in tidying up the existing treaties, and that they will fully protect the national interest before they sign it. That, of course, is what British governments have always assured the British people about every new treaty since we first entered the clutches of the corrupt octopus in Brussels, some 30 years ago. But it has not been true in the past, and it will not be true this time. The truth is that the British people have been lied to and kept in the dark by our political establishment since the passing of the European Communities Act in 1972. The result is that our democracy has stealthily but steadily been removed from our control and passed to Brussels and Luxembourg. What do I mean by our democracy? I mean the right of the British people, earned with such great sacrifice over the centuries, to elect and dismiss those who make their laws. Much of that right has already been surrendered to Brussels, and most of what remains will follow with the signing of the next treaty, unless the people become aware of what is happening and manage to stop it.

So I think it is time to come clean with them, and explain how they were led, without their knowledge or consent, into their present predicament.

I start with the chilling words of Sections 2 and 3 of the European Communities Act 1972, which took us into what was then the European Economic Community. All such rights, powers, liabilities obligations and restrictions from time to time created or arising by or under the Treaties … are without further enactment to be given legal effect … and be enforced, allowed and followed accordingly. Subject to Schedule 2 to this Act, at any time after its passing Her Majesty may by Order in Council, and any designated Minister or department may by regulations, make provision … for the purpose of implementing any Community obligation of the United Kingdom".

Section 3 reads as follows: For the purposes of all legal proceedings, any question as to the meaning or effect of any of the Treaties, or as to the validity, meaning or effect of any Community instrument, shall be treated as a question of law (and, if not referred to the European Court, be for determination as such in accordance with the principles laid down by and any relevant decision of the European Court)".

What these words mean is that when the executive, or the government of the day, agrees or is outvoted on a new law in the Council of Ministers, the House of Commons and your Lordships' House must enact it. If we do not, Articles 226 to 229 of the Treaty Establishing the European Communities allow the Luxembourg Court to impose unlimited fines. That is why no law passed in Brussels has ever been successfully overturned by Parliament, which has therefore been a rubber-stamp for all EU legislation since 1972.

Our fish and agriculture were handed over to Brussels with the passing of the 1972 Act and have been the instruments of fraud and environmental disaster ever since. Our fishing industry has also been ruined in the process.

Quite how the Conservative Prime Minister, Mr Edward Heath, managed to assure us that no sovereignty was lost in that Act must presumably be a matter between him and his Maker.

Similar judgment has no doubt already been visited upon the late Harold Wilson who, as Labour Prime Minister, masterminded the next episode in this treacherous saga. This was the 1975 referendum, when we were deceived into voting to stay in what was then called the Common Market. Mr Wilson repeated the lie that no sovereignty was at stake, and then excelled himself by writing to every household in the land, promising that the danger of a European single currency, which he rightly described as a threat to employment and industrial growth, had been removed.

I do not know about your Lordships, but I voted to stay in the Common Market in 1975 without having the faintest idea of the wording of the 1972 Act, and thus the real meaning of what I was doing. I am sure that that applies to nearly everyone who voted to stay in. Furthermore, we know now that a massive campaign of distortion and propaganda was launched by the Foreign Office, the BBC and other elements of our Suez-inspired establishment. And so we were deceived, and we got it wrong.

Twelve years then passed before the Single European Act of 1987, which set up the single market. This introduced the infamous system of qualified majority voting, or QMV, whereby the Government can be outvoted in Brussels, but Parliament still has to rubber-stamp the resulting law. Twelve areas of policy, which had previously been under the control of Parliament, were passed to the control of Brussels. Alas, these included all of our industry and commerce, and other areas like the health and safety of workers and the European Regional Development Fund. The idea was that the new voting system would be to the advantage of the British economy. Tell that to our fishermen, to our art market, or to those who take herbal medicines, or to a whole host of other British interests.

Then, the pace of integration started to quicken with the Treaty on European Union, or Maastricht Treaty, of 1993. A massive 30 policy areas were ceded to QMV, and a further 15 to a new procedure called co-decision, which involves the European Parliament in decisions taken by the Council of Ministers, but which still removes the decision from the House of Commons and this place. Included in this little list was control of our environment, and everything that goes with that.

In 1999, we had the Treaty of Amsterdam, with 16 areas going to QMV and 23 to co-decision, and last year, in 2002, we were blessed with the Treaty of Nice, which siphoned off a further 43 areas to QMV and 16 to co-decision.

The result of these treaties so far is that the majority of our laws are now made in Brussels, with the House of Commons powerless to stop them.

What have we left? Well, we have kept control of our Armed Forces, judicial system, currency, and most of our health and education policies. It is generally believed that we have also kept control of our tax system, although there are clauses hidden in the treaties which make that doubtful, should Brussels opine that it needs to control our tax system for the benefit of the single market. Anyway, everything that remains is under threat from the Giscard proposals.

So that is where we stand today. This is not the time to debate the Giscard proposals in detail. Suffice it to say that they herald the final extinction of our democracy by giving the EU its own legal personality, superior to that of the nation states. National parliaments will on the whole only be able to make laws when the EU cannot be bothered. The corrupt bureaucracy, the Commission, will keep its monopoly to propose new legislation, and all the EU institutions will get more power than they have now. I know only one joke about the European Union: if it applied to itself for membership, it would not have chance. There is only one loser in the Giscard proposals, and it is of course the people, with their tiresome democracy.

But this Bill does not propose an inquiry to examine what life might be like after the eventual constitutional treaty comes into force, although its findings would of course greatly increase public understanding of what is at stake. The inquiry would amount to a cost-benefit analysis of our present relationship with the EU.

The last time this Bill was debated in your Lordships' House, I am afraid the Government simply refused to engage. The noble Baronesses, Lady Scotland of Asthal and Lady Ramsay of Cartvale, wriggled out of this normal duty in your Lordships' House by claiming that the benefits of our EU membership were so wondrous and obvious that there was no point in even contemplating life outside it, let alone in setting up an impartial inquiry to report the truth to the British people. It is a great honour that the noble Baroness, Lady Symons of Vernham Dean, is to answer for the Government, but I hope she is not going to try a similar wriggle.

Indeed, if she is going to say that the Government are not going to leap at the idea of setting up the inquiry proposed by this Bill, and I fear that may be her line, then it would be helpful to know what the case is for the UK to stay in the European Union. As far as I can see, it simply does not exist, whereas the case to leave is unanswerable and overwhelming. There is not time to rehearse all the arguments now—the inquiry should do that—but perhaps I may hit the two main ideas in the Europhile armoury firmly on the head before we go any further. These are that the EU is essential for peace, and good for trade. It is supposed to bring peace and prosperity.

The idea that the EU is good for our trade is supported by a much-repeated piece of nonsensical propaganda which goes as follows: 60 per cent of our trade, 3 million jobs, and access to the Single Market of 300 million people depend on our membership of the European Union". What they mean by "trade" is "exports of manufactured goods", and even then the percentage is lower. But their statistics are meaningless, because none of our trade, jobs or access to the single market would be lost if we left the European Union. We would, of course, replace our membership of the European Union with a free trade agreement, such as Switzerland and even Mexico enjoy, and which the EU needs more than we do because they trade in surplus with us; we are their largest client. What is more, the EU's average external tariff is now down to around 1.6 per cent, so leaving is not such a big deal anyway. Your Lordships do not have to believe a rabid Eurosceptic such as myself on this fundamental flaw in the Europhile position. There are many detailed reports which bear me out, coming from such prestigious think-tanks as the International Trade Commission in Washington, and the Institute of Economic Affairs and the National Institute of Economic and Social Research over here.

Furthermore, since Brussels regulations apply to and strangle 100 per cent of our economy, the only statistic worth even considering is how much of our whole economy trades with the European Union. And here we come down with a bump to a mere 9 per cent, which, I repeat, would not be lost if we left the EU itself. About 11 per cent goes in trade with the rest of the world, and 80 per cent stays right here in the British economy. So 91 per cent of our economy is not involved with the single market at all; and yet, as I have said, it must obey all the lunatic regulations from Brussels. No wonder our small businesses—most of which trade within a radius of 60 miles of where they are based—are so fed up with our subservience to the dictates of the corrupt octopus; and do not let us forget that they are our economic seed-corn.

As I have said, there is not time today to put the whole economic case to leave the EU, but for those of your Lordships who have an open mind and who are interested, it can be found on the website of the think-tank set up by the noble Lords, Lord Harris of High Cross and Lord Stoddart of Swindon, at www.globalbritain.org. I am delighted that both noble Lords are due to speak today, and I look forward to their remarks with much pleasure.

And so, finally, to peace, and the idea that the EU has brought peace to the continent of Europe and will do so in future. It is this idea which lies at the deepest level in our debates about the European Union, and I accept that most Europhiles genuinely believe it; or, rather, is it that they feel it? I fear that it is a warm, happy, mushy feeling, and anyone who challenges it is immediately dismissed as a warmonger, a Europhobe, a dangerous nationalist or a xenophobe and so on.

So let me just repeat what I have said before, as calmly as I possibly can. The EU is a top-down amalgamation of different peoples, which has been put together without their consent, which patently lacks genuine democracy, and which is therefore much more likely to end in discord than in peace. Surely if Yugoslavia, Northern Ireland, Kashmir, the Transcaucasus, Gibraltar, the Falkland Islands and much of Africa teach us anything, they should teach us that. I cannot foresee the kind of disarray in which the European Union will eventually end, but the point of the Bill is to find out whether the United Kingdom needs to be part of it.

Perhaps I may repeat, too, that we Eurorealists love Europe just as much as the Europhiles. But our love may be more healthy because our vision is a Europe of democracies, trading freely together, collaborating when they want to, and linked through NATO. What we are phobic about and what we fear is the corrupt and undemocratic monster which is taking shape in Brussels.

In short, we fear that the EU may turn out to be a very dangerous idea. I do not need to tell your Lordships, of all people, of the damage that ideas can do when they become generally accepted but turn out to have been misguided. One thinks of slavery, of national socialism in Germany and of Communism. I do not know whether your Lordships remember the letter written to his fiancée by a young White Russian officer from the front against the Bolsheviks in 1918. It went as follows: Oh my darling, please do not worry. In a few weeks I shall be home with you in Moscow, and we shall be married. These people are not very well armed, and their ideas are even worse". A few days later he was killed, but he turned out to be right about the ideas which inspired Soviet Communism. It is just that it took 70 years and 60 million lives to prove his point.

So, I end with a simple challenge to the noble Baroness the Minister. The Government say that they want the fullest public debate about the proposed new EU constitution. Is that so? Have I got that right? Can she confirm that the Government really do want a debate? If that is so, how can the public decide whether they want the new constitution if they do not know what the alternatives are?

The Prime Minister seems convinced, perhaps by his own propaganda, that leaving the European Union would be akin to committing national suicide. Yet consistent opinion polls over many years show that a large proportion of the electorate do not agree with him. Only a fortnight ago, 92 per cent of the 13,542 people who called into a Jeremy Vine show voted to leave the European Union now. Whatever the accuracy of these polls—I accept that they are only polls—it is clear that many millions of British people do not agree with the Prime Minister. They believe that leaving the European Union and maintaining our trading arrangements with the single market would be liberating, refreshing, enriching and modern.

Who is right? Do the Government have the courage of their convictions? In which case, they must surely support the Bill. I look forward to the Minister's reply. I commend the Bill to the House.

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

11.24 a.m.

Baroness Cox

My Lords, I congratulate my noble friend Lord Pearson on introducing the Bill and on the characteristically comprehensive and robust way in which he opened the debate.

I should perhaps declare an indirect interest. My noble friend's charitable trust has given financial support for many years to my own charitable trust for the educational and humanitarian activities with which I am involved. However, I emphasise that that in no way affects my view of the issues confronting us today.

The Bill would help our compatriots to make up their minds about our country's involvement in the European Union. However, a snapshot of today's costs and benefits would not be enough. The committee of inquiry envisaged by the Bill would also need to look to the future. What will the EU look like in 10, 20, 30 or 50 years' time? What are its economic prospects? What are the implications for its geopolitical position in the world? Will the EU be stronger and more influential in the world, or will it become marginalised and less able to influence the well-being of its own citizens? In a word, is the EU flourishing or is it beginning to show signs of decline?

Since I last spoke in your Lordships' House on this subject in January, four impeccably objective studies have been published. They go some way to answering those questions. But before bringing them to the attention of the House, perhaps I may refer to the comments by Dr Denis MacShane, MP, the current Minister with responsibility for Europe, in an interview with Le Figaro on 26th April this year: today the European (EU 15) economy produces 20 per cent less than the US economy … according to economists at the Foreign Office, by 2010 the European economy will produce 40 per cent less than the US economy". That, my Lords, is a very steep rate of decline over just the next seven years.

The first of the four studies to which I shall refer is the report of the House of Commons Treasury Select Committee on the UK and the euro, published on 7th May. In their evidence to the committee, two Cambridge academics, Ken Coutts and Professor Robert Rowthorn, one of whom advised the Treasury in its assessment of the five economic tests, asked: How will Britain's trade patterns evolve in the coming decades? In particular, what will be the share of the eurozone in our trade in 20, 30, or even 50 years' time? The answers to these questions are inevitably speculative, but there is good reason to believe that the share of the eurozone in our trade will decline by a substantial amount … The share of the eurozone in Britain's trade has been falling since 1990. This decline reflects the rapid growth of our trade with countries outside the eurozone … It seems inevitable that the relative importance of the eurozone in our trade will decline considerably in the coming decades, despite any temporary boost that may arise from the eventual adhesion to the euro of new members such as Poland, Turkey and the Ukraine … If the share of the eurozone in our trade were to fall dramatically, to say 30 per cent, which is conceivable over the long term, there would be a case on stability grounds for remaining outside the euro". Martin Taylor, chairman of WH Smith and Goldman Sachs Asset Management International, asked: if the eurozone remains a stagnating zone, which I expect it to be, [businessmen] will say, 'Why tie ourselves more closely to a region which is bound to be a shrinking part of world trade in the next 50 years, because its relative population is falling, and which doesn't seem able to be dynamic and entrepreneurial?"' Hamish McRae, of the Independent, looking at Britain and Germany, in his memorandum submitted to the Select Committee, argued: Were the differences in economic performance between the UK and Germany evident for the past decade to persist, the UK would become a larger economy than Germany in about 20 years' time. Couple this with the different demographic trends in the UK and Germany and the cross-over might come sooner—some time between 2010 & 2020!".

The second report is the Treasury's massive assessment of the five economic tests, published just over two weeks ago. Among the many references to the decline in the euro-zone's importance relative to the British economy is this: There are good reasons to think that the relative importance of the euro bloc will decline over time. Developing economies tend to grow faster than developed economies, and most are in the US dollar bloc. In addition, and notwithstanding recent developments, potential growth in the US itself is still thought to be higher than in Europe".

The third study to which I want to refer was published in May by an authoritative French thinktank—the Institut Français des Relations Internationales. It was commissioned by and for the European Commission. It cannot therefore be accused of any anti-EU bias. Its title is World Trade in the 21st Century. It runs to 340 pages and covers the period to the year 2050. Its basic scenario, entitled "Europe: chronicle of a decline foretold", is that, Even with enlargement to 30 members (the 15 present members, plus the ten official candidate countries, plus Romania & Bulgaria, plus three Balkan countries, but not Turkey) the EU's share of world GDP is forecast to almost halve, from 22 per cent in 2000 to 12 per cent in 2050 … NAFTA (the USA, Canada & Mexico) will retain their share of world GDP".

