HC Deb 23 February 1989 vol 147 cc1161-245
Mr. Speaker

I must announce to the House that I have not been able to select the amendment on the Order Paper.

4.10 pm
The Minister of State, Foreign and Commonwealth Office (Mrs. Lynda Chalker)

I beg to move,

That this House takes note of the White Paper "Developments in the European Community January-June 1988" (Cm.467).

I know that the House wishes to be fully informed about proposals and discussions in the European Community. The House deserves both individual and general debate. I join the hon. Member for Hamilton (Mr. Robertson) in regretting that this debate could not have been held earlier. We would have preferred it, but it did not prove to be possible.

I accept that there is genuine concern in the House about the need to make the process of parliamentary scrutiny more timely and effective. I have noted the amendment that was tabled by some of my hon. Friends. I assure them that, although we are not debating the amendment, as the issue was raised in section 15 of the White Paper, we are noting carefully the views of all right hon. and hon. Members. My right hon. Friend the Lord President will look carefully at what is said in the debate.

We must ensure that the recommendations of the Scrutiny Committee on European Community legislation are acted on in good time. Of course there are difficulties in arranging the timing of debates, but I am determined to do all possible to improve the situation. Our record in 1988 shows a welcome increase: 39 scrutiny debates on 109 documents. Last year, we debated the largest number of documents for many years. We shall aim for further improvement. We shall try to make the mechanics of the scrutiny system work better, for the benefit of good discussion in the House. We look forward to the comments and suggestions that will be made in the coming weeks to my right hon. Friend the Lord President.

Sir Russell Johnston (Inverness, Nairn and Lochaber)

Did any of the debates and reports that the right hon. Lady listed result in any change of any kind?

Mrs. Chalker

Off hand, I would be foolish to give the hon. Gentleman an exact answer. My memory—it is only my memory, and it is fallible from time to time—tells me that suggestions were made and were later taken up, but I rather doubt whether the actual wording was changed. If I have erred, I shall tell the hon. Gentleman so that he knows the correct answer and can make it available to other hon. Members.

Mr. Jonathan Aitken (Thanet, South)

Not only the Leader of the House but my right hon. Friend's Department needs to note some of these suggestions. I refer my right hon. Friend to the debate on 14 November on tobacco products. The most gentle of amendments suggested that the Government should be sensitive to not trying to make article 100A, as Mr. Speaker's counsel has said, do more work than it was ever intended to do. According to revelations that were made by the recently ministerially deceased Under-Secretary, the hon. Member for Derbyshire, South (Mrs. Currie), that amendment was voted down on the instructions of the Foreign Office. That point appeared in correspondence in The Guardian. It is not good enough for the Foreign Office to take such a strong line on a sensible House of Commons suggestion.

Mrs. Chalker

I remember reading something in The Guardian. I am surprised that my hon. Friend believes everything that he reads in it. I remember that the facts were not quite as described in The Guardian. I do not have the relevant papers with me, so I hope that my hon. Friend will forgive me if I refer to the White Paper.

Mr. Tony Marlow (Northampton, North)

I am sure that my right hon. Friend would be happy to agree with me that if there is to be a debate in the House on many of these instruments—there are many important ones and many are coming through at the moment—if democracy is to mean anything at all, it should take place before the common position has been agreed within the Community.

Mrs. Chalker

It is quite difficult to know the best time to have a debate. My hon. Friend is aware that the Commission will put forward a proposal, and comments will be made on it. It may be changed, and it may then go forward again. If the time of the House is not to be concentrated solely on these matters, which would not be in the best interests of the House, we must investigate the best possible times, which may differ according to the matter under consideration, to look at the details. My right hon. Friend the Lord President is concerned with these very measures, as are all Ministers who are engaged on European business, not solely the Foreign Office.

Mr. Marlow


Mrs. Chalker

If my hon. Friend will forgive me, I should like to refer to the White Paper.

Mr. Marlow

Just briefly.

Mrs. Chalker

I shall give way for the last time.

Mr. Marlow

Is there a lot of point in having a debate after the common position has been reached?

Mrs. Chalker

I should not think so, either. My hon. Friend made a reasonable point. My only caution is that I have known an occasion on which we thought that a common position had been agreed, and a further common position was subsequently arrived at. If such an event is possible, we must look at the best possible time to discuss every subject. In this matter, we are concerned to get a better system not only to notify hon. Members when things will come forward but to try to arrange the business of the House in a better fashion to get proper scrutiny. My hon. Friend has my full assurance that nobody will be happier than I if we can get scrutiny debates better organised than they have been for a long while.

In commending to the House this White Paper on 1988 events in the first half of the year, I shall single out three main developments: first, the February 1988 agreements on reforming the common agricultural policy and controlling Economic Community expenditure; secondly, the dramatic progress on the single market which this unlocked; and, thirdly, the consequent developments in the Community's relations with the wider world.

The White Paper covers the period of the German presidency. It was a significant six months for the Community. It included the special European Council in Brussels, on 13 February, and the Hanover European Council, held on 27–28 June. It was at the 1988 February Heads of Government Council that final agreement was reached on the key issues of future financing and agriculture.

That agreement was an excellent one, both for Britain and for the Community. It was a threefold triumph to ensure, first, that future increases in Community resources go hand in hand with effective and legally binding controls on expenditure; secondly, that measures to reduce agricultural surpluses would be effective; and, thirdly, that the Fontainebleau abatement mechanism for the United Kingdom was maintained in full. That is how, in 1989, we will receive an abatement of £1,179 million.

Some of my hon. Friends have argued that we could have painlessly achieved all that if we had adopted a more accommodating negotiating style. With every respect, they were wrong. I know of no one who was involved in the negotiation leading up to February 1988, in any Community capital, who agrees with them. Some argued that the achievements were illusory and that, in particular, time would tell that we have not succeeded in limiting the CAP. I should like to show some of my hon. Friends who still think that why they are wrong.

The February 1988 texts were given legally binding form in June, and the impact was immediate. The 1989 budget was adopted with CAP spending well within the legal guideline. During the 1989 budget process, the Commission proposed, and the Council and Parliament agreed, extra savings worth some £2,500 million. They came from improvements in managements and the change in the dollar-ecu relationship and changes in world prices and, indeed, production due to drought.

The agricultural "stabilisers", that 1988 innovation, were triggered for a wide range of arable crops. This produced 1988 price cuts of up to 20 per cent. For the key cereals crop there will be a 1989 price cut of 3 per cent. The intervention stocks dropped sharply. The milk powder mountain has gone, with quantities in store amounting to only about two days' supply for the Community. The butter mountain shrank by 88 per cent. in 1988.

Mr. Teddy Taylor (Southend, East)

Will the Minister give way?

Mrs. Chalker

If my hon. Friend will allow me to complete this section, I shall give way.

Even the once stubbornly high stocks of beef are falling significantly. They are now 38 per cent. down on last year. In short, financial control is now biting, and biting hard.

Mr. Taylor

How can the Minister, who is speaking to a half-empty House of Commons, talk about the butter mountain being reduced because of reforms? Do not the figures which I have sent to my right hon. Friend and which have been published in Hansard show that we had a thorough clearance sale whereby 877,000 tonnes of butter were sold at prices as low as 2.75p a pound instead of the usual 400,000 tonnes per year? How on earth can the Minister call this the outcome of reform when the figures published by the Ministry of Agriculture show that we had a thorough clearance sale of the existing mountain at a ludicrously low price? How can that be a reform?

Mrs. Chalker

The fact that the stocks have moved from that figure to a current level of 102,000 tonnes does not belie the fact that they have gone down. When they are reduced, it saves storage costs. By saving storage costs, we are not putting good money into a non-productive sector. That was the importance of these reforms.

Clearly, there is much more to be done. The fact that financial control is now biting is one of the most important aspects of the decisions made last year. Obviously, riot everything can be put right overnight. In particular, we need to ensure that value for money in European Community expenditure is pursued with equal rigour. That means effective and continuing action to detect and deter fraud.

The United Kingdom has consistently argued for this. In 1987, I urged the late Mr. Aigner, who was then chairman of the Budgetary Control Committee of the European Parliament, to stimulate an increase in his efforts. I am pressing Mr. Schön, his successor, to give extra attention to this.

Last week, it was alleged in another place that in 1987 the United Kingdom vetoed action on fraud by the Commission. I have to tell the House that that was not so. On the contrary, the United Kingdom has been the leading advocate of the anti-fraud unit which has been set up inside the Commission. Fraud must be tackled by the Commission, and by member states working together, and we shall see that it is. The decision taken in March 1987 at the ECOFIN Council was unanimously to reject the Commission's proposal because it was not thought right to have a Commission-led investigative mission. It is thought right that both the Commission, and the member states working together, should tackle the problem and get it right.

The House may be interested to know that I spent part of Tuesday of this week with Commissioner Schmidhuber on this very subject. We shall indeed make sure that this is high on all the agendas. My right hon. Friend the Chancellor of the Exchequer will be raising the matter in March at the ECOFIN Council.

Mr. Marlow

Will my right hon. Friend give way?

Mrs. Chalker

Very well—for the last time.

Mr. Marlow

Let us be realistic. Is it likely that the Italian Government will prevent the Mafia from fraudulently applying Community funds? It is very difficult for the Italian Government to deal with the Mafia. If they get the money, more Community money goes to Italy, and so Italy will benefit anyway. As the Italian Government will not do it, perhaps it is time that we had an extra-national body that could sort out the problem.

Mr. Teddy Taylor


Mrs. Chalker

I am slightly surprised at my hon. Friend's suggestion for an extra-national body. I believe that a combination of Commission and national Government action is right. Whatever may be the problems of the Italian Government in dealing with criminality in their own society, I cannot answer for them this afternoon. I will say, however, that we have made this a British priority, and it has now become a Community priority. We shall consistently support the work of the Court of Auditors. I agree with my hon. Friends that its report for 1987 makes several disturbing criticisms. It is clear that more action is needed.

It is totally wrong if large amounts of Community money are being wasted, because Community money is taxpayers' money and we certainly do not need gamekeepers turned poachers at taxpayers' expense. We must remember that.

At last week's Agriculture Council, my right hon. Friend the Minister of Agriculture, Fisheries and Food strongly supported the Commission's determination.

Dame Elaine Kellett-Bowman (Lancaster)

Will my right hon. Friend give way, on the point of fraud?

Mrs. Chalker

I am still dealing with fraud, if my hon. Friend will just allow me to complete it first.

My right hon. Friend strongly supported the Commission's determination to follow up the Court of Auditors' findings. Community controls over intervention stocks and export refunds must be strengthened. That is why my right hon. Friend pressed a strong case for a change to the control procedures. Those adopted up to now have clearly failed to deter fraud effectively, and new proposals are needed.

Dame Elaine Kellett-Bowman

Would my right hon. Friend consider, as there has been a lot of fraud in olive oil, linking receipts of EEC money with tax returns in Italy? If one applied for a tax return, one could get olive oil money only on the amount that had been declared.

Mrs. Chalker

I understand my hon. Friend's concern. It is worth investigating measures to get a more accurate figure. Jokes about tax returns have come from various Community countries for a long time. I am not sure that it would be the absolute safety line that my hon. Friend suggests, but we shall consider my hon. Friend's suggestion most carefully because we wish to investigate thoroughly any suggestion to detect and deter fraud.

I mentioned that my right hon. Friend the Chancellor will raise the matter on 13 March at the ECOFIN Council. Let there be no mistaking our determination to pursue the matter. My right hon. Friend the Prime Minister has made clear that she will, if necessary, raise the question of fraud at the European Council in Madrid in June. That is a measure of how seriously we view the problem. We want thorough and effective action, not words.

We have made important strides in 1988 towards the completion of the European single market. That has been, and remains, the major United Kingdom priority. To do this, the Community needs policies which encourage enterprise. It is remarkable how that message of liberalisation has been taken up throughout Europe, including by the Commission. The Hanover European Council endorsed it and called, specifically, for further work on financial services, public purchasing, standards and intellectual property, which are all areas in which we want early progress.

In the six months to June 1988, we secured agreement on a string of 56 liberalising, enabling or market-opening measures, all of them to encourage enterprise. We agreed to abolish quotas for international road haulage. Permits for lorry journeys will be increased each year, so that by the end of 1992 there will be no further restrictions on choice of road transport for businesses throughout the Community. That must bring down costs, and the United Kingdom transport industry stands to benefit greatly.

Secondly, after more than a decade of negotiation, we finally liberalised non-life insurance. That will leave companies free to choose their insurers anywhere in Europe. Choice is the hallmark of a free market, an efficient market and a low-cost market. We intend to press ahead now with liberalising other areas of insurance. We are determined to provide tangible evidence to the consumer of the value of EC liberalisation. The United Kingdom insurance industry, which has such special skills, is well placed to benefit from that. At last it can now market EC-wide. Progress on insurance is a major United Kingdom interest and advance for us.

Mr. Teddy Taylor

In declaring my interest as a director of a large insurance company, may I appeal to my right hon. Friend to look at that directive, which does not bring about liberality but rather allows only a measure of liberality for what are loosely called large risks, but does nothing for the mass risk market? That is particularly true since there is something stuck in it called the "Kumul" rule which says that, if others can provide the same service, they can keep us out. It is a load of rubbish. If my right hon. Friend talks to a few insurance companies, they will tell her themselves.

Mrs. Chalker

I note what my hon. Friend says and I shall look into it. [Interruption.] The hon. Member for Hamilton (Mr. Robertson) laughs. I do not know whether he thinks that I am supposed to be an expert on insurance matters. I am paid by the Government, not by an insurance company, and I need to look into what my hon. Friend has said in order to give him an answer. I am happy to give him an answer, but when I have had a chance to look into the matter.

We agreed that professionals should be free to work anywhere in the Community without requalifying in their profession. At the moment, it would take an accountant or an insurance man up to 50 years to qualify to practise throughout the Community. Under the new rules that have been agreed and are being introduced bit by bit up to 1990, one qualification will be enough.

Public purchasing is another protected citadel of the Community where our current onslaught is penetrating some major regulatory defences. The House will probably know that public purchasing accounts for about 15 per cent. of total Community GDP. Last year we agreed far-reaching changes to the rules governing access to that market. Those changes are opening up opportunities for business throughout the Community. They will bring down costs and produce better value for money for taxpayers, consumers and businesses. This year we are continuing our efforts to extend Community liberalisation to cover formerly excluded sectors, such as transport and telecommunications. That is an important advance.

Last but not least, most member states have agreed to abolish exchange controls by next year. The United Kingdom did that in 1979. Now, the Community has accepted that that makes sense. The last two countries to do that will be Greece and Portugal, by the end of 1992.

There has been good steady progress and it is right that all eyes should be focused on the single market. Those eyes are not just within the Community but outside too, and some third countries have expressed concern. They want to ensure that the removal of internal barriers benefits not only the twelve EC member states, but them as well. More importantly, as internal barriers come down in the Community, they are concerned that no new outer walls should go up.

Let me make that quite clear. We are totally opposed to proposals that would create a fortress Europe. That is why we cannot accept proposals that the liberalisation of financial services should involve protectionist provisions on reciprocity. Such proposals rightly concern our other partners across the world. The Commission's proposals for automatic reciprocity clauses in the second banking directive and in the investment services directive have met with considerable opposition from member states. I am glad to say that the Commission is now thinking again. We shall continue to ensure that liberalisation of financial services does not lead to protectionism. A liberalised economy within Europe is no excuse for a protectionist wall around Europe. That would defeat the whole object of the single market. It is in that context that I shall look carefully at what my hon. Friend the Member for Southend, East (Mr. Taylor) has said.

Mr. John Butterfill (Bournemouth, West)

Will that extend to banking, where we have taken certain powers in recent legislation?

Mrs. Chalker

I believe that it will extend to banking in due time, but I would want to know the precise aspect to which my hon. Friend refers. He may care to ask my hon. Friend the Economic Secretary to the Treasury to respond on that issue when he replies.

Fortress Europe would make no sense for the Community. The Community has recognised, partly as a result of strong pressure by the United Kingdom, that the single market must be open to third countries. The European Councils in Hanover and Rhodes made that clear. One could quote from the conclusions of Hanover and Rhodes, both of which show clearly that the internal market will be a decisive factor in contributing to the greater liberalisation in international trade. I can assure the House that the Government will continue to work for a liberal approach towards our trading partners.

Mr. Edward Leigh (Gainsborough and Horncastle)

Will my right hon. Friend give way?

Mrs. Chalker

I have given way many times and I do not wish to take up too much of the time of the House. Therefore, if my hon. Friend will allow me, I should like to continue.

Progress in completing the single market has greatly increased interest in the Community among third countries. Let me mention our closest partners—our six European Free Trade Association friends. They are collectively the Community's largest trading partner, and they are anxious to preserve the benefits of their free trade agreements with the Community. They are determined to share in the greater prosperity of the single market, and we believe that they should. Therefore, they are negotiating for even closer links to the Community, and we welcome that. We are also seeing considerable new investment by them, and others, in the Community. That is a sure sign of our success in revitalising the European economy.

Another important development in recent years in the Community has been the strengthening of European political co-operation. The depth of day-to-day consultation and the continuity of policy, despite changes in the nationality and political complexion of the presidency, are perhaps surprising to outsiders. Both are helped by the efficient functioning of the EPC secretariat in Brussels. That was a British initiative, taken during our presidency in 1986.

The Twelve's close co-ordination in EPC made a substantial contribution on two particular occasions. One was to the successful conclusion of the Vienna conference on security and co-operation in Europe meeting. But dealing with much more recent events, we were extremely heartened by the solidarity of the Twelve on Monday last on our problems with Iran. That gave us precisely the timely and substantive support that we sought, and demonstrated the ability of the Twelve to take effective, speedy and united action on a key political issue. European political co-operation is now a vital part of the Community's business, and one that we welcome very much.

Mr. Quentin Davies (Stamford and Spalding)

My right hon. Friend puts those points extremely modestly. Will she accept the most heartfelt congratulations of many hon. Members and most people outside the House on her and her right hon. and learned Friend the Foreign Secretary's diplomatic triumph the other day in securing the support and solidarity of the rest of the Community behind Members over this difficult Iranian issue?

Mrs. Chalker

I am grateful to my hon. Friend for his most generous remarks. We shall always seek to work in such a way to support one another in the important area of political co-operation.

I have spoken of the Community's internal work and of our external negotiations. The two come together very much on the international trade front. I am convinced that the Community must use its own internal liberalisation constructively as a lever to bring about wider international liberalisation. Nowhere is this truer than in services, a new area for the general agreement on tariffs and trade. We now have an important opportunity. Economic liberalisation has been the hallmark of this Government's success domestically. We are achieving that now in Europe too. Hon. Members can be certain that we shall fight for it globally in the GATT Uruguay round.

One key to progress in GATT at present is agriculture. That well illustrates the inter-relationship of what we are doing within the Community and our negotiations with the outside world. Reduction in agricultural support will benefit everyone. The consumer is helped by lowering prices; the taxpayer by providing value for money; the Third world by allowing developing countries to compete fairly on world markets; and on top of that the international trading system as a whole by encouraging liberalisation world wide.

That is why we fought last year to reform the CAP and why our success in February last year was so important a step. But the Community must be prepared to go further. We cannot afford to let the Uruguay round fail.

The United States needs to move from its utopian demand for commitment to the complete long-term abolition of agricultural support. Real progress can and will be made only provided there is no politically unrealistic target of total elimination. Once this is recognised, negotiaions can begin on further short-term reductions.

The next step is the senior officials' meeting in April. For our part, the United Kingdom must live up to its commitment to sustained reductions in CAP support. The Commission proposals for the 1989 CAP price fixing—a price freeze in most sectors and a reduction in some—are good. They could have been better, but if we do not fulfil the expectations of continuing progress on CAP reform the Community will be rightly isolated and rightly blamed. That would be in no one's interest.

The Community has a heavy and important agenda ahead. I recognise the value of the major work done under the German presidency. This afternoon I have touched on three main strands. On all of them the results of last year are directly relevant to our current negotiating tasks in the Community: first, expenditure control and CAP reform; secondly, our main priority—the single market; and, thirdly, our relations world wide.

Mr. Leigh

May I bring those three strands together by asking a question? Will my right hon. Friend agree that there are two scenarios in the future of the Community? One scenario, which I call the nightmare scenario, is that in which standards are laid down by Brussels. These often result in the lowest common denominator. The other, which I call the dream scenario, is one in which countries, currencies and Governments compete for the highest common denominator. Would she favour the dream or the nightmare?

Mrs. Chalker

I have always tried to keep my feet firmly on the ground and make sure that my head is not in the clouds. I suppose that every human being likes sometimes to dream dreams, but progress is made only when one's feet are firmly on the ground.

Our internal reforms must be used as market-opening measures. We intend to use the Uruguay round to achieve a more open international trading system. The Government are playing their full part in working for open trading and that momentum must be maintained.

Changes that bring direct benefit to United Kingdom consumers and taxpayers are our overriding goal. The White Paper demonstrates some of the major steps which our European Community policy has made towards achieving it. We have made progress. We intend to make more progress in the area I have described.

4. 44 pm

Mr. George Robertson (Hamilton)

This debate is taking place a year beyond the period that we arc supposed to be discussing. Notwithstanding the apologies of the Minister on behalf of those in the Government who arrange the business, it is an outrage and an affront to Parliament when these debates are designed for the review of the multiplicity of issues dealt with by the European Community in the period January to June 1988. That may have a lot to do with the fact that attendance at these debates is as limited as it is. It is hardly an inspiring prospect for hon. Members to come here on a Thursday afternoon and debate events so far away.

Sir Russell Johnston

Is the hon. Gentleman aware that there are excellent short-break holiday opportunities in Richmond at the moment?

Mr. Robertson

I can only assume that that suggestion has already been taken up. The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) must be the only member of the SLD, the SDP and who knows what else not actually campaigning in that part of the world—and a fat lot of good it seems it will do them—despite the fact that at the end of the day the Government will win the seat, having lost the vote.

The Minister confirmed the intention of this debate in her own speech, in which she sought to look at what happened during the period under consideration, which is now so much history. What concerns the British people is here and now and the future. These debates have degenerated into a farce in which we catalogue events of a year ago but are given no opportunity to influence events that Ministers will decide this week, next week and in the coming year. The Minister conceded that, even with her well-known and established encyclopaedic memory, she could not recall one incident in which a debate on the hundreds of documents that are considered, usually after midnight, by the House of Commons had led to any change in any of the words.

This brings to mind a story I was told by a Conservative Member last week. He recalled an elderly Tory Member telling him that he had heard many brilliant speeches in the House in many debates. The first Conservative Member asked him if they had ever changed his mind. He said, "Of course; some of them were very persuasive. They never changed my vote, but they often changed my mind. " Here we have that incident being repeated. The Minister tells us that despite these great and important debates not a single one of the documents referred to in the report before us today—in section XV: "Parliamentary scrutiny of EC legislation", which runs to two paragraphs and simply lists a number of documents—has been changed. That is the brutal truth.

Sir Anthony Meyer (Clwyd, North-West)

I wish that the hon. Gentleman would not give up so easily. I am quite sure that, with the power of his oratory, he might tempt me into his Division Lobby tonight, if there is a Division and if he is sufficiently persuasive.

Mr. Robertson

Who can tell? I am sure that the looks that the hon. Gentleman is getting from the Whips on this occasion more than make up for the smiles of welcome he might get from me. If he will wait until I am finished, I am sure that, as ever, he will be persuaded.

Even before the Single European Act, the way in which Parliament dealt with the European Community was lamentably less thorough than it should have been. We had, of course, our admirable but circumscribed Select Committee on European Legislation. We had regular reports from key Councils of Ministers and we had these twice-yearly review debates. We also had that long succession of late-night debates on specific issues which had been recommended by the Scrutiny Committee for debate in the House. That was little enough, given the scale of the legislation powering its way through Councils of Ministers, but that little turned into sheer farce when the Single European Act came into existence.

We know that the Prime Minister does not feel any affection for the child to which she gave life in the Single European Act. She now pretends that she did not really authorise the Minister's signature to it or agree to its parts. Her Bruges speech was the repudiation of Mount Ararat and the denunciation of the tablets of stone which the right hon. Lady the Minister of State brought back. The Act included majority voting, harmonisation at a high level, European political co-operation and European monetary union. All that was thrown out as ideological baggage thrust on the Prime Minister in a moment of incomprehending weakness. That fools no one. It does not fool the Minister of State, it does not fool the House and it does not even fool the Prime Minister. However, the Prime Minister will not admit, because it conflicts with her blustering nationalism, that the Single European Act has had a dramatic impact on decision-making in all the European Community countries.

In 1986 the House of Lords Select Committee on the European Communities was blunt about this. In paragraph 28 it stated: The powers of the United Kingdom Parliament will be weakened by the Single European Act … Since the United Kingdom Parliament exercises no control over Community legislation other than through the voice and vote of UK Ministers in the Council of Ministers, weakening of the powers of UK Ministers is felt equally by the UK Parliament. The report concluded on that theme: The power of UK Ministers will therefore be circumscribed in five ways. With those new processes in place and with those new weaknesses imposed on our Ministers—and through them on this House—what has been the Government's response?

