HL Deb 11 February 2004 vol 656 cc1155-98

6.15 p.m.

Lord Pearson of Rannoch rose to call attention to the case for a cost-benefit analysis of the United Kingdom's membership of the European Union; and to move for Papers.

The noble Lord said: I am truly grateful to all noble Lords who are to speak today. The genesis of this debate goes back to the Second Reading of my European Union (Implications of Withdrawal) Bill on 27 June last year. That Bill called upon the Government to set up an independent inquiry into what life might really be like for the United Kingdom if we were to leave the European Union and continue our trading relationships with our good friends across the channel.

During the debate, the noble Lord, Lord Moran, floated the idea that, should the Government refuse to conduct such an inquiry—which they did—your Lordships should set up a Select Committee to do so. In that suggestion the noble Lord was later supported by 50 other Peers, who wrote in November to the Liaison Committee asking that such a Select Committee be appointed. Predictably, your Lordships' Liaison Committee turned the request down, using the intriguing excuse that such an inquiry would not be timely while the inter-governmental conference in Brussels was considering the proposed new EU constitution. The decision was upheld on 14 January this year in a vote, by 189 votes to 58, after an unsatisfactory debate when several noble Lords were unable to speak because of time constraints. I can only assume that so many noble Lords voted against a proposed inquiry because they were impressed by the fact that the Liaison Committee had agreed to set up a Select Committee to look into euthanasia, and our guidelines say that we should not have two ad hoc Select Committees at the same time. Either that, or one must begin to doubt the usefulness of your Lordships' House as the guardian of the British constitution.

Be that as it may, students of our relationship with the European Union should read our debate today in conjunction with debates on 14 January this year and 27 June last year. Anyone who does that will see that there is one constant and very disturbing thread running through those debates, and, indeed, other similar debates for at least the past six years. That thread is that the Government refuse to engage in genuine debate about our relationship with the European Union. They merely assert that our membership of the EU is so obviously beneficial that there is no point in even discussing what life might be like outside it. However, the Government produce no facts to support that contention. They rely instead on the shallowest of propaganda, none of which withstands rational scrutiny. I have no doubt that we shall hear more of this today, so perhaps I may go to meet some of it now and expose some of the presumed benefits of our EU membership for the fallacies that they undoubtedly are.

Apart from the claim that the EU promotes peace, to which I shall return, perhaps the worst piece of pro-EU propaganda is that 60 per cent of our trade and 3.5 million jobs depend on our membership of the EU. The purpose of this propaganda is clearly to make the British people fear that it would be economic madness to leave the EU. I mentioned that deceit in our debate on 27 June and I regret to say that the Minister, who we are honoured and fortunate to have with us again today—especially on such a burdensome day for her— claimed (Hansard, col. 583) that the Government actually believed it. I will try to pin her down today with some very simple questions.

First, what evidence do the Government have that any trade or jobs would be lost if we left the European Union and maintained our trading relationships with the single market? Do the Government disagree with the analyses carried out by the US International Trade Commission in Washington, and by the National Institute for Economic and Social Research and the Institute of Economic Affairs over here to the effect that leaving the EU would at worst be trade-neutral? If the Government do disagree with these and other analyses, can they tell us why?

Secondly, given that we trade in deficit with the EU, can the Government produce any evidence as to why we should not continue to enjoy free trade with the single market—as do Switzerland and even Mexico— if we left the European Union itself?

Thirdly, what evidence do the Government have for another piece of Europhile propaganda regrettably, but I am sure innocently, repeated by the Minister on 27 June? She said: 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".—[Official Report, 27/7/03; col. 583.] When the Minister comes to reply, I ask her to remember that the DTI regularly asks foreign investors why they invest in the UK, and publishes its answers in its White Papers on British competitiveness. Neither UK membership of the EU, nor access to the single market, appears in the 10 most frequently cited reasons for investing in the United Kingdom. Overseas investors say that they like our reliable and flexible workforce, our infrastructure, the absence of corruption, the English language, our business-friendly climate and our low taxes. In parenthesis, one might just wonder for how long foreign investors will see us as offering these advantages, as we become steadily more burdened with the EU's stifling labour and social costs. But the question I have to put to the Minister is, how do the Government justify their gateway theory? Surely it is absolute nonsense.

I would mention one more supposed benefit of our EU membership, again put forward by the Minister on 27 June at column 584 of the Official Report. She argued that if we were not in the EU we would still have to abide by EU rules if we wanted to trade with it, but we would not be able to influence the making of those rules.

So my fourth question to the noble Baroness is, so what? I accept that we would, of course, have to meet EU standards for the 9 per cent of our GDP that goes in exports to the European Union, just as we have to meet the requirements of other overseas markets which take 11 per cent of our GDP and just as the USA and others do when they export to the European Union. But would the Government be so good today as to admit—because it is a matter of fact—that Brussels rules apply not only to the 9 per cent of our economy that trades with the EU, but also to the 11 per cent that trades with the rest of the world and to the 80 per cent that stays right here in our domestic economy? Will she agree that regulations made in Brussels apply to our whole economy, not just to the comparatively small proportion that trades with the European Union?

I hope that that deals with some of the main claimed economic benefits of our membership of the European Union. There is, of course, one more supposed benefit: that the EU promotes peace. I dealt with that one on 27 June and will not repeat now what I said then. I would, however, point out that many people in Europe seem to be starting to regard the EU's main purpose in life as being a counterbalance to the power of the United States of America, even to undermine her, our greatest ally. This development appears to be inspired largely by France, with her deep psychotic need to bite the hand that freed her in two world wars. Indeed, only yesterday the French defence minister, Michelle Alliot-Marie, boasted that the proposed EU battlegroups are another step towards a European megastate that will rival the Americans. Like many in your Lordship's House, I fear we go down that route at our peril.

So much for some of the supposed benefits of our membership of the EU. What about some of the costs?

The Trade Justice Movement, supported by CAFOD and Oxfam, estimates that UK consumers are paying over £20 a week in higher food prices and taxes to keep the EU's iniquitous common agricultural policy going. Assuming that there are 15 million consumers—or families of four—in the United Kingdom, that makes a staggering £15.6 billion per annum. The higher food prices largely fall as 5p on every pint of milk, 40p on every 60p bag of sugar and 3p on every loaf of bread. It would appear that they hit the poorest in our society hardest.

The Institute of Directors has estimated that EU over-regulation is costing our business some £9.6 billion per annum. The Government themselves estimate that £2 billion a year is going on the Working Time Directive alone. Over the past 10 years our average gross cash contribution to the corrupt octopus in Brussels has been running at £11 billion annually, of which they have been good enough to give back £7 billion on projects designed to enhance their wretched image, making our net cash payment £4 billion per annum.

The common fisheries policy has destroyed our fishing industry, which would otherwise be worth a conservative £1 billion a year to our economy. I could go on.

There is also, for instance, the damage done to our modern art market and to dozens of other British interests. There is the incredible waste of time of our bureaucrats and politicians traipsing backwards and forwards to Brussels. The list is a long one.

Just the net figures I have mentioned add up to £30.2 billion a year. However, I am happy to settle for a conservative £25 billion as the wasted cost of our EU membership annually—or £68 million a day. That is the same as our entire defence budget. It is six times our railways budget, double our transport budget and half our education budget. One billion pounds trips very easily off the tongues of those of us who frequent Westminster, but to real people it is an awful lot of money. One thousand million pounds builds, equips and capitalises a decent-sized district hospital to run indefinitely.

So our membership of the EU is costing us the equivalent of 25 district hospitals every year—not a very good deal, one might think. The picture is just as crazy if one looks at some of the capital projects which our love affair with Brussels has cost us. There is the cool £ 18 billion so far on the useless Eurofighter. There is at least £48 billion on the unnecessary water directives. There was £8 billion on the foot and mouth saga. There is £6 billion for "Reach", the new chemicals directive, and another £6 billion for the waste electrical and electrical equipment directive. That adds up to a cosy £86 billion.

I am not saying that we would not have spent some money on some similar projects if we had not been forced into this huge expenditure by Brussels. So let us be generous and halve it. That still leaves us short of 43 new district hospitals on the capital account.

I imagine that that is enough about some of the economic costs of our EU membership. But the strongest case for a cost-benefit analysis comes from the damage already done to our democracy and what lies in store for what is left of it. By "democracy" I mean the right of the British people to elect and dismiss those who make their laws. The British people are not aware how much of their democracy—their sovereignty—has already been passed to Brussels. No one has told them how their new subservience works. They do not know that the corrupt EU bureaucracy, the Commission, has the monopoly of proposing new laws. They have not got the point that once the Government or executive have agreed or been outvoted on a new law in Brussels, the House of Commons and your Lordships' House must rubberstamp it on pain of unlimited fines in the Luxembourg so-called court. They are ignorant of the fact that this system, this abrogation of their democracy, already applies to our commerce and industry, to our social and labour policy, to our environment, fish and agriculture, and also to our foreign trade relations. Nor do they know that if we stay in the EU the ratchet can only grind towards ever greater integration and servitude.

They are perhaps rather more aware of the proposed EU constitution, which the Government are of course right to describe as a "tidying-up exercise". It will simply sweep most of the rest of our democracy under the Brussels carpet. A referendum on the eventual constitution might at last reveal the whole existing can of worms to the public, which one suspects is the real reason why the Government do not want to hold one. That is certainly the reason why the Government do not want to carry out an impartial cost-benefit analysis of our present membership. They are determined to continue to hide from the people the truth about the deceit that has been practised on them by their political classes for more than 30 years.

Anyone who doubts that such deceit has indeed been deliberately practised should read a brilliant new book by Christopher Booker and Richard North, The Great Deception, published by Continuum Books. Read that book, my Lords, and you will understand why the Government resist a cost-benefit analysis of our present membership of the European Union and also a referendum on an eventual constitution.

I put it to the Minister that the British people deserve better than this arrogant treatment. They are not so stupid. In constant opinion polls over many years, about 50 per cent of them already say that they would vote to leave the European Union if given the chance. But 84 per cent of them say that their politicians have not given them enough information to let them decide whether the UK should remain in the EU or not, which confirms what I said earlier. How right they are.

To conclude, by refusing a cost-benefit analysis of our membership of the European Union, the Government are guilty of arrogance, cowardice and deceit towards the British people. If the Government find that accusation somewhat harsh, there is only one way in which they can prove me wrong. They cannot continue to avoid the issue with flannel and transparent propaganda. They must conduct an open and impartial inquiry; they must trust the British people with the result. Only thus can they bring to an end the greatest deception ever practised on our nation. I beg to move for Papers.

6.30 p.m.

Lord Dubs

My Lords, I listened with interest to the noble Lord's speech. I can find one or two points on which I half agree with him and a great deal on which I disagree with him fundamentally. But I have to say that my main perception of his speech is that there appear to be two Europes: the Europe in which I live and the Europe in which he lives. They are so far apart that I do not see how we can inhabit the same territory.

About five years ago, I was invited by the British Council to attend a conference in Prague on the subject of European enlargement. That conference was attended by persons from many of the existing EU countries, as well as individuals from most of the 10 countries that are about to join Europe on 1 May. What struck me forcefully was that these people, who were mainly from countries that had been under communism, saw so much purpose in their countries joining the EU. It was felt that their main mission in life, as countries, was to become part of the EU and to come back to Europe. That enthusiasm and that wish to be part of the EU contrasts very sharply with the views that we have heard just now and which other critics of the EU purvey.

If so many people want to join the EU, how can it be the awful place that the noble Lord says that it is? That does not make any sense. Many of the arguments, although not all, would apply to the membership of other EU countries as well, yet they do not seem to have the sort of arguments and campaigning stance that the noble Lord has put forward.

I shall say something that the noble Lord will find even more contentious. Looking back over history, I believe that we shall be judged as a country as having made a big error in not having joined the European Iron and Steel Community way back in 1951. Had we done so, the EU would have been moulded much more in the way we would wish than some of its details are today. In other words, at the time we were the most powerful country in Europe; the Germans would have wanted a structure such as the EU set up because they would have wanted the credibility from becoming part of it; and the French were less forceful than we were. We made a mistake.