Under this scenario, says the report, The Union will have an ever-decreasing influence on the course of globalisation: its chapter in history will draw to a slow but inexorable close".

The projected decline of EU 30 results from an ever-expanding technology deficit vis-à-vis the US, and from its "entering a demographic winter". These phenomena exist already: the report merely extrapolates current trends in working population, labour productivity and production. Moreover, the assumptions relating to labour productivity growth "are already very optimistic".

Indeed, the report points out: In the last 30 years the EU's export position has weakened in every region of the world except the former USSR and the developing countries bordering the Mediterranean".

There are many other equally bleak assessments of the EU's inexorable decline. The authors suggest—without much conviction—that there is a way in which the decline of the EU might be reversed. This consists of more or less merging the EU with the former USSR and the Islamic countries bordering the Mediterranean. On this vast, unstable and disparate entity, a Soviet-style command economy would be imposed—run, of course, by a strengthened European Commission. To those of us with first-hand experience of the benefits of Soviet economic management that prospect is somewhat alarming.

The fourth report also comes from France: a book published last week by Alain Cotta, a professor of economics and prolific author. His book is called Une Glorieuse Stagnation. Its analysis and conclusions are very similar to those of the first three reports I quoted. Its theme is that the coming decline of the continental EU is unavoidable—being largely due to demographics—and will be steep. Professor Cotta foresees, among other things, the collapse of not just the single currency but of the EU itself.

The harsh fact is that in the next 50 years the present 15-member EU will lose almost as much working-age population as the entire present working-age population of Germany. In contrast, the working-age populations of the UK and Ireland will grow. That is not a criticism of continental Europe, or of the EU. One might wish it to be otherwise. It is simply—however inconvenient, and however reluctant we are to contemplate it—a harsh fact.

Before I conclude, I wish to refer to a separate issue, raised in a remarkable speech by the right reverend Prelate the Bishop of St. Albans on 7th January this year in which he spoke of the spiritual and moral foundations of our European heritage. The values underpinning liberal democracy, which first flourished in Europe, are rooted in traditions born in ancient Greece and developed over the centuries in accordance with Judaeo-Christian values. Of course, there have been times when those principles were lost or perverted, as in the Dark Ages and during the Inquisition and tyrannies such as Nazi Germany or the Soviet Union. However, the basic commitment to fundamental human rights, as enshrined in the Universal Declaration of Human Rights, is directly and distinctively associated with the spiritual values of Europe's faith traditions.

It is not adequate to argue that respect for fundamental values and human rights, such as freedom, justice and equality, will somehow, inevitably, be preserved. There are other religious and secular ideological traditions which do not respect or enshrine these tenets. To leave a spiritual vacuum could allow for the emergence of belief systems incompatible with the principles of liberal democracy. That could be extremely dangerous.

We know that others, such as the Polish people, feel strongly on this issue. I quote some of the words of the right reverend Prelate the Bishop of St Albans, because he summarised the point more eloquently than I can. There is a serious moral weakness in the underlying philosophy of the institutions. It is proving to be a serious weakness in what the Minister referred to as the European political architecture, because it wilfully denies the possibility of God. Therefore, it wilfully denies serious and long-held beliefs about human dignity and worth and purpose, that have helped to shape Europe for the best part of 2,000 years. It limits the vision of what it means to be a human being; and what it means to be a "human being in community". To set up a Europe based on that kind of narrowness of philosophy is to design potential failure into the system. Will the Minister assure this House that, for the sake of richness and diversity in Europe, the role of the churches and other religious communities in relation to European institutions and their political architecture will be given serious attention?… To want to be at the heart of Europe and yet, at the same time, to ignore the soul of Europe would be to make a profound mistake".—[Official Report, 7/1/03; col. 920]

In conclusion, it behoves us to understand what is going on, and to ask why it is government policy to lock in the British people and the British economy to a sector of the world in steep decline. To many dispassionate observers who wish the EU well, such a policy seems not just irrational but highly irresponsible. This Bill, introduced so well by my noble friend, would start the process of questioning the wisdom of pursuing such a policy. I strongly commend it to your Lordships' House.

11.36 a.m.

Lord Stoddart of Swindon

My Lords, I join the noble Baroness, Lady Cox, in thanking the noble Lord, Lord Pearson, for bringing the matter before us and for his persistence in ensuring that the House of Lords debates the alternative to membership of the European Union.

He was right to draw the attention of the House to the fact that only 9 per cent of our total economy is involved in the European Union. Why on earth must we have this quasi-government, shortly to be a total government, for 9 per cent of our trade? That point was well made.

The noble Lord was right, a few titters went around the House when he mentioned that when he was on the Jimmy Young show—which is now the Jeremy Vine show—some 92 per cent of callers said that they wished to withdraw from the EU. As it happens, I appeared on a programme on Sky television. I did not do as well as the noble Lord, Lord Pearson of Rannoch. I only got a result of 86 per cent who agreed with my point of view, but that is still a substantial number.

The House should also know that in recent public opinion polls over 50 per cent of the population would countenance withdrawal from the EU. It is a matter that should be discussed, because it is very much concerning the people of this country.

To have this discussion is, at this time, more important than ever, in the light of the Convention on the Future of Europe, and the new European constitution, which will hand over, as the noble Lord, Lord Pearson, said, even more powers to the European institutions. We should urgently re-evaluate the balance of advantage or disadvantage of remaining in the EU.

I simply cannot understand why the Government, and many others, resist such an evaluation and why they so savagely attack those who are sceptical of the benefits derived from being part of the EU, and who are fearful of the direction that it is taking, through the proposed EU constitution, towards a single European state.

The Prime Minister, Mr Blair, is becoming increasingly Orwellian in his pronouncements concerning the EU. I am afraid that newspeak is in vogue in Downing Street. Words mean what Mr Blair says they mean. Thus, we who wish Britain to remain a self-governing nation where Parliament is supreme. our institutions respected and where dismissing the Government can effectively change policy, not simply persons, are demonised as unpatriotic. I think that that is incredible, but that is what is being said.

When the Leader of the Opposition does the job he is paid for and raises legitimate concerns about the European Union and its future activities, he is accused of conspiring to get Britain out of the European Union. The truth is that the European Union is itself a conspiracy—a conspiracy to destroy the nations of Europe and to create a single European superpower.

And I am afraid that Mr Blair is part of that conspiracy as he is enthusiastically going along with a new European construction.

We have, of course, some experience of conspiracy. Indeed, a recent article in the Daily Telegraph showed that Edward Heath had created a secret government propaganda unit to persuade the British people to accept the Common Market. Civil servants were engaged in a dirty tricks department of the Foreign Office to cover up the threat to sovereignty and to provide rapid rebuttal of anti-Common Market arguments.

The conspiracy comes in when the policy unit persuaded Gwyn Morgan, Labour's assistant general secretary, to reveal Harold Wilson's campaign plans and to leak a copy of a report on the issue by Labour's National Executive. That was a conspiracy if there ever was one because the policy of the Labour Party at that time was to withdraw from the European Union. So if anyone knows about conspiracy, it is the Europhiles and not those of us who simply want Britain to continue to govern itself.

My complaint against the Official Opposition is that it has not yet repented of getting us into the situation in the first place and has forgotten the central tenet of conservatism, which is to defend and uphold the British constitution and to maintain the independence of the realm and the sovereignty of the Queen in Parliament. It really is a bit much that I have to lecture the Conservatives on what conservatism is about, but I am afraid that I have to do it. If the Conservatives remembered that central tenet and promoted it, instead of retreating in confusion every time Blair or the tiny minority of Tory Europhiles say, "Boo, boo!", they might stand a chance of reconnecting with the voters and gaining their respect and perhaps even their votes at the next election.

I have said this before in the House, but I will repeat it. Whenever I and others have demanded a cost-benefit analysis of our membership of the EU, we have been told that the benefits are self-evident. The fact is that they are not self-evident, and you have only to speak to the British people to know that they can see no benefit at all. So they are not self-evident.

Let us take the UK contribution to the EU own resources. The gross contribution is around £10,000 million per annum and the net is around £3,800 million per annum. The public see no tangible benefit for that outlay and believe that the money would be better spent by the United Kingdom Government on improved pensions, better schools and better health rather than by the corrupt "octopus", I had better put in there, and fraud-ridden Commission in Brussels.

Of course the Europhiles say that this is a small price to pay for access to the single market. But even that is a myth. We have access to that market anyway, as the noble Lord, Lord Pearson, pointed out. Norway, Switzerland and the United States, all of whose economies are dynamic, while the EU's is moribund, are able to trade with the European Union. Indeed, according to Global Britain briefing paper 27—I must declare an interest as one of the founders of that organisation—which was based on figures from Eurostat, between 1992 and 2000, the United States increased its exports to the EU at twice the rate of France and Germany. So although the United States is not part of the single market, does not have a free-trade agreement and is therefore subject to the external tariff, and has a strong currency, it is performing twice as well as those major countries which are members of the EU. It seems therefore that far from doing better inside the single market, you do better outside.

Being a member of the EU is not therefore a necessary component of trading with it. That gives a lie to the tired old assertion that trade and jobs depend on membership of the European Union. Indeed, since 1973, the total UK deficit in trade in goods with the EU amounts to some £150 billion—£150 billion—and that represents a great loss of manufacturing industry and jobs. Indeed, one of the main arguments put forward for joining the Common Market was to save manufacturing jobs and industry, but that has not transpired as manufacturing as a percentage of GDP has fallen from 32 per cent in 1973 to less than 19 per cent at present.

Trades union leaders such as Derek Simpson, the general secretary of AMICUS, should take these facts into account and reveal their policy of lining up with the trans-national corporations such as BP, Unilever and Ford in wanting to scrap the pound, the result of which would further impair the Government's ability to take action to stem the decline in manufacturing industry. They might also take note of a recent attack by the Secretary of State for Trade on the common agricultural policy, which she said adds £470 a year to every family's food bill. That puts pressure on wage costs and further disadvantages manufacturing industry as well as other industries.

An examination of all the elements of our continued membership of the EU is necessary. Surely we ought to examine the case for repatriating the CAP and we have not even done it in the new review that has been agreed. We ought also to take back under our own control our fishing waters instead of dismissing such possibilities as mad or disingenuous. Are we not entitled to challenge the view that outside the EU our influence as a country would be diminished when, as part of a union of 25 diverse countries, our influence on an increasing number of issues is likely to be rather less than 10 per cent?

That is a serious question, because as a fully independent nation with a great history and unrivalled experience in diplomacy, we are far more likely to influence world affairs than if we are a mere fraction of a regional grouping.

Finally, we need to consider the road ahead. Will scrapping the pound, for example, lead only to a marginal increase in growth and personal prosperity while incurring the huge penalty of losing overall control of economic policy? Last week, in an article, Anatole Kaletsky put the value of the loss of our sovereignty at about £1 a week and it simply is not worth it. Will it bring penalties to homeowners? Homeowners had better watch themselves because an inquiry is taking place which may bring penalties to them. There is already talk of a capital gains tax on owner-occupiers when they sell their house and an annual charge similar to the old Schedule A tax, plus VAT on new building. Those are all possibilities if we give up the pound.

What of the future of foreign policy arid our Armed Forces? Will they become his or her presidency's foreign policy or his or her presidency's Armed Forces rather than Her Majesty's foreign policy and Armed Forces? I fear that they will.

Those and many more issues need to be examined. We cannot accept a position in which joining an organisation cannot be reviewed and, if necessary, reversed by withdrawal. With a new constitution in the offing, now seems to be the ideal time for such a review. The Bill of the noble Lord, Lord Pearson, gives noble Lords the opportunity to put that in hand. That is why I support the Bill unreservedly.

11.51 a.m.

Lord Harris of High Cross

My Lords, from the Cross Benches I thank the noble Lord, Lord Pearson, for the opportunity to debate these great issues. At the same time I pay a strong tribute to him for his consistency and courage in advancing robust views that have not always been received with the rapture, even the respect, that they deserve in this House.

For the life of me I cannot honestly see what objection there can be to an up-to-date, broad, cost-benefit assessment of membership of the European Union. Above all, when opinion is so widely polarised on the merits of being dragged further into the imbroglio of a new constitution, what are we to make of those who would obstruct an independent, fact-finding inquiry? The only reasoned objection to a similar Bill three years ago came from my old friend the noble and learned Lord, Lord Howe of Aberavon, who on this single issue I have renamed "Lord Howe of Aberration".

In Hansard on 17th March 2000 at col. 1819 he thought it a waste of resources. He said that all major parties favoured staying in the EU. But has he forgotten that all parties once favoured fixed exchange rates, an incomes policy, state industry and similar assorted mischief. Indeed it was with his help that all those consensus views were mercifully abandoned. Today opinion polls are also moving against the BBC orthodoxy on Europe.

Let me first acknowledge from the Cross Benches that the European project was a noble dream and early scored one signal achievement. In geopolitical terms it brought together the two great warring nations of Europe, France and Germany, in a way that could not have been expected after 1945. The analysis that follows summarises what I see as the decline from the European dream to the British, even, I would say, European nightmare.

Back in 1918, after the first defeat of Germany, the historic political rivalries were never healed. They were diverted into economic warfare, with beggar-my-neighbour trade restrictions, competitive exchange rate manipulations and so on. The wisdom of the founders of the Treaty of Rome was to grasp that economic disarmament, by removing tariff and non-tariff barriers to trade and investment, could lead to a new era of European prosperity and peace: prosperity, because free competition between countries offers the same advantages of efficiency and progress as it does within a country and peace because free trade strengthens fruitful interdependence and co-operation.

Only to that extent could the Common Market, as it was, claim a link with European peace, which of course has depended absolutely on American participation in NATO that was shunned by France, if I remember, and is now threatened by the expansion of the EU itself.

At the time of the accession of Britain to the European Union, the IEA sought to inform debate by inviting a strong European advocate, Russell Lewis, to write a Hobart Paper, which was published in 1971 with the striking title Rome or Brussels?. Presciently, the author predicted the conflict between the competitive model of Adam Smith and the bureaucratic control of Napoleon, typified by the scandal of the common agricultural policy.

Alas, the scales were tilted decisively in favour of Brussels and against Adam Smith in 1985 when the French manoeuvred Jacques Delors into the top job as president of the Commission. There were three problems. He was a stern trade union socialist; he was an earnest catholic corporatist and he was a very skilful French apparatchik. He forthwith exploited the Single European Act to launch a massive interventionist programme in the name of harmonisation, which distorted trade and production by specifying the precise shape, size, type and even packaging of acceptable products, thereby raising costs, curbing choice and diverting trade into less beneficial directions. His slogan of a "level playing field" when closely examined turns out to be a schoolboy howler of flat earth economics. In place of the mutual recognition of diverse national products, his Commission ruthlessly imposed uniformity, reached by a somewhat shady process of bargaining and double-dealing between rival lobbies.