We now have fewer oral statements after European Community Councils of Ministers than ever before. We have the same limits on the remit of the Scrutiny Committee in this House and the same lack of opportunity to discuss key issues, often vital to the interests of Britain, before they emerge from the Commission or are dealt with by the European Parliament, or decided upon by the Council of Ministers sitting behind closed doors. To call that satisfactory is grossly to understate the position today.

It is time that the House took a grip on its own future and brought Ministers, who seem increasingly careless of any responsibilities to inform and consult Parliament, to account. We must radically alter the procedures of this House properly to reflect the new circumstances placed upon us by the Single European Act.

Sir Nicholas Bonsor (Upminster)

Does the hon. Gentleman share my concern and the concern felt throughout the country about the number of laws which are introduced into our legal system and which have nothing to do with the will of this House or our people? We have draft directives which direct the Government on what laws they will introduce and which the Government pass through the House by virtue of their enormous majority, despite the wishes of most of us that they should not be passed. There are also regulations whereby laws are introduced into our legal system without any consultation with our Government or people except on a vote of the majority of European Ministers. Those regulations cover such things as driving minibuses and the use of lead shot in shotguns. They are minutiae in the legal system of this country which should have nothing to do with the European Commission. Does the hon. Gentleman agree that we must reform the way in which those laws are introduced into this country through the House?

Mr. Robertson

Those views come ill, even from individual Tory Members. We remember only too well the way in which decisions have been taken in this Parliament by means of the silent majority who troop through the Division Lobby every night. We also recall that the Single European Act was passed through this House on a guillotine against a vote by the Opposition. Precious few Conservative Members voted then.

Mr. Teddy Taylor

How many Labour Members voted against the Act?

Mr. Robertson

If the hon. Gentleman will let me finish answering the hon. Member for Upminster (Sir N. Bonsor), we can get on. The hon. Member for Upminster made a similar point to mine. Several decisions at least deserve the scrutiny and consideration of the House. We have made that point repeatedly in debates with precious little support from the vast majority of Conservative Members.

Mr. Teddy Taylor

Although not many hon. Members listen to these debates, I am told that people in Europe read the reports of these debates. To clarify the position, how many Labour Members voted against the appalling Single European Act? Was the hon. Member for Hamilton (Mr. Robertson) one of them?

Mr. Robertson

Yes, is the answer to the hon. Gentleman's final question, and the Labour party voted against Third Reading and the guillotine motion. The hon. Member for Southend, East (Mr. Taylor) came to the House with a compromise proposal during the truncated debate on the guillotine motion on the proceedings on the Single European Act. He is responsible for the deal that was struck in order to give an extra handful of hours' consideration to something which he now calls a constitutional travesty. He came back with a deal which the Leader of the House accepted. I sat through hours of debates and was willing to argue for even longer so I will not tolerate arguments from Conservative Members about the way in which the procedure was carried out.

Decisions on important bread-and-butter issues affecting our constituents are determined by Ministers usually sitting in private in Brussels and it is time that we had a tight, disciplined procedure to ensure that those Ministers are acting with the knowledge and political authority of the United Kingdom Parliament when those decisions are taken.

The European Community has other political implications for the United Kingdom. My hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) and I represent Scottish constituencies. We are aware that in Scotland today a dangerous fantasy is being peddled by people who want to make separatism more palatable. The salesmen of an independent Scotland in Europe are using justified discontent at the Government's careless big-business-orientated Europolicy to sell secession to the Scottish electorate.

The independent Scotland in Europe notion is a sham and a pretence that Scotland would have an effortless, automatic entry into the European Community, if the Scottish people were to go it alone. Such a move would involve what even the Scottish National party admit would be lengthy negotiations and the near certainty of a veto from member states with their own separatist splinter groups.

The sham scenario is immediately dangerous because by threatening a decade of constitutional turmoil in Scotland's future the effect will repel investment and jobs from outside and inside Scotland's borders. To inflict that new agony on the damage already done to Scotland by 10 years of the Tories would be a tragic folly of historic proportions.

Mrs. Margaret Ewing (Moray)

I waited until the hon. Gentleman had reached an appropriate point in his diatribe, which he has obviously carefully rehearsed. Is the Labour party now saying that if the people of Scotland vote in democratic elections to achieve the ultimate goal of independence in Europe, he and the Labour party will oppose it? If there should be a Labour Government, will he try to apply a veto?

Mr. Robertson

The hon. Lady and I both represent Scottish constituencies and we both became Members at roughly the same time. I remember that she voted to bring down the last Labour Government and offered the key to No. 10 to the present Prime Minister. If the Scottish people, in some moment of madness, voted for the Scottish National party and for separatism, they would have to face the fact that they would have to apply to the European Community. I cannot say what the rump of the United Kingdom Government would do in the Council of Ministers. I make a perfectly valid point, although we are only considering a hypothetical situation. Other countries in the Community have separatist movements and they have made their position crystal clear. There is not the slightest chance of those countries voting for the entry of a seceded Scotland in the United Kingdom. That veto would be exercised by them no matter what anyone in the rump of the United Kingdom did.

Mrs. Ewing


Mr. Robertson

I have answered the hon. Lady's point and I should like to move on to the major subject on which the Minister of State chose to address the House—the drive to complete the internal market by 1992.

In no other sphere does the clash of vision on Europe appear so marked and the differences between the parties seem so clear as their attitude towards completing the internal market. There are alternative visions and clashing ideologies even within the Conservative party and deep divisions have emerged. Those divisions are openly displayed in the European Democratic group, which is what the Conservative party calls itself in the European Parliament where the war between the nationalists and the federalists is open and I am sure there is no quarter given.

The argument is also taking place within the Government. The Prime Minister took to the stage at Bruges last September to repudiate her acceptance of the centralising Single European Act and simultaneously to re-invent British nationalism. She said: We have not successfully rolled back the frontiers of the state in Britain only to see them reimposed at a European level, with the European superstate exercising a new dominance from Brussels. That was trumpeted by a Prime Minister who used the guillotine to ram through the House of Commons the Single European Act, a measure described by the House of Lords Select Committee as the gradual replacement of national competence by Community competence, sometimes even without any parliamentary approval of that replacement. That contradicts the Prime Minister's speech.

Mr. Andrew Rowe (Mid-Kent)

Will the hon. Gentleman give way?

Mr. Robertson


Last month, on 25 January at the Royal Institute of International Affairs, the Chancellor of the Exchequer laid into the social dimensions of 1992. He said: Grandiose attempts to reduce regional disparities by ever-greater resource transfer is likely to be no more successful at Community level than it has been within individual countries. But he had not checked notes with the Foreign Secretary, because speaking only three weeks after the Chancellor made that speech the Foreign Secretary attacked the Labour party's report on 1992 saying that: It forecasts the exploitation of poor regions by the rich—although we have agreed to double the structural funds and put 52 million ECU into them before 1992, half as big again in real terms as the Marshall Plan after the war. But the Chancellor said at the Royal Institute of International Affairs: Another area where the rival visions of the Community are seen is the so-called 'social dimensions' of 1992. The Minister of State, Foreign and Commonwealth Office, the right hon. Member for Wallasey (Mrs. Chalker), made a speech at the Management Centre Europe—[Interruption.]— last November saying: Britain is sometimes charged with having no interest in the social development of Europe. This is simply not true; of course there has to be a social dimension to the single market. But the Chancellor said: The attempt to level up all sorts of so-called 'worker protection' provisions is a sure way not of protecting jobs but of destroying them. The Minister of State said: We need progress on the agreed programme of action on health and safety at work. But the Chancellor said: Subsidising industries and subsidising regions destroys their will to compete and thus their ability to compete. The Minister of State said: The Community structural funds are helping the Community's less developed areas to move towards the prosperity of its richest areas.

Mrs. Chalker

Since the hon. Member for Hamilton (Mr. Robertson) is having such fun taking a sentence out of one speech and seeking to match it with a sentence from another speech, let us examine the entire situation. The social dimension has a role, but in our view that role is limited to ensuring that we do not burden industry in ways which would destroy what we have achieved so successfully in the United Kingdom. Through minimum regulation and maximum freedom we have created in Britain more jobs than the rest of the Community put together between 1983 and 1987. We have also said that we need labour mobility, free access to training and retraining and sensible health and safety at work provisions. That was all part of the 1986 agreement of the Social Affairs Council when we held the presidency. We have not moved from that. That is the social dimension on which we shall press for the advancement of jobs and opportunities in Europe and the diminution of unemployment as we have diminished it in Britain.

Mr. Robertson

I know that the right hon. Lady has to find an alibi, since at the moment the Chancellor's ideology is triumphant over hers. Before the Chancellor makes high-profile speeches at the Royal Institute of International Affairs, the right hon. Lady should tell him about those priorities and about what has been agreed by the Government. It comes a bit thin from the right hon. Lady, who comes from Merseyside, to boast about the Government's record on employment. I should have thought that Merseyside would be the last region in Britain to make that boast.

There are massive contradictions, not just in single elements of individual speeches. When I mentioned the right hon. Lady's speech at the Management Centre Europe the hon. Member for Southend, East shouted out that it was a disgraceful speech. We do not know where the Government stand. We do not know whether they favour the enlightened view of the Minister of State or the blinkered, dogmatic prejudice of the Chancellor of the Exchequer. It is small wonder that a Government who are so confused, divided and incoherent can find unity only in attacking the Labour party's policy towards Europe.

Two weekends ago, the Foreign Secretary and the chairman of the Tory party, who still moonlights as a Treasury Minister, although clearly he is away campaigning in Pontypridd this evening, set up the Tory European election stall, and the goods on display look mighty tatty, even by the barrow-boy standards that we have come to expect. The Paymaster General gave the key theme of the Tory assault. He said: Britain under Margaret Thatcher is not falling behind the rest of Europe—our policies of privatisation, freedom of choice and low taxes are envied and copied across Europe because they have made Britain the best performing major economy in Europe in the 1980s. The so-called best performing major economy in Europe now boasts inflation at 7.5 per cent. and rising, against the European Community average of only 4.6 per cent.

Mr. Butterfill

Will the hon. Gentleman give way?

Mr. Robertson


In Germany the rate of inflation is 1.6 per cent. Britain's inflation has been above the European Community average for more than four years. Only yesterday Mr. Christopherson, the European Commissioner responsible for economic affairs, said that the European Commission expressed "growing concern" about the failure of the British Government to reverse the worsening inflation rate and balance of trade deficit.

Mr. Butterfill

Will the hon. Gentleman give way on that point?

Mr. Robertson

No, I shall not give way.

Mr. Butterfill


Mr. Robertson

No. I am not providing opportunities for Conservative Members to make a brief appearance in Hansard before they disapper for the evening. I have given way enough. [Interruption.] The best performing major economy in Europe now has—

Mr. Butterfill


Mr. Robertson

No. I shall not give way—is that clear? The hon. Gentleman should read my lips when I say that am not giving way.

The best performing major economy in Europe now has another record manufacturing trade deficit with the rest of the European Community that amounts to almost £12 billion. No wonder Mr. Christopherson is getting uptight, because that reverses the £1 billion surplus that the Government inherited from the last Labour Government.

On the very day this week that the Prime Minister was badgering Chancellor Kohl into supporting her lonely, wrong-headed isolated position on the modernisation and expansion of short-range nuclear arsenals in Europe, the British trade deficit figure with West Germany was published and showed a record £6.9 billion. That is the mark of this so-called best performing major economy in Europe, which has almost been overtaken by the Italian economy. Indeed, economists cannot agree which country has the bigger deficit, so close are the figures.

The so-called best performing major economy in Europe has an investment record, expressed in gross fixed capital formation at 1986 prices, that puts us behind all our community partners except Belgium—behind Turkey, New Zealand, Finland, Canada, Austria and others.

This so-called best performing major economy in Europe paraded by the Paymaster General is one in which skill training—on which, more than anything else, our ability to compete will be based—lags behind all our major competitors.

A recent publication by the National Institute of Economic and Social Research which compared Britain and France showed that, in France, 55 per cent. of skilled engineering workers and more than 20 per cent. of unskilled engineers had a formal craft qualification. That is light years away from Britain. Three times as many French engineering workers as British obtain vocational qualifications.

In the vital civil research and development area of this so-called best performing major economy in Europe, public expenditure is at a virtual standstill. Between 1983 and 1986 civil research and development rose by only 2 per cent. , compared with 15 per cent. in Germany, 33 per cent. in France, 43 per cent. in Italy and 20 per cent. in Belgium. On this subject, the influential Henley Centre said: Fundamental economic factors such as profitability and spending on investment and R and D will continue to play a major role in determining competitiveness and the ability to gain market share.

Mr. Graham Riddick (Colne Valley)

I was under the impression that this was a debate about the European Community, not a comparison of various countries. Will the hon. Gentleman answer this simple question: What is the Labour party's policy on the EC?

Mr. Deputy Speaker (Mr. Harold Walker)

Order. I have allowed a wide debate so far, but the intervention of the hon. Member for Colne Valley (Mr. Riddick) will take us even further beyond the terms of the White Paper that we are supposed to be debating.

Mr. Robertson

I am extremely glad to have your endorsement, Mr. Deputy Speaker. We are talking about the Government's report and the European Community document. The Minister rightly directed the attention of the House to the progress made on the drive towards completing the European single market. After all, the Government have spent £9 million of taxpayers' cash in hyping up the promotion of 1992. It is the centrepiece of their report on the position a year ago and of the report on the past six months. Presumably, the latter relates to last year—goodness knows when we shall see it, never mind debate it. The single European market will be the centrepiece of the three reports that will follow.

I merely make the point that this country's future in a completed internal market—either post or pre-1992—will crucially depend on the condition of its economy. It is my contention and that of the Labour party that the Government have brought the British economy to a parlous condition. We shall find our competitiveness in that single market so poor that the regions and jobs will be in severe danger.

Mr. Ian Taylor (Esher)


Mr. Robertson

I shall not give way. The debate is being delayed, other hon. Members wish to participate in it and I have given way generously so far.

This so-called best performing major economy in Europe has reached the point at which one in three of our beaches does not come up even to the minimum cleanliness standard laid down by the Community. We are bending sensible Community rules by delaying for six years our compliance with its purity standards for drinking water.

In this so-called best performing major economy in Europe, the Government have had to fiddle the figures to bring the jobless rate down to near the Community average. They have to include an army of part-time jobs to bolster their suspect job creation figures and ignore the disastrous years of 1979 and 1980 to do tricks with the figures for rates of growth.

The Foreign Secretary claims that the Labour party preaches doom about 1992, but he chooses to ignore the real danger signals to British industry, represented by the deregulated, big business free-for-all that the Government champion out of ideology.

It was not the Labour party but the influential Henley Centre which said: There is a real danger that it will be Japanese companies who have the most to gain from completing the Internal Market", and: If the UK is to substantially gain from the proposals, it will be the South East rather than any other region that benefits", and: However the stress laid by the UK Government on competition as the prime determinant of the public interest is probably unique in Europe and increases the possibility of UK firms being the ones most susceptible to takeovers from inside and outside the European Community. When he spoke a couple of week ago the Foreign Secretary made light of the Leader of the Opposition's forecast of the impact of 1992 on British regions, especially the midlands. However, has he read the Henley Centre report, or the Ceccini report, which forecasts significant short-term job losses—"rationalisations" it calls them—in the, only hopeful, interests of long-term growth in the Community?

The industrialists are being sold this pipedream and bought off by £9 million worth of advertising hype. Do they realise how inadequate is the Government's planning compared to other nations' industrialists that they will meet in the market place before and after 1992?

Mr. Quentin Davies

Has the hon. Gentleman read the reports?

Mr. Robertson

Yes, I have read the Ceccini and Henley Centre reports, and many others. If the hon. Gentleman disagrees with me, I advise him to read the Henley Centre's report.

Alone among our competitors, Britain has no detailed studies into the impact of the single market on industrial sectors. Alone in Europe, our Government are making no serious assessment of the impact that a barrier-free Europe will have on some of our fragile regions. All that we and business men receive are vacuous, cliched exhortations such as those that the Foreign Secretary gave the patrons of Harborough Conservative association—it sounds like the Mafia—on 4 February. He said: There is a new spirit and dynamism here"— that is, the midlands— of which the forecasts of doom, based on old trends and models take no account. The Midlands will have opportunities for growth and prosperity and jobs they have not seen for years. Prospects for jobs and growth in the midlands have certainly not been seen for years. Where is the evidence for what the Foreign Secretary says? All that the patrons receive are words from a passing wordsmith.

In France, Germany, Italy and Belgium, industrialists get real backing from their Governments. There is still no real effort at Government level to establish which technical and professional standards adopted at European level might assist our industry. Instead, while the Prime Minister parades the European theatre as the demonic irritant so graphically described by Lord Jenkins of Hillhead in his memoirs in the Sunday newspapers in the last few weeks, the Germans, French and Italians are capturing the real prizes—the standards which will apply in the new single market.

Nor do the Government have any real clue about how Sir Leon Brittan will apply competition policy and how that will impact on British industry. Given the warnings of the likes of the Henley Centre about the vulnerability of British industry, what precisely is the Government's position on the takeover of British companies, or does the French takeover of our water industry mirror what will happen in many other cases? Are we in favour of giant Euro-companies competing with the Japanese and the Americans, risking monopoly along the way, or do we subscribe to trust-busting, anti-monopoly policies, which might give some protection to European consumers and to small and medium companies in this country? Do the Government know?

How can we hope to gain from the single market when, as a direct result of Government mismanagement of the economy, we have such an undertrained labour force, such underfunding of research and development, an assaulted industrial consensus and a fatal north-south divide, with no coherent idea of where we are strong or vulnerable?

The Prime Minister makes much of diversity in Europe. That is admirable, and we share her antipathy to the implausibility of the concept of a united states of Europe. But uncontained diversity spells anarchy. Diversity which is unrestrained, uncontrolled and unmanaged will produce only a random, arbitrary outcome. Where market dominates Community, the people, the companies, the regions and the cities which are not at the centre will go to the wall. Japan manages her market ruthlessly and successfully. If Europe does not do the same, with the same determination and dedication, we will not compete at all, still less triumph over the forces ranged against us.

The Government are like a rabbit caught in car headlights. They are mesmerised by the unrestrained, liberalised, uncontrolled power of the market, believing against all experience and common sense that standards will automatically be maintained, that regions will get their fair share, and that small companies will survive the onslaught of the Euro megacompany. They are peddling a deadly mixture of complacency and dogma.

The European market of today and of the 1990s, like Japan and the United States of America at the same point in history, is no place for the incurable romantics who place supreme faith in the invisible forces of the market place. The prudent can benefit from and thrive in the European single market, but that will only happen when we have a Government with the vision and the will to prepare our country for the challenges that it faces.

5. 23 pm

Mr. Ian Taylor (Esher)

The speech of the hon. Member for Hamilton (Mr. Robertson) was the most vacuous that I have ever heard from the Opposition Front Bench. It was words, words, words, and most of them were emotional claptrap. If that is the current state of Labour party policy on the European Community, you have real troubles ahead of you internally in the next few months before the European election.

Mr. Deputy Speaker

Order. I do not anticipate any internal troubles in the next few months.

Mr. Taylor

You are quite right, Mr. Deputy Speaker, to call my attention to what I said. Of course, my remarks were not directed at you. It will probably save the hon. Member for Hamilton embarrassment if I get to the subject of my speech. I wish that he had done the same when he had the chance.

The debate is about a year too late. We are considering events which happened early in 1988, so in a sense we are reviewing history. I share the view of many hon. Members that the House must organise itself better in this respect. It is crazy to have before us a paper about events when we already know not only their effects but their consequential developments. The Commission's own report on the period up to October 1988 was issued this week and would be a far more interesting document for us to discuss and a better focus for the debate. In addition, major initiatives are being taken at the moment by the Spanish presidency which are also of more interest to the House than the subject for the current debate.

The European Parliament, too, is taking various initiatives which the House should discuss in more detail. The latest figures show that 45 per cent. of amendments tabled in the European Parliament are translated into European legislation, which means that they become part of our legislation. That is a significant proportion, and it shows that the House needs to pay more attention to the proceedings of the European Parliament.

It is also worth remembering that it is all too easy to assume that any Euro-level regulation is bad for Britain. That negative approach, which is shared by some hon. Members on both sides of the House, is dangerous—given that the Single European Act has been passed, albeit reluctantly. In many critical areas there will be majority voting. We must therefore be more positive about leadership within the Community and about the way in which we try to influence our 11 partners to ensure that our interests are protected.

It is difficult to argue that there should be no regulation at European level. When we are busy making regulations in the United Kingdom about food, toys, fire protection and other essential concerns we should consider the implications throughout the Community. The issue is whether there will be less bureaucracy and more consumer protection if common EC standards are agreed for such matters. That must surely be the case for food, which is a very topical concern. The only way in which one country can protect itself against less strict regulations in another is to destroy the goods at the frontier, which is hardly the most sensible way to proceed.

In the dreaded area of social policy, too, we must not assume that we do not have social policies in this country and that it is therefore inappropriate for the European Community to wish to discuss social policy. Instead of carping, we should take the message to our partners that there are better ways of proceeding than those currently proposed. There was a report this week about worker participation. This country does not want a form of rigid worker participation—it does not want Mitbestimmung. The German businesses that I know do not want it either, but they do not know how to get rid of it.

Mr. Robertson


Mr. Taylor

From a sedentary position, your observations are even less impressive than when you are on your feet.

Mr. Deputy Speaker

Order. I am sure the hon. Gentleman could not possibly have meant that.

Mr. Taylor

When we had a drink the other night, I paid tribute to your Office, Mr. Deputy Speaker—

Mr. Deputy Speaker


Mr. Taylor

It was a slip of the tongue, Mr. Deputy Speaker.

One way in which the House could take the initiative in social policy is to propose to the Council of Ministers a solution which would be very British. A European report which has just come out shows the lead that we have taken in the development of employee share ownership schemes. It is interesting that more and more firms in the rest of the Community are looking to us for advice on such schemes.

Mr. Eric S. Heffer (Liverpool, Walton)

I often hear Conservative Members saying that there should not be worker participation in industry. I do not know what they mean.

Dame Elaine Kellett-Bowman (Lancaster)

Not on the German model—that is what we mean.

Mr. Heffer

Workers do participate. If they did not, no work would be done and no profits would be made. This country's wealth comes from the participation of workers in industry. The trouble is that they do not share in the profits. I came from the shop floor and know something about those matters. What is wanted is not so-called participation but a society in which workers enjoy a share of the profits made from the work they do.

Mr. Taylor

The hon. Gentleman mistakenly interprets my meaning, perhaps because I used the German word "Mitbestimmung". We do not want a rigid system of worker participation. I proposed employee share ownership plans which, had they been in place at the time when the hon. Gentleman was working in industry, would have given him capital interest—making him a much wealthier man than he probably is.

Mr. Tim Boswell (Daventry)

Does my hon. Friend agree that a start has been made? Personal shareholders in Britain now number 9 million. That is substantially more than the number of trade unionists, some of whom are among those shareholders. Will my hon. Friend seek to build on that with his new proposals which I warmly welcome?

Mr. Taylor

My hon. Friend makes a valid point. But we should deepen and widen share ownership to bring capital sharing to the workshop floor. That is the motive behind employee share ownership plans.

Legislation on employees' rights and interests within the European Community must be decided unanimously, but we must watch out for clauses slipped into health and safety regulations—many of which are adopted by majority vote. That is one of the reasons why I said earlier that the House should give more scrutiny to what is happening on the Floor of the European Parliament and in the Council.

Some regulation of the Community's economy is necessary to ensure that the free market is not distorted and that the consumer is protected. Recently, when the House debated the draft second banking directive, right hon. and hon. Members acknowledged that the Commission had made welcome progress in realising that the regulations need only represent the minimum provision required. The mutual recognition criteria and the selection of home country controls enshrined in the directive are extremely welcome. Mr. Jacques Delors, with whom I do not always agree, said: I don't know of any historical example of a liberal market without a minimum of regulation and, frankly, it is possible to discuss quietly this question. The question is when can a regulation at the European level work more efficiently than at the national level. Believe me, I repeat each week to my top civil servants: 'Please, avoid all directives, all initiatives, which are not indispensable to an efficient single market'. I praise Mr. Delors for this insight. The pity is that he did not express it earlier and more often. I encourage him to make it clear that minimum regulation at a European level is desirable. We are really talking about competition in goods, services and regulations between companies and between member states. One must therefore question what role Brussels should have in enforcing the openness of the market and ensuring compliance by national authorities.

A major future incentive and development will be the removal of restrictions on the movement of capital. If capital can be moved freely, no member state could afford to impose tax levels which drive away capital, create unemployment or erode the tax base. Competition through the movement of capital is much better than harmonisation, but there remains a need for common guidelines.