The reason why we were unable to join at the time was because we had not come to terms with the end of empire. We saw ourselves as an imperial power, and our interests stretched way beyond Europe to the far-flung parts of the world. I can understand why at the time it would have been difficult for any British government to say that we should join at the beginning, but it is a decision that has cost us dear with regard to a number of details of the EU.

The main detail is the common agricultural policy, on which I agree with the noble Lord. I am not happy about it for some of the reasons that he mentioned— because we support agriculture whose products are then sold in competition with the products of developing countries. I agree with the Trade Justice campaign. However, the CAP is already on its way to being changed, and the accession of the 10 countries will make it even more likely that the CAP will be changed further in the interests of this country and our agriculture.

I do not share the noble Lord's criticism of all things that come from Brussels—and he used some very strong language about it. I agree that some procedures in Brussels could be changed, and we are well on the way to doing that, if the decisions floated at the last IGC come to pass. With regard to joining the euro, I would argue that it is not a matter of whether we do so but when the time is most appropriate.

However, I do not agree with the noble Lord's condemnation of all the figures that show how much we benefit. The EU will contain 450 million people by May. I cannot easily say, "It doesn't matter, we can get all those benefits even if we are not members". Three million British jobs depend upon it. They may not all be lost if we were to leave the EU, but we might lose some of them. Fifty-five per cent of UK trade is with our EU partners; surely, that is pretty significant. I am not as confident as the noble Lord that there would be no change to our pattern of trade if we left the EU. The EU market is bigger than that of the United States and Japan combined. Our exports to the EU are three times greater than our exports to the United States. If the EU is as bad as the noble Lord says that it is, why have we managed such a big growth in exports to the EU? Why has not our trade to North America increased more?

The noble Lord said something about peace. I go along with John Hume, who said that the European Union was the longest and most successful peace process in world history. John Hume knows something about peace and peace processes, and I believe that he was right in what he said.

The EU gives us a chance to co-operate on security, anti-terrorist measures, difficulties with asylum and immigration policy and tackling international crime. We can deal with environmental issues together. The EU gives us in this country better opportunities for travel and for our students. It is very much in the interests of this country to be in the EU. We have more international influence through our membership of the EU than we would have if we were a small isolated country off the northern shores of Europe. Our sense of identity and Britishness has not in any way been weakened by membership of the EU. Other countries do not sense that, and I do not believe that it has any effect on us.

I welcome the enlargement of Europe. I welcome the fact that 10 countries that have given up communism are keen to join Europe and will do so on 1 May. I wish our industries and British industrialists were keener to invest in those countries; the Germans are doing far more in investment than we are, and we are losing out. There is an enormous opportunity there.

Finally, I have a vision of Europe in which the former communist countries and the western European countries are part of a greater endeavour. Yes, there are faults and weaknesses and there must be changes. However, I believe that it is a mission for peace and that we share our dedication to human rights, democracy and the freedom of the individual. Those values are important and they are what is driving other countries to join Europe. That is why I hope that we shall have none of the noble Lord's suggestions.

6.37 p.m.

Baroness Cox

My Lords, I rise to support the case for a cost-benefit analysis of our membership of the European Union put by my noble friend Lord Pearson of Rannoch. First, I declare an indirect interest. My noble friend's charitable trust has given financial support for many years to my own charitable trust for our educational and humanitarian activities. However, I trust that your Lordships would accept that that would not in any way influence my contribution to this debate or, indeed, to any debate.

I begin by referring briefly to two issues that I highlighted on 27 June, which are still cause for concern, and which support the case for a cost-benefit analysis of our membership of the EU. I spent much of my time in that debate identifying research demonstrating the EU's long-term and irreversible economic decline, partly due to demographic trends. Evidence has shown that the economic and demographic trends in the United Kingdom, the United States and the Far East are forecast to remain beneficial, while those in the EU suffer from a poor prognosis. Should we not undertake an assessment, at least, of whether we would do better to follow our economic fortunes with areas of the world with positive demographic and economic prognoses, rather than pool our future with Europe?

Tonight, I turn to the implications of those economic and demographic trends for two issues that concern me deeply: Britain's contribution to the economic development of less developed countries and our role in meeting humanitarian needs in crisis areas with maximum effectiveness. The Government's determination to stay in the EU without even contemplating a cost-benefit analysis seems hard to square with those concerns in at least two respects. First, one-third of our international aid budget—or some £600 million a year—is spent by the European Union. I am sure that the Minister is aware of criticisms levelled at the EU in many respects. By way of example I quote concerns from the House of Commons International Development Committee 8th report of October 2003. The first states: EC Development Programmes funding, estimated at £865 million … [for] 2003–4. appears as a separate line with no objectives or targets indicated. For such a significant sum it is important for the Department and taxpayers to be clear whether and how this money delivers the government's development objectives". The second concern states: With more volatile exchange rates the £sterling equivalent of the Euro amount attributed to the UK can vary significantly year-on-year. Because the total DfID budget is set inclusive of the EU) element, this means that adverse exchange rate movements have to be funded out of the remainder of the department's budget. This is essentially 'top-slicing' and reduces the resources the Department can direct to priority areas". The third concern states: The Department told us that whilst poverty reduction is now at the centre of EC policy, 'question marks remain as to how widely the policy has been applied' and that only 44% of EC funding has gone to low income countries in 2001. The EU's record in terms of the share of aid reserved for poor countries remains substantially worse than that of individual member states". My final example of concern states: The enlargement of the EU may pose a new challenge for achieving DflD's objectives. The accession countries have small aid programmes and also have understandable interests in their own immediate regions. DfID will have to find ways of ensuring that the accession of the 'ten' does not reinforce the tendency for the EU to focus on the 'near abroad' … In addition, we would like to see more information in the departmental report about how these funds are used, the framework for distributing EC development funds, current shortcomings and limitations in this, including in measuring aid outcomes and DflD's own efforts in this area".

Lord Lea of Crondall

My Lords, I am grateful to the noble Baroness for giving way, but does she think that in a typical African country there should be 15 different EU aid programmes or a country strategy paper for each country, drawn up collectively by the EU, on governance and all the matters, judiciary and so on, that need to be co-ordinated through the EU?

Baroness Cox

My Lords, this is a timed debate and so I shall respond very quickly. I spend much of my time working in Africa. I should like to see British aid of maximum effectiveness being allocated to any African country and a cost-benefit analysis of its effectiveness being carried out.

The concerns that I mentioned fit directly into the case for a cost-benefit analysis made by my noble friend and amplified by the remarks made on the opposite side of the Chamber. There is obviously a need for assessment of the most effective use of resources given by the UK for aid and development, for accountability to our taxpayers and to the people suffering so acutely in many parts of the world from natural and man-made disasters and/or economic underdevelopment.

My second anxiety about ways in which our membership of the EU is damaging our ability to help the developing world as effectively as possible relates to the common agricultural policy, to which my noble friend Lord Pearson and the noble Lord, Lord Dubs, referred. I understand that we pay about £8 billion a year towards the CAP's £30 billion annual budget. Therefore, not entirely irrelevant are estimates by Oxfam that while each European cow enjoys two US dollars a day in support from the CAP, 1.2 billion people around the world live on just one dollar a day, and millions starve every year.

Before I conclude, I wish to deal with a different subject. I was disappointed in our debate on 27 June to receive no reply to my concern about the lack of any Christian or spiritual content in the proposed new constitution for Europe. I quote again from a speech made by the right reverend Prelate the Bishop of St Albans in your Lordships' House on 7 January last year: 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.] That is my view and it is shared by millions of people across Europe. Poland was particularly disappointed not to get some reference to our religious heritage included in the proposed EU constitution. Such an omission may leave a dangerous vacuum that could be filled by ideologies incompatible with the values of liberal democracy which were born and enshrined in Europe's spiritual and cultural heritage.

I conclude by saying that I hope the Minister will appreciate that these are not in any way party political or parochial concerns but attempts to enable and ensure adequate research to assess the implications of the complex realities involved so that decisions will be made which are based on truthful, honest policies grounded in as much evidence as can be adduced relating to past experience, the current situation and assessment of future trends. The Government owe the people of this nation that reassurance and I trust that the Minister will be able to give us that promise tonight.

6.45 p.m.

Lord Hannay of Chiswick

My Lords, I would be risking a charge of hypocrisy if I were to say that I welcomed this debate or that I regarded it as timely or desirable. I voted against the attempt to overturn the Liaison Committee's recommendation not to set up a Select Committee to inquire into the costs and benefits of our EU membership. I voted against it not least, but not only, because it was a fairly transparent device to prepare the ground for our withdrawal from the European Union, as the original title of the Select Committee proposal revealed and as a number of those who participated in the brief debate we had before voting, and a number of those who have already spoken today, have also revealed. What I do welcome, however, is the opportunity today to explain why I opposed such a Select Committee and why I believe that the present debate is neither timely nor particularly useful—a view in which I have been fortified by the customary moderation with which the noble Lord, Lord Pearson of Rannoch. introduced the debate.

The clear implication of the inquiry that was proposed and of the title of our debate today is that our EU membership is a simple matter of readily quantifiable cost-benefit analysis. But it is surely not like that. It is not only the case that many aspects of the fundamental strategic decision we took when Parliament endorsed the terms of our accession in 1971, and when that view was confirmed by a two-thirds majority in the referendum of 1975, are simply not susceptible of accurate quantification, although that consideration should obviously weigh in the balance. There is also the question: how can one quantify the consequences of a decision that has fundamentally influenced every aspect of our economic policy, our business life, our trade policy and many other policy areas in the past 30 years? And how can one quantify the implications of a different set of circumstances, with Britain outside the European Union, when such a calculation requires a series of heroic and unsubstantiable assertions about the conditions under which we would have found ourselves living? One might as well try to quantify the costs and benefits of our membership of NATO, or of the United Nations, or for that matter of the Union of Scotland, Wales, England and Northern Ireland. I have not noticed any great rush to set up such futile and counter-productive exercises.

But even those aspects of our EU membership that give a possibly misleading impression of being readily quantifiable—budgetary costs, the trade balance, inward investment and so on—are not in fact susceptible of a clear cut presentation. Back in the 1980s the noble Lord, Lord Cockfield, whose achievement in building the single market must not be forgotten, commissioned a report on the cost of Europe's innumerable non-tariff trade barriers and of the benefits of removing them. The Cecchini report, as it was called after its author, laboured mightily and used all the econometric tools available. The kindest thing one can say about it, with the benefit of hindsight, is that the sign in front of the figures was correct—it was, indeed, a plus—but the figures were far from correct. That is surely a warning for those who wish to achieve precision and certainty in this field, where none is available.

The Cecchini report was in any case a relatively simple set of calculations compared with what would be needed if one was to put the whole of Britain's membership under the microscope. It had a firm basis in fact in the shape of the current situation and the barriers that existed and had been catalogued by the Commission. It had a reasonably firm basis for the other end of the bridge because it could posit the removal of these barriers and the sort of EU regulatory apparatus which would, in some but not all cases, be needed to take their place. The case of Britain's membership would be far more complex. What would, for example, be the effect on inward investment if we were not a member of the European Union? What kind of agricultural policy would we operate if the CAP no longer applied in this country? Where would we stand so far as concerns trade policy both vis-à-vis our biggest trading partners, the other European countries, and vis-à-vis the rest of the world? To what extent will we be compelled simply to replicate what the EU did without having any chance to influence it— the situation in which Norway and Switzerland find themselves?

Even if a reliable, credible and comprehensive cost-benefit analysis was readily available without too much delay and without too many resources being lavished on it, which I argue that it is not, I would still question the desirability of conducting such an exercise. If the United States, for example, were to undertake publicly and officially a cost-benefit analysis of its membership of NATO—or if one of the permanent members of the Security Council were to do the same with the United Nations, or if a nationalist party were to insist on an assessment of the value of the Union—we would be mightily alarmed and would argue that it was a retrograde step that would undermine both the credibility of the organisation in question and the commitment to and influence in it of the country that undertook the assessment. We would be right to do so.

What then makes us think that we could embark on such an exercise with respect to the European Union in this House and not have a damaging effect on ourselves and our interests? Naturally, our partners in the European Union would be dismayed and would no doubt be made all the more so by the vigorous efforts of those who do want us to withdraw from the European Union, to ensure that the assessment was negative. Until that exercise was concluded, there would be a question mark over our continued membership, and that during a period when we need to be influencing the formulation of EU policies effectively—over the implementation of enlargement, the economic reform agenda, the world trade negotiations, the budget and foreign policy—and not sidelining ourselves in the debates.