In her volume entitled Stagecraft, the noble Baroness, Lady Thatcher, who is much in our thoughts today, revealed how she was misled into accepting the Single European Act as necessary for removing barriers to a competitive market. But there followed a ceaseless flood of complex regulations, including, my favourite, on the export of duck eggs, running to 30,000 words. Measures like the Working Time Directive were deviously proposed in relation to health and safety to dodge the attenuated veto after Maastricht and it was obligingly upheld by the partisan European Court of Justice.

In 1995 another IEA study was published by an austere German academic, Professor Vaubel, who revealed that Brussels had churned out 24,000 regulations and 1,700 directives. He estimated that 70 per cent of all Community legislation and subsidies related to special interest groups promoted by 3,000 lobby organisations in Brussels and 10,000 lobbyists. What were they up to? They were all seeking favours from the pampered apparatchiks with their own interest in extending their empires and protecting their well-paid jobs. The professor revealed that a recent advertisement for 400 job vacancies in Brussels attracted no fewer than 55,000 applications. Nice work, s'il vous plait!

Three conclusions would appear irrefutable. First, we have travelled a very long way from the free-trade vision of the Treaty of Rome. Secondly, no one—not the Prime Minister, not the president of the Commission, and not even the supremely self-confident commissar, Christopher Patten—can conceivably begin to comprehend the full range of EU activities—the so-called acquis communautaire. The third conclusion follows ineluctably: not even the most conscientious student of these matters can begin to put a reliable figure on the total cost.

There is certainly no lack of estimates, as we have heard and will no doubt hear more. The last Pink Book records direct payments to the EU and its institutions of a staggering £90 billion over 10 years. Allowing for receipts under CAP, regional and social support and so on, the annual cost to Britain appears to be running at £15 billion. The OECD has estimated the additional cost of CAP-inflated food prices at £9 billion a year, and a further £5 billion added by some authorities to cover the higher prices caused by so-called anti-dumping duties. Even after allowing for the "Thatcher rebate", which runs at about £3 billion a year, this total cost of £29 billion would devour almost 3 per cent of GDP. The cost of complying with the welter of social legislation has been further estimated by the Institute of Directors to add a further £9 billion a year to the price of British production at home and abroad.

So, we have the mind-numbing first approximation of £38 billion a year. Suppose such a figure were exaggerated and that it was only half: it would be £20 billion a year. The question is: what is the best independently computed estimate of the range of costs? I believe that for an answer we must follow something along the lines of the Bill proposed by the noble Lord, Lord Pearson.

12.2 p.m.

Lord Griffiths of Fforestfach

My Lords, we are all indebted today to my noble friend Lord Pearson for introducing the Bill into the House and for making such a strong opening statement in this Second Reading debate.

It is a great pleasure to follow four speakers who must be the most robust and engaging of Eurosceptics in your Lordships' House. However, I would wish to remind your Lordships that the Bill is important but nevertheless very modest in scope. It is not a proposal for Britain to withdraw from the European Union but a request for a serious study of the implications of withdrawal as one possible future option. Indeed, I would go further and say that the concepts of being in and withdrawal may be too simple; a spectrum and a whole set of alternatives would emerge from such a study.

The background to the debate is the explicit, determined and ever-increasing movement of federalism within the European Union. I voted for Britain to remain in the EEC, as it then was, and I should like to remind noble Lords of what Ted Heath, the Prime Minister, said at the time. He argued that entry was entirely an economic matter; that we would benefit from the gains from trade and from the dynamic effects which would come from being part of a larger market. He specifically stated: There is no question of eroding any national sovereignty; there is no blueprint for a federal Europe. There are some in this country who fear that in going into Europe, we shall in some way sacrifice independence and sovereignty. These fears I need hardly say are completely unjustified". That statement is now laughable and rightly ridiculed. However, I must ask: how many Ministers from these Benches as well as from the Benches Opposite have I heard say something similar over the years?

Since that time in one area after another we have seen sovereignty handed to Brussels. Most recently the proposals for a new European constitution, which have emerged from the Convention on the Future of Europe, transfer even greater powers to the EU at the expense of nation states. Indeed, they explicitly acknowledge federalism.

In particular, the proposals state that in a large number of areas from now on—if passed—there would be shared competence. What is shared competence? It would mean that the Union and member states have the power to legislate and adopt legally-binding Acts. But then the draft goes on to state: The Member States shall exercise their competence only if and to the extent that the Union has not exercised its competence". I always felt that one of the most attractive arguments from Brussels regarding the European Union was the concept of subsidiarity; it was one of its great virtues. The statement that I have just read out suggests that really it is a total sham. I refer your Lordships to the Prime Minister's speech in Cardiff in November 2002. When talking about the Commission he said: We should strengthen the Commission to enable it better to carry out Europe's agenda … It is easy to knock the Commission … We should stand up for the Commission. In terms of the initiation of proposals and their implementation, I want to see both those roles strengthened". I worked in No. 10 Downing Street as head of the Prime Minister's policy unit for five and-a-half years. People used to ask me: do you find that civil servants are biased? Somewhat surprisingly to some people who asked the question, I always said: no, I always found them very fair and that when asked by Ministers to do something they did it, except for one issue on which I felt there was a kind of party line, and that was the issue of the membership of the European Community and the European Union. There were only one or two senior civil servants, in what was the old Board of Trade, who felt that they could disagree and were slightly sceptical about the issue.

From that background I want to suggest that whatever one's view of the relationship between Britain and Europe—whether or not one is a Eurosceptic—we should start from the common ground, and the matter of fact, that the European Union is moving in a federal direction. The implication of that is that there is less room for independent decision making in this country.

My next observation is that, as we move in this direction with less independence, there are three areas which raise great cause for concern. One is the economy. Here I would reinforce the views of my noble friend Lady Cox. First, we should accept that the European Union has made great progress in extending the single market. It deserves great tribute for that. Secondly, despite the many obstacles, it has succeeded in creating the euro. The question we must ask is: is that an economic bloc to which we want to be irrevocably tied? I think not, for the following four reasons.

First, key countries of the economic union are committed currently to such high public expenditures that their generational fiscal accounting is simply out of balance. This means that current fiscal policies in a number of countries is not sustainable without major additional sacrifices on the part of current or future generations. That means higher taxes or cuts in public expenditure. One then has issues such as raising the eligible age before pension and so on and the problems such as those experienced in France. So there is a degree of instability which arises from that.

Secondly, there is the issue of the euro-zone as a trade area. The share of the euro-zone in Britain's trade has fallen since 1990 and looks set to continue. Why is it set to continue? The reason is that the most dynamic areas of growth today and in the foreseeable future are in developing countries most of which are part of the US dollar bloc. For example, in the 1990s, China and India have grown on average by 8 per cent a year. If those countries carried on growing for 30, 40 or 50 years at even 5 per cent, their combined GDP would end up being four-and-a-half times that of the European Union.

Most people accept that in the developed world potential growth in the US is greater than in the European Union. That is because the US has a more competitive and flexible economy, less burdensome regulations and is more conducive to taking risks and creating wealth.

Thirdly, as we have heard, the demographics of the euro-zone mean that population looks as if it will fall. The result is that, relative to the world economy in the 21st century, the euro-zone is set to stagnate.

I was very surprised, on reading the appendix of evidence to the Select Committee in the other place on the UK and the euro, that nearly all the independent witnesses who gave evidence—from independent think tanks or universities—were very sceptical about the future of the euro-zone in the 21st century. The only supporters were pressure groups in favour of the euro.

The argument for the euro is that transaction costs between euro-zone countries are lower; there is greater transparency, as you can now see what prices mean across euro-zone countries; and there is exchange-rate stability. However, the cost of joining the euro is that we would lose a key element of flexibility—the exchange rate—which is a very important dimension of dealing with unexpected changes in the world economy. If euro-zone trade is set to fall, the benefits of joining the euro are less important.

I am sure that, on turning on the evening news last night, I was as surprised as anyone to learn that there had been an agreement on agriculture. As the programme continued, I realised that the situation was far more complex. I still do not understand the asymmetry between what the French and the Spanish are going to do and what we want to do. I was slightly reassured by the leader in The Times this morning—I declare an interest as a director. It states: Sacred Cows—Still free to roam the EU's subsidised pastures". Until we see the detail, the CAP would generally be accepted as something of a monstrosity, as seen in other debates in this House, especially on the Doha development round and on developing countries.

In my judgment, all those elements add up to mean that being a member of the euro-bloc means playing, not in the premier league, but in the second division.

My second area of concern is the European social model. That approach is different from the one that this country has followed for the past 25 years. It is a co-operative vision of a stakeholder society in which individuals and families are protected from change and risk by government support. It is not a society to produce entrepreneurs, risk-takers and innovators; in other words, those who are the foundation for wealth creation. It thinks much more in terms of the community, the social, the collective, trade unions, large corporations and government, not individuals and their families.

In my dealings with the conservatives in Germany, the emphasis on Gemeinschaft as opposed to Gesellschaft is a sort of corporatism that we have not known in quite that way, certainly in Conservative circles in this country. The newly proposed treaty would incorporate the EU Charter of Fundamental Rights and give the European Court of Justice, if it so wished, enormous potential powers, in labour disputes and so on, which could make the matter worse.

The third area that has led me to be sceptical is defence. The noble Lord, Lord Harris, made the very good point that, when European institutions were started in the late 1940s and early 1950s, an element of peace came from the coming together of the French and the Germans of that generation, making it solid.

I was surprised a few years ago when I read in Foreign Affairs an article by a distinguished economist, Harvard professor Martin Feldstein. He argued that, with Europe creating its own identity symbolised by new money—the euro—it would be only a matter of time before it had its own army. He said that, because of Europe's different perception of threats and different foreign policy objectives from the US, they could well end up on different sides. Since then some European countries have made clear their wish for their own security and defence policy at the expense of NATO. Initially, it would be a vague European stand-alone command structure, with only a limited military capability. But, if it is created, I cannot see why and how it would not expand.

The run-up to the Iraq war was a turning point and, in a way, an insight into the future. France, in its disgraceful behaviour, showed its hand as to the kind of future it wants to see in that area of defence. If Britain were to be part of European defence in that way, it can only mean that it would be in rivalry with NATO.

Against the background of an ever-closer Union and the movement of federalism, it may be said that withdrawal is an unthinkable, nuclear option. However, over the past 30 years or so, I have been involved in policy changes that were unthinkable at the time. As an academic at the LSE in the late 1960s and early 1970s, I was involved in the debate on the growth of monetarism. The prevailing consensus was Keynesianism, and it was unthinkable that money was important. Members of your Lordships' House at the time, such as Lord Kaldor and Lord Balogh, argued that money was just a residual in the economy. It was a furious intellectual debate, but today the growth of monetarism has become accepted wisdom.

When privatisation was first mentioned, Amersham International was fine, selling shares in BP was fine and even British Steel was fine, but the idea that you could successfully privatise telecommunications, gas, electricity and water was unthinkable. Then there was the audacious idea of council house sales, hitting at the very base of the welfare state. There was also choice for parents and freedom for schools. I believe that we can think the unthinkable, we do have a veto, and we can be in the position of countries such as Norway, Mexico and Switzerland.

The Bill asks that the issues be looked at rationally. We need the arguments, the options and the numbers. The question to the Minister is not whether we should withdraw; it is whether we should have an informed debate. In our debate on British entry to the euro, the Treasury and other departments must have written hundreds of papers. Members of the Cabinet were required to read great volumes. However, this is a far greater issue. The Government are proud of their commitment to open government. This is a challenge to which they must rise. For the sake of the British people, let us have an informed debate that starts with the facts, that can remove prejudices, and in which the Chancellor, as the Bill suggests, sets up a committee of inquiry.

12.19 p.m.

Lord Monson

My Lords, it is a curious thing that the notion of an objective examination of the pros and cons of remaining in the European Union should be seen by many people as provocative, even outrageous. Such reactions would never be engendered by a similarly objective, no-holds-barred examination of, say, whether the judiciary should be totally reformed or whether our ancient universities should remain centres of excellence or lower their sights so as to appeal to the lowest common denominator.

Why should there be that feeling of outrage? It is, undoubtedly, because, for many, particularly those in the six original EEC member states—Germany, France, Italy and the Benelux countries—the EU has the status of a religion. To question its authority, its beneficence or its glory is sacrilegious. It is as if somebody in 16th-century Spain had cast doubt on the existence of the Virgin Mary or on the physical resurrection of Jesus. The comparison can be extended. Even when Euro-enthusiasts admit the existence of serious corruption and other grave faults in the EU, it is considered extremely bad form—almost treasonable—to hark upon them. Indeed, whistle blowers in the European Commission and other institutions of the Community have a terrible time, although, elsewhere, such whistle blowers are much admired.

There is a precedent for that state of affairs. Forty years ago, the United States media knew all about the bizarre sex life of President Kennedy. Yet, they remained mute, as, a quarter of a century earlier, the British media had stayed mute about the affair between the Prince of Wales and Mrs Wallis Simpson. Meanwhile, throughout the western world, not just Britain and America, the media played down what certain men of the cloth got up to with choirboys. In each of those cases, it was considered so vital to protect the reputation and dignity of, respectively, the American presidency, the British monarchy and the Church that honest inquiry and truth had to be suppressed. That is no longer the case—some might say, "More's the pity". The monarchy, the American presidency—to a lesser extent—and, most certainly, the Church, to say nothing of the judiciary, Parliament and so on, are criticised and lampooned without mercy. Even M Chirac's misdeeds are pilloried in France in a way in which M Mitterrand's never were. Uniquely, the European Union remains untouchable as a concept, cocooned from all criticism, at least on the Continent of Europe.

Why should that be so? I suspect that it is partly because Euro-idealists, some of whom actually believe their own propaganda, have successfully implanted fear deep in the continental psyche. The fear is based on the idea that only the EU—before it the EC and the EEC—has stood between us and mass starvation, mass unemployment and, probably, a third European war. On any calm, reasonable analysis, that is a preposterous claim, as the noble Lord, Lord Pearson of Rannoch, said. It is not unlike the claim made in earlier centuries that sick children would burn in hell if they died before they were baptised, which was believed with equal fervour.

Human beings, alas, are easily panicked. That is what makes it difficult for those of us who are pro-European in a true sense and positively favour a reasonable degree of co-operation with our neighbours, formalised by treaty, if genuine—only genuine—cross-border issues are at stake. The ordinary people of the Continent do not like EU interference in the nooks and crannies of their everyday life—to use the words of the noble Lord, Lord Hurd of Westwell—any more than we do. Two factors stop them from kicking up a fuss. The first is the deep-seated, mainly sub-conscious fear of which I spoke; and the second is the habit, mainly but not exclusively confined to the more southerly nations of the Community, of deigning to obey only the Euro laws that happen to suit. The contemptuous disregard of Community law by the French in the matter of British beef is a case in point.

The Prime Minister tried to reassure us on Monday by pointing out that,¨ the Union only has those powers that member states give it".—[Official Report", Commons, 23/6/03; col. 707.] Indeed. What happens when member states realise that the ceding of certain powers to the Union was a big mistake and ask for those powers to be handed back? They are told to take a running jump, because of the infamous acquis communautaire. Two days ago, Signor Romano Prodi urged Britain to take a decision to, swim in the European sea forever, and with deep intensity". I am a bit puzzled about the "deep intensity", but Britain has always been happy to swim, metaphorically and often literally, in the Mediterranean, the Adriatic, the Baltic and the North Sea. The trouble is that Britain also wants the right to go on swimming in the Atlantic, the Pacific, the Indian Ocean and so on as well.