The hon. Member for Hamilton mentioned the key area of takeovers, mergers and acquisitions. There is a role for the Commission, particularly in respect of consumer protection, but it should not extend to protecting companies or monopolistic practices, nor to imposing some form of Community-wide industrial policy. Without competition policy, 1992 will not be viable. It is no use allowing free movement of goods if nation states subsidise their industries. In 1986, EC states spent 93 billion ecu on subsidies, which is three times the Community's whole budget. Neither will competition by possible if takeovers are impeded by different regulatory hurdles, nor if price cartels undermine enterprise. It is interesting to note that this week's judgment by the European Court, on an action taken against a German firm, upheld the Commission's powers to prevent a cartel.

Current takeover and merger activities are covered by articles 85 and 86 of the treaty of Rome, but these create considerable uncertainty and must be replaced by some other regulation. One issue at stake is the level at which the Commission should intervene. The original proposal that it should do so in respect of companies having more than 1 billion ecu per year combined turnover was recently revised, the qualifying figure now being 2 billion ecu. At that figure, at least 100 deals a year will be referred to the Commissioner, Sir Leon Brittan, who will become in effect a one-man mergers and acquisitions department. He has about 120 staff in the relevant group, DG4, but even that does not make for a viable team when we need a firm hand at the tiller to ensure that no competitive activities leading to oligopoly or monopoly are overlooked. A more favourable cut-off point would be 10 billion ecu combined turnover, resulting in the more reasonable and practical figure of about 10 to 20 referrals per year.

Mr. William Cash (Stafford)

When the Select Committee on European Legislation took evidence from the Secretary of State for Trade and Industry it emerged that when one has dealt with the thresholds, and so on, a critical factor is the procedures that are followed and the way in which the Community handles merger and takeover procedures, which at present is wholly inadequate. The Community would do well to study carefully the way in which such matters are dealt with in this country to ensure that European practice is fair and deals with the problems properly.

Mr. Taylor

My hon. Friend makes an extremely good point. The regulations must be carefully considered in the light of who will make the final decision—the Commissioner alone or the whole Commission. We do not want such matters to become a political football. However, I am sure that my hon. Friend agrees that such safeguards do not invalidate the need for some form of regulation at European Community level. It is essential that we do not fall into the trap of double jeopardy, with companies having to refer both to the Community and to their own national authorities.

As to the clearance procedure and the speed at which decisions are taken, I entirely endorse the Confederation of British Industry's proposal that takeovers clearly not infringing competition rules should not be suspended but allowed to pass very quickly, but that those which affect competition criteria should lapse and be dealt with speedily. A period of three months has been suggested.

In defending British interests we should not try to erect artificial barriers to investment in this country. Britain has a very good reputation for investing world wide. The flow of investment from this country for the purpose of acquiring companies in America and in Europe is distinctly ahead of investment the other way. We should be foolish to provoke other countries susceptible to such provocation into erecting barriers against our own desire to acquire. I therefore regard the CBI's proposals—I am uncertain about their status, but they have certainly been discussed this week—either to tinker with the takeover code or to introduce a form of reciprocity preventing the bid if the bidder itself is bid-proof as a very dangerous move. The CBI should think again very seriously about what it is proposing, which I do not believe to be in the interests of its members.

In a sense, the level playing field argument will resolve itself through the market. There will be difficult periods, but the change within Germany that we are beginning to see, and the change in France, with the increased role of equities and the increased power of institutional investment in pension funds, will force those institutional investors to look for a proper return. I believe that that will enable them to follow the more open pattern of the London stock exchange. That is a particular reason for my not wishing to see the London stock exchange, at this very difficult stage, turn its back on open market practices.

I wish to make a final point about the Commission's judgment on takeovers in terms of whether European Community directives are legally binding. We have a voluntary code, which has worked extremely well and is much tougher in effect than those in other countries. I hope that when my hon. Friend the Economic Secretary to the Treasury considers this matter, he will consider how we reconcile our voluntary code with what I should nevertheless like to see, which is some defined European responsibility for takeovers.

The major issues that we face in the European Community in economic policy, in takeovers and mergers and in competition will be difficult to reconcile with national interests. This goes to the heart of what we regard the Community as being. The Community should not be a socialising, centralising force, but there is no way that we can avoid regulation at the central level. We must go forward positively urging the European Commission to realise that the setting of minimum standards, acting as a referee, the breaking up of cartels and oligopoly positions, is the role that it should take upon itself and the role most likely to gain support and enthusiasm in this country for the Commission's work. My right hon. Friend the Minister of State, Foreign and Commonwealth Office will then find that she can come to the House and receive the enthusiastic support for her personal efforts which she fully deserves.

5. 43 pm

Mr. Tony Benn (Chesterfield)

As I listen to the debate, my first thoughts are of the fact that some hon. Members are only just beginning to realise that we in this Parliament are totally powerless in respect of what we are discussing. When the Minister goes to Brussels she does not exercise statutory powers; she exercises prerogative powers. When we signed the treaty of Rome, all our negotiations about takeovers, and everything else, became treaty-making negotiations, and under our constitution all treaties are signed under the prerogative. The implementation of the decisions reached under the prerogative are then made under an enabling Act known as the European Communities Act 1972, and whatever may be said—whether we have the debates early or late, whether the Scrutiny Committee meets in full or does not—we have no role whatever in deciding anything. We are back to the position of the Parliament that used to petition the King.

Mr. Win Griffiths (Bridgend)

Would my right hon. Friend care to make some comparison with the situation in Denmark, into whose parliamentary system is built provision for proper scrutiny of the legislation?

Mr. Benn

My hon. Friend is perfectly right. Whether the Danish system would stand up to examination by the European Court I am not sure, because under the treaty of accession any nation becoming a member of the EEC has to agree to abide by Community law. But that does not alter my point. This House capitulated, gave all its powers up, and the slightly frustrated and irritable note that enters into some of the discussions seems to me to arise from the fact that people are beginning to realise that they have no role whatsoever.

Sir Richard Body (Holland with Boston)

Does the right hon. Gentleman not agree that under article 100A, as it now is following the Single European Act, the powers of the Danish Parliament are now much diminished in this respect and almost negligible?

Mr. Benn

My argument is that it never really had any powers but it tried. We did not even try. Any Member of this House who voted for the legislative provisions that led us to this position will have a lot to answer for at the bar of history.

However, I do not want to go over the past; my purpose is to look ahead to the future of the continent of Europe because the time has come when the House should think afresh, taking account of experiences, some of which I have touched on, and of the enormous new opportunities that exist. It is astonishing to me that up to now—I hope I am right—nobody has mentioned Mr. Gorbachev. The changes in eastern Europe and in the Soviet Union are fundamental, yet here we are going on with our little discussions about agriculture and takeovers. Nobody has discussed, to the best of my knowledge, the impact on our continent of the changes in eastern Europe and the Soviet Union. I am arguing—and I do not want to take too long because other Members want to speak—that we should discuss the alternatives openly and try to develop a practical vision of how the people across the whole of Europe might live together in peace, co-operating with each other free from the structures that now divide us.

This is a very timely debate. We have had these rather formal, ritual debates, sometimes rather late, about developments in the Community in six-month periods under various presidencies, but this time we are having a debate on the eve of the European elections. Many people—not just hon. Members—will want to know what alternatives there are for the future of Europe when they come to vote in June. Of course, there are many different views. They are not necesarily the same on either side of the House.

There is, of course, the simple nationalist view—one that I have never shared—that foreigners start at Dover, though some have already got to Wolverhampton, and that we should pull up the drawbridge. As I have said, I have never held that view but there are certainly some people who do. At the other extreme there is a view, which probably has more support than we have ever been allowed to know about in Britain, of western Europe as a nuclear superpower, federal in character with a European Bank, and with modernised nuclear weapons as a rival to the United States, Japan, the Soviet Union and China. That idea of a superpower with its own weapons is one much discussed on the continent but hardly ever mentioned here, apart from some vague indications that the Western European Union might perhaps fit in and merge with the Economic Community and provide us with a little bit more muscle.

Then there is the Government's view, which has come across quite clearly in the course of the debate so far. The Prime Minister signed the Single European Act using prerogative powers but, in her view, what we want in Europe—and this emerged from the speech of the hon. Member for Esher (Mr. Taylor)—is that market forces should be supreme. The Government do not want the Commission to intervene with any of this European dirigisme. They do not want a Social Europe, or any co-determination on the German model with the trade union movement, thus evoking a nationalist response. But the Prime Minister is utterly powerless to stop a process of which she has already approved.

Mr. Ian Taylor


Mr. Benn

I will give way to the hon. Member in a moment because I know that he is expert in some fields.

Having been on the Council of Ministers for some years, and having been president of the Energy Council for six months during our presidency in 1977, I must tell the House that, once a law is passed, neither the Prime Minister nor any other Minister has power to stop the Commission applying the law—not just in Brussels but through the British courts. As the British Energy Minister, I was threatened with court action by Guido Brunner and by one of the other commissioners on two grounds: they objected to a British interest relief scheme to provide employment in Scotland, and they claimed that the treaty of Rome gave them authority over the continental shelf where our North sea oil was situated. They took me to court on what, from their point of view, was a very useful day, polling day in 1979, the day on which, I was removed from Government by the British electorate. But let us not think that the Prime Minister has power to stop all this dirigisme. She has not, because she gave away even more powers when she signed the Single European Act.

Mr. Ian Taylor

When the right hon. Gentleman reads Hansard he will see that what I was saying was that the British Government should take the lead in formulating the type of social policy that the European Community wishes to endorse. In fact, I propose employee share ownership rather than the worker participation espoused by the Germans.

Mr. Benn

I understood the hon. Gentleman perfectly. I am telling him that he has no power to act in that way. The strange thing about the EEC, which those who have not been on the Council of Ministers may not realise, is that there is no provision for repealing laws without unanimity. EEC regulations and directives are like a lobster pot: it is easy to get in but impossible to get out. Once there is unanimity on going in there must be unanimity on coming out, and not even the Prime Minister, with all her rhetoric in Bruges, can do anything about the mass of bureaucratic excrescences that surround the European process.

Several Hon. Members


Mr. Benn

I want next to set out some alternative views so that hon. Gentlemen can declare to which they attach themselves.

Another view of the future of Europe associated with the Social Democratic parties in Europe is that of a social Europe, linked to federalism and a European union. That view emerges in the Euro-manifesto, which was adhered to very recently—with reservations—by the Labour delegation. A reading of the manifesto leaves us in no doubt that the Labour delegation wants a federal union in Europe. Although I do not share that feeling, I understand the reason for it. The Social Democrats suffered terribly under Hitler and Mussolini, and for them a European Union is a guarantee that there will not be another war in Europe, and some guarantee that the trade unions will have a better deal than before. They want a Social Europe. They want the European Union. They would really like Britain—a Labour Britain—to go into the European monetary system. It should be understood that that manifesto is on offer, although not from me, and will be on offer in the European elections in the summer.

I am sorry that the hon. Member for Moray (Mrs. Ewing) is not present, because I wish now to talk about—I was going to say the Europe of regions, but Scotland is not a region, so I shall say a Europe of nations and regions. I remember saying and believing—at a time when the hon. Member for Glasgow, Govan (Mr. Sillars), who has just been re-elected to the House, was still a Labour Member—that joining the Common Market meant disintegrating the United Kingdom, and that process has just begun. My hon. Friend the Member for Hamilton (Mr. Robertson) was right to point out that an independent Scotland might find it hard to get in if he were the Minister there, and perhaps the Spaniards would be worried about the Basques, but we should not imagine that the process of disintegration has not already begun.

This is a superficial argument, but no doubt the SNP is putting it forward to the Scots with some feeling. Now they think they have found the answer—two Scottish Commissioners in Europe, Scottish Members at the European Assembly—and no one can argue that it means a frontier post with England, because England is in the Common Market as well.

Then there is the Labour party's view. It is difficult for anyone to identify that view correctly, but I shall be as honest as I can. The Labour party conference has always been hostile to the Common Market. It fought for the referendum. The right hon. Member for Old Bexley and Sidcup (Mr. Heath) signed the treaty of accession without it even being published, and we did not know what he had signed until he had signed it. He signed it under the prerogative; we said that we would have a referendum, and the vote went against us.

At various times the party of which I am proud to be a member has favoured the repeal of section 2 of the European Communities Act. as the House must know very well. Whatever may be the result of our present policy reviews there is a total lack of enthusiasm for the sort of Europe spoken of by some in my party and the Conservative party. I suspect that, as the election approaches, that European Social Democratic manifesto will not feature very much in our campaign. [Interruption.] That speculation is based on a certain amount of inside knowledge which I will not quote. I cannot believe that that will be the basis on which Labour candidates will be presenting themselves, because we still have our own manifesto, which we shall be preparing in the national executive committee.

Mr. Robertson

May I put the record straight? Unlike my right hon. Friend, I am not a member of the national executive committee of the Labour party, but am I not correct in saying that this week the NEC endorsed the manifesto to which my right hon. Friend has referred?

Mr. Benn

It did endorse it—

Mr. Deputy Speaker

Order. I hope that the right hon. Gentleman recalls that earlier in the debate I said that there was nothing in the White Paper about the Labour party's policy on membership of the EEC.

Mr. Benn

Perhaps that is wise. But, in a discussion on the future of Europe, it is reasonable for different views to be—

Mr. Deputy Speaker

Order. The Chair is taking a relaxed view and allowing very wide debate, but we cannot ignore the fact that the debate is concerned with the White Paper on developments in the European Community between January and June 1988.

Mr. Benn

I understand that, Mr. Deputy Speaker, and it is not my purpose to run into difficulties with the Chair. I was tempted by my hon. Friend the Member for Hamilton. who asked me a factual question. The endorsement of that manifesto was carried by 20 votes to four—I was one of the four. For further details I must refer the House to diaries that will be published later.

You worried me rather, Mr. Deputy Speaker, when you set a time limit on the scope of the debate, for, in the course of the century, there have been four of five different Europes. Before the first world war Queen Victoria had a grandson on every major throne. George V was her grandson; Kaiser Wilhelm II was her grandson; the Czar Nicolas II was also her grandson. We did nothing about human rights in Russia when Queen Victoria's grandson was on the throne. That was the Europe that people took for granted at that time. Then Edward VII went to Paris and consolidated the entente cordiale—in ways that I will not go into. Imperialism was what pre-war Europe was about.

Next came quite a different Europe, the Europe that followed the Russian revolution, when we sent an army into Russia to destroy the revolution. Schoolchildren are never told that: they are probably told that the Russians sent an army here. Hitler and Mussolini built their whole position on an anti-Soviet stance. When Lord Halifax went to visit Hitler in 1937—I shall not weary the House with an exact quotation from the German archives—Halifax congratulated Hitler on crushing Communism in Germany and on being a bulwark against Bolshevism in Europe. That was the Europe between the wars.

Then we had the wartime alliance, which in fact followed the opposite policy. The Germans attacked the Soviet Union; Hess came and tried to get Winston Churchill—then Prime Minister—to join him. To his credit, Churchill refused. He was no friend of Communism and once described Lenin as a grinning monster sitting on a throne of skulls, so he was not exactly a member of Militant Tendency. Churchill would have nothing to do with it. Some of the most powerful speeches in support of the Soviet Union came from Winston Churchill, and even Eden.

During that war, we signed a treaty of friendship with Russia—I have a copy—saying that we would pledge ourselves not only to eliminate fascism but to co-operate after the war. That was a third Europe. I have lived through two of them, although I did not experience the one before the first world war.

The wartime alliance looked to the Security Council, and the idea of a united Europe. When the United Nations held its first assembly in Central hall, Westminster—I remember it well: Gladwyn Jebb was acting Secretary-General in 1945—we really believed that we would have a Europe based on co-operation between the Allies.

Finally, we have had the cold-war Europe—the one in which we still live. That Europe was quite different again. NATO was there to keep the R ed Army out. I do not know how many people ever believed that the Red Army would land in Britain, but according to the latest polls only 2 per cent. now hold the cherished view that Gorbachev is about to land it here and make us listen to a lecture on perestroika whether we want it or not.

The Europe of the last 40 years was therefore quite different from the expectation during the war. It was a Europe that we had deliberately divided. No one should think that we did not do that; we played a large part in the division of Europe, based on the Soviet threat and the fear of Socialism and, on the other side, the Warsaw pact, the Brezhnev doctrine and the militarisation of Europe. Hitler's greatest and most tragic legacy was that he left our continent divided.

Sir Anthony Meyer

I was a little disturbed when the right hon. Gentleman talked of a Europe based on the fear of Socialism. He must recall that at various points in that long catalogue Socialist Governments in western Europe were as resolute in standing up to what was then Soviet expansionism as any Conservative Government in this country.

Mr. Benn

I can only give my honest opinion to the hon. Gentleman. I believe that nobody in western Europe ever believed that the Red Army would attack, but they were afraid that Socialist ideas would spread in western Europe. I shall not argue that any more.

We then come to British membership of the Community. I do not wish to go over that because I want to look forward, but when we joined the Community we were told that it would give us endless prosperity. I remember making a speech in which I said that joining the Community would cause unemployment and I was denounced by Roy Jenkins, who was then the Labour Home Secretary. He said that he "could not take me seriously as an economic Minister." Yet looking back, we had a £4 billion surplus in manufactured trade with the EEC in 1970, whereas the deficit is now £14 billion. We have not done very well, yet we are getting the same arguments again now. People say that if we work for the Single European Act, women will get their rights, the water will be purer and training will be better. That is rubbish. It is part of the attempt to consolidate the EEC.

I finish by looking at the alternative open to us. I mentioned a moment ago that the Gorbachev reforms had transformed the prospects for the continent. They are as great a change as the Russian revolution, the advent of Hitler or the end of the war. Gorbachev's reforms are very popular and I think that he might have won the American election if he had been a candidate. He would certainly have been an improvement on the other two candidates. His disarmament proposals are credible for the simple reason that they are not presented as part of the long exchange of politically motivated disarmament proposals. Gorbachev says that he wants to cut weapons expenditure to improve the standard of living of the Russian people. Of course, people here say, "We want that too", so Gorbachev is much more popular in Britain than any other Soviet leader.

I want a wholly non-nuclear Europe. I would like to see all trade restrictions with eastern Europe lifted. When I signed technological agreements in the 1960s, as the responsible Minister, the Americans held us back all the time. They did so allegedly on strategic grounds, but actually because they were waiting for the moment to go in and do the trade themselves. We want closer cultural and political links. I feel strongly that the moment is coming when there will be reunification of the trade union movement and when the division between the International Confederation of Free Trade Unions and the World Federation of Trade Unions will be ended. I would like to see the United Nations Economic Commission for Europe, set up after the war and allowed to wither on the bough, revived instead of the bureaucracies of Brussels and the Comecon countries.

I want to see—and I have said this in trips to eastern Europe—a restoration of the treaty of friendship between Britain and the Soviet Union and its extension to others on a bilateral basis. I want to see a European security pact, which is now a serious possibility, and the withdrawal of all foreign troops from Europe—the Russians from eastern Europe, all American soldiers and bases from Britain and the removal of British troops from Germany. I might add, for good measure, that I want to see the removal of British troops from Ireland. If we are going to build a world at peace in Europe, we cannot have occupying forces, even if they purport to be allies—as the Hungarians and Czechs learned to their cost in 1956 and 1968. I want to see the closure of foreign bases and a massive switch of resources from war to peace. The money saved might go towards the cancellation of the Third world debt.

Those ideas, put in the present mood and atmosphere, may seem somewhat outlandish, but I ask the House to go back to 1945. If anybody had said then, "Let us re-arm the Germans and put two German commissioners in charge who can make laws for Britain", he would have been laughed out of court. Yet 40 years later, because of the cold war, structures have been built up which have changed our view of Europe. I argue that we have come to the time when we must look again. We must move towards a different idea of Europe. I shall pluck one word out of our experience to describe it. We want a Commonwealth of Europe—a commonwealth being a free association of fully self-governing states. We may talk about harmonisation, but only by agreement. We want to look at a way of repatriating the powers from Brussels, in the way that the Canadian Government repatriated their powers from Britain. When I look at the changes over the past 80 years, I can see great support—

Mr. Deputy Speaker

Order. I have allowed a very wide debate, but I find it difficult to see how the events of the past 80 years can be reconciled with the White Paper that we are debating, which covers the events of January to June 1988.

Mr. Benn

Somebody once said that history is hunk, but I am sure that is not your view, Mr. Deputy Speaker. I do not believe that we can understand where we are or where we are going unless we look back at where we have come from, and that is true of nowhere more than Europe. But I shall not tempt you, Mr. Deputy Speaker, by trying to abuse your kindness.

I believe that the Common Market, NATO, the Warsaw pact and Comecon are out of date. They are dinosaurs, overtaken by events, and we should look beyond them to the future. There is an urgent need for new thinking. As there is no vote, I am not asking any hon. Member to come into the Lobby with me in support of my views, but we need more imagination than has been shown by—dare I say it—all parties in the House. There are people with a vested interest in the division of Europe, not least the Commission in Brussels, including the generals in NATO and the Warsaw pact and not least the arms manufacturers, who make billions of pounds out of keeping us at a high level of military expenditure that we do not need. I believe that the time has come to think about ending the division of Europe because it is no longer relevant, necessary or desirable. Above all, if we could replace the fear that lies behind the division of Europe with hope, then we would release the energies of our continent and allow it to contribute more effectively to the peace of the world.

6. 7 pm

Mr. John Butterfill (Bournemouth, West)

Before commencing my remarks, I must say that I am sure that the hon. Member for Hamilton (Mr. Robertson) did not wish to mislead the House when he stated that inflation on a directly comparable basis was 7.5 per cent. in the United Kingdom and 4.9 per cent. in the rest of the Community. I am also not sure that 4.9 per cent. is correct, but it may be. But I do know that it is not true to say that 7.5 per cent. is directly comparable with 4.9 per cent. As my right hon. Friend the Chancellor of the Exchequer told us this afternoon, we are the only country in western Europe that includes the mortgage interest rate in that calculation. The hon. Gentleman also told us that, on a directly comparable basis, our inflation rate would be 5.5 per cent. , which would mean that we have by no means the highest inflation in western Europe. That is an important point to have on record, and I do not see the hon. Member for Hamilton seeking to contradict me.

I welcome this opportunity to debate recent events in Europe, although I, like many other hon. Members, also regret the fact that we are debating them so retrospectively and are not having the opportunity—which I hope we shall have in future—to look forward to where we are going in Europe, rather than always looking back at where we have been. If we look forward in Europe, we can see many encouraging events taking place, not least the solidarity this week over the Salman Rushdie affair and the helpful foreign policy posture that our partners in Europe have taken.

I shall now turn, as some other hon. Members have tended not to do, to the contents of the White Paper, and I shall look at some of the developments that are outlined therein. It may be helpful to see where we may be going.

One of the most important areas of co-operation that is outlined is co-operation on the environment. That is a topical issue in this country and, I believe, an issue on which we should be concentrating our energies in partnership with our European colleagues to build a better environment than our present one. There have been important agreements on sulphur dioxide and nitrous oxide emissions and on diesel emissions. Those of us who travel through London's traffic know how irritating the latter can be.

It was very important that we ratified the Montreal protocol. I hope that we shall be able to go much further in tackling Europewide environmental problems that we must undoubtedly share if we are going to overcome them. If Chernobyl taught us anything, it is that we cannot be an island, and nor can any other country in Europe. Major environmental disasters can overtake all of us, unless we take care to ensure that they do not happen.

I am equally concerned about the trend towards protectionism. The White Paper refers to the trade problems that we have had with the United States and Japan. We should be careful that we do not develop a protectionist policy of our own in Europe and put up barriers around us so that we can no longer look outwards. In that respect, the agreement that we have reached with Hungary, and the important agreements that we have reached with our friends in the Gulf States, are encouraging. We should pursue that example.

There is one rare respect in which I agree with the right hon. Member for Chesterfield (Mr. Benn), which is that we need to look beyond the immediate frontiers of Europe. We need an outgoing Europe. Britain depends more on external trade than any other country in the world. We export a greater proportion of our GNP than any other country—almost double the proportion that Japan, for example, exports. We would therefore be the first to be hurt in any trade war or by European protectionism, which I am sure no Conservative Member would wish to happen.

The White Paper refers to deregulation and gives some important examples of what we have achieved. I should like to express my pleasure that in June we managed to end steel quotas once and for all. All such arrangements are totally undesirable in the view of those of us who believe in free trade, and the completion of the internal market should he a major priority for all of us in future.

I agree with my hon. Friend the Member for Southend, East (Mr. Taylor) that we have failed to tackle adequately the terrible problem of agriculture. It is totally unacceptable that such a high proportion of the Community's budget should continue to be devoted to agriculture. It is essential that we build on the limited successes that we have had so far—with stabilisers, milk quotas and ceilings on agricultural spending—to try to ensure that the Community's attention is turned to matters far more important than agriculture. Agriculture is significant, but in global terms—in terms of the economy of the Community as a whole—it is only a minor part of the matters to which we should be addressing ourselves.