Do those arguments against a cost-benefit analysis weaken the case for our membership? Are they based on a fear that such an analysis would be negative? I would say "No" to both points. There is nothing extraordinary or indefensible about arguing that the long-term strategic decisions of a country or a group of countries can and should not be based purely and simply on a narrow assessment of "nicely calculated, more or less". When the original six European countries came together in 1952, they were not so based—and who would say now, more than 50 years later, that they have not justified their decisions?

Our own decision in 1971 was quite clearly based on a similar, wider political analysis. I will quote only one statement made at the time, and that not by a politician caught up in the parliamentary debate but by Sir Con O'Neill, who was the senior official in charge of the accession negotiating team. He said: The true purpose of the Community is security as well as prosperity; and gradually, by the consent of its members, to extend the advantages of working together into new spheres. Its objectives, whatever the forms through which they first expressed and still express themselves, are not usually economic". And, when the countries of central and eastern Europe, recently freed from the crippling political and economic stranglehold of the Soviet Union, decided to join the European Union, was that a decision based purely on a narrow cost-benefit analysis? Of course it was not. So there is no need to be ashamed, or the slightest bit defensive, about arguing against the wisdom and the usefulness of our now carrying out such an analysis.

I would like to end on a positive note. I hope that this debate will help to clear the air. All the main political parties are committed by their leaderships to Britain's continuing membership. Let us then turn to the massive agenda which faces Europe in the years ahead and concentrate on ensuring that decisions are taken that are in both Britain's and the European Union's best interests.

6.53 p.m.

Lord Harris of High Cross

My Lords, I fear that I am about to demonstrate that independents are people who cannot be depended on, as I stand at approximately the opposite pole from my noble friend Lord Hannay. Indeed, I start by repeating from the Cross Benches my thanks to the noble Lord, Lord Pearson, for his brave persistence on the issue, which I regard as second only to national defence against terrorism. The powerful study that he quoted, The Great Deception, shrewdly defined the threat to our country from Brussels as a "slow motion coup d'etat". No doubt many noble Lords, including some present, regard the noble Lord, Lord Pearson, as a very great bore—and so he is. So was Churchill in the 1930s, in his repeated calls to arms against an enemy.

For me I am afraid, the noble Lord, Lord Pearson, has proved a truer guide to significant developments in the European Union than our Select Committee reports, however admirably presented, which have largely concentrated on the minutiae of the latest directions from our would-be masters. After much reflection, however, I have concluded that he would do better to confine his call to an economic cost benefit. Economic costs are more tangible and susceptible to some kind of accurate assessment than any vague benefits.

After all, why do people support the European Union? Very few do from an economic standpoint. For some, a psychic or emotional satisfaction is a sufficient reason. For others, broad political considerations predominate. For better connected elites, some of which are represented sometimes in this House, support may turn on notions of loyalty, personal friendship or—perish the thought—personal ambition and self-interest, including safeguarding pensions.

The problem for the noble Lord's cost-benefit analysis is that what the late Lord Robbins called, in another context altogether, the mystic joys of tribal unity are subjective. However real they may be to Euro-philes, they cannot be measured. The merit of concentrating on the economic costs is that they are tangible and quantifiable. My challenge is that it simply will not do to commend support for the EU "irregardless", as the late Lord George-Brown would have said, of its costs. Can it be such a fine thing that any cost would be justified? Would even the Liberal Democrats dare to commend the EU without showing the least regard for the cost?

Because we cannot measure everything, as my noble friend Lord Hannay said, should we not try to measure anything? That is an absurd proposition on which I hope noble Lords will reflect. Must this large issue of policy turn entirely on a mixture of emotion, hopes or fears, ignorance or rival propaganda? Nor will it wash to dismiss the patient call for information from the noble Lord, Lord Pearson, on lofty, pseudo-technical grounds, as I have heard in this House, that cost-benefit methodology has no bearing on such complicated issues. That altogether underrates the sophistication of specialists in that line of business, especially if they are offered a fee.

It is difficult to suppress the dark thought that opposition to measurement conceals a preference for sweeping claims of disaster if we dare to contemplate withdrawal, and absurdly exaggerated claims about the EU as the guarantee of peace in Europe and the world. For both Euro-sceptics and Euro-philes, economic benefits may not even be the most important part of the equation. However, for all rational beings, the measurable economic burden is relevant as indicating the opportunity costs of our membership— that is, the sacrifice of alternative uses of the resources.

In an earlier debate, I ventured to offer some broad orders of magnitude of the opportunity costs that might be saved by British withdrawal. The figures were admittedly derivative, but a retired economist can hardly be expected to undergo the fatigue of original research in such a matter. Anyway, I suspect that hordes of experts in the Treasury could produce much of the data for which we are looking from their word processors in their lunch hour.

My first approximation differs a little from that of the noble Lord, Lord Pearson. I start from a gross payment to the EU and its institutions shown in the Pink Book at almost £12 billion, from which might be deducted up to £7 billion, including the Thatcher rebate, which of course the French and Germans would like to snatch back. Then there are estimates of the total cost of the CAP, which range from £5 billion to £9 billion. Is it about right to put at £5 billion the higher priced imports that follow from the EU's dubious anti-dumping duties? Such outside "guestimates" would suggest that annual costs might range from £15 million to £25 million—a little short of the estimate made by the noble Lord, Lord Pearson. They are huge figures to set against the arguable political and psychological advantages of membership.

Rather than retreat into her usual charming evasions, would the noble Baroness, the Minister, at least acknowledge the desirability of a more accurate assessment than I have been able to offer? The stakes are high. The Minister might even avoid further re-runs of our unending debates.

7 p.m.

Lord Willoughby de Broke

My Lords, I am grateful to my noble friend Lord Pearson for initiating the debate and I congratulate him on his excellent speech. It admirably set the scene.

For reasons that defeat me, all the Front Benches are to a greater or lesser extent in favour of the EU; some want more, some want less and some want the unattainable. So it is usually left to Back-Benchers to question the whole relationship; to question whether it is a good idea for Britain to be in the EU at all; and to examine the costs. But when we dare to ask those questions we are slapped down as "Euro-phobes"—a convenient catch-all label which means that we are so far beyond the pale that it is not even worth having the debate. An example of that occurred last month in a Liaison Committee debate when one of our opponents—the noble Lord, Lord Peston, I think —called it "damaging" to have such a debate on our membership of the European Union and its costs. I do not see how it can be "damaging" to ask for an open debate about the fundamentals of the EU—called the "bottom line" by the noble Lord, Lord Harris.

Our gross annual contribution to the EU budget is £11 billion—I prefer to deal with the gross, rather than the net, figures. The British taxpayer is handing over £30 million every day of the year to an organisation in Brussels and that is a byword for—how shall I put it— financial irregularity. It is an organisation whose accounts have failed to be signed by the European Court of Auditors for nine consecutive years. But the poor old taxpayers are never asked whether they think that is a good idea or told how their money is being spent. I suppose it would be "damaging" to do that. When it comes to the EU, honesty is definitely not the best policy.

So what happens to that £30 million a day? Where does it all go? As we have heard, most of it goes on the Common Agricultural Policy. Although there is talk of reform, I shall tell the noble Lord, Lord Dubs, that the bill has not come down and does not look like coming down. We are still paying the same amount, it just goes into a different pocket. That reform will not be particularly promising. The EU has also been lucky enough to be able to contribute towards modernising the Spanish fishing fleet so that it may operate with full efficiency in what used to be our North Sea waters, while the British fishing fleet is laid up. I am sure that we would all like to pause and thank Sir Edward Heath for making such self-evident benefits possible.

What do we get back? After careful study of replies in House of Lords Hansard, the Government's case appears to rest on two positives: first, our membership of the single market. I do not propose to deal with the claims about jobs as they have already been dealt with and subsequent speakers may also wish to touch on that point. All I shall do is to remind the House that a Government Written Answer on 30 March, 1999 slated: There are no meaningful figures on the effect of European single market legislation upon net UK job creation between 1993 and 1997" [Official Report, 30/3/99; col. WA 32.] The second alleged positive is that within the EU we are able to shape the way it develops; to make it, in the Minister's words, more democratic, more effective and of course more efficient". If only that were true, but it is patently not. Britain has been hit by a tidal wave of EU directives, regulations and red tape that damage rather than help British competitiveness. An absolute classic of that kind is the Commission's recent ruling that Ryanair's deals with Charleroi airport are illegal. Now, instead of paying say £10 or even less for a flight to Brussels, would-be travellers—those outside the EU and government salariat who do not have to count the cost—will have to pay enormous sums. They will be back in the hands of the grisly gang of "state champions"—Air France, Aer Lingus, and Alitalia—and will probably have to take out a second mortgage to afford a ticket to Brussels. I am afraid that the Commission would not recognise competition if it fell over it.

EU red tape has now become an avalanche. It flows into every corner of our life, with directives on working time, parental leave—

Lord Hannay of Chiswick

My Lords, I thank the noble Lord for giving way. Would he be in favour of allowing local governments to subsidise illegally airlines that wish to come to their airports? Would that be a good use of taxpayers' money? Does he favour a single market in which such practices are common and allowed?

Lord Willoughby de Broke

My Lords, I favour an open and competitive policy. It was open to other airlines to do the same as Ryanair; they were just too slow to do it. The Commission should recognise competition for what it is, not what it thinks it is.

I was talking about the various directives that have flowed our way—working time, parental leave, pregnant workers, part-time workers and an uncountable thicket of health and safety regulations. Also our horses must have expensive and unnecessary passports in case they get eaten by our Belgian or French friends; fanners are criminals if they bury a dead ewe on their own land; and any trader is a criminal if he sells goods in pounds rather than kilos.

But I do not wish to be too negative. When she wound up our debate on this subject in June last year the Minister pointed out that thanks to the EU we in Britain have safer toys. She is quite right. Thanks to the EU rocking horse directive, we now have a new "free height of fall" standard which will ban all rocking horses that are over two feet high. Just as we are deemed too spavined to clean up our own beaches and provide clean drinking water for ourselves, we can now sleep easy in the knowledge that killer rocking horses will longer damage our kiddies. That makes it all worthwhile.

The politicians and Euro-crats who have charted our progress into the European morass are fond of the image of vehicular progress to instil the necessary urgency in us laggards. We must not miss the boat, train or bus; we must keep pedalling the Euro-bike in case it loses momentum and we all fall off. The Euro-limo is looking more like a Euro-banger day by day. After the findings of massive fraud in Eurostat, the smell over the Commission's own accounts, the ignominious collapse of the stability pact and a collision with Poles on the way to the constitution, the wheels have come off the Euro-limo in a big way. It is now parked hissing and creaking in a lay-by, waiting for the rescue service.

The rescue service comes in the shape of the President of the European Commission. His solution is a whacking 25 per cent increase in the European budget. In broad-brush terms that would bring Britain's annual contribution up to £13.25 billion. Would the Minister say whether the Government are in favour of such an increase? And if not, could she explain why the Government believe that £13.25 billion is not right, but that £11 billion is. We would like to know. If the Government are so confident of their case, they should be able to make it in the study for which we are asking.

7.08 p.m.

The Earl of Liverpool

My Lords, I rise to support my noble friend for initiating this debate and to congratulate him on the vigorous and sincere way that he deployed his arguments. I also congratulate him on his good timing—I shall return to that matter.

His request for a cost-benefit analysis is reasonable by any standards. I would have thought that europhobes and europhiles alike would be seized of the wisdom of being in possession of as many facts as possible before taking the next and possibly irrevocable step. If nothing else, the Iraq war has taught us that. I have heard it said by noble Lords who are on the europhile side of the argument that there is no point in carrying out the sort of exercise that my noble friend is requesting, because the benefits of remaining within the EU are so obvious. I can only say that I, and increasing members of the British public, find that argument is wearing thin.

There is another argument that is deployed by the europhiles, which is that a cost-benefit analysis would be so complex—the noble Lord, Lord Hannay, referred to that—that it would be difficult to carry out and it would be time consuming and expensive. It may be all of those things, but I do not believe that that absolves us from carrying out the work.