We are not inward-looking little Europeans who hanker after a re-constituted Holy Roman Empire. De Gaulle understood that. Perhaps his conclusion was, in retrospect, the right one. We are not at the heart of Europe geographically, and, mainly for that reason, we were not at the heart of Europe historically. I doubt that we can ever become so, psychologically. We look to the wider world.

Perhaps a graceful withdrawal from the fetters of the EU, while remaining a member of the European economic area, in company with Norway and Iceland, would be the happiest solution for ourselves and for the continentals. The noble Lord, Lord Griffiths of Fforestfach, said that we had a range of options to consider. That, I think, is my preferred one, although I could be wrong. Unfair competition from illegally subsidised continental steel mills, about which the noble Lord, Lord Hardy of Wath, so understandably complained in the debate on the steel industry two days ago, would be no worse than it is now. The illegal French refusal to recognise the qualifications of British ski instructors would be no worse than it is now. British families would no longer pay £470 a year extra because of EU taxes imposed on imported food, as the Department of Trade and Industry revealed on 5th June. Those are not my figures; they are the figures of the DTI. Our long-suffering and battered fishermen—those who survive—would no longer be sacrificed for the benefit of Spain.

There are bound to be at least some adverse consequences. Perhaps the downside would be so great as to outweigh the benefits of simple EEA status. If that is a possibility, we should have detailed chapter and verse, so that we can make a judgment and re-formulate our opinions accordingly. There is nothing sacrilegious about going through the EU balance sheet with a fine-toothed comb. We will not be rent asunder by bolts of lightning, and the heavens will not cave in.

This short Bill, for which I warmly commend the noble Lord, Lord Pearson of Rannoch, presents us with an ideal opportunity. I suggest only that, given that 50 per cent of the areas to be examined set out in Clause 1(2) have nothing to do with economics, the Chancellor of the Exchequer is not the best person to appoint the committee. It is, perhaps, a job for a new model, non-political Lord Chancellor.

12.28 p.m.

Lord Willoughby de Broke

My Lords, we should all be grateful to my noble friend Lord Pearson of Rannoch for introducing the Bill at such an important time. It is important because the Convention on the Future of Europe has recently produced a blueprint for an EU constitution. As my noble friend Lord Griffiths of Fforestfach pointed out, we are about to embark on yet another exercise in handing over power or what EU apparatchiks like to call "competencies" in the hope that people will not notice that they are talking about power. That process will be sanctified in yet another of those interminable intergovernmental conferences, after which Parliament is presented with a binding constitutional treaty and required to ratify it in its entirety without the option of removing a line.

Before the Government commit the people of this country to such a constitution, the implications of which they know nothing, they must make a rational appraisal of the economic and political advantages and disadvantages of our continuing membership of the European Union. They have a duty to do that, if only because the draft constitution includes a provision for any member state to leave the Union if it so wishes. Article 46 in my copy of the draft constitution, which is probably out-dated, is a friendly little article. It simply states that, a Member State which decides to withdraw shall notify the Council of its intention. Once that notification is given the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for withdrawal, taking account of the framework for its future relationship with the Union". That article sets out a perfectly sensible and amicable way forward. I see nothing wrong with it. It acknowledges that there is life outside the Union for any member state that does not wish to go down the road of greater integration. Yet the mention of the shadow of the thought of leaving the Union has the Government behaving as though they had received an indecent proposal. It would be the end of the world as we know it. The moon would drip blood and we would be threatened by all sorts of unmentionable horrors, frightening things that go bump in the night, something nasty in the woodshed.

Surely the Government are grown up enough to carry out a cost/benefit analysis of our membership of the EU without having a collective nervous breakdown. It is not good enough to wheel out the tired, empty banalities about "being at the heart of Europe", "our European destiny", or having "a voice at the top table". There is no vacancy at the heart of Europe. There never has been; France and Germany occupy that space. From a British point of view, what is the EU for? That is what we must ask ourselves. Do we benefit from our membership or not? If not, what should we do about it?

Let us look briefly at the balance sheet. My noble friend Lord Pearson has already dealt with employment, but it is worth underlining that there would he no, or very few, job losses if we left the EU. Well, there probably would be some among our MEPs and the Euro-apparat, but we could probably live with that. They could be redeployed in more worthwhile jobs. We run a massive trade balance of payments deficit with the EU. Is anyone seriously suggesting that Germany, France and other EU member states would stop exporting to one of their strongest markets if we left the EU? The idea is infantile. It would be totally counter-productive. Britain is economically vital to the other member states—more so than membership is vital to us.

As my noble friend also pointed out, only a small percentage of our economy is in any case involved with the EU, but 100 per cent of it is affected by single market regulations, which have become a nightmare for the small and medium-sized enterprises on which our economy depends. Those enterprises are, or should be, the expanders, the job-creators, but the thickets of red tape, the forests of futile directives and regulations from the EU are strangling them.

If the Minister does not believe me, she should listen to what the Confederation of British Industry and the Federation of Small Businesses have been trying to tell the Government for years. Or she could refer to her Answer to a written Question tabled by the noble Lord, Lord Stoddart, which revealed that so far as the Government can verify, 101,811 EU regulations had been enacted by August 2002. Those directives and regulations cover everything from abattoirs to zoos, passing through condoms, ladders and London buses.

In that cost/benefit exercise, we must not forget the common agricultural policy, which eats up almost half of the current EU budget. We have today had talk and news of reform of the CAP. At first glance, it looks like little more than a re-labelling exercise. It certainly does nothing to reduce the burden on British taxpayers. The CAP will cost as much; the money will simply be spent in a different way. We get a thoroughly bad deal out of the CAP; that will not change. We would be far better off running our own agriculture.

What of fisheries? We have no fishing industry to speak of any longer—the shameful result of Mr Heath and the Foreign Office concluding that British fisheries and fishermen were expendable. The common fisheries policy is as much of an economic, social and environmental disaster as the CAP. Of course, we pay through the nose for those failures through our contribution to the EU budget, which, since our entry into the EU in 1973, now exceeds £150 billion—money that would surely have been far better spent in this country rather than being channelled through Brussels and our getting a little bit back with EU regulations attached.

Like my noble friend Lord Pearson, I ask whether the EU social model is right for us. Like him, on the face of it I think that the answer must be no. In spite of—or, more likely, because of—the plethora of employment directives and health and safety directives, unemployment in the larger EU economies remains stubbornly high—far higher than in this country. That is what most concerns me about the EU: it does not seem to want to raise its own game, but rather to drag us down to its level. The structural changes needed in the EU are moving at a glacial pace. We are urged to harmonise with economies doing less well than us and with higher unemployment.

Finally, I turn briefly to foreign affairs. The common foreign and security policy was always pure illusion. The plan seems to be, "They supply the policies; we supply the troops". The war in Iraq has demonstrated beyond doubt—if there ever was one—that divisions among EU countries are deep and will long outlast the war. Suddenly, the need to be part of a strong EU looks terribly outdated. The EU is increasingly irrelevant, while Britain remains—at least for the moment—the fourth largest economy in the world and has more military power than the rest of the EU put together.

Lord Wallace of Saltaire

My Lords, I am fascinated by the statement that Britain has more military power than the rest of the EU put together. Can the noble Lord substantiate that claim?

Lord Willoughby de Broke

My Lords, like a Minister, I shall write to the noble Lord about it. How can it possibly be in Britain's interest to increase French influence over our foreign and security policy? How can it possibly be in Britain's interests to shackle itself with the EU's anti-competitive rules and regulations? How can it possibly be in Britain's interest to pay billions of pounds a year to be part of a Union with high unemployment and dwindling prospects? Those are questions with huge implications for our future freedom and prosperity. Yet they are questions that the Government seem too frightened to ask. The Bill introduced by my noble friend Lord Pearson will have to do the work for them.

12.36 p.m.

Lord Moran

My Lords, we should be grateful to the noble Lord, Lord Pearson of Rannoch, for introducing this Bill, and so giving us a rare opportunity to address the issue of what might happen if we were to leave the European Union. For a long time, the noble Lord has put considerable time, care and resources into making and publishing critical assessments of what is going on in the European Union. That has been of great value to the House and to the wider public.

As the noble Lord, Lord Willoughby de Broke, pointed out, the draft constitution put forward by Mr Giscard D'Estaing and his convention states, in part I, Article 59, any Member State to may decide to withdraw", and that an agreement should then be negotiated, taking account of the framework for its future relationship with the Union". That negotiation is likely to be somewhat one-sided, as it is laid down that, the representative of the withdrawing Member State shall not participate in Council of Ministers or European Council discussions or decisions concerning it". No doubt the draftsmen had the United Kingdom in mind. They seem to envisage dictating terms to the withdrawing member. Will the Government see to it that those words are deleted in due course?

The Government and the zealots of Europhilia maintain that withdrawal would be a disaster for the United Kingdom and that it is unthinkable that we should take that step. They imply that anyone who advocates that course must be not quite right in the head. They hold that we must remain full and active members of the Union and must join wholeheartedly in its future development. Ministers argue that that is the policy of sanity and good sense and is in the British interest.

The Prime Minister recently promised to try to build a pro-European consensus and to combat anti-European prejudice. Yesterday, he and Mr MacShane briefed Ministers who are to be deployed in a pro-European "road show" and to make the case for Britain being fully engaged in the European Union.

Ministers talk a good deal about preserving our influence in Europe. But it does not seem to me that we have much influence—nothing compared with that of the French. If we had, the EU would by now be a very different animal. Too often, influence appears to mean simply going round the conference circuit with suitable photo opportunities.

Is the enthusiasm of the Government for European integration in fact the policy of sanity and good sense? Consider the Union as it is. First, membership imposes a huge financial burden on our taxpayers. Our net contribution to the EU budget this year is more than £4 billion. My noble friend Lord Harris of High Cross has given us some alarming figures about the real costs. Then there is the CAP. It is too soon to assess the agreement just made by agriculture Ministers. We must hope that after 38 years of an immensely costly and inefficient policy, which has failed to give European farmers a good living, there is a real change for the better—not too much of a muddy compromise—and that it will not penalise our struggling farmers or put them at a disadvantage with overseas competitors.

The common fisheries policy is still unreformed. In our last debate on this subject on 5th February 2001, speakers from all sides of the House agreed that the CFP had been a disaster and was getting worse. The infant European army is unnecessary and is undermining NATO, set up by countries some of which spend hardly anything on defence.

There is notorious corruption and fraud in the Brussels administration. This resulted in the removal of M Santer's Commission. The Eurostat scandal suggests that matters might not be all that better today. Commissioners are being summoned and asked why they did not crack down on this earlier. They include Mr Kinnock, who I think has three relations on the European payroll—a modern version of "Happy Families".

We all know that there is vast over-regulation by the Commission, a never-ending stream of directives and regulations imposing a heavy burden on business and farmers. Even cleaning fluid, used to take spots off ties and skirts, has had to be taken off shop shelves, ear tags in livestock have to be changed at considerable expense two or three times, while horses now have to have passports. The Commission admits that there are now 97,000 pages of EU laws and regulations, forming the acquis.

Above all, there is the endless push towards a single European state, an extension of the "ever closer union" prescribed in the Treaty of Rome. There is the ratchet moving us towards this goal—sometimes small steps and sometimes large, like the Maastricht Treaty. Now we are faced with two huge new steps. There is the pressure to join the euro, which would lead to a massive loss of control over our affairs. According to a recent poll, this week the Guardian reported that only 21 per cent of the population were in favour of our joining.

Yesterday, I went to the magnificent exhibition in Greenwich about the first Queen Elizabeth. I noted that a small section was dedicated to what she had done in the field of finance and to the improvement of coinage. It was interesting that her restoration of the currency was reckoned by contemporaries to be one of her three greatest achievements and recorded as such on her tomb—a remarkable contrast to the actions of the present Government in trying to get rid of our currency.

We now face the draft constitution. I was struck that the Economist—hardly a flagship of the Eurosceptic point of view—described the draft constitution recently as, a lamentable piece of work", and, a blueprint for accelerated instability". It continued: The Union's governments should take it up for exactly as long as it takes to dump it in the nearest bin". Strong words from such a respected journal.

I noted an article in The Times on 25th February by Rosemary Righter which stated: The draft is so frankly and robustly integrationist that, unless it is radically amended, its effect will be to strip national self-government of all but residual meaning".

We all like to control our own affairs but when we become very old we may become incapable of handling them and others may have to deal with them. Do we think that this country has become so senile that it can no longer run its own affairs and must allow others—the Brussels bureaucracy—to do so? Should not the British people be asked about that?

Looking at all this dispassionately, is it not reasonable to consider that those who support the way in which the Union now functions and favour rapid progress towards the disappearance of the United Kingdom and the establishment of a single European country, in which we should be a peripheral province only, are precisely those who, on any normal judgment, appear irrational, and that this is not true of those who argue for the preservation of an independent United Kingdom with a full trading relationship with Europe but without the enormous disadvantages involved in full membership? It is galling to see that Mexico now enjoys just such a relationship with the EU while we do not.

It is of the greatest importance that we should have a thorough, impartial and well-informed study of what detachment from the Union, in whole or in part, would mean for this country. I do not suppose that this Government or any other that is in sight will do this, although of course they should. I believe that in those circumstances, the best way forward might be for us to set up a Select Committee of this House to consider thoroughly and to report on the implications of acting in accordance with Part I, Article 59 of the draft constitution. Such a committee must command confidence and be as balanced and impartial as possible.

A good precedent was the Select Committee on the 1996 Inter-Governmental Conference. At the instigation of, I believe, the noble Lord, Lord Pearson, three Eurosceptics were co-opted to this committee to balance the Europhiles—that is, the noble Lord, Lord Tebbit, the noble Lord, Lord Stoddart of Swindon, and myself as a Cross-Bencher. It worked well and we all signed the report which was, I think, a useful one.

Such a committee established now could hear evidence from experts in all the relevant fields. A report on these lines—calm, dispassionate and authoritative—would be an enormous help to all those considering our future relationship with Europe and would enable all of us to judge whether withdrawal would be a catastrophe or bring benefits to this country. I commend the idea to the House.

12.47 p.m.

Lord Vinson

My Lords, I, too, am very indebted to my noble friend Lord Pearson for introducing this historic and timely debate. The future governance of this country is of profound historic significance and ratification of the new European constitution in anything like its present form would be the end of Britain as a self-governing country.

It is strange how Mr Blair and his Government want to tell us about the regime change in Baghdad, yet how little they wish to talk about the regime change in London and Brussels. As other noble Lords have said, we witness the destruction of Britain by stealth. Throughout my lifetime I have witnessed the pursuit of national political idealism three times and seen its subsequent costly failure.

First, there was the German pursuit of national socialism—fascism—which culminated in the last Great War. Overarching that period was the Soviet pursuit of communism and we all know the tragedy that brought to millions. Subsequently we saw in Britain the pursuit of socialism and the national ownership of the commanding heights of the economy. We now know clearly what dis-benefits that brought.

So here we are in our own period of history watching the pursuit of internationalism and—in its more local form—Europeanism, mostly promoted by those who, with the best of intentions, somehow believe that tomorrow's form of government must be better than that of today, and government by strangers far better than government by ourselves. The nirvana of Euro-governance is, I predict, yet another false dawn.