The White Paper goes on to deal with the budget, and pleasure is taken in the fact that we have managed to maintain the Fontainebleau agreement, so vital to British interests. It was interesting to discover that the Council agreed that we needed to tighten the budgetary management of the Community. That is a great understatement. The budgetary management of the European Community to date has been lamentable. If the member states are to be asked to agree to increase the budget of the Community—no doubt there are respects in which that might conceivably be desirable—the Commission will have to show that its budgetary management is a good deal superior to that which it has achieved to date.

The White Paper discusses the single market and instances what it claims to have been significant successes in promoting the single market. Undoubtedly, there have been successes, and I would not wish to decry what progress we have made. We have had limited successes in banking and financial services. We have had limited successes with insurance—my hon. Friend the Member for Southend, East was right to point out just how limited those successes have been. In general insurance, our success has been very limited indeed, and as yet we have made no progress on life assurance. It is vital that we make progress in these matters and that we in Britain take the lead in ensuring that we make progress. We have a great deal to contribute to the Community, and we also have a great deal to gain from the Community if we can make that progress.

Hon. Members have referred to monetary union—with which the White Paper also deals—and to the directive on free capital movement. I have one or two things to say about that. This country gave the lead on free capital movements some time ago by abolishing exchange controls. The Opposition predicted that that would have dire consequences and that it would be an appalling thing for our economy. Quite the reverse has happened, and we have been able to show our fellow member states what a good thing free capital movement would be.

I am nevertheless concerned that the price being asked for free capital movement is the imposition of a 15 per cent. withholding tax throughout the Community. What an absurd suggestion. I put it to the Minister that it may also be ultra vires in terms of the treaty, as such a tax would achieve no Community purpose. While it can be argued that VAT should be harmonised and even that VAT should be imposed because it is the base tax for the Community's own finances, there is no justification in any Community purpose for the existence of a withholding tax, which would be raising revenue from non-resident members, not for the Community but for the member states. That is an extraordinary suggestion.

I know that the suggestion comes from the French and that it comes from them because, with the retention of their Socialist philosophies, they cannot believe that, given free capital movements, their citizens would not remove all their money from France and make fraudulent returns to their tax authorities. The French must give up the shibboleths of state authoritarianism and move with the rest of us into the latter part of the 20th century and have a good deal more confidence in the integrity of their own citizens.

Mr. Ian Taylor

Does my hon. Friend agree that the French would be better off if they imposed a 15 per cent.

withholding tax on suitcases, in recognition of the most common way in which the French transfer money across borders and frontiers?

Mr. Butterfill

That is true, although it would probably cause problems for the travel industry in France, which makes a lot of money out of those who travel back and forth carrying the suitcases to which my right hon. Friend rightly referred.

The other great plank in the argument about monetary union is that Britain should join the European monetary system. No doubt as a long-term objective, monetary union and membership of the European monetary system could be a good thing, as it might facilitate internal trade within the Community, but we should not under-estimate the problems that would arise not only for us but for the Community if we joined now.

No other European country has a reserve currency such as the pound. The currencies of most European countries are traded in only to the extent that they need to have trade within their borders. Trade in the pound is very much greater because so many countries external to the Community use sterling as a reserve currency. If hon. Members do not believe what I am saying, they need only consider the recent enormous movements in the pound's parity against the deutschmark and the United States dollar. Not all that long ago, we were discussing the possibility of having a pound parity with the dollar. Now, the value of the pound is close to $1.80.

There is no way that the EMS, as presently constituted, could have survived swings and changes of that nature, nor do I believe that we should have been able to take the measures necessary for the correction of the great stimulus that we have give to the British economy if we had been members of that system. Therefore, I believe that, both for our own internal purposes and for the benefit of the EMS as a whole, it has been right that our Chancellor and our Government have decided not to join the EMS at this time.

Much has been said about the social market, and there has been some concern that we should be giving any support to the concept of a social market. I do not have any problem with the concept of a social market, but I have a problem with the concept of a Socialist market. I do not want to see a Common Market or a European Community that imposes upon us the sort of Socialist measures that we have so successfully removed from our own economy, and that would bring back our previous problems.

If we look, for example, at the fifth directive on company law, the Mitbestimmung or the proposals made by Mr. Vredeling, we see that we are being asked to accept worker directors, two-tier boards and trade union participation. Make no mistake about the fact that the worker participation would be through the trade unions. We would be back to the days of beer and sandwiches at No. 10.

Mr. Win Griffiths

The hon. Gentleman referred to the co-operation of workers and the introduction of boards, but does he acknowledge that Germany already has a similar system to that which was proposed? Can the hon. Gentleman explain why, if that system works in Germany, it cannot work anywhere else in the European Community?

Mr. Butterfill

I am happy to explain that to the hon. Gentleman. The system of trade unions in Germany is different from the system here, as are German traditions. In fact, a large number of companies in Germany and in Denmark—where similar systems exist—would like to get rid of those systems. I have no objection if they wish to keep them, or if some British companies wish to adopt them, but I object to them being imposed upon this country and all other countries of the European Community whether they are wanted or not. It is that dimension of the social market to which I most profoundly object.

If we are to have company law directives, it would be far more profitable for Brussels to look at the restrictions in company law and in the articles of association of companies in the European Community and, indeed, the governmental restrictions which frustrate takeovers of companies on the continent, in contrast to the freedom which exists for countries to come here and take over British companies. That appears completely unacceptable, and it is an area of company law that the Commission would do well to look at.

I believe that it is vital that we have an agreement on that, and that we remove all those areas of covert and actual restrictions that exist within companies—for example, in Germany, where it is almost impossible for a major German public company to be the subject of a hostile takeover bid. That cannot be acceptable while the reverse is not true in this country. Those are the areas to which I would like the Commission to devote its attention.

If we consider, for example, the interference which the Commission is proposing in the employment of part-time workers, we see that it is telling us that, if we want to have part-time workers, they must have exactly the same conditions of employment and rates of pay as full-time workers. That is absolute nonsense. It is saying that there should be limitations on the hours that part-time workers can and will be permitted to work. That is an awful piece of authoritarian jargon. How damaging that would be to the economy of this country and the economies of the other European countries. Such authoritarian Socialism plays no part in the sort of Community that I wish to see; nor does paternity leave.

If the Belgians and the French would like to have a 35-hour week and believe that that would benefit their economies, let them have it. Let it not be imposed, however, on all the other countries of the European Community.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

When the hon. Gentleman is speaking against worker participation and the provisions which would protect and give rights to the worker, is he speaking as the Member of Parliament for Bournemouth, West, as the president of European Property Associates, as a director of John Lelliot Developments, or on behalf of any of his other declared interests? Is it not clear that the hon. Gentleman is looking after those interests—as representing the employers—rather than representing the interests of his constituents?

Mr. Butterfill

The hon. Gentleman does himself rather a disservice by that intervention. He knows that I am speaking not only for my constituents in Bournemouth, West, but for the benefit of the great majority of British, and indeed European, people. I believe, for example, that a 35-hour working week which was imposed upon the whole of Europe would lead not to benefits for workers or for any of my constituents, but to higher inflation, lower output and loss of productivity. I cannot see any benefit to my or the hon. Gentleman's constituents in adopting all this Socialist claptrap.

I do not expect the hon. Gentleman to agree with me, because the Labour party never agreed. It was the burden that the hon. Gentleman's party imposed upon this country under successive Governments after the war that brought us almost to our knees. It is only this Government's subsequent actions to divest ourselves of those burdens that have enabled us to become as successful as we are today.

Mr. Foulkes

The hon. Gentleman mentioned my constituents in Carrick, Cumnock and Doon Valley. Whenever I speak in the House, there is no doubt that I am speaking on behalf of my constituents. I have no other outside interests. I have no consultancies or directorships. It is incumbent upon Conservative Members to reveal from time to time that they are speaking not necessarily on behalf of their constituents, but on behalf of their outside interests. The hon. Gentleman has outside interests, and what he is saying is directed much more to defending those interests than those of the people of Bournemouth.

Mr. Butterfill

I believe that the hon. Gentleman's allegation is disgraceful, and unworthy of him. He will know that I have made a full declaration of my interests, which are well known to the House. I have not taken directorships of any companies of which I was not already a director before I became a Member of this House. Nor have I taken any consultancies since I became a Member of this House. Indeed, I have refused all consultancies since I became a Member of this House, quite deliberately, because I believed that I should represent my constituents and that I should not use my position as a Member of this House to further my personal career. Therefore, my business career has been damaged and not enhanced by being a Member of this House.

I do not speak on behalf of any of the companies mentioned by the hon. Gentleman. In fact, I am no longer a director of John Lelliot Developments. If the hon. Gentleman looks in the Register of Members' Interests, he will see that I resigned from that company some time ago. I am now a director of fewer companies than I was when I came into the House. His allegations are really quite beneath contempt. I do not propose to deal with them any further.

Mr. Boswell

Is it not the case that my hon. Friend's constituents contain an unusually high number of retirement pensioners? Are not their interests quite as important as those of people who are in employment, both in this country and throughout Europe? Do they not all have an overriding interest in economic efficiency and a reduction in inflation?

Mr. Butterfill

My hon. Friend is right. I am grateful to him for that helpful intervention. It is, however, dignifying the hon. Gentleman's comments far more than they deserve to proceed to consider them any further.

I would like to turn to some of the other areas in the European Community where I believe that we are being damaged by the sort of claptrap that the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) believes in. The Commission is, for example, seeking to promote new funds. It is not content with its existing empire, but wishes to move into new areas of activity. The latest proposal is a draft directive for a medium term transport infrastructure fund. With this fund, the Commission proposes to tell us how we can best build roads in the individual countries of Europe so as to better create a road infrastructure for Europe. Certain people, including representatives of the CBI in the south-west region—my region—say that that is a good thing. They think that they might get the A350 rebuilt more quickly if they latch on to the idea of a European infrastructure fund.

As I told them, there is no such thing as a free lunch. If we were to contribute to such a fund, the vast majority of it would go to building new roads in Spain, Portugal, Greece, and other parts of the Community. They would be rather less likely to get their road than if they left the process to our national Government. It is far more appropriate for national Governments, being more responsive to their citizens' wishes, to decide what roads are needed, and where. I object to the concept that some gentleman in Brussels will decide where my constituents will need a new road. That is another case of empire building.

Sir Russell Johnston

I agree with the hon. Gentleman's argument, but does it not apply with equal logic to Scotland, which is within the United Kingdom?

Mr. Butterfill

That may be the case. No doubt the hon. Gentleman will have an opportunity later in the debate to propound that view.

There are matters within the European Community in which we should make further progress, and there are other matters in which it is quite inappropriate for a supranational body to make such decisions. It is much more appropriate for them to be left to local decision.

Mr. Win Griffiths

Will the hon. Gentleman give way?

Mr. Butterfill

I shall not give way. I am winding up my remarks—I have been very generous in giving way—and many other Members wish to speak.

We did not defeat the slush fund philosophy of public expenditure in this country to accede to it again in Europe. That is why we are being so vigorous and why the Prime Minister was so vigorous in Bruges in opposing that philosophy, and why it is—unexpectedly, perhaps, for those who were so opposed to Europe gaining so much currency among Opposition Members.

6. 32 pm

Sir Russell Johnston (Inverness, Nairn and Lochaber)

Perhaps the hon. Member for Bournemouth, West (Mr. Butterfill) will forgive me if I do not directly follow him. I agree with his remarks about environmental co-operation and the avoidance of the development of a protectionist attitude within the European Community. However, as will become evident. I do not go along with some other things that he said.

Sadly, the right hon. Member for Chesterfield (Mr. Benn) has abandoned us after a robust, vigorous and entertaining contribution. When I stand at the bar of history—I am not terribly keen to do so all that quickly—I shall stand with my head high and be proud of what I did in respect of the European Community. I shall not be at all apologetic for my position and the critical Liberal vote in 1972. I reject the right hon. Member's argument. However amiably it was presented, he was wrong. The Community is in time and has imagination. It is not about division. In many respects, it is the most stable and encouraging element in world politics.

The hon. Member for Hamilton (Mr. Robertson), who led for the Opposition, said that we are supposed to be debating something that happened a year ago. As has been observed, that is ridiculous, and it is reflected in the turn-out of hon. Members. It is not entirely due to winter breaks in Richmond and Pontypridd. What is the point of talking about something that is a year old?

The page in the White Paper dealing with parliamentary scrutiny is the only page which is about three quarters blank. It has two sentences which state that lots of things were discussed, lots of reports were looked at, and lots of debates took place. In response to an intervention by me, the Minister said that, as a consequence, nothing happened. Therefore, why do right hon. and hon. Members spend so much time in committees? Why did the Secretary of State for Trade and Industry—a chap with a lot of things to do—trot along to give evidence? What effect will his evidence have, on whom, and when? I doubt whether it will have any. The Minister said that we must examine the way in which we are doing things.

However, there is a simple answer. We must give greater powers to the only body that is in a position to do anything, and that is the European Parliament. We should recognise that fact. It is simply not good enough for opponents of the Community to whine on about a lack of accountability when there is a realistic solution. Hon. Members would not expect me to say anything other than that, from a British point of view, this means changing the way in which we elect Members to the European Parliament. It is the last debate before direct elections. I shall take two or three minutes—no more—to say, not for the first time, that this matter is important.

We must examine the matter from a philosophical point of view. I must admit that the Conservatives are increasingly ideological in their approach to life. They were not ideological in the past. They used to be perfect empiricists, but now they are ideologues—much more ideological than the Leader of the Opposition, who is the master pragmatist of the day.

It is contradictory for a Government to advocate the virtues of free competition versus monopolies and the right of each invidual to have the option of share ownership and a stake in what were once state industries and, at the same time, not champion the idea that each individual should have a stake in Parliament. In the 1984 election—the last election—19.5 per cent. of the votes were cast for Liberal and Social Democratic candidates. About 2.5 million people voted for them, and we got no representation of any kind. That is wrong. It had a considerable impact on the balance within the European Parliament, in which all other member states have proportional systems. The European Liberal and Democratic group polled 10 million votes throughout the Community and got 32 seats in the European Parliament. The British Conservatives, who, in a remarkable euphemistic jump, described themselves as democrats, polled 6 million votes and got 50 seats. That is wrong.

If one is prating about accountability without taking account of that flagrant and peculiarly British injustice, one is approaching matters in a superficial way, and it is small wonder that the turn-out at the election was so low.

The hon. Member for Upminster (Sir N. Bonsor) talked about "the will of the House and the will of the country". In those terms, such concepts are nonsense. In 1979, when I stood for the European Parliament, Angus Maude, as he then was—he is Lord Maude now—speaking about the 13 per cent. Liberal vote, said that it was not fair and that something should be done. The man who is now the Home Secretary said and wrote similar things, but nothing has been done. The time has come for something to be done.

The Minister said that we are debating the period of the German presidency. I welcome the opportunity to pay tribute to Hans-Dietrich Genscher who was the Chairman of the Council of Ministers at the time. A former leader of the Free Democrats—the German Liberal party—his sane and enlightened influence has contributed much to the more effective operation of the Community, as, for that matter, it has in other matters, not least defence. The right hon. Member for Chesterfield referred to that point.

The period that we are referring to, as the Minister rightly said, was dominated by the Brussels agreement. That reasonable settlement tackled many of the problems that had beset the Community. Those of us who appreciate the importance of the Community to the United Kingdom were especially grateful that, on this occasion at least, the Prime Minister was for turning and was prepared to accept a deal that she had rejected in Copenhagen two months previously. Therefore, the European single market was on track.

I should like to commend in particular the increasing support for the European social fund which resulted from the agreement, and which supports job creation and training throughout the Community. I also commend the regional funds and measures to control the cost of the common agricultural policy. The regional fund is to double between 1987 and 1992. There is a risk, confirmed by the Padoa-Schiotta report, that the single market will draw even more money and economic activity into the central golden triangle about which so much has been said. It is necessary to counter-balance this trend.

I am very alarmed by the view of the Chancellor of the Exchequer. It has been referred to by the hon. Member for Hamilton, quite properly, and I want to put a direct question to the Minister about it. The Chancellor said in his Chatham house speech that the growth of regional policy within the Community would be positively damaging. That is a very alarming statement. Secondly, and related to that, when will the Government face up to the issue of additionality in respect of the regional fund? Unless one has the money as an addition rather than a substitute, it makes a mockery of the whole business.

The Chancellor's appalling view is certainly contrary to what the Secretary of State for Scotland or the Secretary of State for Wales continually tells us, as no doubt do the Ministers who claim that they are working for the betterment of the north and west of England.

In my part of Scotland we have a state development authority called the Highlands and Islands Development Board. It was established in 1965 by the Labour Government following, incidentally, three Liberal wins in the Highlands. We had advocated the idea since 1929. Little plugs like that can do no harm. The board has certainly been effective and works very well with the regional fund of the European Community. Is the Chancellor attacking that as well? That is the logic of it. The Chancellor said—and I repeat it—that the growth of regional policy within the Community would be positively damaging. That means that he is against the Highlands and Islands Development Board.

Presumably also he believes that the approach of the Federal Republic of Germany, that of decentralised economic planning, is wrong. I do not believe it to be wrong. I hope that the Minister will clarify this. If the Chancellor's words represent Government policy, they suggest that the Government are moving back from the Brussels agreement.

The same consideration applies to the European social fund. The United Kingdom is the largest beneficiary of the fund within the Community. I think it forms a large part of the funding of employment training and the youth training scheme projects, although I am not sure how much money is involved; perhaps the Minister will tell us. But it is certainly something that the United Kingdom desperately requires, as the hon. Member for Hamilton says.

The director general of the National Economic Development Council has pointed out: 60 per cent. of the German work force have attained apprenticeships or similar qualifications, compared to only 30 per cent. in the United Kingdom. Additionality applies here as well, whether the money through the social fund is used to make better provision or simply as a substitute within the budget. The Government must not treat help from the European Community as an excuse to save money. Rather, they should take full advantage of it to ensure that our work force is well trained. It is very welcome to the Social and Liberal Democrats that we are making progress towards the single market. One is always ready to welcome converts to this cause. As a Liberal who has been involved in European matters for a long time, I believe that we have sustained and been consistent in our position, but I am worried that many within the Government and certainly within the Conservative party regard the Community as some kind of "EFTA" writ large, rather than a community of peoples working towards a supranational cohesion.

The Prime Minister held up a vision of Europe open for business. I support that fair view, but I cannot support the idea that Europe can have a genuinely common internal market without the necessary economic means. I must say to the hon. Member for Bournemouth, West that that means a European monetary system. I shall not argue with him about the moment of its introduction, which has been discussed for so long. Many people disagree with the hon. Gentleman's stance. I believe that we should also move towards the creation of a central bank. There must also be the necessary environmental and regional policies to complement the market.

Over the past months, those whose view of Europe is contrary to mine have been organising more effectively in this country. A new brand of Right-wing antiEuropeanism has grown up in the Conservative party. It has not articulated itself perhaps so long as the hon. Member for Southend, East (Mr. Taylor). The hon. Gentleman's record in the matter is so blemished as to be unblemished, if I may put it that way. There can be no doubt that the hon. Gentleman is most consistent.

I am referring not just to the Chancellor but to the so-called "Bruges group" which has just been established.

One has the impression that some members of the Conservative party want to have their cake and eat it too. They are happy enough when European Community action cuts Government intervention across Europe. But as soon as it involves arty increase in the role of Government, for whatever good or bad reason—of course there may be bad reasons for Government intervention—they take refuge in this great notion of sovereignty.

Mr. John Redwood (Wokingham)

Will the hon. Gentleman give way?

Sir Russell Johnston

I shall give way in a moment. If we are referring to jargon, as some hon. Members have done, the concept of sovereignty is the acme of casuistic jargon.

Mr. Redwood

I should like to point out that, as I understand it, the "Bruges group" has been established by a Cross-Bench peer in the Upper House and is a group of academics that has not stated its party political disposition.

Sir Russell Johnston

I shall titillate the hon. Gentleman with some quotations from the statement of the Bruges group later on. If that is a Cross Bencher, I am a cross—well, I do not know what; but that was not my impression.

The Bruges group claims to favour a Europe of sovereign states competing and co-operating. The whole idea of the single internal market is that there should be fair competition between business and individuals within Europe. Once sovereign states try to compete within the market, real competition is stifled.

The Bruges group's prospectus has come into my hand. I understand that it is freely available. The gentleman concerned may be a Cross-Bench Peer, but the basis of the document seems to be in a pretty narrow conservative ideological brace. Let me give three short quotations. The document says: The Bruges Group not only denies politicians the right to pronounce on issues relating to national sovereignty, but it also strongly feels that political integration of the European States is a negative step that will severely damage the security at present enjoyed by Europe. It will also heighten existing tensions and differences in Europe. That is gobbledegook, but never mind.

Secondly, the document says: In principle, therefore, increasing the powers of Euro-MPs, even to act strictly within the limited context of an economically-integrated Europe, would be quite undesirable". Lastly—this might interest the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes)—the document says: We have to ensure that social measures do not extend into the domain of worker participation, social security, pensions, etc. because this would represent a massive interference into the workings of the Free Market". If the free market were left to work by itself, without the state doing anything about pensions, social security and such matters, we know perfectly well that the free market would pay remarkably little attention to them.

Now that the Prime Minister claims to have seen, as it were, the "green light", it is to be hoped that we shall see increased environmental protection at European level. As the hon. Member for Bournemouth, West said, pollution knows no boundaries. But that too means ceding a degree of national sovereignty, which may be for very good reasons.

To say, as the hon. Member for Wokingham (Mr. Redwood) so blandly said, that the Bruges group was led by this Cross-Bench chap, which presumably implies a moderate, reasonable, fair-minded objective fellow who could not in a way be described as a Conservative, is a lot of poppycock.

Mr. Butterfill

The facts just did not happen to suit the hon. Gentleman's argument. The person concerned did not happen to be a Conservative. The hon. Gentleman was seeking to say that the Bruges group is a Conservative group, when it is not.

Sir Russell Johnston

Let me give the hon. Gentleman another quotation. The document says: This vision of Europe runs against the free market economic philosophy of the present Conservative Government that has set such a good example to the rest of the world". If that is the view of a Cross-Bench peer, he is not all that objective.

This debate has occurred at an historic time. There has already been a reference to the co-operation in foreign affairs which led to concerted action on the appalling conduct of the Iranian Government over the Rushdie book. It must have been a good experience for the Foreign Secretary to find that all the Community countries meeting in Brussels were rallying to support the British position. There was no question of him pressing them to do anything; he was perhaps taking the softest line of all. There is great scope for the EC to make considerable advances in foreign affairs, and it is something of a criticism of us that the Soviet Foreign Minister is moving positively into the middle east at the moment when the EC, against the background of the Venice declaration, should have done much more.

The Prime Minister has condemned the visionaries of European unity. It is always easy to condemn people who dream dreams and hope hopes, but without vision the Community would never have been created. The Prime Minister warns of a centralised federal Europe, showing that she does not really understand the word "federal". It means co-operating on the broad issues of economy and environment within the federation while giving self-recognising communities the institutional right to run their own affairs. [Interruption.] The hon. Member for Newham, South (Mr. Spearing) is making squeaking noises. Does he wish to intervene?

Mr. Nigel Spearing (Newham, South)

I was not going to intervene because I have not been present throughout the hon. Gentleman's speech, but does he agree that the definition of "federal" is essentially that of a legal constitution, not necessarily of a modus operandi, and to mix the two is constitutionally imprecise and misleading?

Sir Russell Johnston

I admit that the hon. Gentleman makes a fair point. It is a constitutional institutional legal arrrangement. Nevertheless, the modus operandi of federations, as we have seen them, is to achieve the balance of powers to which I referred. That is true in the Federal Republic of Germany, Canada, the United States and so on. That is certainly what I would wish to see in the EC. It involves a balanced and democratic approach which could provide not only effective co-operation on a wider scale, but new freedoms for old nations such as Scotland and Wales and Bavaria and Catalonia as well.

That is the only sane future for the EC and for us within it. Such a concept of a federal Europe, focusing on the rights and social situation of the citizen, is that for which the European Liberal, Democratic and Reform group, of which we are a part, will work, I hope successfully, in the European elections to come.

6. 55 pm

Mr. Teddy Taylor (Southend, East)

The wild enthusiasm of the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) for the Common Market and all it stands for has never been in doubt, but he has been a bit unfair to the Bruges group. I happened to go along to its first conference, not because I was part of a conspiracy, but because I was curious, and I can assure him that far from being some kind of promoted arm of the Conservative party, it is pretty representative of what he will find in the Labour and Conservative parties and throughout the country—a rising tide of concern over what is going on in the Common Market.

Mr. Foulkes

It is important to be clear about what the hon. Gentleman is saying. Is he saying that Labour party Members are actively involved in the Bruges group? I hope that he will clarify that, because that is not the case.

Mr. Taylor

I have not the slightest idea about the parties of the people involved in the Bruges group. All I can say is that there seem to be some genuine academics who are putting forward what seems to be a genuine point of view.