This is one of the most important and long-lasting decisions that we have to make in our lifetime. And assembling all the facts which would then enable us to do our "due diligence" has to be the right way forward. Indeed, to do anything less would be—to use a City expression—an abrogation of our fiduciary duty.

I mentioned earlier the good timing of my noble friend Lord Pearson in getting his Motion on to the Order Paper today. As we all know, the EU spending budget is very much in the news at the moment. A 25 per cent increase in contributions is being proposed, with, very possibly, a demand in 2006 that we forfeit our annual rebate of nearly 3 billion euros. To read some comments in the press, one would think that this was a bolt from the blue. But after enlargement it was ever going to be thus. Of course the richer countries were going to have to increase their contributions because the poorer countries joining were always going to be the net beneficiaries. As the noble Lord, Lord Dubs, said, that is why so many Europeans think that the EU is a brilliant wheeze. It benefits them, it is right that it should and it is right that we should help them. It goes some way towards answering the question posed by the noble Lord, Lord Dubs.

Many of us warned that this would happen and so I found it somewhat extraordinary to read yesterday in the Evening Standard that our Chancellor, Gordon Brown, will label the proposals for increased EU spending as, unacceptable and unrealistic, wasteful, inefficient and unfair". I found that most interesting and I want to focus on two of his words; wasteful and inefficient. For me, they summarise so much of what is wrong with the EU.

At present, our net contribution is running at about £4.5 billion per annum. My noble friend Lord Willoughby de Broke says that the gross figure is some £11 billion and my noble friend Lord Pearson came up with £25 billion. By any standards, it is a large contribution. Among other places, it going is down a black hole of fraud, as referred to by my noble friend Lord Willoughby.

The EU auditors have been unable to sign off the accounts for the past nine years because they cannot account for the whereabouts of what they acknowledge to be about £3 billion to £4 billion. It is of course more than likely to be even greater than that.

If that is the case, it becomes apparent that our entire net annual contribution of about £4.5 billion is being lost to fraud of one kind or another. One talks nowadays in billions without capturing in a real sense the amount of money we are talking about. Let us say that our contribution is £4.5 billion; that is £4,500 million. It is a great deal of money and all of it is coming from the long-suffering British taxpayers' pocket. To what extent are British taxpayers aware that an amount equivalent to almost all our net contribution is being lost down a black hole of fraud in the European Community? I do not suspect that many are but people should know.

I may be exaggerating the figures, but I fear that I am not. In any case, the only way to find out is to carry out a cost-benefit analysis of the kind my noble friend Lord Pearson is advocating. I live in the hope that the Government may be persuaded that this is the only wise and sensible way forward.

7.15 p.m.

Lord Beaumont of Whitley

My Lords, this is a debate which should not be needed. But it is and all your Lordships should be grateful—although I am sorry to discover that some are not—to the noble Lord, Lord Pearson of Rannoch, for his tireless efforts to achieve it.

It is self-evident that any country which is a member of an organisation which involves money should have a cost-benefit analysis both economic and political. I am sure that the Government will say that they have one. Possibly they have, but it is my contention that if they have, it is out of date and extremely tendentious.

And therefore, it is probably advisable that those of us who support the Motion should make it clear where we come from. In so far as I speak for the Green Party on this matter, I have to say that the party's policy is in favour of Britain being part of the EU but would like to see it reformed. That, I think, is a triumph of hope over experience. No one looking at the EU as it is at the moment can hold out much hope of it reforming itself in the direction we want; that is to say, becoming less bossy and less economics oriented.

As for myself, I have abandoned hope of reform and I will campaign for our speedy exit. I was not always thus. Soon after our accession, the British office of the EU gave a small dinner party for those of us who had campaigned for it before what were then the "big parties" decided to. My wife and I had helped to organise, under Lord Gladwyn and Mark Bonham-Carter, a small conference in 1963 called "Europe— after Britain joins" and so we were counted among the good, if not the great, and were rewarded accordingly with a nice dinner party.

But my devotion to Europe, which is as strong now as it was then, was to a Europe des Patries, as De Gaulle would have called it, and was deeply rooted in the concept of Christendom, the basis of which the noble Baroness, Lady Cox, pointed out is disappearing down the plug hole. I failed to notice for far too long a time that such ideas were being swamped by economic factors. Far from a reversion to Christendom, we were heading inexorably into the jaws of Mammon.

I must point out that I have spoken for more than the nought minutes, which is shown on the clock. I welcome what it is doing to me and I promise not to over-run, but I think I should point that out.

I am an unrepentant reader of the Daily Telegraph and the Sunday Telegraph on the basis that together with the Financial Times they have by far the highest standards of British journalism. Therefore, your Lordships will not be surprised that I could not bombard you with the endless instances of the dictatorial record of Brussels, which Christopher Booker and his colleagues provide. But tonight is not the time for that. That time will be when we set up a body, as envisaged in the Motion, to draw up the balance sheet. I am sure that sooner or later we will.

In the mean time, I will continue to fight to maintain British independence against a take-over by the Brussels Commission's United Europe, as I saw done when I was a boy against Hitler's United Europe and as our ancestors did against Napoleon's United Europe. Now that the opinion polls tells us that the majority of all members of the EU are opposed to that body—the noble Lord, Lord Dubs, asked us to consider why so many people want to get in but I would ask him to consider why so many people want to get out—I see some hope as long as doughty fighters such as the noble Lords, Lord Pearson and Lord Stoddart, stick to their guns.

In 1940, after the fall of France, the Times printed a poem by my beloved Dorothy L Sayers called "The English War". It had the courage to rejoice in those dark days that we stood alone and contained the stanza: This is the war that we have known And fought in every hundred years, Our sword upon the last, steep path Forged by the hammer of our wrath On the anvil of our fears". So, stirred by that clarion cry, let us at the very least press for a cost-benefit analysis!

7.19 p.m.

Lord Vinson

My Lords, we are, yet again, indebted to the noble Lord, Lord Pearson, for instigating this topical debate. Ever closer union with Europe is to many people, such as the noble Lord, Lord Dubs, indeed, the fulfilment of their vision of a supranational European state bringing—

Lord Dubs

My Lords, I did not argue for a supranational European state. I thank the noble Lord, but that is not what I said.

Lord Vinson

My Lords, I apologise. I am delighted that the noble Lord made that point clear. However, to many people, the fulfilment of their vision is a supranational European state bringing peace in our time. They argue that the nation state is on its way out and will soon be part of yesterday's political framework. They argue that we are on the escalator of commitment and the die is cast. I used to think that way, too, but my vision has been tempered by reality.

I believe that the nation state is far from dead and that Europe should be built on foundations that acknowledge basic tribal patriotism rather than attempting to eliminate it. One glance at the crowds at international football matches should be enough to alert all politicians to the force of nationalism. Nationalism should be embraced in our arrangements if we wish to give the whole European ideal democratic legitimacy. As the Government ponder on the new EU constitution, now, indeed, is the time to do so.

Interestingly, only last week Joschka Fischer, the German Foreign Minister, said that he had, learnt a lot from the Iraq conflict which split the EU down the middle". and that, the dispute raised fundamental questions of how close European neighbours with different histories and traditions could agree on vital policies". He went on: I think all countries have the same interest: a strong Europe. But we have different traditions, different political disputes at home, complicated parliamentary systems—we have to balance that and go forward". Wise words indeed.

Meanwhile, as every poll on the popularity of the EU shows, the British public are becoming increasingly doubtful about the whole exercise and sceptical as to its benefits. Even the Government's own representative on the Giscard committee, Gisela Stuart, changed her mind after first-hand experience of the realities of the EU, saying in her recent speech: The fabric of the EU is tottering and it needs amending If the Government sign up to this constitution, forced on our people without reference by a political elite, it will reinforce the growing alienation from the democratic process. I wish I could remember who said: If you value peace over freedom, you will finish with neither". but he was dead right. We must have an arrangement with the EU that works with the grain of human nationalism. Another botched deal based on reluctant consent is in no one's interest. What the public need is an assessment of where this country stands, what economic benefits it has reaped from our membership to date and what, if any, alternative arrangements it could have within an enlarged Europe. Change is in the air. We have all read the audit of war; now it is time for an audit of peace.

I cannot for the life of me understand why the suggestion of a cost-benefit analysis is not encouraged and supported by many on the opposite Benches. It could well vindicate their vision and justify their belief in further economic integration. Alternatively, are they terrified of seeing one of their sacred cows, grazing in the verdant pastures of Europe, suddenly slaughtered by a fact?

Others in this debate have spelt out areas and parameters that a cost-benefit analysis should examine. Time is short but I hope that, not least, we can look at the true cost of our 1 per cent GNP contribution to the EU and the dubious benefits and lack of utility of much of the grants returned to us— grants which can be spent only on items which our own Government would not have supported in the first place. It is good to see that this week the Treasury is having some thoughts on this financial roundabout and all the waste that goes with it—probably up to 0.25 per cent of our GDP frittered away and well over £2 billion.

I hope that our analysis could also examine the cost of over-regulation and why we gold-plate our regulations and others do not. A perfect example of our attitude and how damaging it is to our economy is in this week's press. A fully HSE-licensed and approved waste paper furnace was used to heat a building—an excellent example of recycling. Out comes a new EU regulation describing it as an "incinerator" and no longer as a "furnace". So the same HSE department takes steps to close it down, albeit previously recognising its intensely useful function. That results in the destruction of a highly commendable recycling operation. Have we gone mad? Whatever happened to subsidiarity in cases such as that? One could repeat that type of example a thousand-fold.

The European Union is making the most significant decisions about its future structure since the Treaty of Rome established the Community in 1957. We need the facts because the Government, whatever their red lines, will be under pressure to sign up. As ever, we shall witness diplomacy by exhaustion and the future legal and financial framework of this country will no doubt be changed irreparably. Deeper embedded will be taxation without adequate representation and regulation without the possibility of rectification because the new constitution gives the EU a legal entity in its own right and its laws will take preference over those of national parliaments.

The constitution of this country has been developed over 1,000 years and has given us, uniquely, remarkable political and economic stability second to none—one which we all too easily take for granted. The British people must know what they are getting in exchange. The EU convention is not just a matter for governments; it is a matter for parliaments and people. The recent vote in Sweden was not only a vote against the euro but a vote against the political establishment that was taking people along a route which was going they did not know where and which, instinctively, they did not like.

The Government must find the resources to establish the facts and then the British people must be allowed to decide on those facts by way of a referendum. If a new EU constitution is imposed upon them without a real effort to explain its desirability, those football crowds will divert their patriotism into strident nationalism, and the dream of a peaceful Europe—a dream we would all like to see come true— will turn into a nightmare.

7.26 p.m.

Lord Stoddart of Swindon

My Lords, I join others in congratulating the noble Lord, Lord Pearson, on putting this item on the agenda today and also on his persistence in pursuing this particular view. I also congratulate him on his presentation a few Sundays ago on the Jeremy Vine show. That was certainly well received, and I believe that he has had a great deal of encouragement and correspondence about it.

However, it is beyond my comprehension that, after 32 years' membership of, first, the Common Market and then the European Union, there is a blank refusal by the Government and the main opposition parties to agree to the need for a cost-benefit analysis of our continuing membership. What on earth are they all afraid of? We have had myriad inquiries about virtually everything else; why on earth cannot we have an inquiry about the most important issue to face this country during the rest of this century? We should have such an inquiry and we should have it now.

Surely we want to know what benefits—economic, social and political—we derive from membership, how far the governance of Britain has been handed over to the European Union and what future lies in store for us as an independent, self-governing democracy. Those are huge and important issues and they affect the future of this country. Why on earth cannot we have an inquiry into the matter? If this item is not worthy of an inquiry, what on earth is? Perhaps we should have an inquiry into why there is such resistance to having an inquiry into this most important issue confronting Britain.

Unfortunately, those of us who raise these matters are accused of being little Englanders, extremists, nutters—you name it; we are them—and even worse. But what we are seeking is the truth about the European Union. I should have thought that everyone wanted to know that—not only people such as me who believe, and have always believed, that it is not good for us. Those in favour should welcome such an inquiry. So often, the predictions of people such as myself are scoffed at, as are the outcomes.