Sadly, history is increasingly undervalued in our schools, but it remains true that those who do not know where they have come from really do not know where they are going. Our own pattern of self-governance with its own judiciary may not be perfect by any means, but to hand the governance to others, and with it effectively destroy the mechanism that enables change, is, in my view, a recipe for social and political unrest of the first magnitude.

Those who would push for an ever closer federal Europe echo the belief of its early founders that this would prevent war. But such belief is founded historically on totally the wrong assumptions. Wars between democracies have yet to happen. Wars are caused by political or monarchic dictators. Civil strife, on the other hand, is caused by the frustration and inability to right wrongs. This is the essential weakness of the European Union, which has moved from a simple trading relationship to one that merges national, economic and political sovereignty into a bureaucracy virtually immune to influence.

Democracy as we know it is a very frail plant. Some say that it only just works because of a residual authority from a previous autocracy; others that it is a charade and that it is not really democratic at all in the widest sense. But whatever its imperfections, it does give the electorate a safety valve. They can, by voting in or out the elected representative they know by name, effect to some extent the changes they seek. Not so the deeper we go into the governance from Europe. The democratic deficit is inherent in its structure.

If one stretches that democratic elastic too far, it will snap. Currently we have roughly 65,000 voters per MP. We have around 600,000 voters per Euro MP, a constituency 10 times the size. Most voters will never meet him. His constituency is too big for him to make effective personal contact, and all the harder when he is drawing his expenses in Strasbourg or Brussels.

Every government since 1975 has diminished, almost by stealth, the powers of the UK Parliament in favour of ministerial power exercised in camera throughout the European institutions: the Council of Ministers, the Commission and the trans-national bureaucracies of the EU.

Over 55 per cent of the legislation that affects Britain is now initiated or authorised in Brussels or Strasbourg with all the rigid inflexibility of a Soviet central planning regime by another name. Democracy needs responsive government. The democratic elastic is already stretched by a factor of 10 and surely it will eventually snap.

Just over 200 years ago, our own American colonies declared war against us, their mother country—their slogan: no taxation without representation. History may not repeat itself exactly, but human nature does not change. The same conditions are inherent in the euro decision, which is really about democracy, accountability and patriotism. A government which loses control over the economy eventually loses control over everything else. As powers move up to Brussels and minor powers move down to the regionalism that is deliberately designed to weaken national government, nothing will be left for Parliament to do but argue over the price of dog licences. For MPs to vote to transfer even more power to Brussels must be the finest example ever of turkeys voting for Christmas.

If we were getting good governance from our EC Ministers it would he possible to argue that the present system works. Sadly, many of our elected representatives at all levels of government are unaware of the realities because they know little of the real world they govern. I have no doubt that they are motivated by the best of intentions when they nod through EC legislation, but few of them have come up against its mind-numbing realities.

Nothing illustrates this better than real examples of the endless regulations designed to harmonise economic activity throughout Europe and, in the name of uniformity, introducing unnecessary conformity. For example, throughout the British Isles over thousands of years, farmers have buried their dead stock on their land in the same way that you would bury a family dog at the bottom of the garden. But now we have a new EU regulation that forbids the burial of sheep and insists that these must be incinerated. On a hot summer's day, a farmer has to stop what he is doing, load the stinking carcass into the back of his van, cover it as best he can and then cart it, at great cost in time and money, 30 or so miles to the nearest incinerator. When he inquires what is the malady this regulation is attempting to put right, he is assured that no water courses in Britain have been affected by the practice of burying stock, but that the high water table in Belgium, Holland and some other countries makes the practice undesirable. Our burials could hardly poison their water.

If ever there was a case for subsidiarity and a national interpretation of the rules, this is one. But, no, it was nodded through as a gesture of harmonisation and compatibility with our EU neighbours. It is a totally unnecessary and costly infliction for which there is no arguable need.

Such examples could be repeated a thousandfold. They really illustrate the kind of costs falling on the United Kingdom as a result of membership and the increasing harm done to our economy. Only last week we had a projected and likely to be implemented new European directive on medical clinical trials. In Britain, the scale of publicly funded clinical research dwarfs anything in Europe and the proposed rule would barely affect other countries, but it would affect us. I shall quote from our own Medical Research Council: The adoption of an EC single model could double the amount of paperwork involved in running clinical trials and the extra costs of bureaucracy could seriously delay medicines coming to market. It would particularly affect the early stages of bio-science research…it could strangle medical research". Have we a problem with the present arrangements in the UK? We have not. But how many of our MPs and Ministers are personally affected by this and other numerous, nonsensical regulations flowing out of Brussels? Blindly, they vote on.

When Dean Swift wrote Gulliver's Travels, an allegory on the religious and other regulations of the time, he said No one silken thread held him down, but a thousand made him immobile". It is the cumulative effect of regulations—designed to be interpreted by a Napoleonic code where the law is aspirational, but reinterpreted and applied in our traditional manner where the law is mandatory—that is so mind-numbing and so job destructive.

Over 100,000 new regulations have poured from Brussels, so many that even the Government are unable to provide a central record of them. To make matters worse, most of those regulations have no sunset clauses and no provision for review.

In this country, one used to be able to put right bad regulation. A constituent could see his MP, who in turn would arrange to see the Minister responsible. He and his department were responsive to constructive criticism and mostly wrongs were righted. That is not so today. Critical complaint is no more effective than punching a jelly, resulting in total frustration and resentment, and sowing all the seeds of potential civil discord. Is it surprising that people are increasingly voting less? They are becoming disconnected from the institutions that are supposed to serve them.

Our citizens are beginning to seethe and it is not surprising that every poll shows increasing antagonism towards greater Euro-federalism and an awakening concern about our loss of national sovereignty. One size of government fits no better than one size of interest rate, and the democratic deficit implicit in Euro-federalism sows in itself the destruction of the entire concept—just as, recently, the Iraq War exploded the myth of a common foreign policy.

The ridiculous thing is that none of this is necessary. If we look at Canada, it has maintained its political and economic sovereignty, along with its own currency. It remains at peace, with open trading borders, with the United States. It is a perfect model. We could have precisely the same arrangements. Europe needs us rather more than we need it, a point that has been well made by other speakers. National self-interest would ensure the continuity of our trading arrangements. What is more, there would be no massive flow of cash from this country as our budget contribution to the EC—money used to finance projects of low utility where the matching fund concept encourages at home pork barrel politics.

That brings me to the central issue of this debate: the taboo subject of the repatriation of powers to the United Kingdom; powers that were given away without proper consultation. Indeed, misinformation was given to the British public in the first place by the former Prime Minister, Sir Edward Heath, as has already been made clear in the debate.

On all fronts we await the conjectural economic benefits that were promised to us on entry. Even Gordon Brown, in his speech on 17th June, said: The promised benefits of a European single market have yet to materialize…the EU needed to open up trade and to liberalise its markets to deliver them".

Dream on, Peter Hain—your dreams are turning into a nightmare. The conjectural benefits will remain conjectural. The concept can never succeed—it is founded on a false premise.

Meanwhile, while we retain the remnants of our independence, contrary to what all the pundits forecast, we are manifestly doing better. We have already given away, for example, not only our fishing industry but numerous political, financial and social freedoms which, previously regulated at a sensible level, made this country a very special place in which to live and work and, not surprisingly, attractive to others.

We are now pressed to accept a European constitution Which Would override our own constitution and create a country called Europe where we would be governed by continental politicians—strangers to the British public—who, once elected, even if corrupt, could not be voted out of office. We would be completely at the mercy of an unelected European Commission and a new European law corpus juris, which, far from defending the freedom of the individual, is designed to ensure the supremacy of the state. We should ask the plane-spotters who spent five weeks of their lives in a Greek gaol facing charges that were never laid because of a lack of evidence what they think about European justice.

This country should not sign up to a premature federalism in Europe and become part of the rush for political integration which turns federalism into little more than a mask for a unitary super-state. The loss of self-governance would put at risk our distinctive political culture, and it is far from clear how long that culture would withstand subordination to a centralised rule-making agency which pitches its actions at the level of a common denominator.

There is a limit to the degree that citizens will accept the subjugation of their interests to wider group interests. Democracy works only when it has the legitimacy of public approval. Far from ensuring European harmony, the EC contains all the ingredients for social unrest. The benefits of membership are conjectural and dubious; the disbenefits are manifest. Its economic situation is getting worse and can only get worse. It is yet another political dream doomed to fail.

I am convinced that any assessment would conclude that we would be better off out. What is more, we should get out before even more harm is done and before the situation gets even harder to undo. I hope that this debate will do something to save the independence of this ancient and wonderful country.

1.2 p.m.

Lord Beaumont of Whitley

My Lords, as the sole representative of the Green Party in this Parliament I should make it clear that what I am about to say does not represent Green Party policy, although it would be approved by most members of the Green Party.

There are a number of problems in making policies about the European Union once you are in it. For instance, the Green Party supports membership of the European Union but believes that it should be reformed in a large number of ways, many of which would be approved by noble Lords who have so far spoken in the debate. The problem is that there is not a hope in hell of any of these reforms actually happening.

Therefore, the policy of the Green Party as a whole amounts to my policy—that is, that we should get out as soon as possible. But, as other noble Lords have rightly said, this is not because we are anti-Europe. With my family name, I should certainly be part of and treasure the whole Christendom tradition of Europe—and I do. I do not believe that we are merely an off-shore island.

There is a perfectly good European organisation of which we are members—it has been too little referred to in the debate so far—and that is the Council of Europe. For some time I have had the honour and privilege of being the Liberal Party's delegation leader at the Council of Europe, which has been very worthwhile. The Council of Europe has enormous power to set things going, to help matters, to urge civil rights—of which it was the pioneer—and to support our heritage. It has all the power to do all the good things that Europe can do—and there are good things.

I would be the last person to deny that the Green Party representatives of Britain in the EU do anything but good— in fact, they are an enormous power for good—but the Council of Europe has the kind of pattern that we need. The objection to the Council of Europe always used to be that it was a worthy body but it had no teeth. Now that we are in a body that grows more and more teeth every month, I am not sure that that particular criticism carries much weight with either your Lordships or the citizens of this country. We need rather fewer teeth. We do not like the teeth—they bite, and they bite in the wrong place.

It is time that we looked at this problem seriously; it is time that it came to the forefront of political life in this country; it is time that we looked at the whole proceedings in relation to what we should do if we did decide to get out. That is what the Bill is about and what the debate is about. Although the debate has ranged much wider than that, I shall not fall into the trap of ranging wider—particularly at this time on a Friday.

I welcome the Bill enormously and I hope that the Committee of the Whole House which deals with it will do something really worth while to enable this country to make up its mind what it wants to do about the situation in which it finds itself today.

1.7 p.m.

The Earl of Liverpool

My Lords, one of the advantages of being the last speaker before hearing from noble Lords on the respective Front Benches is that one has the benefit of listening to your Lordships and gaining a consensus view of the debate. My noble friend Lord Pearson must be delighted that he has unanimous support for his Bill. The disadvantage is that most of what I wanted to say has been said already. However, I make no apology for saying that I believe there is nothing like a good story oft repeated, and so I shall battle on.

I join with other noble Lords in thanking my noble friend Lord Pearson for introducing the Bill. His speech was masterly. This is a sensitive and important subject which has the tendency to excite passions and his voice was the voice of sweet reason.

The only purpose of the Bill is to require "UK plc" to do what any responsible company would do before taking a major business decision; namely, to analyse and consider all the options and implications before deciding what to do next. Indeed, if a substantial public company did not do so before making fundamental policy decisions, shareholders and the City generally would be justified in sanctioning, or even sacking, the chairman and directors responsible.

I assume that we do still have an option. If we do, it seems to me that there is an absolute requirement to pass the Bill and to get started on the research. Future generations would be right not to forgive us if we did not look very seriously at all the alternatives before taking the next irrevocable step. That is the proposition on which I believe my noble friend Lord Pearson bases his Bill, so I hope that the Minister can give a straightforward answer as to whether we still have an option.

I believe much of the reason my noble friend feels this Bill is necessary is contained in a report which appeared in the newspapers only last Monday. It was about how Edward Heath, as he was then, deliberately misled the people of this country in the lead-up to the referendum of 1972. This point has been raised by other noble Lords but I will quote briefly from the article: Civil servants were engaged in a dirty tricks department of the Foreign Office to cover up the threat to sovereignty and provide rapid rebuttal of anti-common Market arguments". It goes on to say that a list of 200 files recently released at the national archives, show that staff were drafted in from another secret unit, the Information Research Department, that for 20 years of the Cold War had been fighting a…covert battle against communism". We must guard against anything of this nature happening in the future. We must not allow the people of this country to be hoodwinked a second time.

We now have a European constitution which our Government, led by Tony Blair, will sign up to. We are told there will be elements which will be "red lined", but we know from past experience that this means very little and the Council of Ministers will reject most, if not all our arguments so, after much huffing and puffing, and without giving the people of this country a chance to voice their opinion through a referendum, we will be signed up to a federal European constitution. I am sorry, my Lords, I used the "F" word, but I just could not help myself.

We have managed for thousands of years without a written constitution, and if we look back at history, we have not done too badly as a result. So why would it be in our interests to sign up to this one, which has been designed by foreigners and without the consent of the British people? Where will our Royal Family stand in the order of things if we do? Will the Queen be above the constitution or not? I believe we need a very clear answer to that question, and I hope the Minister can respond to that when she speaks.

The proposed constitution is a much more important matter than whether we join the euro, but Mr Blair will deny the public to have a voice on it. Once we are signed up to the new constitution, there will be no going back, so the question of the euro becomes almost academic. I believe Mr Blair knows that only too well.

We have already lost nine-tenths of our rights under our unwritten constitution. One of its main principles is that no Government have the right to bind another. The people have the right to choose who governs them every five years, but this right is fast being eroded. Nowadays so many of our laws are imposed upon us as a direct result of directives from unelected bureaucrats in Brussels. Harmonisation of interest rates and tax will mean that no matter which party governs us, 70 or 80 per cent of all important policy-making decisions will be decreed from Brussels and Strasbourg, as has been said by other noble Lords.

This brings me to the positively Orwellian aspect of the workings of the European Parliament. For reasons which I do not fully understand, it is decreed that the Parliament will meet for approximately half the year in Brussels and the other half in Strasbourg. This inevitably gives rise to the need for accommodation requirements for Commissioners, MEPs, their researchers, secretaries, and so on, in both cities. Quite apart from the absurd logistics of moving the whole apparatus around, it makes it very expensive and to some extent explains why it costs over £1 million to sustain one MEP for one year.

So many extraordinary figures emerge as a result of this crazy way of operating, but I read one the other day which I should like to share with your Lordships.

The library which serves the European Parliament has to be moved when the politicians decamp. If you take the cost of operating the library and divide it by the total number of books requisitioned each year, it works out at a cost of £48,000 per book. I find that an incredible and shocking figure.

I turn to another aspect of the EC that baffles me. Who will pay for the 10 countries which are soon to join, bringing the total to 25? It is a recognised principle that the countries which can afford to pay do so, and the rest receive. Our net contribution to this club, the rules of which we do not appear fully to understand, is approximately £4 billion per year, as the noble Lord, Lord Stoddart of Swindon, explained. That is equivalent to about £11 million of taxpayers' money leaving our shores every single day. What do we get in return for this? And how many new hospitals could we build here with that money?