The attendance in the House today tells us what is happening in British politics today. The Labour Benches have almost been deserted, not because Labour Members are lazy or do not want to come, but because they are too embarrassed to talk about the Common Market because they are changing their policy, although there are one or two exceptions, such as the right hon. Member for Chesterfield (Mr. Benn) whose views are clear. The Conservative Benches are more crowded than used to be the case because there is no doubt that there is a rising tide of concern in the Conservative party about what is going on.

I want to make three brief points because I realise that other hon. Members wish to speak. First, I appeal to the Government to consider seriously that there might be a case for stating things as they are in the Common Market, not simply living in a dream world and trying to pretend that things are what they are not.

I could give a mountain of examples, but the best one occurred again today when my right hon. Friend the Minister kindly talked about the great reform of the Common Market, initiated by the United Kingdom, which had led to a reduction in the butter mountain. The facts are there for all to see. Hon. Members know exactly what has happened. We simply agreed to a fire clearance sale, more than doubling our sales of butter at a ludicrous price. There was no reform or great mystery; there was simply a fire clearance sale. It is rather like Harrods saying that it had improved its sale by reducing the price of its fur coats to 28p each. If only the Government would stop trying to pretend that miracles are happening when they are not, they could make more progress and we would have a far more satisfactory debate.

We all know that our trade with Europe is bad. In fact it is worsening. The position is serious. There has been a deficit in our trade in manufactured goods with Europe of £12.75 billion over the past 12 months compared with only £2 billion for the rest of the world. I am not saying that that is the fault of the Common Market. I do not know what the reason is. But it is a serious problem.

The same applies to budget control. After Fontainebleau Ministers were saying what they are saying now after the February Council meeting about budget control. They say that matters have been resolved and they have made decisions which are binding on the Council. We all know that budget control was a sick joke. Sadly, the same is true of the CAP. We repeatedly hear all the pledges about what Ministers think will happen and the spending cuts that they hope will happen. In every previous instance they have been totally and completely wrong.

Sadly, it is the same now about 1992. I am sure that the Minister is well aware that we are not seeing moves towards free trade. We are seeing a move towards massive harmonisation. On insurance, in which I am involved, a measure has been proposed for a very limited form of flexibility, which certainly might not happen in Germany because of the special rules which they have there. I would love to see free trade within the EEC, but I think we are kidding ourselves if we believe that great progress has been made.

It is the same with fraud and, in particular, protectionism. The Minister said that she was very pleased with the measures being taken to try to undermine protectionism. I must ask her if she knows of any measure at all that has been taken within these six months that has reduced the amount of protectionism in the EC. We all know that it is increasing.

The Economic Secretary to the Treasury (Mr. Peter Lilley)

Is my hon. Friend aware of the liberalisation of road haulage?

Mr. Taylor

I was not aware that that was a measure dealing with protectionism. I asked the Minister if she knew of a measure to do with protectionism—in other words, Europe against the rest of the world.

I appeal to the Minister to look at the issue of the use of anti-dumping procedures. The Commission is now using, not dumping procedures, but what it regards as a normal price as a means of increasing substantially the price of imported goods, or else forcing domestic producers to increase their prices.

I am not trying to say that everything is bad. I do not want to preach against membership of the EEC, because that is a battle of a long time ago. I simply appeal to the Minister and to the Government to make a positive decision not to try and sell the Common Market but just to try and say how things are. On that basis we could make more progress.

Secondly, on the question of documents and our debates, I hope that we shall not go through the whole nonsense of saying that somehow things will improve dramatically if we have our debates at 7 o'clock instead of at 10 o'clock, if we have more time, and so on. Other hon. Members have rightly said that—sadly or happily for the country, we do not know which—massive amounts of sovereignty have been surrendered. Many of the laws which we used to make in the House of Commons are now being made by the Council of Ministers on the recommendation of the Commission. Although the views of the House of Commons are interesting, we know that, as far as decisions are concerned they do not affect things at all.

It would help enormously if, instead of trying to pretend—as the right hon. M ember for Chesterfield rightly said—that we are influencing decisions in Europe and that our views are terribly important, we simply accepted the fact that most of the big decision-making has gone to another place. What should worry us is that it has gone to a new form of democracy where there is no elected assembly controlling Ministers and policies, but—

Mr. Benn

The hon. Gentleman, being a realist in his present manifestation, says that we should accept it, but of course it is our electors who put us here. I wonder if he would comment on the possibility that I see ahead one day that people would vote for a party expecting something to be done and discover, after that Government, if they were able to form one, were in office, that they had no power to do what they had been elected to do. That is the real issue. It is the rights of the electors, not the rights of individual Members of Parliament, that seem to me to matter. That is when the threat to democracy will become apparent.

Mr. Taylor

I am sorry if I was confusing the right hon. Gentleman. I listened to his speech with infinite care and I thought it was a masterful speech about what had happened in the past. When he came to looking to the future I am afraid I got rather confused, because the idea of Britain signing some kind of treaty of friendship with the Soviet Union as a means of solving the practical problems of the EC did not seem to me to be very practical.

What I am saying is that we in the United Kingdom—I do not care whether it is the Government, the Opposition, the press, television or anyone at all—should surely accept the fact that this has happened, reluctantly in my case, not so reluctantly in the case of others. We should say what has happened and then ask ourselves what we should do about it.

Thirdly, we should accept—I hope the right horn. Member for Chesterfield, who I know has a terrific interest in the time of Oliver Cromwell and King Charles and a great historical interest generally, will agree—that there is a case for the Government and the House of Commons saying: "This has happened, power has gone, the Common Market is not working well; it is not an efficient body; it is a body with a lot of fraud and overspending. When and how can we influence this?"

There is, in my view, apart from the endeavours of our Ministers who go to the Council of Ministers and try their best but often get outvoted, only one time when we can do anything. That is when the Common Market runs out of money and has to ask for more resources. At that point, of course, we have a veto. That is the situation that arose in February 1988, and then the Prime Minister sought an assurance, as she did at the time of Fontainebleau, that there would be strict budgetary controls. Sadly, we shall not get them, for the reasons we know, but at that stage we could make a number of important demands.

I suggest that we should not go through all the nonsense of saying how we are going to improve our discussions of European affairs, but instead draw up a realistic agenda.

We know what agenda would be generally acceptable to the House of Commons. We all surely know that the CAP is not working well and is not being reformed. It cannot be reformed so long as it is controlled by the Council of Ministers. It will not happen and we are kidding ourselves if we think that it can. Is there not a case, without affecting the integrity of the Common Market, for repatriating agriculture to member states and having each of them carry out its own agricultural policy, subject to Commission approval if need be? In that way we could make some progress.

Is there some way in which we could have a better way of saying which article of the treaty is relevant to which Euro-document? The Foreign Office, if its officials are the very clever people we think they are, should be starting to look carefully at how the Commission is seeking to use article 100A for majority voting when it should not be so used. Surely this is another case in which we could ask for a change.

I believe that we have to accept that decisions have been made. I regret them, but we shall never know what would have happened if they had not been made. Now we have to do some realistic work on the Common Market. There are a lot of interesting things in the White Paper. We are told that moves towards 1992 are making great strides. If we look at all these major supermarket issues that have been agreed we see that one has been to extend the non-noise directive and cover what are called sit-in lawnmowers. I do not know what they are, but I do not think they are terribly important.

There is an important job to be done and when we next come to the point of bankruptcy—when the Common Market has no more cash at all, when it has to appeal to us for more cash—we shall be in exactly the same position as earlier Parliaments here were with King Charles. He used to come to the Parliament when he ran out of money and ask for more. And we told him that he could not have it unless he agreed to a, b and c. If we really want to reform the Common Market, stop the nonsense and move in a better direction, we should start preparing our agenda for change.

So, first, accept things as they are and tell the whole truth; secondly, do not fiddle around trying to pretend that things have not happened that have happened; and, thirdly, let us use the one opportunity we have for achieving real changes in the Common Market to make it better, more workable and more sensible.

7. 8 pm

Mr. Win Griffiths (Bridgend)

I intend to do something that has so far been rare in this debate—to dip at some length into the report that we are debating. It may seem a little unorthodox, but there are some useful things to be said, not just about what is written in the report but also about what has been left unwritten.

I notice, for example, that at one point the Government referred to the fact that they had achieved a major victory when the Commission agreed to provide an impact assessment of any move in the open market saga on specific industries. But when, on the first page of the report, they referred to the fact that the structural fund would double by 1993, they forgot to mention that the Prime Minister was on record as having said in the House that that would not happen. Nevertheless, in the end she agreed to it, and I am glad that she did, because although those structural funds suffer from a lack of additionality they eventually find their way to regions with high unemployment.

There is another omission from the White Paper. The Government are happy to refer in paragraph 1. 16 to the fact that the Commission endorsed: policies on deregulation, including support for the 'fiche d'impact' system (whereby each Commission proposal for legislation is accompanied by an assessment of its likely impact on business". When I have requested in this House and in the European Parliament that all the moves towards a single market should be assessed in terms of their impact on the regions, my requests have been turned down. I still believe that it would be useful if the Government attempted to assess the impact of the moves towards a single internal market on jobs in the regions. I believe that most economists agree that it will place further strains on regional economies, particularly if the Government are not prepared to develop the necessary communications to ensure that the regions have close links with population centres in the Community.

To that end, projects such as the building of a second bridge across the River Severn, the electrification of lines from London to south Wales and the need throughout the United Kingdom for direct rail links with EC capitals must be brought to fruition if the regions are not to be left behind in the move towards the single market which, according to the Government, has progressed better under the German presidency than under the British presidency.

There is a titillating sentence about economic and monetary union: The Council also decided to establish a committee of central bank governors and others to study and propose practical steps towards the progressive realisation of economic and monetary union. Did the Prime Minister agree with that? From the tone of her Bruges speech, one could swear that she was on another planet when that agreement was made. For good or ill, however, that agreement has been made and the Prime Minister has made a commitment on behalf of the British Government to move towards the realisation of economic and monetary union. Perhaps the Government can tell us what progress might be made on that, or will it be like the fight against inflation—something that the Prime Minister says is proceeding albeit, as we are all aware, proceeding very unsuccessfully?

The hon. Member for Esher (Mr. Taylor) asked about true inflation rates and much play was made about the fact that mortgage rates are included in our inflation rate but not in the inflation rates of other Community countries. It is also true, however, that fewer householders have mortgages in other Community countries and the rental element does enter their inflation indices.

I will cite some figures, although I accept that they are not the latest figures. Indeed, they may flatter the Government because they are the OECD main economic indicators for November 1988. Of the G7 countries, the figures show that British inflation was 6.4 per cent., in France it was 3 per cent. , in Germany it was 1.4 per cent., in Italy 5 per cent., the United States 4.2 per cent., Canada 4.1 per cent., and Japan 0.5 per cent. According to the OECD figures, there is no doubt that the British economy is performing very badly with regard to inflation—and the position has become worse since last November.

The Government should also tell us what they think will happen about economic and monetary union. Time and again we have been told that in principle the Government want to join the European monetary system, but that the time is not yet right. Perhaps the Government can tell us today what will happen to the pound in relation to the deutschmark, the dollar or any other European currency. Will they want to take into account comparative unemployment rates before they do that? Under what conditions would the Government be prepared to join the EMS? I am sure that the whole House would like to know that.

My right hon. Friend the Member for Chesterfield (Mr. Benn) referred to the appearance of Mr. Gorbachev on the scene. A very short paragraph in the White Paper gives us some hope that the Commission and several European Governments might be prepared to respond more positively than the British Government to Mr. Gorbachev. We might see the spectacle, as has happened in relation to several issues relating to foreign affairs, in which the British Government are dragged along to a more positive and progressive position than they really wanted. Paragraph 10.12, headed "EC/Hungary" states: Following several further rounds of negotiations, the EC and Hungary initialled in Brussels on 30 June an agreement on trade and commercial and economic co-operation. If we link that with the fact that the Russians under Mr. Gorbachev have also allowed Comecon to recognise the European Community to make trade and commercial agreements, there is every hope that other such agreements might be made in future. If we take that in tandem with Mr. Gorbachev's obvious desire to see reductions in nuclear and conventional forces, Britain, which at the moment is being dragged unwillingly by countries such as Germany, might achieve developments which go way beyond the competence of the Community.

Mr. Jonathan Sayeed (Bristol, East)

The hon. Gentleman continues to say that this country is being dragged unwillingly towards trade or discussions with the Soviet Union. He will recall that the Prime Minister very early on said that we can work with Mr. Gorbachev. Does he also agree that it would be necessary for the Soviet Union to devalue the rouble very considerably if we are to trade effectively with them?

Mr. Griffiths

I do not dispute the fact that the Prime Minister said that Mr. Gorbachev is a man she can deal with. However, in the context of the move to remove nuclear weapons and the agreements which have already been made between the United States and Russia, the Prime Minister still seems to be determined to modernise NATO nuclear weapons while countries like Germany are counselling otherwise. I hope that their counsel will hold sway. With regard to the exchange rate between the rouble and the pound, I leave it to the trading experts to find the most effective way of developing our trade relations.

Two matters affecting the environment are specifically mentioned in the White Paper. The first relates to an agreement covering the phased reduction up to 2003 of sulphur dioxide and nitrogen oxide emissions from large combustion plants. An organisation called EURISOL, the United Kingdom mineral wool producers, published a report yesterday. It shows that if the proposals currently under discussion for building regulations as they affect insulation standards were to be introduced by the Government, they would stop 39.4 million tonnes of carbon dioxide from polluting the atmosphere over a 50-year period. That is a significant reduction. In regard to the energy objectives of the European Community, on the basis of current use we would need two fewer average-sized power stations to produce the electricity that we need.

I wish to refer to a matter which is not mentioned in the report but has been aired recently—the water quality directives. The hon. Member for Gainsborough and Horncastle (Mr. Leigh) opposed any concept of European standards because we would always use the lowest common denominator. If we have the lowest common denominator for bathing water and drinking water quality standards, why have the Government taken some 13 years so far to fail to bring more than one third of our beaches up to the standard of the so-called lowest common denominator? Why are the Government still seeking derogation on the drinking water quality directive which they affirmed in 1980 and why, unless there is a vast reappraisal of the programme, will we not achieve the standards of that directive until after the year 2000? Have the Government received any response from Brussels on their proposals on the bathing water and drinking water quality directives?

Earlier this month the Chancellor of the Duchy of Lancaster and the Minister of Trade and Industry had discussions in Brussels on the regional fund as to which areas of the United Kingdom, such as areas of declining traditional industry, would be eligible under the second objective. Has a definitive list now been introduced? Although most of south Wales is likely to be included, there are still some doubts about south Glamorgan which should be cleared up.

Finally, one issue relating to the development of a single market has aroused no official response—the ability of all citizens holding British passports to travel unimpeded throughout the European Community whether they are on holiday or looking for work, as that is supposed to be one of the great advantages of the single market. At present, there are several types of British passport, not all of which give their holders all the rights of normal British citizenship. Will the Government clarify whether anyone holding any British passport would be able to mow freely throughout the European Community looking for work when the single market has been completed?

On a constitutional issue, the Minister of State suggested that the Government might take advice as to the best time for the House to discuss proposals from the Commission. I suggest that the best time would be fairly soon after any proposals are announced. Whether or not the Commission makes major amendments to those proposals later on, if the Government have any intention of listening to advice from the House, the sooner we are able to give that advice the better it will be for everyone.

My right hon. Friend the Member for Chesterfield mentioned, the Danish Parliament which has a system of scrutiny which, before the Single European Act was passed, led to the Danish Minister laying a veto on the table while he went back to Copenhagen to discuss the issues with the Danish Parliament's European Community committee and attempt to reach some agreement before returning to Brussels and explaining the position. That system works in Denmark probably because the Government always have a knife-edge majority, and the public at large perceive that the European Community can have an enormous impact on people's lives. It has therefore become an important part of the constitutional process in Denmark. By extending majority voting, the Single European Act will reduce the effectiveness of that committee, but the Danish Parliament will still be able to play an important role on matters in which Governments have a veto.

If the Government are to listen to the advice of the House, there is no reason why an informed debate should not be held one month after a proposal has been published, giving hon. Members the opportunity to examine it and seek advice from other interested bodies. It would be nice to think of the Government going to Council meetings and putting forward the view of the British Parliament.

Mrs. Chalker

We do.

Mr. Griffiths

The Minister whispers "We do", but more often than not we discuss European matters after a common position has been reached and after the Council has made a decision, so our debates in the House are almost post-mortem discussions.

Mrs. Chalker

The hon. Gentleman should know that we frequently use a scrutiny reserve—the term used in the Council of Ministers when a Minister listens to a debate but keeps a scrutiny reserve until the issue is discussed in his national Parliament. That procedure is frequently used by United Kingdom Ministers, and we shall continue to use it. Nevertheless, I understand what the hon. Gentleman said about early deliberations on Commission proposals, although that might not be the best time in every single instance.

Mr. Griffiths

I am grateful to the Minister for that advice. I should be interested to know how often the use of the scrutiny reserve has led to the Government listening to advice from the House and changing their position in the Council of Ministers.

Mr. Benn

Before my hon. Friend is seduced by the Minister's language, I should explain that the scrutiny reserve is used as an instrument by the Executive to give themselves more time to think. It is not at the discretion of the House of Commons, so it is in no sense a legislative safeguard. It is a technique for a Minister who does not want to say, "yes", probably because he has not consulted his colleagues at home, but it is no guarantee for the House of Commons.

Mr. Griffiths

That is why I asked whether the House had ever had any impact on a decision after a scrutiny reserve had been made by a Minister in the Council.

Mr. Spearing

While I concur entirely with the point raised by my right hon. Friend the Member for Chesterfield (Mr. Berm), a resolution of the House on 30 October 1980 requires a Minister to debate an issue in the House prior to assent in Brussels unless that is impossible. While the right hon. Lady's words were seductive, does he agree that any debate, whether or not it is held under a scrutiny reserve, unless it involves a constitutional change which is required by the treaty, is merely advisory, so all the debates to which my hon. Friend refers are advisory and consultative debates only, unless we adopt a similar system to that which applies in Denmark?

Mr. Griffiths

I appreciate what my hon. Friend says, which serves to emphasise the need for this House to play a more positive role in these affairs.

I conclude by saying that the White Paper, while telling us what happened under the German presidency, does not tell us what will happen in the future, particularly with regard to economic and monetary union. I hope that we shall receive a detailed response on those matters because they are vital to the future of the British economy, especially in the regions.

7. 29

Sir Richard Body (Holland with Boston)

As a Welshman I am sure that the hon. Member for Bridgend (Mr. Griffiths) appreciates the perils of the single market. He will realise that if there is to be an integrated market which embraces more than 300 million people over such a vast area, there must be a limited number of growth points. Broadly speaking, they will be in what we have come to call the golden triangle. Wales is unlikely to be in that triangle and so is Lincolnshire—if I may say so in the presence of my hon. Friend the Member for Stamford and Spalding (Mr. Davies).

I hope that the right hon. Member for Chesterfield (Mr. Benn) will not mind me saying that he made a powerful and entertaining speech. I wonder whether he realises how close he came to the views expressed by no less a man than M. Monnet just before he died. I saw a paper written by one of Monnet's colleagues in which he described a conversation in which M. Monnet, reviewing his life, said that he had a regret about the European Community—he wished that it had been founded not on economics but rather on the sort of cultural links to which the right hon. Member for Chesterfield alluded.

Comparing this White Paper with its predecessors, I am struck by the way in which the European Commission is now nibbling away at a range of issues far wider than that with which it used to deal only a few years ago. To some extent, that can be explained by the magic year, 1992. I hope that the House appreciates why that date was selected. It was designed to coincide with the end of Lord Cockfield's second term of office, the vice-president who was responsible for the internal market. As we know, he launched a programme of 300 changes that were to be made before his term of office came to an end. I hope that now that he has departed we may look upon 1992 as no more than one—albeit very important—year in this century.

This does not altogether explain quite a large number of items in the White Paper, which refers to environmental matters, health, education and youth training. Very soon, we must make up our minds whether we want a deeper Europe that deals with such issues, or a wider Europe. We cannot have both.

As I have said so often, I am totally in favour of more international co-operation. I do not understand how one can speak of many of the environmental issues unless one talks in European terms. We cannot deal with many of them by ourselves, and the question is with whom, and how, we should try to overcome our problems.

I should particularly like to discuss the paragraph in the White Paper that deals with copyright, and a number of allied matters that are of enormous importance if we are to achieve the expansion of trade to which my right hon. Friend the Minister of State referred. I wonder whether she reads that excellent journal called the "New European". A recent issue of that quarterly contained an article by Mr. Anthony Walton, a leading member of the English patent bar. He spoke of the enormous success of the European Patent Office, which goes back a number of years and includes all the EC countries. It goes far beyond that—it means that an inventor in Stockholm, Geneva or any other European capital can go to the local office, register a patent and immediately it takes effect throughout all the countries that are adherents to the European Patent Office.

The system works extremely well—it is efficient and cheap. However, outside the profession of patent lawyers and patent agents, very few people know about the European Patent Office because there are no rows or disputes. It works. Yet in the White Paper, the EC Commission is nibbling away and trying to undermine the Patent Office by arrogating its role to itself.

I wonder if my right hon. Friend the Minister of State will consider this matter carefully, because there is at hand an institution that can extend the work of the European Patent Office very effectively. That institution is the Economic Commission for Europe, based in Geneva. That city is as European as any other, although I fear that some of my hon. Friends rather quixotically deny that it is in Europe. Every European country in the United Nations is entitled to take part in the proceedings of the commission, and many of them actively do so. Many of them, particularly EFTA countries, wish to take a more vigorous role in co-ordinating the economic activities of the European continent.

I am told, and perhaps my right hon. Friend will put me right if I am wrong, that sadly our Foreign Office is not at all enthusiastic about the Economic Commission of Europe, which it fears may be a competitor with the EC. However, if we are to have a wider, rather than a deeper, Community, surely it is an institution not to be overlooked—especially when we seek to expand trade throughout the whole of Europe in the way that my right hon. Friend suggested.

Whether or not one approves of the Economic Commission for Europe turns largely, I suppose, on whether one believes in the deeper Europe or the wider Europe. If the deeper Europe is our objective, I hope that we realise the consequences when we seek to have over 300 million people governed by the same laws and the same system of taxation. It will mean that we will evolve into a unitary state, which will have grave implications for the future of the House, making it primarily a consultative rather than a legislative body in due course.

That was not the vision that the Prime Minister saw at Bruges. The first half of her speech was passionately pro-European, but did she not make the point that Europe would work more harmoniously if there were opportunities for countries to act in a sovereign way, making their own laws fit in with Europe's interests? If Europe is indeed a number of circles of interest, European law should be limited to where those interests converge rather than beyond the circles. Once the law goes beyond the circles, there is bound to be conflict and disharmony.

Does my right hon. Friend the Minister of State wish the European Patent Office to be strengthened and enlarged, with its role extended still further into eastern Europe, so that it embraces all the 38 countries of Europe, or would she rather that its role were taken over by the Commission of the EEC? If the latter course is taken, it will not advance the argument that my right hon. Friend made earlier about wanting more trade. Indeed, it would be a step towards a fortress Europe. Surely it must be obvious that if we want trade opened throughout Europe the position on the patent and copyright system must be settled amicably and the 12 items listed under that heading in the White Paper must be dealt with properly. If they are to be arrogated to just 12 countries, with those countries imposing their ideas on the remainder, that will do nothing to liberalise trade throughout the whole of Europe.

Copyright and patent law, prosaic though it may be, may present a little test of whether the Foreign Office will be moved by the principles of Bruges or whether it would rather dabble with a fortress Europe. I hope that my right hon. Friend will consider the matter carefully because those of us who wish to see a wider Europe and the barriers to trade broken down throughout the continent think that there is only one route for us to take, and that route is not mapped out in the White Paper.

7. 44 pm

Mrs. Margaret Ewing (Moray)

Earlier in the debate the hon. Member for Southend, East (Mr. Taylor) referred to the widespread concerns of the British public about developments within the European Community. Without wishing to sound facetious, may I tell him that I encountered widespread concern in my part of the world about the activities of the Government? That concern is referred to more often than what is happening within the European Community.

I accept that there are concerns. Perhaps part of the problem has been that the coverage given to the European Community, including its Parliament and the Commission, is not so wide as the coverage given to this place. It is only recently that the media and the press have started to move towards adequate coverage of activities within the European Community. The European institutions must be given greater coverage so that people can understand and switch into what is happening within the Community.

Much of the debate has centred on the apparent inability of the House to scrutinise proposed legislation from the European Community. Reference has already been made to page 35 of the White Paper and to the fact that the House has had the opportunity to have 13 debates, on 49 documents, in the six months covered by the White Paper. Such debates tend to be held late in the evening, usually after the main vote al. 10 o'clock, they last for one and a half hours and they may not be the best way of dealing with that aspect of our responsibilities.

We need to consider how we deal with European legislation. Particularly as 1992 approaches, it would be remiss of the House if we did not have an opportunity to extend our powers and facilities to scrutinise European legislation. Perhaps one of the first things that we need is someone to translate the gobbledegook of European documents and to spell out their implications in a comprehensible way to hon. Members and to the public. The point was drawn to my attention by an industrialist in my constituency last weekend. He said that he found it difficult to understand the implications of some of the directives. Perhaps that facility in itself would do a great deal to assist public comprehension of the workings of the Community.