All too often we have been proved right. I take, for example, the issue of scrapping the pound and adopting the euro. Those who cautioned against it again were attacked for not wanting to join the "euro express" and were even labelled unpatriotic because they believed in keeping our own currency. Events have proved us right. Even Jacques Delors, the former commissioner, agrees that we were right. A Times report of 17 January 2004 quotes him as saying: The UK was right not to join the flawed euro". So we have his endorsement.

One important result of an inquiry might be to find out why the Prime Minister was so anxious to get us into the euro post-haste, and led a campaign to achieve that.

One advantage claimed for EU membership is trade. Yet Britain has consistently had an average trade deficit of £5 billion every year since we joined. Think of what that sum means in terms of jobs. So, in fact, the advantage of trade does not lie with this country, it rests with other countries in the European Union.

An inquiry could also establish whether our fishing and agriculture industries have thrived within the EU or whether they would do better outside. It could also examine the effect of membership on other great industries, such as shipbuilding and steel, and indeed the effect of the overregulation throughout the whole of the EU and its functions.

Furthermore, an inquiry would examine whether the taxpayer is getting value for money, and the effect of losing our rebate amounting to £3.23 billion each year, which is clearly under threat and is being defended—I am glad to say ably—by the Chancellor of the Exchequer. And, of course, a cost-benefit analysis at this time would be able to examine the new demands by the Commission, of which we have already heard; for example, a huge increase in funding for education. So far as I can understand from what has been said, it wants to take over further education and it wants to spend an extra £1.8 billion on administration alone.

Finally, we are always being told that if we do not further integrate with the EU we will be isolated. Of course we will not be isolated. That is complete nonsense. The noble Lord, Lord Dubs, said that we would be described as a small isolated country if we were outside the European Union. But we are the fourth largest economy in the world and we are respected throughout the world for our experience in diplomacy.

There is a wide, wide world beyond the European Union. What we should consider is our place in that world and whether we should be thriving in it, leading a Commonwealth comprising one quarter of the world's population, rather than rooting ourselves further into the stagnant regulation-ridden backwater of the European Union where we can only—and always do—follow while others lead.

7.34 p.m.

Lord Monson

My Lords, the noble Lord, Lord Stoddart of Swindon, suggested that the Government should welcome an impartial inquiry. I am confident that the Government, and indeed the main Opposition parties, will welcome the quite admirable clarion call of the noble Lord, Lord Pearson.

Why? For this reason: ordinary mortals—among whom of course I number myself—are fully entitled to be swayed as much by emotion and sentiment as by cool calculation when evaluating the pros and cons of membership of organisations such as the EU, but governments, and what the French call la classe politique are not supposed to allow their hearts to rule their heads. Hard-headed practical considerations, both economic and non-economic, are all that should count.

As Palmerston famously put the matter 156 years ago: We have no eternal allies and we have no perpetual enemies. Our interests are eternal and perpetual, and those interests it is our duty to follow. This traditional lack of sentiment—rather dismaying to a layman it must be said—has been all too well illustrated by Britain's treatment of New Zealand. In this country, 55 years ago New Zealand was riding as high as possible in public estimation. Together with the Canadians and the Australians, the New Zealanders had rallied to help us in two world wars. New Zealand had suffered—like the Canadians and Australians—disproportionately high casualties in the process. Its people were mostly of British stock, and most of our lamb and butter came from there.

Yet, less than a quarter of a century later New Zealand was politely but firmly cast adrift, to facilitate Britain's entry into the EEC. How strange then, given this Palmerstonian lack of sentimentality—indeed ruthlessness—that there are those in the British establishment who argue that any talk of loosening our formal—I stress "formal"—links with continental countries collectively must be firmly squashed, since it would allegedly "hurt the feelings" of those countries and indeed be deemed a "hostile act", and provoke them into inflicting unspecified Lear-like retaliatory horrors upon us. Such a mixture of emotionalism and panic is inconsistent, to say the least, with traditional British foreign policy.

Emotion and sentiment in the field of foreign relations is fine for individuals, but where governments are concerned they need to be subordinated to practical considerations.

Most Euro-enthusiasts, like the noble Lord, Lord Dubs, will now concede that there are some disadvantages to EU membership while most Euro-sceptics will concede that there are some advantages to EU membership. For example, I willingly admit that, when standing up to American bullying in matters of trade and tariffs, there is a lot to be said for being part of a large, populous negotiating bloc such as the EU.

So, if we can agree to put emotions and sentiment on the back burner for the time being, it is simply a question of whether or not the overall advantages— both economic and non-economic—outweigh the overall disadvantages. What could be wrong with that?

If, at the end of the day, the evidence points overwhelmingly one way, that is probably the end of the argument for most people—not of course for everyone—and a lot of talk, time and money would be saved. If the evidence demonstrates only a small overall benefit in continued EU membership, that is the moment when emotional and sentimental considerations can legitimately come into play in deciding what steps to take.

If, on the other hand, the evidence shows that there is a small overall disadvantage in EU membership, that would give the Government a golden opportunity to pinpoint the most disadvantageous aspects of that membership, with a view to seeing whether it might be possible to initiate a ground swell of public opinion across the Community in favour of rolling back the frontiers of the acquis communautaire in certain areas. One would have to pitch one's arguments directly to the continental electorates; it is no use appealing to the European elite, who do not want to relinquish their grip on power—their "benign" grip, as they would argue, unconvincingly.

The ordinary people of the Continent do not want "obsessive harmonisation" as the noble Lord, Lord Dahrendorf, put it many years ago, or interference in the nooks and crannies of their everyday lives—to quote the noble Lord, Lord Hurd—anymore than we do. So improvements are, although in practice unlikely, theoretically by no means impossible.

The inquiry would have one other great benefit. It would knock on the head two big lies and one smaller lie, or at least fib. Quite disgracefully, too many Euro-enthusiasts have successfully terrified much of the British electorate by claiming that 3 million jobs directly depend on membership of the Community and that, if we left the EU, 3 million people would lose their jobs overnight or before long—something that they know to be untrue. But I exempt the noble Lord, Lord Dubs, from those strictures, because he admitted that 3 million was a grossly exaggerated figure.

The second big lie is slightly less inexcusable, in that some people genuinely seem to believe it—quite amazingly. That lie is that only the existence of the EU and its earlier manifestations has prevented western European nations from going to war with one another once again. Time and again, I have challenged those who make that assertion to set out one plausible scenario in which western European democracies would have gone to war with each other in the past 50 years had the EEC never been created. Unsurprisingly, no one has ever risen to that challenge.

A smaller lie—or perhaps misconception, as it may well have been genuinely believed—was advanced in debate on the Maastricht Treaty some years ago, I think from the Conservative Back Benches. That was that the continued existence of the European Youth Orchestra depended on our signing the treaty. I yield to no one in my admiration of the European Youth Orchestra or any other youth orchestra; they are marvellous, inspiring, usually a joy to see and hear and give one enormous hope for the future of our civilisation. But if the European Commission vanished overnight and the Council of Ministers never reconvened, the European Youth Orchestra could still flourish and go from strength to strength.

It is quite possible that, ultimately, the inquiry proposed by the noble Lord, Lord Pearson, might find continued EU membership to be beneficial to the United Kingdom, on balance. But if it did so, at least the findings could no longer be based on the ridiculous claim that withdrawal would lead to mass unemployment, a third European war and the diminution or cessation of all social, cultural and intellectual contact with the European continent.

7.41 p.m.

Lord Black well

My Lords, I join other noble Lords in welcoming the Motion moved by my noble friend. As the noble Lord, Lord Stoddart, said, few more important questions face us at this time. The reason for that is that, week by week and year by year, we face a huge number of decisions on how we participate in Europe, including, later this year, the issue of the constitution itself, which other noble Lords have mentioned. It surely cannot be sensible to enter those negotiations and agree outcomes without a clear view of what is at stake and what are the alternatives to proceeding with that option.

As other noble Lords have said, the Government's tactic tends to be to assert that there is simply no alternative to signing up to whatever option is offered from Europe, other than full withdrawal. It is then argued that such a step would be economically and politically disastrous, and that those who question the benefits are therefore extremists whose questions can safely be dismissed. I reject that form of response to an attempt to have an intelligent debate on matters of such crucial importance.

I cast my case for the Motion in the context of current discussion under way in Europe and the reality that there must be a high probability that failure to reach an agreement on the proposed constitution acceptable to all—in particular, if it is vetoed by Britain or other countries—will inevitably drive practical consideration of what has in the past been called a multi-tier Europe. We cannot assume that Europe will from this point on always proceed at a uniform pace or in a uniform way. A multi-tier Europe is a likely outcome—whether now or at some point during the next few years. That is what my noble friend Lord Hurd has previously called variable geometry.

I believe that there is nothing wrong with that; indeed, it is probably highly desirable, because we must recognise that different countries in Europe have different needs and that different outcomes are likely to suit their interests. There may be many in Europe with different situations from that of Britain who would benefit from a higher level of integration than that from which many of us believe that Britain would benefit.

If we are to participate in such discussions, as and when they appear on the agenda—which I believe is likely to be sooner rather than later—we must decide what kind of tiers we want to help shape in a multi-tier Europe and which of those tiers bests suits our interests. That means that we need clarity about what aspects of the current European Union are in our favour; and clarity about which aspects, on balance, we would rather be outside.

I am sure that there is general agreement in the House that many things occur alongside our membership of the European Union that we would want to preserve under any scenario—in particular, the notion of free trade across Europe and as much of the world as we can achieve. That applies similarly to co-operation on aspects of crime, security and other matters that cross national borders. None of those things is in doubt. The question is: how much of the current European Union overheads do we need to deliver those benefits; and what burdens imposed by those overheads do we not need?

Let us take the single market as an example. It is clearly desirable to have as low a level of tariffs across Europe as possible. The truth is that, since the European Union was founded, tariffs have dropped across all global trade. Several countries outside the European Union now achieve as favourable terms with our European partners as we do, without being part of the European Union. Yet the costs of the single market are now significant.

Thousands of regulations are imposed every year— many of them introduced into UK law without effective scrutiny. Can the Minister tell us how many regulations originating in European legislation have been passed into UK law during the past 12 months; and whether on that narrow aspect the Government have any estimate of the cost to British business? Despite the fact that we are all in favour of free trade, it is reasonable now to ask what are the benefits of additional trade that we may achieve in Europe through being a member of the single market, versus the loss of trade elsewhere that may arise because of diminished competitiveness due to those regulations.

As other noble Lords have said, we should enter that discussion recognising that the European Union accounts for less than 10 per cent of Britain's GDP and that, as my noble friend Lady Cox pointed out, the European Union will actually be one of the slowest growth areas for trade in the coming years. It will be China, India, Russia and similar countries that will drive world growth during the next 50 years. They are where our future lies.

Germany, by contrast, will have flat or close to flat GDP during the next 20 years, if current forecasts are to be believed. If its productivity continues at no more than 1 per cent a year, or thereabouts, and its population in work declines by 1 per cent a year, simple maths says that it can look forward to little growth in its overall economy during that period. So we must be clear in a hard-headed manner about where our interests lie against the true engines of world and British growth in the years ahead.

As other noble Lords have said, beyond the single market there are huge questions about the benefits that we may achieve from our membership of the common agricultural policy, the common fisheries policy and other common policies. If we were constructing Europe today—and if, as I believe, we have the chance to construct a new Europe now that better suits our needs—would the Government choose to be a member of the common agricultural or fisheries policies? If not, may we see the benefit analysis that justifies that decision; or their arguments why we should continue our membership? It is not a question of dismissing them as part of a "take it or leave it" package; we have the opportunity now to shape a new Europe. Let us shape it around our interests, not around the false argument that we must accept everything or nothing.

The final argument made against the proposal, as the noble Lord, Lord Hannay, said, is that because we cannot estimate something to decimal places, it is not worth doing. In my experience, there are few very important questions to which one cannot get approximate answers and an approximate analysis. This is a case in point: we do not need the answer to decimal places. If the Government set up such an inquiry, it should be able to give a ballpark estimate that would at least give direction to the debate. If I am wrong, and such an inquiry could not come up with such an analysis, the Government should admit that neither they nor we know, rather than continuing to assert that the evidence of benefits is so overwhelming. If it cannot be proved, we must all accept that the answer is unknown.