The real question of who will pay for the 10 eastern European countries remains a mystery to me. I do not see any substantial contributors to the club's coffers among them, so presumably our contributions will have to go up. Or perhaps the real truth is to be found in a quote from Mr Romani Prodi, reported in the American magazine National Review on 5th April this year. He said: I keep telling the applicant countries in Eastern Europe that in the long run they will not be able to seek prosperity from a United Europe and security from Europe". This is certainly not the expectation of the applicant countries in my experience, so perhaps Mr Prodi should try a little harder to get his message across to them.

I now pose a question to which I would dearly love the answer: why do we persist in our efforts to join a club which many believe is heading for "skid row"? Even France's most prestigious think tank, L'Institut Français des Relations Internationales, has concluded that unless it radically changes its policy, the EU will fail totally to rival the United States and will soon enter a downward spiral of relative economic decline. My noble friend Lady Cox has already referred to its report, but I make no apology for repeating some of her comments, which are so fundamental to this debate. It concludes: The enlargement of the European Union won't suffice to guarantee parity with the United States. The EU will weigh less heavily on the process of globalisation and a slow but inexorable movement onto 'history's exit ramp' is foreseeable".

Why does it come to that conclusion? It forecasts that by 2050, Europe's share of world trade will shrink to only 12 per cent against 22 per cent today and the euro will be regarded as a second-class currency. Over this period, North America will maintain its technological hegemony and Greater China, including Taiwan, will come to account for almost a quarter of the world's economy. It estimates that by 2050 an EU of 30 states will have a growth rate of 1.1 per cent, the North American free trade groupings 2.3 per cent and Greater China 2.6 per cent.

The institute blames Europe's problems on two factors: demographic decline, with a fall in Europe's active population from 331 million to 243 million, and the likelihood that North America, the "locus of innovative activity" will continue to suck in the lion's share of the world's savings.

These are dramatic pronouncements by any standards, particularly coming from the IFRI. They bring me to the theme that I developed in my speech on the same Bill when we debated it a little over three years ago.

I believe we are an outward-looking island. We have strong ties with Europe but we also have strong ties with other parts of the world. Why oh why do we not have a very serious look at the possibility of joining NAFTA and entering a free trade agreement with our European partners. They assuredly need to trade with us just as much as we need to trade with them, so I do not believe here would be any problem there, and we could be the bridge into Europe for our American and other allies and friends around the world.

We could learn a lot from Mexico—

Lord Wallace of Saltaire

My Lords, we have just signed a non-reciprocal agreement on extradition with the United States, which means that we have to accept their rules and they do not accept ours. Is the noble Earl seriously proposing that rather than negotiating with our European partners, we accept what the Americans tell us to do within NAFTA? Is that the preferred way in which one subordinates British sovereignty?

The Earl of Liverpool

My Lords, I do not believe that the Americans are as bureaucratic as the EC. I believe that one would be able to negotiate with them quite happily.

To continue, we could literally become the Hong Kong of Europe, and we could have the best of both worlds. NAFTA does not have a bureaucratic government or the structure of a bureaucratic government, so the costs would be minimal in comparison. We could then build on and develop our relations with North America, which is undoubtedly our strongest ally in the world today. It would require a leap of faith to do that, but is that not just the sort of thing that UK plc should seriously consider before signing up to the European constitution, since when that is done there will be no going back?

I conclude by saying that I very much hope that the Bill will be passed so that the people of our country can have the opportunity of weighing up the arguments for and against. Only then would we see true democracy at work.

1.21 p.m.

Lord Weatherill

My Lords, I apologise for my inability to be present throughout the debate, but I did have the opportunity to hear the opening speech of the noble Lord, Lord Pearson of Rannoch, and I have heard other speeches as well. I crave your Lordships' indulgence in making a brief contribution in the gap and your forgiveness if I repeat things that have been said which I have not heard.

About a month ago, there was a headline in the Daily Telegraph that drew attention to the wages of spin. It went on to say that the electorate was increasingly lacking trust in the truth of what they are told by politicians. In my adoption speech in Croydon North East, in 1964, I campaigned on the slogan "Truth in Politics". At the time of the referendum for entry into the European Economic Community, I was the Deputy Chief Whip. I campaigned for entry on the assurance of Mr Edward Heath, the Prime Minister, that: Joining the community does not entail a loss of national identity or an erosion of essential national sovereignty". I do not support the Bill because I am anti-European. On the contrary, I support it because I believe that the electorate has an absolute right to be told the truth about our closer associations with the European Union.

I hope that it is not being too dramatic to say that we are approaching one of the great crossroads of history. It is far easier to lose our freedoms than to regain them. One of the lasting legacies of the previous Conservative Government is the awful phrase, "to be economical with the truth"—a near relation to spin. As the former Speaker of the House of Commons and a guardian of the rights and privileges of our inherited sovereign Parliament, I cannot approach closer union with Europe with the feeling that the Speaker of our House of Commons may possibly become as important as, say, the Speaker of the House of Representatives in Virginia in the United States of America—however admirable he or she may be.

As parliamentarians, we have a sacred duty to explain the pros and cons of ever-closer union with Europe. We would be failing in our duty if we did not do that, and we should not be forgiven. It is in that spirit that I support the Bill, which gives the electorate the opportunity to hear the other side of the story from politicians. We should tell them the truth.

1.24 p.m.

Baroness Ludford

My Lords, I am glad to be able to take part in the debate. I recognise the sincerity of the beliefs expressed by the noble Lord, Lord Pearson. The trouble is that he is wrong. I am most grateful to the noble Lord for giving a website address. My only disappointment is that I believed that he was going to give us www.corruptoctopusofbrussels.org, which would have been rather fun.

I am really quite surprised that Conservative speakers are opposing the new draft constitution of the EU. After all, it does have a clause permitting voluntary exit.

Lord Beaumont of Whitley

My Lords, I gather from the speakers' list that the noble Baroness is speaking on behalf of her party. May I ask how many of the speeches she has listened to in this debate?

Baroness Ludford

My Lords, I have listened to most of them. Even when I was having a sandwich, I was listening to the speeches.

I was just going to recite the clause permitting voluntary exit from the new constitution. It says: Any Member State may decide to withdraw from the European Union in accordance with its own constitutional requirements".

The article would allow for a straightforward unilateral self-exclusion from Europe, answering all of the dreams of the noble Lord, Lord Pearson. However, the new countries queuing up to join the EU are unlikely to take advantage of such a clause. I remind the House of the percentages by which their citizens have just voted to confirm their EU membership. In Malta, 54 per cent voted in favour; in the Czech Republic and Poland, to which the noble Baroness, Lady Cox, referred, 77 per cent were in favour. In Hungary, 84 per cent and in Slovenia 90 per cent voted in favour, while in Lithuania 91 per cent and in Slovakia 94 per cent did so. Those citizens have voted for security, prosperity and an entrenchment of their democracies in the community of human rights and the rule of law.

In response to the point made by the noble Lord, Lord Vinson, I was at the appeal of the Greek plane spotters, in Kalamata. I have to say that, inadequate as I found Greek law in that case, only the framework of the EU is working to raise the standards of guarantees for defendants that will hopefully reform the situation in future.

The noble Lord, Lord Pearson, has said that: If Estonia votes against joining the European Union, she will strike a tremendous blow for truth and freedom across the whole of Europe. The British Euro-sceptic case would gain enormously". I fear that the noble Lord will be disappointed in September.

The noble Lord disputes that the EU has secured peace. If I understood him rightly, he ended by quoting a Russian soldier before he went to his death. However, dramatically fewer Europeans have died in the half-century since the second of two massive 20th century wars ended than in the half-century beforehand.

At least the noble Lord is honest about his isolationist intention, as other Conservative Peers have been. In August 2000, he said: It is…deceptive to suggest that we can renegotiate the Treaty unless we are prepared to leave the EU if our 'partners' don't agree the changes we need". On the "Jeremy Vine Show", he said: We should get out of it"— that is, the EU.

That is indeed the logic of Conservative Party policy, and my sympathies are with the noble Baroness, Lady Rawlings, who is going to have to explain whether Conservative policy is being dragged in that direction.

The noble Earl, Lord Liverpool, believed that the position of the Queen might be endangered, but I assure him that the Saxe-Coburg-Gotha family of European immigrants to Britain is most comfortably ensconced. Indeed, the EU has the highest percentage of constitutional monarchies of any region in the world.

I fear that Eurosceptics will never be convinced by any rational arguments in favour of the EU, although I shall attempt a few. The basic problem is their irrational difficulty over sharing. The whole basis of the EU is the willingness to pool formal sovereignty in order to achieve more real control over what happens to us. There is more real sovereignty in being part of a bigger whole that can collectively ensure currency stability, curb global warming, tackle third world debt, secure human rights and address security threats, than there is from the trappings of impotent isolation.

Those who oppose European unity usually have the same problem with recognising diversity in society, pluralism of opinions or dispersal of power. It is the concentration of formal competence in one place, the illusion of homogeneity, the notion that there is only one way of living one's life, the refusal to compromise and co-exist, that seems to be the hallmark of the mindset of those who hate the European Union.

The noble Lord, Lord Pearson, has in fact revealingly said: I loath and fear the Treaty of Rome". That fear speaks volumes and surely comes from deep insecurity and lack of confidence. Yes, there are certainly some proposals from Brussels with which we disagree, but we should fight our corner, and we can win. In fact, we win more votes in the Council of Ministers and are more often on the winning side than any other member state.

There certainly is an issue about some English people in particular failing to connect with Europe. There is a sense of Europe as a threat and as something that will rob them of their identity. It is perhaps a lack of confidence about what identity consists of in modern Britain, and we have to address that. It is not possible to operate with assurance and ease in Europe if you do not know who you are in the first place. Those of us who do have that sense of confidence are able to add the European dimension to our other identities—in my case as a Londoner and a Briton—and feel that far from losing, we are gaining something in addition; namely a share in the power to shape our lives for the better. It is that sense of optimism and confidence that I would most want to encourage among my fellow citizens.

We all know that the French, the Italians, the Spanish and the Dutch have absolutely no intention of submerging their own identity in some Euro-fudge. There was an attempt last year to design a Euro-flag that looked like some poor imitation of a Bridget Riley picture which was said to encapsulate all the national flags. It was fundamentally misconceived. We are not a Union that tries to be a melting pot, a stew of nationalities and races stirred together to get a nouvelle cuisine new dish. The 12 yellow stars on a blue background—which I am afraid the EU stole from the Council of Europe—will do quite nicely, thank you.

I am, as I said, surprised that more Conservatives do not support the new constitution, which has an exit clause. It also offers a more competent, effective and democratic EU with some very beneficial features. That is why 52 per cent of British people support the constitution.

I should like to mention in particular the charter of rights which will mean protection against abuse of power by EU institutions. Surely that is something that Conservatives and other Eurosceptics could support. It would also protect us against abuse of EU law by national governments implementing that law. Perhaps we could look forward to an end to the gold-plating of EU regulations, for which I am afraid this Government have a weakness. Think of the abattoirs legislation. In implementing legislation on veterinary inspections of abattoirs the then Ministry of Agriculture imposed additional requirements so that UK law required a permanent veterinary attendance rather than regular veterinary inspection—a very different thing—as set out in the directive. That added enormously to costs and threatened to put small abattoirs out of business, particularly those dealing with organic and specialist herds—an issue which I believe is dear to the heart of many in this House.

In my own area of justice and home affairs, on which I speak in the European Parliament, the Government have gone much further in the Extradition Bill—on which I was able to speak—than required by the EU regulation on the European arrest warrant. I think that that gives EU law a bad name. I very much hope that the charter of fundamental rights will curb that type of tendency.

Some speakers today have said dismissively, "Don't talk about the clear benefits of the EU". Perhaps they are afraid of their reiteration. I should cite a few. As has already been cited, 3.5 million jobs, I think, depend on our exports to the EU. There are exports to the value of £143 billion. Some 750,000—three quarters of a million British-based firms—

Lord Pearson of Rannoch

My Lords, perhaps I may come back later to one or two of the points that the noble Baroness is making. However, the one that she has just made is really so naughty. Is she really suggesting that those jobs would be lost if we left the European Union and maintained our free trade arrangements?

Baroness Ludford

My Lords, I am indeed saying that. I shall deal with the point later. What needs to be absolutely clear is what kind of alternative you think you could secure in leaving the EU. I think that one speaker today said that the EU needs Britain more than Britain needs the EU. We would put that proposition very much to the test in any renegotiation, and I think that we might come off the worse.

Lord Pearson of Rannoch

My Lords—

Baroness Ludford

My Lords, would the noble Lord mind if I continued?

Lord Pearson of Rannoch

I will not interrupt again, my Lords. However, the inquiry would, of course, bring all that into the open.

Baroness Ludford

As I said, my Lords, I do not think that there is a need; there have already been numerous studies, particularly by the National Institute for Economic and Social Research, I think. It really would be a waste of taxpayers' money to repeat all of that.

Lord Stoddart of Swindon

My Lords, before the noble Baroness leaves this point on the 3.5 million jobs, I really would like to get this straight. Is she saying that if we left the European Union, 3.5 million jobs would be lost and that those 3.5 million people would be on the dole? If that is what she is saying, may I remind her that we have an enormous annual deficit with the European Union? As they would be erecting barriers against our trade, which we would reciprocate, would they not lose a lot more than 3.5 million jobs? We would have to do that work in this country, thereby creating new jobs.

Baroness Ludford

My Lords, I am saying that it would be great folly to test the proposition. I am also saying that those jobs depend on our membership of the EU. In the 20 years to 1999, Britain received almost 30 per cent of foreign direct investment in the EU, and 2 million people work for those firms alone. Some 7,000 American and Japanese firms have been established in the UK. If they did not have the kind of tariff-free access and, crucially, the single market and our influence in making the rules of the single market, then I fear that those jobs would be very much at risk.

Lord Stoddart of Swindon

My Lords—

Baroness Ludford

My Lords, I am sorry but I really must move on.

Baroness Crawley

My Lords, noble Lords have had an opportunity to say what they feel about the Bill. I believe that this is the first time that the noble Baroness, Lady Ludford, has had an opportunity. So I would ask noble Lords to be patient.

Baroness Ludford

My Lords, I am grateful to the noble Baroness.

Clearly there is room for economic reform in the EU. I am glad to say that the UK-backed economic reform agenda is now the agenda for Europe to get more dynamism, competition and liberalisation, which is already having an impact. For example, the cost of our telephone calls has decreased by half because of competition and liberalisation in the EU. We get all the benefits of the EU for a net cost of £3 billion a year. The chief European economist at J P Morgan has said: In the great scheme of things, our net contributions are so small as to be trivial … the net benefit of membership of the EU is many orders of magnitude above our net contribution to the EU budget".

Speakers this morning have advocated other options than pure withdrawal. They would, would they not, because studies show that withdrawal would mean that our GDP would decline by 2.25 per cent and wages would have to decrease for people to stay in jobs. I shall not dwell on the sometimes touted option of the North American Free Trade Agreement. My noble friend Lord Wallace of Saltaire effectively demonstrated with his intervention the colonial status that UK membership of NAFTA would entail—like Hong Kong in China, according to the noble Earl, Lord Liverpool. I really do not think that that is a status which British citizens would want.