Mr. Spearing

May I draw the attention of the hon. Lady and her industrialist constituent—indeed, of all industrialists and all citizens of the United Kingdom—to the weekly reports of the Select Committee on European Legislation which has that very duty to perform? In the last Session those reports were HC43—i-xxxvii; in this Parliament the reference is HC15 and so far we have published nine reports. I am not saying that our English is pellucid, but it is the clearest interpretation that we can achieve of some of the convoluted documents to which the hon. Lady has referred.

Mrs. Ewing

I thank the hon. Gentleman, and I will draw my constituent's attention to his comments. I know that the hon. Gentleman appreciates the point that I was making.

I share many of the concerns of the hon. Member for Bridgend (Mr. Griffiths) about the implications of the White Paper for transport policy. One issue affecting transport is the development of the Channel tunnel. While that may not be covered by the 1992 legislation, it is touched by it. It is interesting to note that the Select Committee on Welsh Affairs is considering in detail the implications of the Channel tunnel for industry and development in Wales. We do not have such a facility for Scotland because the House has been unable to establish a Scottish Affairs Select Committee, so we are in difficulty in terms of the communication system.

It is important for industry, particularly in an area such as I represent, to have easy access to the market. We already suffer severe disadvantages. I therefore very much welcome the establishment of an organisation called CREATE, which is the Campaign for Rail Electrification from Aberdeen to Edinburgh. That would be a step in the right direction which would assist Grampian region and the Highlands and Islands to compete more effectively. Many of the goods produced there are high quality products for which there is a great demand in the European Community. I shall not detail all the wonderful assets of my part of the world, but they include food and fish processing, textiles and whisky—a major export from my own constituency. It is important that as we move towards 1992 the Government should consider transport issues as they affect peripheral regions of the United Kingdom.

The hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) spoke about the regional fund. We feel strongly that the Government, by their failure to give additionality to what has been made available by the Community, fail to recognise its importance. The Chancellor of the Exchequer insists that the growth of regional policy would be positively damaging, but we regard that as insulting to those areas which have benefited extensively from the work of the European Community and from the funds that it has directed to us. The Government must consider more carefully their handling of regional policy and its operation within the context of the European fund.

Last year, the Highlands and Islands faced a major problem when they were suddenly informed by the Commission that they were regarded as being better off than areas of Kent. It was only because of a major campaign by the local MEP, the Highlands and Islands Development Board, Highlands regional council and certain hon. Members that the situation was improved. We did not achieve a return to the original position, but we moved further up the scale so that the Highlands and Islands were not left high and dry without the major assistance that is so important to them.

I refer also to the antagonism of Conservative MEPs to any suggestion that there should be an agricultural development plan for the Highlands and for Grampian. They have consistently voted against an ADP in the European Parliament. As agriculture is a fundamental part of the Scottish economy, can the Minister explain the reason for that antagonism?

With regard to proportional representation in the European Community, it is ludicrous that the United Kingdom is the only country to be left without proportional representation and has ended up as the odd man out. I share the view of the hon. Member for Inverness, Nairn and Lochaber that people are discouraged from casting their votes because they feel disfranchised. If proportional representation operated, people would be encouraged to take more interest in the Community and the European Parliament. If Scotland were a self-governing nation, it would be entitled to 16 MEPs instead of eight. With proportional representation, there would also be a better spread of Scotland's political viewpoints, and as MEPs link together in political groupings Scotland would have greater influence in the European Parliament.

The hon. Member for Hamilton (Mr. Robertson) deliberately set out to attack my party's policy. It is important to set the record straight, for the benefit of right hon. and hon. Members and for the wider audience outside the House. My party has believed in the independence of Scotland within the European Community since 1983, and that policy was re-endorsed last year at our party conference in Inverness—by a majority of eight to one, which any politician would accept as being an overwhelming majority. Given the absence of any Scottish right hon. and hon. Members on the Conservative Benches, the hon. Member for Hamilton may have felt compelled to do his best to fill the gap—and I congratulate him on making the best Tory speech that I have yet heard from this side of the House. The hon. Gentleman is attempting to be a hatchet man and to bolster up the Tory establishment, with which he seems happy to be in cahoots. Perhaps that is because, since Govan, the Labour party has been scared witless and is losing its grip, so the hon. Gentleman is happy to become involved in the conspiracy of establishment politics.

The basic principle underpinning Scotland's right to be an independent country within the European Community is the legal principle clearly spelt out by the Secretary of State for Scotland—or the governor general, as we prefer to call him—in his capacity as Minister of State, Foreign and Commonwealth Office, on 31 October 1984. Referring to the situation which obtained as a result of negotiations between Denmark and Greenland, he said: As the treaties contain no provision for the withdrawal of a member state, or a part of one, the precise terms of Greenland's change in status had to be negotiated within the Community to provide appropriate amendments to the treaties."— [Official Report, 30 October 1984; Vol. 65, c. 1319.] If Scotland votes to become an independent nation, it will clearly remain within the Community and negotiations will follow about the terms of that continuing membership. My party has never sought to deny that, and it is disingenuous—to put it mildly—for hon. Members to suggest otherwise. The hon. Member for Hamilton failed to point out that other parts of the United Kingdom would be in the same position as Scotland.

Mr. Robertson

The United Kingdom is a permanent member of the United Nations Security Council. Is the hon. Lady saying that, in the event of Scotland becoming independent, she expects it to have a sixth seat?

Mrs. Ewing

I do not take the same imperialistic view as the hon. Member for Hamilton. My understanding of international law is that Scotland has been included in treaties as a result of international agreements reached by the British Government, and that those treaties stand until such time as Scotland negotiates out of them. The hon. Gentleman has again produced a red herring in respect of a specific situation.

The political principle underpinning the concept that I described is a nation's right to self-determination, which the House, or anyone else, would be foolish to deny. The final adjustment of Scotland's status will require the unanimous agreement of member states, but so would expulsion from the EEC. The arguments made by the hon. Member for Hamilton are wrong, and I hope that he will desist from making them again until such time as he has researched the subject more thoroughly and is informed of the legal principles which obtain in international law.

The White Paper also raises the question of representation on the Council of Ministers. Annex A on pages 36 to 39 of the White Paper presents a list of the 56 meetings held in the six months between January and June 1988. On only one occasion, on 29 February 1988, did a representative of the Scottish Office attend when Lord Sanderson of Bowden played second fiddle to the Minister of Agriculture, Fisheries and Food. Right hon. and hon. Members may ask why Scotland seeks separate representation and requests that Scottish Ministers attend the Council of Ministers. I remind the House that Scotland has a separate legal system, which means that the implications of some directives must be treated differently.

Scotland also has a different education system. Mention has been made of the interchangeability of professional qualifications, so that lawyers and vets can already work anywhere in the European Community without obtaining additional qualifications. Soon teachers will be able to do the same. Because Scotland has a different education system, and a different way of registering teachers— through the General Teaching Council for Scotland—it needs separate representation when such matters are discussed.

Scotland's fishing industry represents 60 per cent. of the Community's fisheries. That industry is vital to Scotland. Many jobs all around our coast depend on fishing. Despite that, in a six-month period on only one occasion did anyone try to represent Scotland's interests at the Council of Ministers. I understand that the position has not improved and that Scotland now faces massive cuts in its haddock and whiting quotas.

With regard to agriculture, Scotland's crofting communities are very different from those of other agricultural areas—with different traditions, different attitudes, different crops and a different way of life. A great deal of the marginal farmland in the United Kingdom lies within Scotland, and there should be representation for that.

Transport has also been mentioned. The whisky industry merits special representation because, while we may not be unique in the European Community in producing whisky, we are certainly the major producer and it is vitally important that those interests be looked after.

It is not appropriate that Scotland should continue to be deprived of full representation in the Council of Ministers. Such representation can be achieved only through full self-government for the people of Scotland. That is something that they have the right to choose or to reject by democratic process. It is my firm belief that words such as those that we have heard from the Opposition Front Bench today are intended to demean the aspirations of the Scottish people. Perhaps we should remind ourselves that after the 1983 election the hon. Member for Clackmannan (Mr. O'Neill) said that we needed to play down the aspirations of the people of Scotland. It is certainly not my intention to play down the aspirations of the people of Scotland. I see an interesting future for them within the European Community.

I do not think that the Community is perfect—many of us are only too well aware of the problems that exist and of the difficulties that have to be overcome—but the members of any organisation have to go forward in trust, with self-respect and mutual respect. That is how l should like to see Scotland participating in the Community, and I hope that the day will come sooner rather than later.

8. 2 pm

Mr. Bowen Wells (Hertford and Stortford)

May I start with a quotation: Our future must lie in willing and active co-operation between independent sovereign Governments, each answering to their national parliaments. I emphasise the words each answering to their national parliaments". That statement was part of a speech made by my right hon.

Friend the Prime Minister at Bruges.

It is the implications of answering to their national Parliaments that I should like to go through with he House tonight. In case, Madam Deputy Speaker, you should think that I am not speaking to the White Paper that is under discussion, may I say that the principal reason is set out in paragraph 1.4 of that document: The European Council met again in Hanover on 27–28 June, when it reached agreement on priorities for the next phase of work on the single market—the opening up of public purchasing, the further liberalisation of banking and other financial services, the achievement of common standards for manufactured products, and the registration of intellectual property, (patents/trade marks) throughout the Community. The Council also decided to establish a committee of central bank governors and others to study and propose practical steps towards the progressive realisation of economic and monetary union. Included in those things that the central banks are considering are a common currency and a central bank. I have not heard in this Chamber any discussion about any of those essential matters since that statement was made a year ago.

Are not you, Madam Deputy Speaker, like me, humiliated by the fact that those matters have not been discussed in this Chamber? Is it not time we began to discuss them seriously and properly, particularly when we have been advised by those who know—the lawyers—that under article 100A, by majority vote, European competence can be extended, without further treaty obligations, without any further treaty signatures, into all areas of our life? We have been told that it can be extended to all areas of decision-making in this country, including education, health, welfare and other such matters.

I think we have to find out how we should be trying to influence those decisions. If my hon. Friend the Member for Southend, East (Mr. Taylor) and the right hon. Member for Chesterfield (Mr. Benn) are right, this Chamber has no further part to play in them. I do not believe that to be true, nor that it should be the case. I believe that we can influence decisions if we bother to understand this decision-making process within Europe. We need, therefore, to locate where the decisions are made. We need to find out how policy is arrived at and attempt to influence it.

Under the procedures in this House, in the European Legislation Committee and in the Standing Committees whose purpose is to consider various parts of European legislation we are failing in our duty to do that. I realise that many hon. Members know the European decision-making process—particularly those taking part in this debate—but I should like to examine it very quickly. Our former Commissioner, Mr. Stanley Clinton Davis, appeared at the European Legislation Committee the other day. He said that the ignorance of the procedures and of the way in which Europe works that was displayed by a Select Committee of this House, at which he had given evidence, was mind-boggling.

Mr. Foulkes

The hon. Member is talking about this House influencing decisions made by the Community—the Commission and the Council of Ministers. Will he address his mind also to the question of this House influencing decisions that are the prerogative of this Parliament? Does he really believe that decisions are made by this House? Does he not accept that, increasingly, they are made by the Executive, particularly by one person in that Executive? Is it not a fact that this House is becoming a mere rubber-stamp for domestic decisions that are not influenced in any way by the European Community?

Mr. Wells

If the hon. Member truly believed that, he would not have bothered to stand for election as the representative of his constituency. I do not think that any of us believe that what he has said is true. By very hard work and by locating the places of influence in the Executive, Members can make an impact. This House is sovereign and Ministers have to answer to it.

That provides the link to what I wanted to say about the way in which Ministers have to be influenced when they are taking decisions on our behalf or trying to influence the Council of Ministers in Europe—and it is the Council of Ministers that takes the final decisions. At present, Ministers are not made to be accountable to this House before or after making their decisions. Indeed, outside the Council of Ministers we have the European Council, made up of the Heads of Government. We do not even get the dates of meetings in advance. So far as I know, the agenda is not made known to this House. Enormously important decisions are taken.

The decision on the Single European Act was never discussed before the Prime Minister agreed to introduce it in this House. It was then gone through in a poorly attended debate, and we agreed, amongst other things, to the famous article 100A, which extends, or could extend, European competence into many areas of our domestic legislation.

Mr. Foulkes

Will the hon. Gentleman be fair and admit that he does not see the agenda of the Cabinet, or Cabinet Committees, on domestic matters? He probably does not even know what Cabinet Committees exist: we are not allowed to know. Even when Ministers come to the Dispatch Box and purport to be accountable to the House, there is still a lot to be desired in terms of real accountability. I am not saying that the hon. Gentleman has not got a very good argument, but does not some of it apply as much to domestic decisions and legislation as to European decisions and legislation?

Mr. Wells

Like the hon. Gentleman, I am a parliamentarian, and Parliament vies constantly with the Executive for power. If the hon. Gentleman is asking me to agree that the Executive has too much power and is not sufficiently accountable to Parliament, I entirely agree, and we may join together as parliamentary companions. But we as a Parliament are sovereign, and it is our fault if we do not make our Executive more accountable to us. That is our job. The Chamber has that power domestically, but we do not have it in Europe, which is what many hon. Members have been complaining about. It is not possible to have such power in an international organisation, but we must seek to influence it none the less.

First, let us consider how we can ensure that proper account is taken of British interests before decisions are made and brought to the Council of Ministers. We must also make certain that our Ministers know what our Parliament thinks and what it wants them to do when they make decisions at the European Council. At present this Parliament receives no documents or intimations about what is to take place until a document is issued by the European Commission, and that happens after a common position has been established—a political agreement between member states.

That document then goes to the Council of Ministers and gives rise to an explanatory memorandum to the Select Committee on European Legislation, chaired so fairly and well by the hon. Member for Newham, South (Mr. Spearing). That is the first time that we see the document, and it is not the time at which we can exert our influence. Although, as the hon. Member for Newham, South pointed out to the hon. Member for Moray (Mrs. Ewing), the documents are issued with excellent explanatory memoranda, they often reach us after the adoption of the instrument concerned, and certainly after policy has been agreed in Europe. Thus anything that we say in debate, at however late an hour, will not influence the actual decision.

Mr. Spearing

The hon. Gentleman has illustrated something of the overall problem. Does he not agree, however, that although on occasion—alas—we see documents after the decision has been made, fortunately the majority of documents and explanatory memoranda come before our eyes before the establishment of a common position and the Council's decision, when it need not go to the Parliament? I admit that the position is not perfect.

Mr. Wells

I am grateful for that correction. The hon. Gentleman is absolutely right, and I was about to add that the vast majority of documents come before our Committee before decisions have been adopted and are debated in the House before the Minister has made his decision.

The hon. Gentleman should recognise, however, that there has been an acceleration in the number of documents, and also in the number that have been adopted without being considered by the House. Let me give him the figures. In the 1987–88 Session, 24 documents of political and legal importance which the Committee recommended for debate in the House were adopted before the House ever saw them, while 100 documents not of political and legal importance were adopted in the same circumstances.

Mr. Cash

Does my hon. Friend agree that that is where one of the greatest problems lies? The documents that it is claimed should be adopted before we have an opportunity to see them are the very documents that are agreed because they are considered important. The position is the reverse of what it should be: in a sense, the more urgent the document, the greater the reason for this Parliament to know something about it.

Mr. Wells

I could not agree more. We must consider a different method, particularly as we approach 1992. According to the most recent assessment, we must agree 279 measures of major importance—not in 1992; they must implemented before that. If we do not alter our procedures, the House will consider those measures in the defective way in which, as I have illustrated, we consider such measures now.

Several suggestions have been made about what we should do. My hon. Friend the Member for Stafford (Mr. Cash) has written an excellent article in The Times, and no doubt hon. Members have seen another excellent article—also in The Times—by the former Leader of the House, my right hon. Friend the Member for Shropshire, North (Mr. Biffen). I am sure that my right hon. Friend would give credit to the European Legislation Committee's second report of the 1986–87 Session, in which we suggested that the Committee's powers should be extended, but I feel that we should go even further.

We must ask where are the decisions made? How are we to influence the Commission? The Commission is at present discussing questions such as a unitary monetary union, a universal unit of account and a central bank, and Ministers are well aware that they are being discussed, but we have no document on which to consider such matters. Surely it is not beyond the capabilities of a Minister and his civil servants to present such a document to the European Legislation Committee, telling us that, say, a central bank is being considered and listing the arguments and the options being canvassed. It could be presented to another Committee, of course: there are other ways of doing this.

The Committee would immediately recognise the document as a matter of considerable policy importance, and would, perhaps, take evidence on it before issuing its report to the House. The European Legislation Committee is the only Select Committee in our lexicon, apart from the Public Accounts Committee, with the power to recommend debate, and its recommendations are then fulfilled. These important policy matters could therefore be considered on the Floor of the House, and the Minister would then know what Parliament was thinking.

That would be at an early stage. We could influence policy at another stage. When the documents have been formulated by the Commission they go to the European Parliament, whose Members could then amend them in the light of debates proceeding both inside and outside Parliament—for it is through this House that, traditionally, those outside have been alerted to this type of discussion.

Hon. Members know perfectly well that if they want to influence a Civil Service decision—a law—they do not influence its formation and what is in it simply in debate in the House; they make certain that they ask the Minister what is happening, they ask to see the civil servants and they put in letters and representations. Such representations often result in a change in the law. In exactly the same way, that is how we should be operating in Europe. My first suggestion is that we try to influence and have debates on policy issues. I suggest that if we had debates on such specific issues the House would be full. Many hon. Members would want to discuss whether we should have, for example, a central bank because that raises many policy implications and problems which people would want to discuss and which would result in lively debate.

There are other matters that the House must consider and I refer briefly to them. Policy issues are considered by the European Council. I believe, again, that the Cabinet Office must bring those matters to the attention of the House before my right hon. Friend the Prime Minister and her senior Ministers go to European Councils and that debates should be held. Holding a debate before every European Council meeting would mean holding debates twice a year. Those debates would be much better attended than debates on documents that are a year old, as is the case with our debate now. The present procedure, therefore, of having two debates a year on year-old documents would be superseded by debates on immediate issues on which we would have the power to influence and act. That is my second suggested reform.

Thirdly, we must reform the European Legislation Committee and also think about how we deal properly with lesser documents. At present, we recommend that they are debated in Standing Committee. We know what that means. It means that a group of hon. Members, who may have a lot to do but who, by chance, are not on a Committee at the particular time when the Selection Committee sits, are drawn together and told that they must consider a legislative question at 11 o'clock one morning. They are given about five days' notice of the meeting. They may have no competence, no interest and no knowledge of the document and we know that those debates take the form of a ministerial statement and some replies by the Opposition spokesmen, and then a desultory debate, which the Whip wants to get finished as quickly as possible because he has other things to do. He shuts up Government Members and there are few contributions from Opposition Members. That is the completion of debate in the House of Commons.

Sir Richard Body

I agree with what my hon. Friend says, but would he not agree that our existing departmental Select Committees have the power to do much of that, if not all? They are in a position to go to Brussels to find out what the Commission may have in mind, they have a unique relationship with the Minister and, as we know, the power to call for persons and papers, so they could, therefore, exercise the role that my hon. Friend has described.

Mr. Wells

Yes, that is one of the ways in which we might attempt to deal with the flood of European legislation more effectively. There should be no arguments on turf on this matter. There is so much legislation coming through that all the departmental Select Committees could play that role. They could play it now, but they have not chosen to do so. However, it is conceivable that they may agree to take on some of the European legislative load and that they could act sufficiently quickly to take evidence. One would, therefore, have an all-party group that would have some competence and knowledge of the subject matter under discussion and that would be able to advise the House more closely and better than we can at present.

However, at present the Select Committees—and this is one of the defects—do not have the power of the European Legislation Committee to recommend debate. I am a member of the Select Committee on Foreign Affairs and we have often recommended a debate after our reports, over which we have laboured long and hard, but rarely has the House debated them. So we would have to change either our modus operandi or, alternatively, we might have to alter the Standing Orders of the House. However, that is certainly an alternative.

Another alternative is to have Standing Committees in the true sense, in that we would have Committees of people who had some competence and interest in trade and industry or agriculture and who would agree to sit to debate the documents, possibly joining some members of the European Legislation Committee. The European Legislation Committee can form an infinite number of Sub-Committees under its present constitution. It can call for Members of Parliament to join these Sub-Committees which can travel and take evidence and have all the powers of a Select Committee. They can then recommend, through the main Committee, that the matter be debated and give the arguments for and against.

If we took that course, the European Legislation Committee would have to be greatly expanded. At present, it has only 16 members and, although larger than most of the departmental Committees, that number is insufficient to deal with the vast flood of European legislation in the way that we would expect. If it did, the 16 members would be in permanent session and could do nothing else in the House, which would be wrong to ask of hon. Members. It would, therefore, have to expand considerably.

We must consider urgently the way in which we conduct ourselves on European legislation. We need to take a decision now. To summarise, we need to debate matters at an earlier stage, before the Commission has made its proposals to the European Parliament. We need to see the European Parliament regularly. I am glad that the House has agreed that Members of the European Parliament may have passes and come here, but we must now extend that and see them on a regular, formal basis to concert our action on European legislation. We must ensure that all debates take place in good time on the basis of reports issued as a result of interviewing Ministers and other people when the legislation is being formed—and certainly before it comes to the Council of Ministers—so that no Minister can go to the Council of Ministers without knowing what Parliament thinks. We must reform our own European Legislation Committee and, possibly, our other Select Committee, to ensure that they can deal with legislation in the traditional sense and also with the European Council and other more general matters under consideration. I hope that the House will make this decision soon and quickly so that we can, once more, hold up our heads with pride, knowing that we are dealing properly with Europe, that we are influencing it properly and that we are getting the right decisions for Europe as well as for Britain.

Several Hon. Members


Madam Deputy Speaker (Miss Betty Boothroyd)

There is still a number of hon. Members who want to get into the debate. I would like to be able to call them all, so may I ask for brevity of speech in the last few minutes.

8. 28 pm

Mr. Nigel Spearing (Newham, South)

I shall endeavour to comply with your request, Madam Deputy Speaker, but these matters are not as simple as some of the matters that we address in our own legislation.

I must say how pleased I am to follow the hon. Member for Hertford and Stortford (Mr. Wells). I agree with much of what he said, but I commend to him the fact that Standing Committees, provided they are properly chosen and that hon. Members have sufficient notice, can sometimes be very effective in debates because they have two and a half hours of debate rather than the one and a half hours after 10 pm that we often have here.

I think that his idea of a debate two days before Council meetings is a good one, but I do not agree about the effectiveness of all the hon. Member's remedies, welcome though they are. I disagree with one particular and important reason which he and other hon. Members, I believe, have not yet grasped. The reason is that, however effective the scrutiny and however long and effective the debates, they are constitutionally only advisory. Ministers can hear the debate, but can then go to the Council of Ministers and do what they please at their own peril—to use the ancient phrase. That is not good enough. It creates a democratic deficit, which I shall discuss in a few moments.

I want to refer briefly to paragraph 3.5 of the White Paper, Cm 467, which is the topic of our debate. It deals with the elimination levy for sugar, introduced in the last six-month period. Since then, events have moved on and we heard last week that there is a proposal for a 5 per cent. cut in sugar prices this year.

This matter is important, for two reasons. First, such a cut may not be very helpful to our own producers. Secondly, and more important, it runs counter to the resolution passed by this House on 11 November 1974, when we refused an EEC regulation on sugar because it did not take into account sufficiently—if it took them into account at all—the needs of our Caribbean and Commonwealth partners, now called the ACP, or the interests of cane refining in Britain, then based in London, Liverpool and Greenock. I do not believe that the present proposals take those matters into account either. Instead, they reduce the sums available to our ACP partners by up to £23 million a year. That may not seem much to some hon. Members, but in Third world terms it is a very substantial amount.

The Mauritius representative, Mr. Paul Eynaud, said yesterday: The purpose of the sugar protocol is to provide a permanent and reliable trade instrument between 12 industrialised countries and 15 developing countries. The introduction by the Commission of a policy of price reductions would defeat the purpose. Moreover the Commission have themselves recognised by their acknowledgement that compensation would be necessary, that the price reductions under consideration would cause undue hardship to the ACP. It is not merely a question of compensation. How can mere handouts of money compensate people for loss of occupation or the loss of the industrial independence that the export of their raw materials affords them?

The evidence that the Minister of Agriculture, Fisheries and Food gave the Select Committee this afternoon suggests that he has taken that on board, but it is to the discredit of the Commission that it has produced a proposal without sufficient field work in the Third world. It is reneging on the moral responsibility of the Common Market, which it has espoused through the convention of Lomé and its sugar protocol. It was a bad day when the present proposal was made, and I hope that it will be stopped.

I turn hastily to the whole question of scrutiny and the democratic deficit. The House seems to forget that scrutiny is not enough. Scrutiny is important, and the shortening time scale that we have makes it much more difficult than it was, as the hon. Member for Hertford and Stortford explained. But there is a great deal more to it than that.