The only conclusion that one can reach is that the Government are afraid of the analysis. Surely, it is almost a dereliction of duty to negotiate the kind of steps being proposed without at least attempting an analysis. I hope, therefore, that the Minister will concede to Parliament the kind of analysis for which my noble friend's Motion calls.

7.51 p.m.

Lord Moran

My Lords, our thanks are due to the noble Lord, Lord Pearson of Rannoch, for giving us the opportunity to debate this important matter. I should like first to say a word about the noble Lord. As he is one of the rare parliamentarians who say without equivocation that we should come out of the European Union, quite a number of Peers seek to disparage him as a lonely eccentric. That is a serious mistake I have noticed a tendency in this House to be impatient with views that run counter to the general consensus. I remember how Peers made it clear that they regarded the repeated efforts of my noble friend Lady Mar to alert them to the dangers of organophosphates as tiresome and boring. The time came eventually when they recognised that she was right and paid her the respect that she was due.

The noble Lord, Lord Pearson, suffers in much the same way. However, he has built up a great fund of knowledge about the EU and knows more about its workings and its effects on this country than most Members of the House. If we look at opinion outside the House, it is clear that the noble Lord is not part of a negligible crackpot group but puts forward views held by a substantial part of national opinion. MORI polls have recorded that for the past 25 years just under half of all its respondents want us to get out of the European Union. The latest available MORI figure for June last year was 46 per cent. The fact that all three of our main political parties support continued membership seems to have had little effect on the public's views.

The noble Lord, Lord Pearson, complained for a long time that the BBC was biased against those who wanted to leave the EU. He arranged to monitor a large number of programmes and demonstrated that his suspicions were correct. The BBC was somewhat abashed and finally asked him to come on to "The Politics Show" during prime time television. He put the case for leaving the EU and answered questions. At the end, a bemused BBC presenter said that they had received more than 400 e-mails in 20 minutes and that most of them called for the noble Lord, Lord Pearson, to become Prime Minister or whatever. Later the switchboard was jammed for an hour and a half, with 90 per cent of callers in favour of leaving. I cannot think offhand of any other Member of your Lordships' House who could persuade the BBC to give him or her a solo slot to put forward a controversial case on Europe and secure such massive support from viewers. I suggest that in future the House would be wise to take the noble Lord's views with the seriousness that they deserve.

I welcome the debate. I had hoped that the House would have been able to discuss our relationship with the EU after I had moved an amendment to the Motion on the Liaison Committee's report on 14 January, but that hope was frustrated. In a vote that evening the House resolved by a large majority that within the next 12 months the slender resources available for an ad hoc committee should be devoted to euthanasia rather than to our relationship with Europe. That seemed an odd choice of priority. Why do we devote relatively little of our time and resources to questions of great concern to the people of this country, such as immigration, crime, MRSA in hospitals, the need to strengthen the family and our relationship with the EU, and instead spend weeks discussing the banning of hunting or a whole series of Bills improving the standing of homosexuals? That does not do much for the standing of this House. I am in no doubt that, if we are to have an early inquiry into the pros and cons of detachment from the EU or of a looser relationship, sadly we cannot look to this House to carry it out. We shall have to make other arrangements.

On 14 January, I said that an inquiry should first bring together, in a readable form, details already in the public domain. On reflection, I concluded that this part of the inquiry would best be carried out by a research organisation rather than a committee. Arrangements have therefore been made for the respected independent research institute Civitas, with which some noble Lords are associated, to collect from impeccable sources and to publish in a clear and easily understood way the costs and benefits arising from our membership of the EU. I hope that it may be available by the summer. It will be interesting to see whether the view expressed before our entry by the head of the Treasury, as recorded on page 225 of Hugo Young's book This Blessed Plot, that the advantages were far outweighed by the costs, now appears to have been correct or not.

7.56 p.m.

Lord Williamson of Horton

My Lords, those who feel strongly about the matters covered by this debate are fully entitled to put their views to the House, and so far have been doing so at full throttle, if I may say so. None the less, I have a certain sense of dé jà vu.

The topic of the debate was the subject of recent exchanges on the report of the Liaison Committee, as some noble Lords have mentioned, when decisions were taken on the appointment of a Select Committee on another matter but not on the cost-benefit analysis of UK membership of the European Union. The merits and demerits of our membership certainly played a major role at the Second Reading of the European Union (Implications of Withdrawal) Bill, which the noble Lord, Lord Pearson of Rannoch, moved in March 2000, and which we debated on that occasion for more than four hours. It was also relevant, in one way or another, to the discussion and decision on the Nice Treaty and to the UK Government's support for the convention that led to the draft constitutional treaty, which this House debated for eight hours on 9 September last.

It is highly desirable that we should look at the benefits and disadvantages, not only of individual proposals, but of some sectoral policies as they have developed in the European Union. In the field of environmental protection and consumer affairs, for example, it seems fairly evident that European Union actions directed at the maintenance of high water quality; the reduction of potentially damaging emissions; the protection of certain habitats; or the control or removal of damaging chemicals, all within a European Union context, are of benefit to the United Kingdom and the individual citizen. None the less, it is desirable from time to time to assess the policies to see that they are being applied in the most effective manner, and that from the strictly national perspective we are getting maximum benefit from positive measures.

Similarly, we ought to be attentive to cases where, for example, judgments of the European Court of Justice have given rise to a different interpretation of the law from that which we expected. An example now being examined by the social affairs sub-committee of the Select Committee on the European Union, from which I have come directly to this debate, is the European Court of Justice judgment that, when a junior doctor is on duty in a hospital, the time that he or she spends having a rest break or even sleeping is to be counted as working time. That complicates considerably how some medical services are currently organised in the National Health Service and in some other countries.

Thus, I believe that the proper way to approach policy developments within an established structure, such as our membership of the European Union, is a continual process of assessment. The work of the Select Committee on the European Union is an important contribution, by providing material for Parliament, Government and the private sector to make such assessments. Over the years, a number of reports within the European Union have also sought to quantify the value of certain policies, most notably the Cecchini report on the internal market.

It is a separate question whether we ought to seek today to attempt a complete cost-benefit analysis of UK membership of the European Union. In the light of the detailed attention that is given to all proposals and to the progress or lack of progress on policies in the European Union, there would only need to be a comprehensive examination—which is obviously a mammoth task—of all the elements, quantifiable and non-quantifiable, of our membership of the European Union, if there were some special reason to do that. I do not see it. The situation remains in many ways similar to that prevailing for many years, and in some important ways it is better.

The budget of the European Union remains capped at 1.24 per cent of gross national income and has often been under spent. It represents less than 2.5 per cent of public expenditure in the European Union, the remaining 97.5 per cent being spent by member states. The single market is in effect, and although there is more to be done, the four freedoms—free movement of goods, services, capital and people—are largely respected. The single market was the biggest single initiative to remove red tape in Europe. Millions upon millions of forms were abolished. All of us who experienced it know what an enormous change that was. It is true that some things are not perfect now, but before the single market they were totally different and markedly worse.

The common agricultural policy has been considerably reformed. It will no doubt be further changed when, as I hope, the current round of international trade negotiations gets under way again. We have had a huge vote of confidence from the 10 countries who will become members of the European Union in May.

It is important and the most useful course for Britain to concentrate our attention more strongly on practices in the European Union that do not correspond to our approach nationally, but where it is realistic to conclude that the EU practices could, over a period of time, be corrected. I have in mind—I give examples, but they are important for the UK—three features of European Union legislation that should concern us as parliamentarians. There are many cases where criticism in the British press of decisions or legislation is mistaken or just plain batty, but it is none the less true that the perception of the British public that the EU is legislating in nooks and crannies has some element of truth. We know that the European Commission is capable of saying, as it did to the Select Committee recently, that it is going to put forward "only" 126 proposals or communications. I pointed out that we do not think like that in this country.

My message is that we can do something about it. Since almost all European Union primary legislation is decided by the Council and the European Parliament, we ought to make sure that the delegated authority to make secondary legislation is limited in the primary legislation to what is strictly necessary. We should use far more sunset clauses, which are not favoured in Brussels, but are a very good idea. The Commission should always present a list of legislation which it proposes to repeal or to let expire at the same time as it puts forward proposals. In this way, we can make practical changes that would be beneficial to us.

I am inclined to the view that a cost-benefit analysis on the scale suggested would be a diversion. We need to make best use of the advantages of EU membership, and to target strongly and in a focused manner areas for improvement, as I have indicated in relation to legislative practice.

8.4 p.m.

Lord Roper

My Lords, it is the custom of the House to thank the noble Lord who has introduced the debate. The noble Lord, Lord Pearson of Rannoch, has been fortunate in winning the ballot for today's debate, but he will not be surprised to hear that there is not unanimous agreement on these Benches with all the points that he made in his characteristically vigorous introduction. Nor will your Lordships be surprised when I say that I particularly valued the speeches made by the noble Lords, Lord Dubs, Lord Hannay of Chiswick and Lord Williamson of Horton.

Initially, I shall say one or two words on cost-benefit analysis, a point to which I shall return when I deal with one of the points made by the noble Lord, Lord Monson—before he leaves. I shall deal with the noble Lord's point at this stage. I go back to the wise words used in the debate on 14 January by someone who is one of the most distinguished academic economists in the House and Chairman of the Select Committee on Economic Affairs—the noble Lord, Lord Peston. He put that day's proposal in its place from an academic economist's perspective. He has dealt with cost-benefit analysis for 40 years, and is therefore in a better position to speak on such matters than many of the rest of us. Tonight, the noble Lord, Lord Hannay of Chiswick, made it clear why it was a difficult way of proceeding.

The noble Lord, Lord Dubs, said that there were two very different pictures of Europe drawn by Members of the House. I am one of those who see the European Union and its development during the second half of the 20th century as one of the most remarkable political achievements of that century. One cannot give it credit for all that has changed and all the differences, but I think that it is not unreasonable to claim, when one considers Europe in the first half of the 20th century, that it has been a significant contributory factor.

Perhaps the most significant evidence of that is the extraordinary fact of a new entity that has attracted all its neighbours into wanting to join. Nobody who has argued the case from the same side as the noble Lord, Lord Pearson of Rannoch, has had much to say about enlargement. The Union attracts even those that are not members at this stage. Ten new members will come in on 1 May. Every one had a referendum in order to decide whether to go in: in each case the proposal was carried. That must be very strange and they must have a rather different picture of the European Union from the one we have heard about tonight. I wonder why they have been so misguided. There are another dozen countries that I suspect may become members of the European Union in my lifetime. These include Romania and Bulgaria, with which negotiations continue, and six countries in the western Balkans, including Moldova, and perhaps Turkey. Nor do I exclude the other three European countries—Iceland, Switzerland and Norway—from joining the European Union before 2020.

The noble Lord, Lord Monson, suggested that it would be a lie to say that the European Union had stopped a war. In a sense, he is right. We cannot prove the negative. We cannot prove that if the European Union had not existed there would have been a further conflict in Europe. In the same way, one cannot say that NATO deterred the Russians. We do not know that the Russians would not have attacked even if there had not been NATO. But those two institutions have created a culture of co-operation among the countries that belong to them and have been one of the most fundamental confidence-building measures among their participants. They have created something referred to by a Czech political scientist as a "security community"; that is, a group of countries that cannot imagine the use of force to settle disputes among themselves. Of course, that is very different from what we knew in Europe in the first half of the 20th century. That is an outstanding achievement.

The noble Lords, Lord Hannay and Lord Williamson, referred to the creation of a common economic space—the single European market—for which the noble Lord, Lord Cockfield, had an enormous amount of responsibility as a member of the Commission. That freeing up of European trade was not just the removal of tariffs. It was much more than that and much more fundamental.

Here I agree with something said by the noble Lord, Lord Monson. The role of the European Union within the World Trade Organisation enabled us to organise and negotiate collectively. When the noble Lord, Lord Brittan, was commissioner, he did that in a remarkably effective way.

I should like to make a point about cost-benefit analysis. It is impossible to think of any way in which one could evaluate financially the value of the benefit of being in a group like that when negotiating. That is why cost-benefit analysis, which is all right when deciding whether to have a Victoria Line—one of the first decisions where cost-benefit analysis was used— becomes much more difficult with something of this kind.