The noble Lord, Lord Pearson, wants the same status as Switzerland, with a pure free-trade agreement. However, Switzerland has already recognised the weakness of this situation. The Swiss Government are in favour of joining the EU by 2010 because, they argue, Switzerland is already affected and has to follow EU developments relating not only to the single market but also in the field of internal security, foreign policy, immigration and asylum over which they have no say whatever. The Swiss believe that only full EU membership will give Switzerland a say in the decision-making process that is shaping the political, economic and cultural future of Europe. I think that that puts paid to the Swiss model.

Some advocate a Norwegian-style status. Norway participates as a member of the EEA in the single market. Again, however, it has no say in how those laws are made; it just has to implement them. Indeed, this situation is known in Norway as the "fax democracy" because they introduce EU directives and regulations as soon as they come across on the fax machine. They have implemented 4,000 pieces of EU legislation with no Norwegian influence over them in the Council or the European Parliament. If I may say so, our status under such models would he like that of a lady member of a gentlemen's club forced to use the back stairs, or like that of a lady member of a golf club allowed to play only on weekday mornings. Our ability to govern ourselves would decrease, not increase. Our real sovereignty would actually decline.

I turn to the question of our influence in foreign and security policy. The key issue is that if Britain were to leave the EU, we would lose influence on both sides of the Atlantic. Our lack of clout in Europe would make us a less important ally for America. Numerous previous American ambassadors to Britain have affirmed that position.

Recently British citizens gave remarkable responses in the Euro-barometer survey. The figure that received a lot of publicity was the 52 per cent in favour of the constitution, but equally remarkable were the responses on the common foreign and security policy. Some 71 per cent of people believe that the EU should have a rapid military reaction force that can be sent quickly to trouble spots when an international crisis occurs. When such a crisis occurs, 72 per cent of Britons believe that the EU member states should agree a common position; that is, over 70 per cent support a common foreign policy. Half believe the EU should have its own seat on the UN Security Council and that the EU should have its own foreign Minister. I believe that puts paid to the idea that British people do not support a common policy for Europe in the world.

I sum up. There may be around one-quarter of British people who think that EU membership is a bad thing. Around 30 per cent are firmly against the euro. So the Eurosceptic case resonates with a maximum of three out of 10 people. Seventy per cent of the British people believe that the EU is a good thing, or they remain to be unconvinced, but they are certainly not in the firm Eurosceptic camp. There is plenty of scope for persuasion and to demonstrate the benefits.

I am very glad to say that 20 years ago, perhaps this month, the Labour Party abandoned its policy of withdrawal. Sadly, this Government have been in power for six years and still we have no date for a referendum on the euro, but when that happens—soon, I hope—it will provide an opportunity for the pro-Europeans to beat the Eurosceptics hollow by two or three to one. We have done it before and we shall do it again.

Baroness Cox

My Lords, before the noble Baroness sits down, did she imply that those of us who have some doubts about Europe are against values such as cultural diversity? If that is the case, I hope that she will withdraw that in due course or prove her point because I for one and, I believe many others, take grave exception to such an allegation.

Baroness Ludford

My Lords, I shall take the opportunity to read the noble Baroness's remarks in Hansard, if I may, rather than delay the debate further by responding now.

Lord Monson

My Lords, before the noble Baroness sits down for the second time, is she aware that, with the exception of Malta, turnout in the various referendums in accession countries on whether to accept EU membership was extremely low? In no country, with the possible exception of Slovenia—I have not had time to check that—did more than 50 per cent of registered voters vote in favour of accession. The enthusiasm in these countries is very much less than the noble Baroness suggested.

Baroness Ludford

My Lords, we live in democracies and what matters is those people who vote. Unfortunately, turnout is too low in many elections. I was present at by-elections in the London Borough of Islington last night where the turnout was 20 per cent. Turnouts are too low and we have to work on that, but the fact is that the results were absolutely conclusive.

1.44 p.m.

Baroness Rawlings

My Lords, I, too, thank my noble friend Lord Pearson of Rannoch for having instituted the debate through the introduction of his Bill. There is one 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 this Parliament.

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 would probably benefit those who argue strongly for staying in the European Union. However, I fear that the Bill as it stands would introduce a procedure which could go no further.

As regards 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 European Union would constitute a decision to stop the world and try to get off. It is unrealistic in today's world, a world in which we see time and again countries agreeing on how to allow a part of their sovereignty to be pooled in an international body.

From studying the speeches in the previous debate on this subject, I must confess to being not at all surprised at the way in which the debate developed today. Despite all the speeches from these Benches, we on this side of the House are good Europeans. Let me be quite clear. The Conservative Party policy is not to leave the European Union; it regards such thinking as defeatist. Indeed, this is a very exciting time for Britain to be involved in the debate on the future of Europe.

The European Union is going through a period of great change at the moment, not least due to its expansion with the upcoming accession of the new member states and soon that of further countries such as Bulgaria. My right honourable friend the Leader of Her Majesty's Opposition has on numerous occasions repeated our commitment to continued membership and has made it quite clear that any accusation otherwise is simply a lie. We have always believed that the European Union should move forward. However, that commitment to our membership of the European Union does not relieve us of our responsibility to debate legitimate questions with regard to its scope and purpose.

We want the European Union to go ahead but not along old-fashioned, centralist, bureaucratic, or, more recently, sadly, anti-American lines. Nor, might I add, do most of the people of Europe. The European Union has always been an evolving organisation and we must continuously debate its direction.

The political and economic scope of the European Union is by no means settled, particularly as it continues to expand, taking in new members with new opinions and new ideas. I hope that noble Lords on all sides agree with me when I say that the European Union and its organisations are not, and should never be, beyond criticism, as we have heard from the noble Lord, Lord Moran. We have a duty to question them and to hold them to account, just as we do with the Government of this country.

There is an inevitable pooling of sovereignty, as there is when joining any club. We frequently speak about the European Union as if it were unique in that respect but unquestionably some pooling of sovereignty—as we heard from the noble Lord, Lord Griffiths—is also involved in membership of NATO, an organisation supported by Members in all parts of the House. Unquestionably, a considerable sacrifice of sovereignty is involved in membership of the World Trade Organisation, of which this country is a member and which many other countries seek to join. There is obviously some sacrifice of sovereignty in trying to establish a world which observes human rights, which I believe most Members of this House and of the other place powerfully support, and of which my noble friend Lady Cox is such a brave protagonist. All sides agreed last night, in our very good debate on Cuba, on that point. You cannot establish a world of law, human respect and civilisation unless you are prepared to accept the existence and strengthening of global institutions.

The European Union is a broad church and encompasses many shades of opinion, which in a democracy is welcome. As with any discussion, there is always a perfectly sensible course between pandering to the integrationists and super-state builders—merely drifting along nonchalantly with their ideas—and turning our backs completely on a continent with which we have been intimately involved for more than a thousand years.

We are quite clear on what that means in an ever-evolving union. The sensible approach is to ensure that the Union becomes a flexible network of friendly states, working closely together in some areas, but acting independently in others. With enlargement, which we debate next week, Britain now has plenty of friends who share that view, and we should have the confidence to push it more vigorously than the Government do. Post-Iraq, combined with American views that are held towards old Europe, and with the new Europe evolving, the time has never been better for reform—surely not abandonment—of the Union.

Setting up another independent committee to judge the tides of history and interest is a strange way to proceed. I am sure that my noble friend Lord Pearson of Rannoch would agree that the famous tests by endless economists on whether to join the euro are trying to decide on issues far larger than narrow economics can handle. It is absurd to think that some independent gurus can decide how we should operate in Europe and how to weigh up all the pros and cons. Those are political matters for political judgment.

Lord Stoddart of Swindon

My Lords, I am trying hard to follow the noble Baroness's argument. I understood that the Conservative Party was in favour of a referendum on the proposed new constitution. Before we can have a referendum, presumably we shall need to know the pros and cons of whether we should continue in this particular organisation as it is to be revised. Why is she so against the Bill, which seeks only to find out whether there are implications from withdrawing, in which case the implications for remaining in would also be seen? I could understand what the noble Baroness, Lady Ludford, said, but I am afraid that I am simply not able to follow the argument of the noble Baroness, Lady Rawlings.

Baroness Rawlings

My Lords, I thank the noble Lord, Lord Stoddart, for that intervention. He is absolutely right that Conservative Party policy is for a referendum. It is better to go for a wider view of the general public of this country.

We have surely learned by now that trying to stay detached from Europe's future is a recipe for disaster for us all. We want to see an open, internationalist, outward-looking Europe. That involves seizing the historic opportunity presented by the recent 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.

I want to say a few words about the economic situation, and perhaps to mention the alternative offered to us, as mentioned by my noble friend Lord Liverpool. The North Atlantic Free Trade Association is, of course, a single currency area. It has a currency called the dollar.

Lord Pearson of Rannoch

My Lords, my noble friend really must not say that; it simply is not true. The Canadian dollar continues to exist, and so does the Mexican peso. They float freely on the world market against each other. The same mistake was made by the noble Baroness, Lady Williams of Crosby, during our previous debate on the subject. It simply cannot be allowed to go on the record.

Baroness Rawlings

My Lords, I thank my noble friend for that intervention. I believe that the Canadian dollar and the Mexican peso are both pegged to the American dollar, as the Bulgarian lev is to the euro, to give a little extra information.

Were we to join NAFTA, 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 many of today's speakers.

Europe needs to complete the internal market, including electronic commerce and financial services, bringing more choice and lower prices to Europe's consumers. Europe must concentrate on the enforcement of competition rules and a programme of deregulation. It 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 lead Europe along it, so that it is outward looking, with low regulation, low tax, free enterprise and flexible.

1.55 p.m.

The Minister of State, Foreign and Commonwealth Office (Baroness Symons of Vernham Dean)

My Lords, I, too, thank the noble Lord, Lord Pearson of Rannoch, for moving that his Bill be read a second time. I have listened with a great deal of interest to the contributions made by your Lordships. As always, it has been an enjoyable and enlightening experience, and at times quite exciting, too. Noble Lords'passion and conviction were evident on this occasion, as they always are when we discuss all matters to do with the European Union.

The forcefully argued case of the noble Lord, Lord Pearson of Rannoch, was somewhat marred by his repeated claims that governments of both parties had deliberately lied in order to mislead the British public. That is a very heavy charge, and one on which he may wish to reflect. I am not sure which is worse: to be accused of lying—the noble Lord, Lord Pearson of Rannoch, made that accusation—or of conspiracy, an accusation made by the noble Lord, Lord Stoddart. I am bound to say that neither charge will add a great deal to the rational debate that we need at this time.

Lord Stoddart of Swindon

My Lords, will the Minister give way, as she mentioned my name?

Baroness Symons of Vernham Dean

I will, my Lords.

Lord Stoddart of Swindon

My Lords, the Minister will of course know that I was around in 1975 and, indeed, in 1972, when I was in the House of Commons debating the then European Communities Bill. The fact of the matter is that Mr Heath misled people by saying that our essential sovereignty would not be compromised. Later, when he left government, he went on a television programme and said, "Of course everyone should have realised that we were going to sacrifice sovereignty". As I—and I think the noble Earl, Lord Liverpool—pointed out, he set up a Civil Service department to mislead the people about the real intention. That is the history of the matter.

Baroness Symons of Vernham Dean

My Lords, the noble Lord had 15 minutes to argue his case, which he did very forcefully. I am bound to tell him that if I am going to be interrupted at the Dispatch Box every time I mention his or anyone else's name, we will not get away from the House this afternoon much before six o'clock.

Lord Stoddart of Swindon

My Lords—

Baroness Symons of Vernham Dean

My Lords, the noble Lord made his points, and we have heard them twice now. I merely answered them once.

I congratulate the noble Lord, Lord Pearson, on the exemplary timing of his debate. What better day could there have been to consider the implications of withdrawal from the European Union than the day after the Union agreed the set of reforms to modernise and improve the common agricultural policy? Yesterday's agreement is a breakthrough for agriculture in Europe and, as some noble Lords have rightly acknowledged, for world trade.

If the United Kingdom were not a member of the European Union, we would have had no chance to press for the much-needed reforms. The consequences would have been felt not only in Britain, but around the world. As it is, we are now in a position to negotiate towards progress on a trade agreement that we need in Cancun this September. The events of this week are momentous in relation to the possibilities now opening up for fruitful WTO negotiations.

The matter is not only important to the export of our manufactured goods, as the noble Lord, Lord Pearson of Rannoch, claimed. World trade—the growth of the world economy—can benefit by as much as 400 billion dollars each year. That is not my calculation but that of the World Bank. We, the United Kingdom, have been part of opening that door through our membership and the arguments that we put forward in the European Union.

The Bill calls for a committee of inquiry to examine the implications of this country withdrawing from the European Union. Let there be no mistake about the position of Her Majesty's Government. At the risk of further inflaming the noble Lord, Lord Stoddart of Swindon, I believe that the benefits of EU membership are evident. The European Union is arguably the most successful regional organisation in the world, and this Government are absolutely convinced that membership of the EU is in the best interests of the United Kingdom. We believe that it is in our political interest and in our economic interest. So I am not going to "wiggle", as the noble Lord, Lord Pearson, particularly asked me not to do, but I am going to set out the Government's case.

Lord Pearson of Rannoch

My Lords—

Baroness Symons of Vernham Dean

My Lords, I am going to set out the Government's case. The noble Lord has had his opportunity, he took it, and he will have an opportunity to reply. I am now having my say.

Much of my argument will not, I am afraid, surprise the noble Lord, Lord Willoughby de Broke, but I hope that he will find that not all my arguments are entirely "tired" and "old", to quote his words.

The noble Earl, Lord Liverpool, asked whether we have the option to withdraw. The answer is: yes, we do. It is a matter for all of us to judge whether, in any practical sense, we have a real option to withdraw. That, as I understand it, is at the heart of the debate on this Bill.

The economic arguments that first convinced the British people that EU membership was in the United Kingdom's interest remain as valid today as they were when that decision was taken. Indeed, it could be argued that they have grown stronger over time. British jobs and prosperity have increased as a result of our free trade with Europe, and I agree strongly with the case that was put forward by the noble Baroness, Lady Ludford.

There are more than 370 million customers in the single market; that is, some 38 per cent of world trade. With enlargement next year, that will rise to 450 million customers—creating the world's largest single market. Enlargement alone is expected to boost the UK economy by some £1.75 billion.

Not only does that provide benefits for British businesses trading with other EU member states—and it is worth pointing out, particularly to the noble Baroness, Lady Cox, that some 58 per cent of UK trade in goods is with our EU partners—it benefits producers too, by ensuring a level playing field on which British producers can compete. It benefits customers. More often than not, it is the myths—such as banning curved bananas; and we have heard quite a few such references today—that we remember rather than the reality. That reality has seen the EU championing better consumer safeguards on a range of subjects, from toy safety to package holidays. Thanks to the single market, British consumers have access to a greater variety of and better-quality products at competitive prices.