I have one suggestion that might improve the scrutiny process. The excellent—and sometimes not so excellent—explanatory memorandum produced and signed by Ministers and available in the Vote Office in typescript form could be published weekly and printed. Why should they not? They are proposals for legislation. They are, in effect, super-White Papers that express the intention of the Commission and the Government's reaction to what will, in many cases, become legislation. If they were issued weekly and printed, not only Parliament but the nation would be the gainers.

We have changed gear since the passing of the Single European Act, which amends the treaty of Rome. In particular, as the hon. Member for Hertford and Stortford pointed out, that Act creates a much wider area of competence. The consequence of the combination of new article 8A and new article 100A, which provides for majority voting, is as yet undefined. Not long ago I tabled a question asking which areas of legislation were not open to the competence of the Community under article 100A. As I recall, the answer given by the Attorney-General was "family and criminal law". There may be others, but I shall not consider this theme further because the Select Committee is at the moment examining the very question of the treaty base.

When hon. Members—including some Conservative Members, who are now calling for greater scrutiny—voted for the Single European Act in 1986, they did not know what the implications were. I am sorry that the Minister of State is not with us; she has been here for much of the time and no doubt she will return. It was her signature that appeared on the Single European Act. It was unfair of the Government to ask her to sign the document when she was not even a Privy Councillor, so that if something went wrong they could blame her. Either the Foreign Office did not know what it was signing or it did not say. It must be one way or the other. I have said that before, and have not been contradicted on it.

Mr. Wells

The hon. Gentleman also contributed to the third report on the Single European Act of the Select Committee on Foreign Affairs. That report made available to the House the sort of information to which he refers, but I do not think that articles 8A and 100A were dealt with.

Mr. Spearing

The hon. Gentleman will recall that that report emerged only after the Second Reading of the Bill, and a week or even less before the commencement of the Committee stage. The Select Committee's conclusions hinted that there was a purpose behind the Act which it could not fathom—a thought that some people dared not express. I leave that thought with the hon. Gentleman.

Bearing in mind what you said, Madame Deputy Speaker, I shall hasten on. The Act has created what might be called the "Bruges phenomenon". There has been much talk of the Bruges group and what the Prime Minister said in a famous speech in that ancient and lovely city.

I am rather surprised that the Prime Minister, as a lawyer, should have got her constitutional wires twisted. Understandably, she is against federalism; so are a lot of hon. Members on both sides of the House. She is also against the bureaucracy of the Commission. There is one important point that she has failed to apprehend, and which the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) did not recognise in his speech—that the European Economic Comunity is a new political and constitutional animal. It is unique. It takes power in a federal manner, as we vote power away. but it exercises power in a unitary manner.

I know of nothing in the treaty of Rome that gives power to the House. It refers only in code to the respective constitutional processes. That is all there is, so we are not talking about a federation. The Prime Minister is wrong to think that there is a threat of a united states of Europe. There is no provision in the treaty of Rome for progress towards that, but there is plenty of provision for the creation of what is, in effect, a unitary state of Europe. Economic and monetary union is referred to in the preface to the treaty. The idea of a two-way constitution is so novel that some people have not grasped the reality, although it is there for all to see.

There has been much talk today about the Commission. Only yesterday, the Select Committee received evidence from former Commissioner Clinton Davis, who said, "We go around listening to what people have to say. We listen to the Governments of member states, to pan-European consumer and industrial interests and to people in the 12 member states. Then we write the proposal." Every proposal for legislation must come by, with or from the Commission; I cannot remember whether it is couched in the dative or the ablative. Legislation must come through that gateway and through that gateway alone. We in this House and the Prime Minister herself are but petitioners in respect of the powers of the Commission.

In historic constitutional terms, we are in the same position as those who send us here with petitions to place in the bag behind the Chair. That is what the constitution and the law are. We start with a request. We in Britain, even the Government, make requests to the Commission and the Commission disposes of them by producing the documents of the kind to which the hon. Member for Hertford and Stortford referred. It has wide discretion collectively if all Ministers get together in a collegiate college. It is that and only that that the Council of Ministers can consider.

Strictly speaking, the Council of Ministers cannot amend what it produces. It can send a document back and then produce another one, perhaps instantaneously or perhaps after three months. Any Minister in the Council of Ministers can do less than any hon. Member can in respect of our legislation. Ask George Cunningham—one man, one amendment: "delete 30, insert 40". No one can do that in respect of anything placed before the Council of Ministers.

Mr. Foulkes

A majority can.

Mr. Spearing

My hon. Friend says that a majority can, but there is no opportunity for that in this House.

I shall now describe what I understand the Minister must do. First, the Council of Ministers is a revolving body. The Minister has other responsibilities. I recall the great television commercial which some hon. Members will have seen. The Minister is coming over on the morning flight from London. He has had an Adjournment debate the night before. He has been in front of the Prime Minister that afternoon. The chairman of his constituency party has been on the phone. He has had a deputation of doctors and nurses. His sister-in-law tells me that his wife says that he is not spending enough time with his children and family. Then he gets there. He is briefed by COREPER on a whole series of negotiations which have probably been going on for weeks or months beforehand. Great detail is entered into. He has to go into a great big room, with a group of people behind him suggesting what he might do. Perhaps he will stay there over cups of coffee through the night. He comes away the next day to pick up his red case in Whitehall.

I have never been a Minister, but I have been in the Charlemagne building and spoken to people who have been. I ask my right hon. Friend the Member for Chesterfield (Mr. Benn) to tell the House whether what I have said is an exaggeration or something near the truth.

Mr. Benn

My hon. Friend has it about right. The brief for Ministers going to Europe is a brief imposed by Departments here, but when one gets to Europe one finds that it has all been stitched up by package deals which have nothing to do with the subject one is discussing. The COREPER will have negotiated a deal with the Commission. I was President of the Council of Ministers for six months and it was the only committee upon which I sat where I was constitutionally unable even to submit a document, because the role of Ministers is like that of a collective sovereign body which, like the Crown, can say, "La Reyne le veult" or, "La Reyne s'avisera". One can say yes or no to what the Commission proposes, but one cannot change its proposals, or submit a paper. Negotiations are conducted on a multiple packaging basis which have practically nothing to do with the House of Commons, and the House has no role to play.

Mr. Spearing

I am grateful to my right hon. Friend for confirming my suspicions. It is not just the House of Commons, but, from what my right hon. Friend has said, the Minister does not appear to be able to do very much, especially when, as we all know, it is package bargaining across the political scene or, perhaps, across part of it.

Mr. Foulkes

There is in the Cabinet.

Mr. Spearing

Yes, there is in the Cabinet, but the Cabinet can come to this House and what it proposes can be voted out—for example, Sunday trading. Nothing need be produced by the Government which they think does not stand a chance of getting through. Very rarely does it not get through, because no sensible Cabinet would bring to the House something that it did not think would get through.

Sir Russell Johnston

Sunday trading is a terribly bad example of normally non-governmental business. If the hon. Gentleman is complaining that the Commission has these powers, yet, as he agreed, it consults everyone in sight, why does he find it offensive that within the domestic situation we have a highly centralised Government who by and large do not consult?

Mr. Spearing

I am confining my remarks to the powers of the House because the powers of the House cannot even control the Minister, when he goes—my right hon. Friend was, untypically, wrong when he mentioned Europe—to the European Economic Community. If it wishes, the House has some control over the Executive in Whitehall. At the moment it has no control even over the Minister who goes there as a representative. There is not a connection on the Floor of this House and, therefore, the Minister is footloose in Brussels. The House cannot control him unless it chooses, as it could do, to take power over certain decisions. I am not saying all decisions nor am I advocating a Danish system, but it has certain power over what the Minister does in Brussels on any specific proposal for legislation. So far, the House has not chosen to take those powers. I believe that it could take them within the treaty of Rome as at present constituted.

There is a lot of talk about the democratic deficit. I believe that nowhere is that democratic deficit more apparent than across the Chamber of this House. Indeed, that deficit can be said to be 301 years old this month. The House must address itself to the means by which, even within the terms of the present treaty of Rome—or as it can be changed—that deficit can be reduced or perhaps eliminated altogether. It is on the degree to which the Government now press towards that mark that the public will judge them and this House.

8. 47 pm

Sir Anthony Meyer (Clwyd, North-West)

Much of the debate has revolved around the Prime Minister's Bruges speech although, strictly speaking, it did not fall within the period that we are considering. That speech is sometimes presented as the great anti-European cry, but of course it was nothing of the kind, as this passage shows: Britain does not dream of some cosy isolated existence on the fringe of the European Community. Our destiny is in Europe, as part of the Community. None the less, there is no mistaking the tone of assertive nationalism in the speech—the determination to arrest and, indeed, to reverse the process of increasing the power and authority of the central institutions of the Community.

There is some confusion of thought, at any rate in the commentaries surrounding that speech. It is not necessarily true that a centralised Europe would be a Socialist Europe. The original Community of six, which had very strong centralised institutions—that was in the days before the Luxembourg compromise—was firmly free market in its philosophy. That was one of the reasons why the Labour party was so hesitant about it. It is possible to be a supporter of strong central institutions and of a leading role for the Commission but at the same time to argue strongly against the encroachment of Socialist ideas.

There is no doubt that in asserting the right of the British to stay British the Prime Minister touched a deep chord in every heart. The point which should concern us is whether the true Britishness of the British people can best be preserved by a doctrinaire refusal to yield one inch to the central institutions of the Community. Sovereignty is a priceless possession but national sovereignty is not inviolable, and…may be resolutely diminished for the sake of all the men in all the lands finding their way home together."—[Official Report, 27 June 1950; Vol. 476, c. 2159.] As the House will have guessed, those are not my words, but the words of Winston Churchill speaking in this House—very aptly for our present debates—on the subject of Britain's failure, under a Labour Government, to join the European Coal and Steel Community. For the European Coal and Steel Community, hon. Members should read in 1989 the European monetary system—or rather the exchange rate mechanism.

The issue then was exactly the same issue as today. Because we refused to accept any limitations on our sovereignty, we were unable to join the Coal and Steel Community. That Community came into existence without us and despite us. That led inexorably onwards to the creation of the European Economic Community, which we likewise refused to join—this time under a Conservative Government, but not Churchill's. The end result in the 1970s was that we eventually joined all the Communities, but on terms which infringed our national sovereignty more extensively than if we had joined back in 1950 and had been able to shape the rules. What is more, the reason why we decided to join in the end was that the power and influence being exerted by the European Community was increasingly affecting our freedom of action and limiting our real if not our theoretical sovereignty.

We run exactly the same risk today—of finding ourselves excluded from the increasingly close and effective co-operation upon which most of the other EEC members are now embarked. We can stand on our veto and block many European Community projects that are unwelcome to us—such as worker participation on boards of directors—but any other country can block measures or changes that we badly need, at any rate in areas where the veto still applies.

The situation is not exactly as I have described. In signing the Single European Act we have drastically limited our sovereignty. For all practical purposes we are already in a quasi-federal—I apologise for that word—situation. That being so, is it wise to talk so stridently about resisting encroachments on our national sovereignty? Would it not be more effective and more in accordance with our national talent to seek to use the instruments at hand as effectively as possible to achieve our ends? And what, indeed, are those ends? That brings me to the passage in the Bruges speech which I most warmly welcome. My right hon. Friend the Prime Minister said: I want to see us work more closely on the things we can do better together than alone. I cannot think of a better definition of the proper aims of the European Community. By that definition, some of the Community's present activity is misdirected and, by definition, much of the strategy and most of the tactics of the British Government in their European policies are likewise misdirected.

To refer to the Community's shortcomings, the most obvious one is the ludicrous overemphasis on the common agricultural policy. Endless regulations and directives pour out of Brussels and offer an easy target for jibes about bureaucracy run riot, but none of those jibes is well directed—unless it be about the failure of the House to devise effective methods of scrutinising such directives. Almost all of them are designed to produce the level playing field that the Government are always going on about.

The main area in which the Community's efforts are misdirected is that in which its activities are almost universally applauded—the regional development fund, which has been seen by the Prime Minister as the most effective way of getting our money back. It is true that we get money back under it, and I should make it plain that I am a strong supporter of regional policy. If it is right for the British Government to use taxpayers' money to promote development in outlying or less prosperous parts of the country, it is equally right for the Community to use Community resources to assist: development in such areas.

I rejoice in the fact that, under the leadership of my right hon. Friend the Secretary of State, Wales has been notably successful in attracting EC support for development. I also rejoice in the fact that Miss Brookes, the energetic north Wales Member of the European Parliament, has had striking success in attracting European funds to ther own Euro-constituency. She can and does fairly argue that no other Member of the European Parliament, and certainly no other Member from any other party, could possibly hope for equal success in attracting European Community support. But what is good for north Wales, as undoubtedly it is, may not be the best thing for the country or the Community as a whole. Is it right that it should be left to the EC in Brussels to decide which of two local bypasses, factories or rural development schemes should have EEC backing? Is there not scope for the use of Community funds for the promotion of one party rather than another, or one candidate rather than another? How does such a use of Community funds square with the Prime Minster's admirable dictum that Europe should work more closely on things that we can do better together than alone?

In what ways do we do things better together than alone? There are two. The first is when the countries of the EEC act together as one in their relations with the outside world. No case is more conspicuous than their response to the ayatollah's threats. It may have looked easy to get agreement, but the different reaction of the New Zealand Government shows how easily commercial considerations can work against unity of purpose. The other important matter is scientific or research projects or industrial enterprises that are too large to be commercially viable on a purely national scale. This is a huge subject and it justifies an entire debate.

The Government have put all their efforts into advancing towards the single open market, but even on that, their chosen ground, their record is mixed. They seem to think that they can get everything that they want in free movement of capital, removal of restrictions, and so on, without making any concessions on matters such as open frontiers or some approximation of indirect taxes. They cannot expect to be believed when they say that widely different rates of VAT constitute no distortion of trade, that there is no advantage to free movement of goods in the removal of frontier controls or Customs examinations at frontiers, or that there is never a right moment to join the exchange rate mechanism.

In scientific research, in which co-operation on a larger than national scale is indispensable, to say the least, the Government's record is mixed to say the least. With bad grace, we have decided to stay in the CERN project, but our record in the European Space Agency is so abysmal that we are losing more and more key posts that we originally had in the agency. I know that it is not an EEC operation, but it is a European operation and the EEC plays a dominating role. We are getting a reputation throughout Europe of being uninterested in European scientific co-operation.

What worries me even more is the consequence of the Government's refusal to admit that they have such a thing as an industrial strategy. The entirely predictable consequence, particularly when combined with a rigidly non-interventionist approach, goes hand in hand with a financial climate which positively encourages massive takeovers motivated by accountancy considerations rather than industrial logic. More and more of British and European industry passes out of Europe's control. In the end, we land up with multinational corporations which go some way to fulfilling the Prime Minister's condition—that we should do together the things that we can do best together. We Europeans are no longer doing the things that we can do best together—others are doing it. God forbid that we Europeans should build high walls around our industry, services or technology. There is a case for a European car industry, aircraft industry and electronics industry, but there appears to be no one—except possibly my right hon. Friend the Member for Henley (Mr. Heseltine)—to make that case.

8. 56 pm

Mr. William Cash (Stafford)

It is not possible to deal with this subject in a few minutes, when so many other hon. Members wish to speak, so I shall come straight to the point. We are already moving hard and fast towards a federal system. We have moved so far down that line by our debate about scrutiny and the activities of the European Scrutiny Committee that it is only by using the procedures that are available to us that we will be able to contain the thrust towards a federal system. The other day, an article in The Times, quoting an MEP, stated that there is no such thing as British sovereignty any more, only a myth that Mrs. Thatcher puts out when she wants to make a dramatic speech. That is the type of thing that we have to put up with. I shall soon be glad to have the opportunity to reply in the columns of The Times.

At the heart of the federal matter, there are questions relating not only to our economy and self-regulation but to matters that are intimately connected with those questions—foreign policy and defence. For example, I must raise the question of the reunification of Germany because that sort of question is at the heart of any study of the relations of the European Community with the USSR. In other words, at the same time as centrifugal activities are appearing within the USSR, with greater independence in Lithuania, Estonia and Latvia, in the United States there are increasing doubts about the extent to which they are tied in by legal order, with a ring fence around them, which prevents them from exercising certain options as they wish. We are now moving into a similar position. I argue that we must resist the federalism for the simple reason that it will close our options and contain us within more legal order when the other great power blocs in the world are moving in exactly the opposite way.

We must also remember that there are some disturbing signs in West Germany. I hope and believe that we shall continue on the best possible terms with them. But there is, for example, the sudden re-emergence of a tendency that is expressed in the significant number of seats recently won by the republicans in Berlin. Admiral Schaling was recently dismissed from his important position in charge of a military think tank because he called for the withdrawal of western troops from German soil. I do not have time now to go into all these questions in detail, but we must pay attention to them.

At the same time we must realise that the Japanese power bloc is moving towards another centre of gravity with the United States. The other day Prime Minister Takeshita said that Japan must assume a major share of responsibility for managing the world economy. We know the extent to which they are invading the American economy. There are now fears of a fortress Europe. Centrism is creating, as well as reacting to, concern throughout the world. The fact that we tend to concentrate this power rather than retain it on a mutual basis within sovereign States creates and even exacerbates these problems.

It is certainly possible to argue that all we are doing is reacting to what is going on in the rest of the world, especially when we are dealing with a contracting global village. But if we over-react to it by setting up a fortress Europe, diminishing free trade and opting for protectionism in military or economic spheres, it is a snare and an illusion to imagine that we shall do other than make the position worse.

Therefore, although I should like to have discussed many other matters relating to the economy, I simply make the point that we must beware of a federal Europe. It takes power from the House of Commons. That effect has been examined by other hon. Members this evening. It also implies danger for our foreign policy and the defence of the nation.

9. 2 pm

Mr. Quentin Davies (Stamford and Spalding)

One of the most intriguing and potentially momentous developments in the European Community at the present time is the consideration currently being given to making progress towards European monetary integration. Last year the Government together with our Community partners set up the Delors committee. When that committee's report has been published and digested, one of three possible situations will arise. First, it may be concluded that a common currency is not technically feasible or is undesirable and the notion will be laid aside for the time being, or indefinitely. Secondly, it may be decided collectively that we should proceed towards the creation and introduction of a common currency in the Community. Thirdly, a majority of our partners may decide to move in that direction and we shall have the choice of joining them or remaining on the sidelines. However, in that event, so long as the Community remains our major trading partner, in practice we would need to align sterling increasingly with that new common European currency.

In the light of the important decisions that must be made, it might be useful to take this opportunity to air some of the arguments on either side. I thought I might do that most conveniently by examining the position in turn from the viewpoint of each of the fundamental categories of economic agent: the Government; the personal or household sector; and the corporate sector.

From the point of view of the Government, the creation of a common currency would remove at the same time both the opportunity and the necessity for the Government to combine monetary with fiscal and other forms of economic management. Whether that would be good or had would presumably depend on one's judgment of whether the opportunity was more valuable or the necessity more burdensome in our present situation.

Let me set out briefly some of the benefits and costs associated with that opportunity and that necessity. The freedom that we have to manage our monetary affairs has been regarded differently depending on which side of the House one sits. Conservative Members have always regarded the prime task of monetary policy as being to ensure that we maintain the value of the currency and all the confidence for our economic system and industrial activity that go with it.

The Labour party, on the other hand, has traditionally set a great deal of store by its ability to manage the currency because that has enabled it to devalue it and thereby to pursue a policy throughout the 1960s and 1970s when it was in power which has the effect of nurturing the relative decline of our competitiveness and productivity. Under the slogan of monetary adjustment we were insulating ourselves from the competitive pressures of the wider world. Moreover, inflation flowing from lax monetary management was the only means by which the then Labour Government could see some ultimate way of amortising over time the enormous national debt that was being accumulated by their irresponsible fiscal management.

But I take it for granted that Conservative Members would not accept any new successor form of monetary policy, or a common currency on a community basis, unless we could be assured of at least the same degree of monetary rigour being adopted as we have at the present time, and at least the same confidence that we would preserve the value of that new common currency in the future.

What about the costs on Governments of the present system of separate currencies? We know those costs all too well from our experience of the currency difficulties and the crises over the past 40 years. Although we have not had crises in the past few years, we continually have uncertainties and difficulties on the foreign exchange markets.

Those costs are of two kinds. They are of the longer term and of the shorter term kind. The longer term costs arise when it is considered that, for example, sterling is appreciating too much and so it is necessary to adopt a laxer monetary policy and to run the economy at a higher level of demand, although that carries with it the terrible danger of inflation increasing in the medium term. Alternatively, when we consider that our currency is depreciating unduly, the Government may feel obliged to run the economy at a lower level of demand than we would otherwise choose, and a cruel cost is paid in jobs and output forgone.

The short-term costs are palpable and well known to every Treasury Minister, and they will be well known to my hon. Friend the Economic Secretary. When it is considered that sterling is appreciating unduly, the authorities may decide that they need to intervene to sell sterling on the foreign exchanges. That sterling has to be borrowed, either from the banking system, which would be appallingly inflationary, or, as is the general practice here, thank heaven, by borrowing from the non-banking private sector by the issue of gilts and other instruments. That pushes up interest rates. It also adds to the national debt, and it has the perverse consequence that it attracts capital into this country, thereby exacerbating the appreciating tendency that we are trying to combat.

The reverse situation arises if sterling is depreciating. The authorities, in intervening, will need to purchase sterling on the foreign exchanges, and so to borrow foreign currencies, adding to our foreign currency debt, or reducing our net foreign assets, and exposing us further to any subsequent fall in sterling. So if we could remove this incubus of invidious and highly expensive constraints which operate on us, while not losing any of the monetary stability to which we aspire, that would obviously be a very attractive and desirable package for the Government to achieve.

Let me take the second category, the household or personal sector—in other words, ordinary people. 1 think the case here was best illustrated by the journalist on a national newspaper who recently went on a tour of the 12 member states of the Community. He took with him £100 and did not spend any of it, but changed it at each airport on his way into the local currency. When he came back to Heathrow he had £51 in his pocket.

The fragmentation of currencies within the European Community constitutes a tax on travel and mobility. It also represents a gratuitous transfer of resources from individuals to the commercial banks which sell foreign currency to individuals and for which, it must be admitted, this must be a very attractive business.

I come now to the corporate sector and will illustrate that by taking an example from my own constituency. I have a constituent, a small business man, in the north of my constituency, in Lincolnshire, who trades with Germany. His typical order is for about £2, 000, which, for reasons with which I will not bore the House, is generally delivered in two tranches. The only problem is that his margin is only about 10 per cent. and, in order to avoid the costs of documentary credits, he trades in the cheapest way possible. He trusts his German customer, who sends him a cheque in the mail. Can you guess, Madam Deputy Speaker, what that costs him? Every time he clears a deutshmark cheque it costs him £35 and on top of that his bank takes a margin of 1.5 per cent. or 2 per cent. on the currency transaction. So out of his £200 anticipated profit he loses £100. Once again, the fragmentation of currencies is a tax on trade and again in this instance involves a gratuitous transfer of resources from the general corporate to the commercial banking sector.

In this case, however, the costs must be considered in an even wider context; they would need to be calculated in terms of the trade that would take place if we had a common currency but which is now inhibited, and therefore in terms of the output forgone, and the competition in the Community as a whole that is thereby diminished.

I anticipate that someone will say, although no one has yet, that the larger corporate sector, the ICIs and BPs—unlike my poor constituent—do not pay 1.5 per cent. or 2 per cent. margin every time they do a foreign exchange deal. Anybody who knows those companies knows that they have a whole apparatus of departments and even subsidiaries involved in nothing other than the management of their foreign exchange exposure. Those highly paid specialists spend all day doing spot and forward currency transactions, hedging their purchases and receivables, buying and writing options and organising swaps.

If we could remove the necessity for all this activity, which has as its counterpart in a transfer of resources the payment of a tax which is paid directly, again, to the banking sector—if we could remove in respect of the 50 per cent. or more of our trade that we do with the Community, this particular cost—that could only give a further boost to trade and output.

In conclusion, I wish to make two points. It is often said that we cannot have a common currency unless and until we have a unitary state to administer it. I am not among those hon. Members who would like to see the European Community transform itself into a highly centralised unitary state. But there are many precedents for monetary control being exercised by a monetary authority which is not associated at all with any political authority. I would go further and say that, with the sole exception of this country, in the last few years since my right hon. and learned Friend the Foreign Secretary, my right hon. Friend the Chancellor of the Exchequer and, above all, my right hon. Friend the Prime Minister came to power, quite the most outstanding examples of successful monetary management in the western world were in countries in which the monetary authority was quite separate from the political power. I refer of course to the Swiss national bank, to the Federal Reserve system in the United States and to the Bundesbank in the Federal Republic of Germany. If we believe that a balance of advantage lies in pursuing the idea of a common currency, we should not be inhibited by the stage that any discussions elsewhere in relation to the future of political integration may have reached, or by the difficulties which those discussions may have encountered.