In conclusion, perhaps I may echo the remarks made by the noble Lord, Lord Astor of Hever, in the earlier debate. I, too, congratulate the Minister on her remarkable stamina. She has not only given a most important Statement on the ways in which this House will play a larger part in future in dealing with European matters, but she is also winding up two of the debates. I look forward to hearing her response.


Lord Howell of Guildford

My Lords, I, too, warmly thank my noble friend Lord Pearson for bringing forward the debate. I salute his determination on this issue, which he has shown again and again in bringing the matter to the attention of your Lordships' House. Like the noble Lord, Lord Roper, I, too, add commiserations—I am not sure that that is quite the right word—or I note with sympathy the fact that the noble Baroness, Lady Symons, when she speaks following me, will have performed three times today at the Dispatch Box on arduous and difficult subjects. I hope that the immense work she puts in is recognised in the right places and that she receives a pay increase, and so forth.

As I think the noble Lord, Lord Moran, indicated, we have heard voices in this debate which ought to be heeded and, if possible, should be argued against by good robust arguments. They should not just be dismissed, or met with stale facts that may have suited yesterday's debates but are not good enough for the 21st century, nor just met with mere assertions. That is difficult because there are deep feelings on either side on those issues. From time to time, the re-assessment or revisiting of our major international commitment is, in the words of the noble Lord, Lord Beaumont, self-evident.

That must be so in the situation that we face in Europe where, clearly, enlargement, with the prospect of still greater enlargement in a few years' time, and the prospect of Turkey joining the EU after that, means that we are dealing with a completely different entity. We have to reckon with completely different policy considerations from those that drove the original six countries together or, indeed, inspired the commitment of the United Kingdom to the then Common Market. The original European Union has been totally transformed, as have been the original reasons for its creation. As the noble Lord, Lord Beaumont, observed, it is self-evident that one needs to look again at these issues with care in order to find the right arguments to carry public confidence in the policy, otherwise it will simply drain away.

In economic terms, I strongly hold the view that the original Common Market, as we called it, was for the United Kingdom a way forward out of socialist and corporatist stagnation and into free markets and competition, a point touched on by the noble Lord, Lord Williamson, in his contribution. But that was many years ago. Recently there has been a complete reversal. Over the past 10 to 15 years, the UK has gradually emerged as the competitive, free market economy while large parts of the original European Union are now stagnating, weighed down by excessive labour and other kinds of regulation, as well as high taxation. The Chancellor of the Exchequer, Gordon Brown, keeps pointing that out with great vigour, and no doubt he will continue to do so.

There is nothing inevitable about this contemporary and rather unhappy trend, one which is leading to considerable quarrelsomeness. The Commission is litigating against nation states and the Stability Pact has been driven through in a way described by my noble friend Lord Willoughby de Broke. While I may not carry all my noble friends with me on this, the signs are that with enlargement, with the arrival of 10 new countries and more to come, along with the obvious failure in so many areas of the integrationist agenda and the bitterness that that is causing, the European Union is on the point of very great change. That, too, is self-evident. Its citizens and some of the member states want that change.

In my view, this is not the time to think about cutting loose from the European Union, because this is probably the best opportunity during my lifetime, or certainly for the past three decades, for reshaping the European Union in ways that are more comfortable, sensible, democratic, open and flexible; that is, in ways that I suspect the vast majority of the people of Europe now want. So this is not the time to break away. Therefore, the wider debate, to which I hope our debate today has contributed—and to which my noble friend Lord Pearson has certainly contributed— should not turn so much on the narrower traditional issue of the UK's precise relations with the rest of the European Union, but on what kind of Union we now want to set our sights on, and what kind of Union can now be achieved in the new conditions constantly appearing around us. How flexible, comfortable for its members, open, convenient, useful and committed to free market principles can it be?

That is plainly not the kind of EU we have now; we have something very different. It is obvious that a Union structured to meet the problems of 30 or 40 years ago cannot meet the needs of the totally different world now emerging. The agonies of some recent treaty-making negotiations such as Nice demonstrate the clash between the past and the present. The Union cannot meet the needs of the newer or smaller member states which are now joining, and it cannot even meet the needs of some of the existing members, as we hear every day.

What is now called the European Union was inspired by great ideals and has great achievements to its credit. But everyone knows that the EU institutions have become hopelessly out of touch with the peoples of Europe. That was the problem the recent convention was meant to address, but did not. It is also hopelessly out of touch with and remote from our democracies. The attempt over recent years to force on Europe, from the top, the priority of deepening integration has been not only deeply unpopular, it has failed Europe and those of us who from the start have fought for and believed in greater unity within Europe. It has also led directly to the serious mishandling of the widening and enlargement of Europe which should have been the Union's greatest aim and highest fulfilment.

We should put all these failures behind us. It is high time that Britain, with all its acknowledged inventiveness and negotiating skills, its great public servants and its passion for democracy, took the lead towards this new and better Europe instead of dancing all the time to the old tunes of others who cling to the past and lack an understanding of changed global conditions.

If the present Government cannot muster the will to do this, then we will take up the baton. If the Prime Minister and the Foreign Secretary are tamely going to return to a warmed-over version of the ill-conceived and centralising constitution, then we will take the lead in showing that there are much better ways forward, both for our own country and for an enlarged Europe.

In reshaping the Union for modern conditions, constant monitoring of the economics is important, but also very difficult. As the noble Lord, Lord Roper, reminded us, cost-benefit analysis is tricky enough for the layman. In the hands of economists, it rapidly slides off into total confusion. However, the British people are not prepared to be fobbed off with the kind of stale arguments which may have worked 20 years ago, but which today look frankly implausible. I would not dare to go on the doorstep and say that the reason we must stay in the Union is all the wonderful jobs that are being created. People read the newspapers and see that, just across the water, there are yawning levels of unemployment looming like huge black holes which, luckily, we have avoided here.

The economic issues are bound to be very subjective and difficult to get to grips with. I agree with the noble Lord, Lord Hannay, that they are only part of a broader political case for remaining deeply involved in our region as well as being a global power—an involvement which we would be very unwise to break. We have broken with it once or twice in the past with absolutely disastrous results.

I cannot see that a committee of this House carrying out a cost-benefit analysis will be a terribly useful answer. I do not in any way want to cast doubt on the extraordinarily good reports that come out of our committees, but in this case, as we have heard during the debate, there would be more heat than light. The noble Lord, Lord Dubs, quite freely admitted that he lives on a different planet, or in a different world or different Europe, from those whose voices he has heard. Both of these extremely opposing viewpoints would have to be represented on a balanced committee. Whatever the intentions, I wonder whether we would get anything out of it at all.

As to whether the Government should undertake an analysis, again this is a very subjective issue. The last analysis they carried out was on the euro. That came through as an enormous two-foot high block of paper—I have tried to read most of it—but it reached no conclusions; the economists all argued with each other. The only use I have found for it is as an excellent pedestal for my grandchildren to stand on when they are washing their hands. So I do not see that as a solution. Perhaps the Civitas Group will provide a clearer answer.

As our global involvement becomes more and more intricate and as Asian power rises and there is a huge shift in the centre of gravity of the world economy towards Asia, perhaps we should establish not a Lords cost-benefit analysis committee but a Lords foreign affairs committee. Such a committee would be well placed to look at European and wider policies in the many areas which, as I know from experience, are not covered in another place and which will not be covered, inevitably, by our excellent EU Committee. As the noble Lord, Lord Grenfell, quite rightly said the other day, the EU Committee will be increasingly occupied with scrutiny.

I hope that your Lordships will give that suggestion and the need for a wider and less Euro-centric perspective—which we must bring to our foreign policy and international relations—serious thought in due course.

8.23 p.m.

Baroness Symons of Vernham Dean

My Lords, I have listened with enormous interest to the contributions made by your Lordships today. As the noble Lord, Lord Pearson of Rannoch, said, this is certainly not the first time that we have considered his proposal. Once more, as on previous occasions, noble Lords around the House have made eloquent and forceful speeches. I was particularly struck by the heartfelt words of the noble Baroness, Lady Cox, and by the clarity and intellectual precision with which the noble Lord, Lord Hannay of Chiswick, set out his case in his forceful contribution. The forensically argued contribution of the noble Lord, Lord Williamson of Horton, was, as usual, very powerful indeed.

To answer the specific point raised by the noble Lord, Lord Howell of Guildford, I do not dismiss the arguments put by the noble Lord, Lord Pearson of Rannoch. I am here today to make the Government's case and I am prepared, as always, to argue the Government's points. In the time remaining, I shall try to focus on the principal themes raised by your Lordships and, at the same time, to make the Government's position as clear as I can.

The Bill of the noble Lord, Lord Pearson—which was introduced most recently last year—proposed a committee of inquiry to examine the implications of this country withdrawing from the European Union. Again today the noble Lord asks for a cost-benefit analysis of our membership of the European Union. It is, as the noble Lord, Lord Williamson of Horton, said, something of dé jà vu.

I understand that the noble Lord, Lord Pearson of Rannoch, wants to defend our democracy; that the noble Lord wants to defend the sovereignty of this Parliament. Those are noble aims that we in the Government share. The Foreign Secretary set out earlier today in another place—indeed, I repeated his Statement in your Lordships' House—new proposals for achieving greater engagement by Parliament in European Union affairs. These would include an annual White Paper to give Parliament and the public a clear overview of the issues which are coming up in the EU and the Government's priorities in that context. In addition, the Government favour creating a committee to build on the success of the Standing Committees established last year on the convention and the IGC, in which Members of both Houses can participate.

The noble Lord, Lord Pearson of Rannoch, says that in arguing these points, the Government give no facts. He implied that there was no real discussion. The fact is that Ministers and officials have attended 13 sessions of committees; we have responded to 16 Select Committee reports, and we have had more than a dozen debates on EU issues on the Floor of both Houses, as the noble Lord, Lord Williamson, reminded us. Let me assure the noble Lord, Lord Vinson, that gold-plating, as he put it—and as my right honourable friend put it in his Statement—is being tackled. The Statement this afternoon made that very clear.

The fact is that Parliament decided to take this country into the European Union. It has not changed its mind since. In the case of every major treaty amending the terms of our membership under governments of different political persuasions, it has voted to enact those treaties into United Kingdom law. I do not think, as the noble Lord believes, that it did so in ignorance. On the contrary—it did so because it saw clearly the arguments in favour of EU membership. If the noble Lord or any of your Lordships disagree, it is for your Lordships to set out the contrary case, as, indeed, many have done so eloquently this evening. But it is also to secure a parliamentary majority in favour of the argument—that is the nature of our democracy.

The noble Lord, Lord Willoughby de Broke, wanted to know why such a cost-benefit analysis would be damaging. The Government's agreeing to the proposal of the noble Lord, Lord Pearson of Rannoch, would send two very misleading messages, the first being that we believe that Parliament is ill-informed on Europe. As we have heard today, even when your Lordships' views are, in our opinion, incorrect, your Lordships are certainly not ill-informed. Those who want to know more about the way in which the European Union works and to influence our approach to its future agenda have in any case more and more opportunities to do so, not least those which the Foreign Secretary proposed in another place today.

The second false message would be that we have even the smallest doubt about our EU membership. We do not. In the time remaining to me, perhaps I can try to explain why. Before I do, I would like to make a third point. Some of your Lordships have suggested or implied that if there were a cost-benefit analysis and if it were proved somehow that the enterprise were not in this country's favour, that would be fine. But it would be equally fine if that were not the case. The idea that such a cost-benefit analysis would be undertaken on a risk-free basis is fanciful. It would involve many risks to us.

Let there be no mistake about the Government's position. We are absolutely convinced that membership of the EU is in the best interests of the United Kingdom. I freely acknowledge the financial contributions that the UK makes to the European Union. Between 1995 and 2002, the EC budget has averaged around £55 billion per annum. The UK contribution before abatement has been in the region of £9.5 billion. Our average receipts have been £4.45 billion and our net contribution, once we have taken into account the abatement, has been around £2.75 billion.

The noble Lord, Lord Willoughby de Broke, the noble Earl, Lord Liverpool, and the noble Lord, Lord Vinson, referred to the Commission proposals on future financing of the EU. The Commission proposals are unrealistic and unacceptable. A budget of no more than 1 per cent of EU gross national income could meet the needs of the enlarged union and be affordable. Incidentally, before the point is raised, we believe that our abatement is fully justified and non-negotiable.