Of course the European Union provides jobs—I agree with the point put forward by the noble Baroness, Lady Ludford, which excited so many of your Lordships—some 3.5 million already, and 300,000 more upon enlargement. These are the kinds of results that matter to most people—not people sitting in the House of Lords at five past two on a Friday afternoon, but those in Darlington and other towns throughout the country who are working to sustain those jobs in the future, people whose jobs are needed in this economy.

The noble Baroness, Lady Cox, put her argument well and cogently, as she always does. But let me try to put the other side. A brief glance at the figures demonstrates how important EU membership is for British jobs and prosperity. More than 3 million of our jobs now depend on our exports to the EU; 800,000 British-based companies trade with Europe; through our membership of the EU, British business has tariff-free access to 380 million customers—the largest and richest market in the world—and that is set to rise by nearly half a billion consumers after enlargement next year. Because Britain is a gateway to the European market, we, here in the United Kingdom, receive the largest share of foreign direct investment in the EU. American firms alone employ nearly 1 million people in Britain.

I am sure that others will argue: "Ah, well, the Americans are the ones doing the investing". But do they really believe that we should have that much investment were we not part of the European single market? That single market has helped to deliver the highest standard of living in European history. It has helped to provide the greatest choice and the cheapest prices for consumers ever.

So, in promoting the benefits of withdrawal from the EU, the noble Lords, Lord Pearson and Lord Stoddart, fail to take account of quite a number of crucial facts. They would argue that we should still be able to trade with Europe—and, of course, that would be true to some extent. Self-evidently, European countries do trade with countries that are members of the EU. That is a perfectly straightforward point. But the other countries are not members of the single market. That is the point: I refer to the tariff-free trade that we have at the moment.

I would also argue that, even if we were riot a member of the EU, we would have to abide by EU standards if we wanted to trade with the EU—a point made by the noble Baroness, Lady Ludford. But there would be one fundamental difference: we would have absolutely no influence over setting those standards. As a committed and respected member of the Union, not only do we have access to the market, which is crucial, but crucially as well we can help to shape it and mould it into the kind of union that we want to see—more democratic, more effective and, of course, more efficient—and better able to deliver real results to citizens.

I am sure that the noble Baroness, Lady Cox, is right: if the world economy expands, if the developing countries do come to expand their economies in the way that we should like to see, we may not he as much richer in comparison to them as we currently are But we as a Government argue for decreasing the gap between rich and poor countries around the world. I have heard the noble Baroness make that argument. We hope and we work for a trading system where many of the poor countries in the world do get richer. If that is so, the proportion of European trade ill comparison to the rest of the world may well change. The noble Baroness is right. It may well do that. But is that such a bad thing in and of itself—if developing countries are becoming richer, if they provide us with more markets, if we raise their standards of living, have greater stability in the world and less of the much spoken of gap between rich and poor countries? I believe that that is something to look forward to: it will increase world prosperity and world stability.

I turn to some other areas. The noble Lord, Lord Pearson of Rannoch, implied that the EU was an instrument for lessening democracy rather than promoting it. But the European Union is far more than just a free-trade area. The benefits are not only economic. For more than half a century, the EU has been a powerful force for good, bringing democracy, peace and human rights to the peoples of Europe. It has done much to ensure peace and prosperity, and it offers us new opportunities and experiences, from the food that we eat to the holidays that we are now able to take.

It has also delivered tangible benefits to improve the everyday lives of people in this country. In areas as varied as culture, sport, music and literature, Europe is an ever-present and positive influence. Europe today is not only about an ideology of "peace and unity"; it is a real, living organism. It delivers practical benefits that, although often overlooked, people would never want to live without again.

The noble Lord, Lord Stoddart of Swindon, said that our trade union leaders should reconsider their position. They have considered their position; they know what the benefits of EU membership are. Thousands of British workers have gained from EU legislation which improves working conditions Every member state must apply the principle that men and women should receive equal pay for equal work. Under EU law, it is illegal to discriminate on the grounds of sex, race, religion, belief, disability, age or sexual orientation. EU law means that both men and women are entitled to at least three months' parental leave. Therefore, the trade unions do know what the EU has delivered for them in a very real sense.

The noble Lord, Lord Monson, spoke of the freedoms that he claimed we must relinquish through our membership of the EU. The noble Lord, Lord Weatherill, had some rather similar fears. But perhaps I may list some of the freedoms that we gain. Being in the single market means that British people now have the right to travel, work, study and live, visa-free, throughout the European Union. Hundreds of thousands of British people have been able to take advantage of that. UK citizens will make around 40 million trips to mainland Europe this year alone; 100,000 Britons are currently working in other EU member states; 234,000 UK pensioners draw their pensions in other EU countries; and more UK students study abroad in the EU than those of any other country—on average, 10,000 each year.

The noble Lord, Lord Harris of High Cross, entertained us with his litany of difficulties arising out of European Union membership, although I considered his characterisation of some of them to be more of a caricature than a description. But perhaps I may try to put the positive case to him. The Union improves our quality of life. I see that the noble Lord is not in his place. In that case, I shall not detain your Lordships further in answering the noble Lord, Lord Harris.

I turn instead to the points raised by the noble Lord, Lord Griffiths of Fforestfach. He reminded us that the Bill of the noble Lord, Lord Pearson, is not about leaving the European Union. Of course, it is not, although I believe that it was presented to us very much in those terms.

The noble Lord, Lord Griffiths, concentrated much of his address on what I might call the "threat of creeping federalism". It was the "F" word that the noble Earl, Lord Liverpool, felt so constrained to use. But this Government have made it abundantly clear that we do not want a federal state; we want a Europe where national identities are not submerged and where countries co-operate with each other. We shall not agree to any action at Union level simply for the sake of it; we shall do so only where there is a clear benefit to the United Kingdom.

We are not alone in that. Perhaps I may quote from Jacques Chirac, who said on 26th June 2000: I do not think that one can have a federal Europe. The creation of a United States of Europe is not realistic because not a single nation is prepared to give up its identity". That is a French quotation. I quote also from Joschka Fischer, who said on 24th January 2002: The EU is never going to be a state, let alone some kind of superstate". No one—not in Germany, France or anywhere else in Europe—wants to see a centralised super-bureaucracy. A more closely integrated Union is the exact opposite of such a superstate.

We also had some discussion about the convention on Europe. Perhaps I may turn to the wider issues raised on that, as did the noble Lords, Lord Vinson and Lord Moran, and the noble Earl, Lord Liverpool. It was precisely because we needed a response to the type of concerns raised by those noble Lords—and, indeed, by the noble Lord, Lord Beaumont—that the Convention on the Future of Europe was convened. It was convened, to consider the key issues arising for the Union's future development and to try to identify the various possible responses". That is why—in order to help to shape the debate—the noble Lords, Lord Tomlinson and Lord Maclennan of Rogart, have spent much of the past 16 months travelling to Brussels. I shall take a brief moment to thank them wholeheartedly for the very hard work that they have undertaken on our behalf.

The draft constitutional treaty prepared by the convention was presented to the European Council at Thessaloniki last week. There, leaders concurred that the agreed draft was a good basis for starting our discussions at the intergovernmental conference which will begin in October.

This Government believe that the convention has done a good job. The outcome provides a foundation for a modern, more democratic Europe, that is better anchored to the member states and more accountable to its citizens. The draft constitutional treaty will be clearer and easier for everyone to understand, and it will help them to ensure a more efficient, effective union of the future.

In answer to the noble Lord, Lord Vinson, there are areas in which negotiations are continuing. There are issues which we should continue to defend, and fight hard to protect British interests. We shall return to these matters at the IGC. Above all, the draft constitutional treaty offers the prospect of stability in the way that the union works.

There is no truth in the wild claims in some newspapers that this represents "a blueprint for tyranny" as it said in the Daily Mail. In fact, Robert Badinter in Nouvel Observateur noted that, we could dub this constitution for the Europe of 25 "la britannique" in recognition of the diplomatic skill of our British friends".

Those are the same diplomats whom some of your Lordships have accused of being party to some sort of international conspiracy against this country. The noble Lord, Lord Vinson, quoted freely from the Guardian, the Economist and The Times. I could quote back to him from Le Monde, from the Spanish newsper El Pais and from German newspapers. Le Monde of 29th May 2003 stated: The British government is pleased with the Convention and has every right to be so. The text meets virtually all its expectations and allays most of its fears".

Let me quote from the Sueddeutsche Zeitung of 24th May 2003. It stated: Following pressure from the UK Government, the draft future EU constitution no longer speaks of the Union developing its policies in a Federal Manner".

It is an enlightening experience to read the European press, as well as our own. I urge your Lordships to glance at those European newspapers on occasion.

Finally, in an oratorical flourish worthy of the noble Lord, Lord Pearson of Rannoch, himself, it was Mr Amato, the vice president of the convention, who, on voicing his disappointment about the outcomes of the convention, said, "I want to kill myself'.¨

Some of your Lordships have concentrated on defence issues. The noble Lords, Lord Griffiths of Fforestfach and Lord Harris of High Cross, mentioned these issues. I cannot agree that we have more military powers than the rest of Europe put together. It is demonstrably not true. I would agree with him, if the point that he really wanted to make was that we have more military strength than any other single country in Europe. That is true. We have the best disciplined forces in Europe. Those are strong points. We do not support the introduction of common defence, either at 25, or through enhanced co-operation. We believe that it is divisive and a duplication of NATO.

I will not detain your Lordships any longer on these points, because I have repeated them so often from this Dispatch Box. However, I stress that there is no question of our moving away from the position that the Government have adopted in relation to our defence relationship in Europe and the importance that we attach to NATO. I hope that there is no dubiety whatever on that point.

The noble Earl, Lord Liverpool, stressed the cost of enlargement. He is quite right; it is natural that current member states pay more for enlargement. That is a matter of record. However, I am bound to say to the noble Earl and to the noble Baroness, Lady Cox, that there is no greater testimony to the benefits of EU membership than the desire of the 10 accession countries to be part of the Union. It stretches the imagination too far to believe that 10 independent countries should all be suddenly struck by the same aberration of wanting, against their national interests, to join the European Union. That stretches the hounds of credibility too far.

I could detail many other points on reform, but I am not going to do that. The noble Lord, Lord Pearson, does not attempt to camouflage his motives. He says unequivocally that he wants to leave the European Union. By his own admission, he is "a rabid Eurosceptic". He told us of the detriment to fishermen, to the art world and to those who take herbal remedies. However, he did admit that parts of our national life were intact, including our Armed Forces, foreign policy, judicial system, health and education, and possibly—although I was not sure about this—our tax system. Even by his own criteria, the noble Lord's own assessment was far from a compelling case for leaving Europe—unless one happens to be a vegetarian fisherman with a penchant for a little artwork.

The benefits of the European Union are abundantly clear. If we had not joined the EU, we would be poorer today—economically, socially and politically. We would find it harder to project power and influence beyond our borders. We would be less safe. The rights we take for granted are not automatic; they come with membership of the EU. It is in Britain's interest to be a committed member of the Union.

The costs and implications of withdrawal are evident. We have seen the implications of the United Kingdom being a not-so-committed member of the EU in the past. The impact of complete withdrawal would be far worse, with dramatic consequences for jobs, economic security, and for the quality of life of the people of this country.

Therefore, the Government do not believe that it is necessary to set up a committee of inquiry to tell us what we know already. However, it is not the Government's practice to oppose a Private Member's Bill on Second Reading in this House, so I do not do so. But I do not do so in the full knowledge that all your Lordships understand the Government's position.

2.20 p.m.

Lord Pearson of Rannoch

My Lords, I am most grateful to all noble Lords who have spoken. It is regrettable that the only people to oppose the Bill were from the Front Benches.

I was particularly grateful for the comments of the noble Lord, Lord Stoddart, which he addressed to the Conservative Party. I have been saying it for years, but it does not seem to have had any effect. Let us hope that here we have an instance of nemo profeta inpatria.

The noble Lord, Lord Harris of High Cross, frightened even me with his estimate of the total cost of some £38 billion a year for our membership of the European Union. But the noble Lord, Lord Harris, is one of the great economists of our age and a great father of free-market economics. The trouble with £1 billion is that it slips very easily off the tongue. But just £½ billion builds a really decent district hospital. It equips and staffs it to run indefinitely. So in this absurd contribution to the corrupt octopus, we are throwing away 76 district hospitals per annum.

I was very grateful to the noble Lord, Lord Moran, for his intervention and for his suggestion that a Select Committee of your Lordships' House might be the best way of taking this Bill forward. If the Government upon reflection really want to stick to the line put forward by the Minister, I hope that the noble Lord and I can do that together.

I shall not thank all noble Lords who spoke on my behalf. I am sure that they appreciate my gratitude and their words can be read in Hansard. I am sure that they will repay study.

The noble Baroness, Lady Ludford, speaks from her great experience as a former employee of the European Union. I was a little surprised that she did not mention it. It would have allowed us to understand the wisdom with which she spoke. She mentioned the proposed exit clause in the new Giscard constitution. Quite so; but how do we know how to judge the exit clause if we do not know what it might mean?

The noble Baroness, Lady Ludford, and the Minister exalted the referendum results from the applicant nations in Europe. Of course, those nations are voting for one thing and they may be a little less amused when they get another. There is also the point that nearly everyone who has conducted negotiations for the applicant nations hopes to get a job in the European Union when their countries accede—I may say at a minimum of times 10 of their present salaries. I feel sure that that has had some influence on the process.

I am accused by the noble Baroness, Lady Ludford, of wanting the same status for this country as Switzerland. Then the old chestnut fell from the lips of both the noble Baroness and the Minister that that would mean we would have to obey all the European rules without the possibility of influencing their making, with our measly 14 per cent of the votes. But of course that is not true. The only change that we would have to make is that our exports would have to meet the requirements of the single market, just as do exports from the United States of America, Japan or anywhere else to the single market.

The noble Baroness, Lady Symons, took me to task for saying that the British Government have been lying. My definition of a lie is when someone says something which they know to be untrue, as Mr Heath undoubtedly did. So I am afraid I do not withdraw the comment.

And then the Minister could not resist telling us how wonderful was the new breakthrough in the common agricultural policy. As far as I am aware, British taxpayers will not save anything under the deal. I am not in a position to ask her a question, but I am sure we can return to the issue. If the French gave away something, what did they receive in return? What was the quid pro quo? I am sure it is interesting.

Then I am afraid both the Minister and the noble Baroness, Lady Ludford, said what I said they would say: that the 3.5 million jobs which support our trade with the single market would be at stake if we left the European Union. Of course that simply is not true. We could have a free trade agreement and that would be the end of it.

Finally, the Minister got herself in a bit of a muddle as to whether I accused her of being about to wiggle or to wriggle. I am sure that your Lordships would not mind if she wiggled on a Friday afternoon at this time of year, but I feared that she might have tried to wriggle out of the case that we have put to her. I would say that she did so with great elegance, but with a considerable lack of conviction.

Noble Lords

Oh!

Lord Pearson of Rannoch

My Lords, I mean that she did not convince me. I have no doubt that her wriggles convinced her.

The Bill does not require us to leave the European Union. However, European integration is clearly moving to the point where most of our partners may wish to create a union of which very few people in Britain will want to be part. The Bill would show whether that is necessary or wise and I trust that your Lordships will support it.

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

House adjourned at twenty-seven minutes past two o'clock.