The issue of cost is not the end of the story. There are the benefits of the single market and the unquantifiable benefits—yes—of peace and democracy in Europe. I make no apologies for putting forward that argument. However, I was not surprised that the noble Lord, Lord Harris of High Cross, wanted the argument to focus totally on the financial issues. But I hope that the noble Lord remembers that the economic arguments for our membership convinced the British public in 1975 that EU membership was in this country's interests. Those arguments are even stronger today. British jobs and prosperity have increased as a result of our free trade with Europe. There are more than 370 million customers in the single market—38 per cent of world trade. Within a few months, enlargement will increase that number to 450 milliont—the world's largest single market; bigger than the United States and Japan combined.

I am sorry that the noble Lord, Lord Monson, thinks that we have behaved badly towards New Zealand. I do not believe that, taken in the round, New Zealanders think themselves that badly disadvantaged. However, it is not ruthless but plain common sense to recognise that a market of 450 million is more advantageous than one of 3 million. There are 3 million jobs in the United Kingdom that depend upon that market, and 800,000 British-based companies trade with Europe. We already export three times as much to the EU as to the United States and more to France and Germany than to the whole of the developing world. Nobody argues that all that would be lost. I do not argue that. The noble Lord, Lord Roper, made it very clear that he does not argue that either. However, it would be placed in jeopardy.

Enlargement alone is expected to boost the UK economy by £1.75 billion. Britain receives the largest share of inward investment into the EU because we are a gateway to the European market. Being outside the single market would kill foreign direct investment and devastate our manufacturing industry. We may not be isolated, as the noble Lord, Lord Stoddart, says that the Government argue, but we would be hugely disadvantaged. I was a trade Minister for two years and I know how often investors told me that our position as part of Europe was vital to their decision to invest in this country.

The noble Lord, Lord Blackwell, took an interesting line. He said that we need not buy the whole package and that we could partially disengage. I do not think that the noble Lord can honestly believe that we could cherry pick our way through even the last four treaties—the Single European Act, the Treaty of Maastricht, the Amsterdam Treaty and the Treaty of Nice—with one willing partner in Europe, let alone 15 or 25. He is right; there is China and India and possibly even Russia, which will grow exponentially. So, incidentally, will Mexico and Brazil, in all probability. However, does the noble Lord really think that we would strengthen our negotiating position as a market of 60 million? Or would we be better advantaged as part of a market of 450 million—the strongest and arguably the most attractive market anywhere in the world?

In promoting the benefits of withdrawal from the EU, the noble Lords, Lord Pearson, Lord Harris of High Cross and Lord Willoughby de Broke, fail to take account of one crucial fact: even if we were not a member of the EU, we would still have to abide by the EU's standards to be able to trade with Europe. But there would be one fundamental difference—we would have absolutely no influence over setting those standards. The costs of this would be considerable. I quote a member of the noble Lord's own party, Kenneth Clarke—perhaps the noble Lord does not have much time for Ken Clarke. He said: It is hard to see what form a new semi-detached model might take, even if it were possible … the Norwegian government has no choice but to accept single market laws and regulations made by the Member States. If we are to abide by EU rules, it is better to play a part in drawing them up. Under this Government, by engaging positively with European partners, we are able to win the arguments on a range of important policy issues. The EU has signed up to enlargement, to the Lisbon agenda, and to CAP reform. We are confident too of making our case on the EU's future financing, a subject about which many noble Lords are very interested.

The noble Lord, Lord Pearson, says that we can leave the EU and enjoy free trade. I find that a remarkable argument. Does he think that we would be able to escape the tariffs and taxes? Does he think that we would have free movement of capital and product markets? The argument that we can leave the club and still enjoy all the benefits of membership defies sensible analysis.

Let us consider the other benefits. Thousands of British workers have benefited from EU legislation to improve their working conditions. Every member state must apply the principle that men and women should receive equal pay for equal work. As a woman, I can tell your Lordships that that is a very important issue. 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.

It is not only the UK workforce that benefits, it is our customers too. The very persuasive contribution from the noble Lord, Lord Williamson of Horton, made that admirably clear. The reality has been that the EU has been championing better consumer safeguards on a range of subjects, including the environment and package holidays. Thanks to the single market, British consumers have access to a greater variety and quality of products at competitive prices. An example is the price of long-distance calls across Europe, which has been almost halved since 1998, thanks to telecoms liberalisation in the EU. The single market has helped to deliver the highest standard of living in European history and has helped to provide greater choice and cheaper prices for consumers.

Let us look at freedom of movement. Being in the single market means that British people now have the right to travel, work, study and live, visa-free, throughout the whole of the European Union. Hundreds of thousands of British people have been able to take advantage of this. UK residents will make around 40 million trips to mainland Europe this year alone. One hundred thousand Britons are currently working in other EU member states. Some 234,000 UK pensioners draw their pensions in other EU countries; and more UK students study abroad in the EU than any other country—on average, 10,000 each year.

What is more, the European Union improves our quality of life. Everyone knows that issues such as crime and environmental pollution recognise no borders. Because of their transnational nature, such issues are better tackled on a European basis rather than by individual countries. By working together we can achieve far more than we are able to achieve in isolation. Measures taken within the European Union to protect the environment have made our beaches cleaner, our air cleaner and our countryside greener. I could not help being very surprised by the contribution of the noble Lord, Lord Beaumont of Whitley, whose green credentials are, as we all know, very strong indeed. But action at EU level against crime—another issue—has also helped to ensure that fewer drugs end up on Britain's streets.

I know that the noble Lord, Lord Willoughby de Broke, poked some fun at me over the issue of toy safety. I think that toy safety is something in which most sensible parents of young children are extraordinarily interested. As he made the point, I asked officials to have a look at this issue. I am told that three-quarters of a million accidental injuries a year are caused by unsafe products. That is very serious for those who are injured; it is very serious for the children who are injured. So rocking horses may seem quite fanciful, but there is a serious issue, as the noble Lord knows in his heart of hearts, when he considers how important safe toys really are.

Lord Willoughby de Broke

My Lords, the point I was trying to make in respect of both drinking water and toys is that, if it is that important, we can do it ourselves. We do not need to be told to do it by Europe.

Baroness Symons of Vernham Dean

Yes, my Lords; but the party opposite did not do that in 18 years of government. We are able to talk about standards across the whole of Europe, not just standards in this country. The noble Lord has to grasp that we do not trade in isolation; we are talking about what we buy into this country and about the possibilities when people go overseas. This is a serious issue; it is not a fanciful one.

It will not surprise your Lordships to know that I agree very strongly with the noble Lord, Lord Hannay of Chiswick. Although the economic arguments for EU membership are overwhelming, the other arguments are, in their own way, even more powerful. I agree with the noble Lord, Lord Roper. One cannot know with any certainty what would have happened in Europe had there not been a European Union. What we do know is that tens of millions of Europeans died in the wars of the first half of the twentieth century, and we were all threatened by the Cold War and the division of Europe. Along with NATO and the United Nations and other international institutions, the European Union has helped to prevent those terrors recurring. It has provided a model of democracy, tolerance and freedom for both its immediate neighbourhood and the wider world.

I was very struck by the point made by my noble friend Lord Dubs who, quoting John Hume, said that the EU is the longest and most successful peace process anywhere in the world. I thought that was a very powerful point.

In Europe itself in the early 1970s, the period when the UK joined the European Community, Spain, Portugal and Greece were all at some point ruled by military dictatorships. Today they are peaceful and democratic members of the EU. I do not claim, as the noble Lord, Lord Monson, suggested that I might, that war would have been the inevitable result had the EU not existed. I do not claim that; I merely state the facts.

In the wider world, we now face new threats and challenges. The visit to Tehran last year of the Foreign Secretary with his French and German counterparts was an example of how we can achieve far more in partnership with our neighbours than we can in isolation.

On 1 May this year, we have the accession of 10 new member states of the European Union, and we shall finally see the last traces of the Iron Curtain pulled away. It is a strange time to argue that the costs of EU membership outweigh the benefits or even that the benefits can be quantified financially. When the countries of eastern Europe have chosen unity with Europe, should Britain really be retreating from it? I listened very carefully to the points made by the noble Lord, Lord Pearson of Rannoch, but does he really believe that 10 countries have been simultaneously misled by a massive conspiracy to believe that the benefits of joining the EU are entirely illusory and that their governments are either perfidious or just plain stupid? That really does defy rational analysis—that 15 current governments and 10 others due to join us are somehow part of a massive conspiracy seems an extraordinary suggestion.

The noble Lord said that the Government were guilty of arrogance, cowardice and deceit. No—I simply disagree with the noble Lord. If I may say so gently to him, I thought that the use of those accusations was pretty outrageous. I can tell the noble Lord, Lord Moran, that I do not regard the noble Lord, Lord Pearson, as a crackpot. I do not use words such as "arrogance", "cowardice" and "deceit"; I simply say that I disagree with him, and I disagree with others of your Lordships. But I do so respectfully—I hope that I do so sensibly—and I do so with candour.

Of course, there are things that need reform. Many will argue that we have mistaken their position and that it is not the unity of Europe but the European bureaucracy. Bureaucracies are rarely popular, but they are necessary to some degree or other—but yes, we need some reforms. We have supported reform of the European Union institutions, including those introduced by Neil Kinnock to improve accountability and transparency. We also support the reforms agreed at Seville in 2002 on the workings of the Council of Ministers. Our presidency in the EU next year will give us a valuable chance to keep the agenda alive and in good focus.

On one point I did agree with the noble Lord, Lord Pearson of Rannoch. I thought that he was absolutely right in many of his criticisms of the CAP. Again, I agree with my noble friend Lord Dubs on this point; the UK is firmly committed to further modernisation of the CAP, and we are strong supporters of the reform deal agreed last June, which brought about the decoupling of direct payments and transferred resources towards wider rural development.

The noble Baroness, Lady Cox, was right, of course: every cow receives a subsidy of two dollars a day, as opposed to the one dollar a day given to the 1.2 million starving people around the world. She is right— that is outrageous. I have argued that from this Dispatch Box on a number of occasions. However, I am not going to turn my back on that argument or stop being part of the engine for that reform. I want that change, not only from this country's point of view but from the point of view of all the European Union countries. I want to be there, having that argument.

I agree that EU aid could be better spent. We are working with the Commission and the member states to improve its management and to focus on global poverty reduction. We are engines of that argument; if we were not there, a lot of the passion in putting that argument would not be at that European table. The noble Baroness may disagree with me, but I have been there and been part of making those arguments and I can tell her that they are made with enormous force by the UK Government.

I agree strongly with the noble Lord, Lord Howell of Guildford. We have a chance to reform; we in the UK are committed to that. I might even go so far as to argue that we in the UK—all of us, in all parts of your Lordships' House—are engines for that reform in the future. I disagree with him, however, on his points about the constitutional treaty. We discussed that earlier this afternoon. I believe that that text will help us in the reform endeavour.

I have come to the end of my time. The notion that somehow this cost-benefit analysis will do anything to reform the European Union and would take our arguments forward one iota is fanciful. It would be not only time-wasting and expensive but, I argue as passionately as I can, immensely damaging to everything that we value about our relationship with the European Union.

8.44 p.m.

Lord Pearson of Rannoch

My Lords, the Table advises me that this debate should end at 8.47 p.m., which I believe leaves me two minutes in which to thank all noble Lords who have contributed. Of course, my special thanks go to the 12 of your Lordships who supported me, but I also wish to thank the five noble Lords who spoke against the Motion as at least that made for something of a debate.

There are a number of points that I should like to put to the noble Baroness but she has run me out of time, so I cannot. No doubt we shall have another opportunity. Finally, however, I should like to thank the noble Lord, Lord Moran, for his extremely generous comments about me. I have a confession to make, which is that in 1992, when I was, obviously mistakenly, put on your Lordships' European Union Select Committee, I made the mistake of reading and understanding the Treaties of Rome. I do not think that many people in this country have done that. I am afraid that it has given me inspiration, as the noble Baroness said, to try to save our democracy. Our involvement with the European Union is taking us to disaster in that respect. As the noble Baroness rightly suggests, I, at least, and, I think, many of my noble friends, will try to continue to do just that. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.