I have a final plea and I believe that I will carry all hon. Members with me in this. If it is decided that there should be a common European currency with a European central bank or monetary authority—and I repeat that I do not wish to prejudice that decision tonight—we should decide now, in advance, that it is vital that that institution should be located in London. If it is, we shall secure all the advantages in terms of the prospects of real monetary stability, the avoidance of currency crises and their costs, an increase in trade and the removal of artificial costs which currently weigh down our trade. At the same time, we shall reinforce this country's position as the financial centre of Europe.

9. 16 pm

Mr. John Redwood (Wokingham)

My hon. Friend the Member for Stamford and Spalding (Mr. Davies) seems to have made the case that the pound in one's pocket will no longer be devalued, but might be swapped for an ecu instead.

I do not have time now to praise all the measures in the White Paper which represent signal progress towards the creation of a genuinely unified Common Market. In the time that remains to me, I will raise a few quick questions with the Minister.

Does the Minister believe that the British Government will have adequate contingency plans if the controls on budget outgoings prove to be inadequate? In the past there have been miscarriages in European Community budgeting where new resources were used up rapidly. The Government should have good contingency plans prepared in advance to deal with that eventuality.

I hope that the Government are serious about using the powers which remain to retain control of domestic taxation levels. I hope that the Government will also consider using the Luxembourg compromise, if necessary, if the Commission proceeds with plans to impose VAT on children's shoes, food and other items. The Government made an important pledge to the British people at elections, and they should use every means in their power to ensure that their pledge is duly honoured.

It appears that, in the first half of 1988, the period that is reviewed in the White Paper, the Government tried to keep the pound stable against the deutschmark for several months. The graph shows that around the DM3 level there was a concerted effort to keep the pound within a narrow band of the deutschmark. For a time we were surrogate and surreptitious members of the EMS.

Interest rates had to be cut dramatically to keep the pound down. Many new pounds had to be created and sold across the exchanges to keep the pound down. A credit explosion caused a massive increase in credit and inflationary pressures in the economy with the results that are evident today.

I hope that we will not be in any hurry to repeat that experiment. It appears that all the European countries which are members of the EMS are experiencing problems at the moment. A recent analysis by a neutral firm of City stockbrokers has shown that 10 of the 11 member states—apart from Germany—are running, and have been running for some time, substantial deficits with Germany. The stockbrokers sum up the position by saying that EMS is a device to keep the deutschmark at a relatively low level in comparison with satellite currencies in Europe to ensure that German industry prospers at the expense of everyone else.

There are periodic revaluations of the deutschmark but they are always too little and too late, so the surpluses for Germany continue to mount at alarming rates. Britain currently has a large deficit with Germany because it was a surrogate member of the EMS and is now having to undergo the penance of a very high interest rate to correct the monetary excesses caused by that currency intervention.

I hope that the Minister will respond to those three points. I am only sad that time did not permit me to praise the dozens of measures in the White Paper and elsewhere which represent genuine progress towards a free, unified, liberalised European market, which is what I thought was what we entered originally.

9. 20 pm

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

The increasingly irregular debate on the six-monthly progress report of the European Community tends to induce a sense of deja vu. I may have said that about the last debate. The debates tend to be ritual, sterile and repetitive. To be fair, today's debate has been rather more positive. However, as the hon. Member for Hertford and Stortford (Mr. Wells) rightly said, it would be better if the valuable time debating these issues on the Floor of the House were spent debating the real issues at the right time to influence, as far as possible, what Ministers are doing within the Community.

The Minister of State, Foreign and Commonwealth Office said that no one would be happier than she if scrutiny were better organised. With respect, the right hon. Lady said that last year and the year before and her right hon. and learned Friend the Member for Edinburgh, Pentlands (Mr. Rifkind), now the Secretary of State for Scotland, said it previously. As the hon. Member for Esher (Mr. Taylor) said, we do not want more words, we want action. We want suggestions such as those made by the hon. Member for Hertford and Stortford—I do not agree with them all and I would add some more—and my hon. Friend the Member for Hamilton (Mr. Robertson), who suggested a European Grand Committee. Those suggestions were positive and constructive and it is about time that the Government found some mechanism by which to consider them, as my hon. Friend the Member for Hamilton said today and on previous occasions, but that is only one major problem with the organisation and logistics of the Community.

I had some sympathy for the Minister of Agriculture, Fisheries and Food when he was taken ill. The Minister of State, Foreign and Commonwealth Office also spends a great deal of time flying backwards and forwards between long, tedious meetings. We sympathise with them, but that should not prevent them from producing reports, making statements and increasing their accountability to the House. That was a clear message from both sides of the House today.

I was disappointed that the right hon. Lady did not mention a number of important issues involving the Community. It is astonishing that, in a debate on the European Community at this time, the Minister made no mention of enlargement. There have been signs of requests from several countries and I had hoped that the Minister would mention the subject, at least in passing.

Although the right hon. Lady mentioned political co-operation, as usual her approach and the examples she cited were somewhat selective. We agree with what she said about Iran. I wish that the same positive action and collective involvement were applied to central America, where the European Community would have a significant and positive counter-influence to that of the United States. We certainly support European co-operation in that sphere.

I should also like to welcome the Economic Secretary, who is a ministerial newcomer to these regular arid somewhat repetitive debates. It is nice to have him here instead of the Paymaster General, who I understand is vainly assisting the Conservative party to retain Richmond. I am afraid that the vibes that we are receiving from that part of the world seem to indicate that he faces an increasingly difficult task.

Mrs. Chalker

Would the hon. Gentleman like to take a bet?

Mr. Foulkes

I shall take bets with the right hon. Lady later.

Madam Deputy Speaker

And I shall hold the bets.

Mr. Foulkes

I can think of no one better to look after our money, Madam Deputy Speaker.

The Economic Secretary has an opportunity tonight to make a name for himself by making some dramatic announcement—he does not look too keen to do that. I hope that, as a Treasury Minister, he will be aware of the concern felt in this House that the British Government should use their veto to maintain zero-rate VAT on food, children's clothes, domestic gas and electricity, and books, periodicals and newspapers.

I hope that the Economic Secretary will assure us that the Government will continue to use the veto to ensure that zero rating stays. I hope that the hon. Gentleman will ignore the encouragement from his hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) for tax rates to be harmonised. In the United States, which is a federation with a common currency, there are different tax rates. There is no reason why that should not obtain in the much looser federation of the European Community.

My main theme this evening is to continue what my hon. Friend the Member for Hamilton did in his excellent introduction—to point out the double-talk and contradictions of the Government. The hon. Member for Clwyd., North-West illustrated that, and I shall underline the contradictions between the utterances of one Minister and another. The hon. Member for Clwyd, North-West quoted from the Prime Minister's Bruges speech as though it were a pro-Community speech, thereby showing that there are major internal contradictions even within that one speech. It has been pointed out that, if one reads alternate sentences of the speech, one obtains a totally different view of what it meant—no doubt that might have been the right hon. Lady's intention.

There has been double-talk on the environment. For example, the Minister of State said: We favour, too, concerted, sensible action to deal with the problems of the environment."—[Official Report, 26 May 1988; Vol. 134, c. 539.] Yet we receive reports that tap water in some areas of the United Kingdom fails to meet European standards.

The former Commissioner, Mr. Stanley Clinton Davis, who was an excellent contributor to the work of the European Community, pointed out that, again and again, the British Government attempted to avoid the implementation of positive EC directives on water and other aspects of the environment such as beaches.

The Financial Times of 8 February reported: Britain is seeking permission to delay implementing tough EC standards on the grounds that early compliance will require a 'multi-billion pound' investment programme. We have heard words from the right hon. Lady but have seen no real action. In fact, the Government's action has been to stop any real progress on the environment.

I think that the right hon. Lady will recall that, even more recently, the British Government vetoed the decision to take real action on sulphur dioxide control. [Interruption.] The right hon. Lady seems to be losing her temper and is throwing books around.

Mrs. Chalker

I dropped it.

Mr. Foulkes

Fortunately, there is no VAT on it yet. How can the right hon. Lady reconcile her words of 28 May with the Government's actions?

Then there is the double-talk. A number of hon. Members, particularly the hon. Member for Southend, East (Mr. Taylor), who is a frequent contributor to the debate, although he has not yet joined us—

Mr. Boswell

It is his wife's birthday.

Mr. Foulkes

It is his wife's birthday. I am very pleased. The whole House will offer her our deepest congratulations. I offered her our deepest sympathy on another occasion, soon after the wedding.

The hon. Member for Southend, East rightly raised the question of fraud. On 19 February The Independent said: The British Agriculture Minister, John MacGregor, called yesterday for urgent action in the European Community to combat fraud". The same report says: Mr. MacGregor also implied that reports from the Court of Auditors, especially those devoted to particular problems such as intervention, had hitherto not been given proper attention by ministers. Those were strong words. Let us look at the action.

In the other place last Tuesday, a former Commissioner, a great servant of the country, and previously of the Government, Lord Cockfield, challenged the Secretary of State for Trade and Industry. I must not quote him, but he said that it was the British Government which had vetoed more effective fraud investigation in 1986.

Mrs. Chalker

indicated dissent

Mr. Foulkes

The right hon. Lady shakes her head, but that is what the noble Lord said. When the Secretary of State for Trade and Industry was challenged by Lord Elwyn-Jones, he was severely embarrassed. He could not answer the questions that were put to him. Parliament is rightly concerned about fraud, but we want action, not words. Again, the contradiction—I must not say hypocrisy—the double standards, the double dealing and the double-talk of the Government have been shown up.

Perhaps I should let the Government relax for a few moments. [Interruption.] I know that the Whip has been relaxing; that is obvious from his demeanour. I want to deal for a moment with a point raised by my hon. Friend the Member for Hamilton in his introductory speech and by the hon. Member for Moray (Mrs. Ewing)—the false prospectus described by the Scottish National party as independence in Europe. Although the hon. Member for Glasgow, Govan (Mr. Sillars) is supposed to be the international, European, world, universal, inter-planetary spokesman of the SNP, I note that he has not managed, yet again, to get here this evening. After his victory at Govan he said that, unlike me and the hon. Member for Hamilton—inadequate as we are—he would make Mrs. Thatcher sit on the thistle. I think she is still comfortable.

Recently, in The Scotsman, the hon. Member for Govan stated that an independent Scotland would remain a member of the European Community. That is manifest nonsense. The United Kingdom is presently the Community Member. If Scotland were somehow to gain independence, which I would greatly regret, it would be the remainder of the United Kingdom—England, Wales and Northern Ireland—that would inherit membership. There is no doubt about that. An independent Scotland could apply for membership, if it wished, but that would be fraught with problems and uncertainty.

Mr. Redwood

And a veto.

Mr. Foulkes

I will come to that.

Such an application would create tremendous difficulties for other member countries. Some, like Italy, are states that are far more recent than the United Kingdom, and others have independence movements that are as strong or even stronger than the movement in Scotland. It is by no means certain that even nationalists within a newly independent Scotland would wish to submerge its newly acquired sovereignty in the Community.

Indeed, the SNP chairman, Mr. Gordon Wilson, said on the BBC Radio Scotland programme "Corridors of Power" a few weeks ago that the SNP would only want to seek membership "all things being equal" and "if the terms were right". That is a very different matter. The concept of independence in Europe was dreamed up to try to allay the concerns about the undoubted economic and political problems which would arise if Scotland were to break away from the United Kingdom.

The Scottish people are beginning to see through that camouflage. The rupture would have to take place first. Only yesterday, the Greenland case mentioned by the hon. Member for Moray was dismissed as a precedent by a legal expert from the Europa institute at Edinburgh university, because Greenland remains part of Denmark. It moved to get out of the EEC, whereas my understanding of the SNP position is that they want entirely the opposite—Scotland separated from the rest of the United Kingdom while remaining within the EEC. For them to cite Greenland as a precedent is manifest nonsense.

Mrs. Ewing

First, I may tell the hon. Gentleman that my hon. Friend the Member for Glasgow, Govan (Mr. Sillars) offered his apologies for his absence because he is in Dundee this evening, undertaking an engagement to which he committed himself a considerable time ago.

On what does the hon. Gentleman base his arguments? I have yet to hear from the Labour Front Bench any clear statement indicating the legal principles on which they make their assertions. It seems clear to us that, under international law, Scotland would be an integral part of the European Community, unless it chose to negotiate its way out. As to other movements within other Community states, can the hon. Gentleman say which Governments have clearly defined any policy indicating that they will reject the democratic processes of the Scottish people taking a particular political option?

Madam Deputy Speaker

Order. The hon. Lady makes an enormously lengthy intervention. I remind the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) that he was referring to developments between January and June 1988.

Mr. Foulkes

No one is saying that the wishes of the Scottish people in respect of independence would not be recognised. The argument is about whether or not, if Gordon Wilson's conditions were satisfied, Scotland would be accepted as a member of the European Community. I am grateful to the hon. Lady for reminding me that the hon. Member for Govan is making a television appearance tonight. We all know that he puts appearances on the media ahead of appearances in the House. The SNP's policy is increasingly being seen for what it is—a venture into the unknown, with guides who disagree on where they want to go, and who are uncertain how to get there.

I return to the Government, and to one aspect of social Europe on which I should have liked to speak at much greater length, but which my hon. Friend the Member for Hamilton dealt with extremely well. I refer to health and safety. On 23 November 1988, at that famous Management Centre Europe conference, the right hon. Lady said: We need progress on the agreed programme of action on health and safety at work. My hon. Friend pointed out that her statement clashed with the comments of the Chancellor of the Exchequer. The right hon. Lady's wish for progress with health and safety at work is also entirely inconsistent with the actions of the junior Minister at the Department of Employment in the European Community. On 17 December 1988, The Guardian reported: Britain was dragging its feet yesterday over moves by the European Community to improve standards of health and safety at the workplace…The junior Minister for Employment, Mr. John Cope, was isolated at a meeting of social affairs ministers". That happens again and again. The right hon. Lady is the nice front for the Government. She presents a cosy image and says the right things at conferences of nice Europeans. However, the reality of what is being done by Ministers in the European Community is something else.

I want to touch on other areas of social Europe, but I must give the Minister as much time as possible to reply. However, I shall conclude by saying a few words about Labour party policy.

Sir Anthony Meyer

Which one?

Mr. Foulkes

We are concerned about the negative attitude of the Government towards a social Europe. We accept—I think that even the hon. Member for Southend, East, who is an ardent anti-marketeer, accepts—that withdrawal is no longer an option. We look towards the future in the European Community.

But Europe must be a real community as well as a market. It must be a community of co-operation and diversity. The two concepts of economic efficiency and social justice are complementary. The Government try to achieve economic efficiency, but they are not trying to introduce the complementary social justice that is necessary to balance that economic efficiency. We want a community in which the market works to the advantage of the people, not one in which the people serve the convenience of the market.

The Labour party and our Socialist colleagues in Europe have a common manifesto for the European election—unlike the miscellaneous people with whom the Tory party joins. We look forward to substantial victories in this country in the European elections in June. We look forward to a Labour Government in this country. We look forward to Labour giving the United Kingdom a fresh start in Europe.

9. 42 pm

The Economic Secretary to the Treasury (Mr. Peter Lilley)

I thank the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) for his kind welcome to this debate, not the least enjoyable aspect of which was h is own contribution. Having read through previous debates of this kind, I have to say that today's debate has shown both a wider and higher standard of contribution than we have seen for many a long year and shows the growing importance of the issues that we are discussing.

One of the central points raised by the hon. Member for Newham, South (Mr. Spearing), by my hon. Friend the Member for Hertford and Stortford (Mr. Wells) and by many other hon. Members is the issue of scrutiny—how this House considers European legislation. As my right hon. Friend the Minister of State said, my right hon. Friend the Lord President of the Council has established a review of this and I understand that a Committee of the House is also considering it. My right hon. Friend the Lord President has already urged Departments to ensure timely and speedy progress on scrutiny of measures from the Commission for which those Departments are responsible here. I personally attach great importance to this, not just because of the importance that I attach to the role of this House but because I have found our debates on European measures to be of great value, both for the opinions expressed by hon. Members and for the support that is so often forthcoming from both sides of the House for the British Government's position when negotiating in Europe.

My hon. Friend the Member for Hertford and Stortford made a detailed set of proposals on improving scrutiny in this House. Unfortunately, I heard only part of what he said, but I shall read with interest all of his remarks, and I know that my right hon. Friend the Lord President will find it a valuable contribution for the purposes of his review of these matters. The hon. Member for Newham, South also pursued this aspect. He said that we were often mistaken in believing that we might be in danger of being sucked into a federal institution when the real danger was that Europe was, if anything, an embryonic unitary state. In this respect the hon. Gentleman is, of course, constitutionally correct, but he is wrong to suggest that my right hon. Friend the Prime Minister did not recognise this. In her speech—I have had it checked—she referred not to a federal Europe but to the dangers of a supranational Europe and the importance of retaining a Europe of co-operating sovereign states.

The hon. Gentleman was also right to recognise that Ministers within the Council of Ministers cannot themselves propose anything with any prospect of its being accepted unless it has first been proposed and adopted by the Commission. Of course, that does not prevent Ministers from putting up ideas. For instance, my right hon. Friend the Chancellor has made proposals for achieving a single market without approximating VAT rates. That has received considerable study and attention on the continent, and I think that it has influenced the course of the debate.

Mr. Spearing

It is of course true that the Chancellor issued a discussion document, which I believe was debated at Rhodes, but that makes him a petitioner, does it not? Has not the Prime Minister, or any Minister of the Crown, less ability to introduce legislation formally through the Council of Ministers than any Member of Parliament has to introduce legislation in the United Kingdom?

Mr. Lilley

That is true, although a Minister has in many respects far greater powers to prevent the adoption of legislation proposed by the Commission than has any ordinary Member of Parliament in respect of legislation proposed to the House. The very fact that, according to the right hon. Member for Chesterfield (Mr. Benn), deals are often struck between officials of the different Governments suggests that Governments have power based on their voting power. That the right hon. Gentleman in his previous role was unable to influence the deals into which his officials entered on his behalf reflects more on the Government concerned than on the practices of the European Community.

My hon. Friend the Member for Clwyd, North-West (Sir A. Meyer) made an extremely balanced speech about the role of the European Community. I entirely agreed with him when he prayed in aid my right hon. Friend the Prime Minister's statement that Europe should work together on the things that we are best at doing together. My hon. Friend cast doubt on the need for the Community to disburse money. I agree that it is better disbursed at local level by Governments and institutions closer to the point at which the money is needed—if it is needed at all.

The debate has been largely dominated by the development of the single market, as that issue is central to the document that we are ostensibly discussing—although at times I had doubts about the role that that document played in the debate. The British Government's position is clear. We believe wholeheartedly in the philosophy underlyng the single market, and particularly in the White Paper that initiated it. It involves applying, at European level, principles and policies that we have applied successfully at national level and that have regenerated the British economy—the principles of deregulation, increased competition and, of course, strict control of public expenditure.

The record of progress on the single market during the six months that we are considering is extremely favourable. Some 56 measures—a record number—were adopted, and they were significant as much for their quality as for their quantity. My hon. Friend the Member for Southend, East (Mr. Taylor) challenged me on whether any of the items in the document were of significant value in liberalising and overcoming protectionism, and I mentioned the road haulage directive under which road hauliers travelling across Europe will not be prevented from picking up loads en route. There was also the mutual recognition of professional qualifications. By any standard, that is a measure of liberalisation of great importance to individuals living and working in the Community.

I suspect, however, that the most significant measure —although it involves no change for us—is the capital liberalisation directive. Just as we benefited enormously from scrapping exchange controls, I believe that Europe will also benefit from their abolition. It is, of course, fundamental to the establishment of a free market in financial services and therefore of great importance to the United Kingdom.

Mr. Teddy Taylor

By protectionism I meant protectionism in Europe against the Third world. I asked whether there was any sign of measures having been taken during those six months to reduce such protectionism. I cited, for instance, the use of anti-dumping powers, which has created more protectionism.

Mr. Lilley

Capital liberalisation is one such measure—incorporating, as it does, the principle of erga omnes which, as I need hardly explain to the classically literate, means "towards all". Such a measure removes not just the barriers on capital between ourselves, but those between the Community and the rest of the world. I do not doubt that the document contains many others.

My hon. Friend the Member for Bournemouth, West (Mr. Butterfill) adopted a novel approach by actually considering the document before the House, item by item, and giving a cogent and concise response to it. He raised one especially important matter which arises from the directive on capital liberalisation. He mentioned the withholding tax which was proposed by the Commission in fulfilment of its obligation to consider whether such a tax was necessary. There is, of course, no obligation on member states to accept that proposal. The British Government disagree with the principle that taxing power should be taken away from the House. Incidentally, I do not think that there is any foundation for my hon. Friend's belief that the very proposal is ultra vires because it falls within article 100 of the treaty.

We also believe that there are sound practical reasons for objecting to a withholding tax. It is unnecessary. We can understand that the French Government may feel apprehensive that the abolition of exchange controls will be followed by a flood of tax evasion money out of their country, but the British experience when we abolished exchange controls in 1979 provides no evidence that those fears have any basis. The experience of the German Government, who have imposed a withholding tax after having long had complete freedom from exchange controls, was that it was the imposition of the withholding tax that caused the outflow of money.

Mr. Butterfill

My hon. Friend will appreciate that the difference between us and the French is that when we abolished exchange controls we had a sound Conservative Government, whereas they still have a Socialist Government.

Mr. Lilley

That is true, but the French Government have that fear. Some believe that there is something intrinsic in the French approach to tax which makes the problem greater, but I believe that those who are willing to evade tax are also willing to get round exchange controls so there will be little change.

The second reason for not supporting a withholding tax is that it will not work. Instead of the money going from one European country to another, it will leave the Community entirely. New York has no withholding tax, Swiss fiduciary accounts have no withholding tax and the Bahamas have no withholding tax. A chain of tax havens would doubtless spring up—I know that some hon. Members are experts on this—all around the Community to provide a home for such funds.

Thirdly, the proposal is potentially damaging not just because it would drive Community money abroad but because foreign money, although itself exempt from the tax, would resent coming here because much Japanese, American and middle eastern money would object to having to identify and go through the bureaucratic procedures of proving residence to reclaim or escape the tax. Most damaging of all is the effect that a withholding tax would have on the commercial markets and the wholesale markets. In such markets, one cannot identify money that is constantly changing hands or decide who owns it and who is, therefore, liable for tax. Many legitimate commercial transactions would be driven offshore. The German experience shows that the effect of that would be to raise interest rates in the Community relative to outside.

The Swedish Government already find that they can borrow in deutschmarks at a lower interest rate than the German Government can since the introduction of the German withholding tax. We do not want to see a similar burden inflicted on European Governments and industry as a whole. I am happy to say that we are not alone in opposing the measure—which requires unanimity, as does any change in value added tax. My hon. Friend the Member for Wokingham (Mr. Redwood) can therefore rest assured, as can the hon. Member whose tripartite constituency I can only get right once in the course of debate, the hon. Member for Carrick, Cumnock and Doon Valley—

Mr. Foulkes

Say it again.

Mr. Lilley

Not twice. The hon. Gentleman can rest assured that we are able to uphold the pledges that we gave the electorate in respect of zero rates of VAT. We have given a further assurance that we will not abandon our right to retain zero rates.

Mr. Robertson

That was a very interesting reply, proving that the Minister can count up to three twice. It must have been a written answer. The election commitment was that there would be no end to zero-rating on the commodities to which he referred. Why is there no similar guarantee that the Government will not abandon zero-rating on books, periodicals and newspapers?

Mr. Lilley

Except in the exceptional context of a general election campaign, it has never been the practice of this Government or previous Governments to give pledges restricting their rights in respect of taxation—certainly not at this season of the year.

Mr. Spearing

There is a very important point at stake. The Minister asserts that the Government have a right, under the respective treaties, to retain zero-rating. I wish that I was as confident as the Minister about that right. If it could be tested in the European court, has he any reason to suppose that that court would find in the direction that he suggests?

Mr. Lilley

I have every reason to suppose that. Had there been even the slightest grounds for testing the right of the British Government to retain zero rates, the Commission would have included them when it brought its case on our rights before the court. It did not because it knows that there is no conceivable reason for testing that right.

My hon. Friend the Member for Stamford and Spalding (Mr. Davies) raised a matter related to capital movements—the issue of a common currency in Europe—and gave an extremely lucid account of the monetary arrangements now, and those required for it. Much of his analysis—and the problems that he identified—would apply just as strongly if we linked our currency closely in the ERM as is done at present. As for my hon. Friend's business man, I advise him on my own experience to suggest that his constituent tries another bank where he will get a much better and lower-cost exchange rate. I agree with him that business men in general would like greater currency stability in addition to lower cost of currency exchange. To some extent, currency movements reflect underlying economic changes and we cannot get stability in currency unless we have stability in the underlying economic relationships—above all, the elimination of inflation in all countries concerned. That is why we want convergence in economic performance—not towards the lowest common denominator or towards the average, but towards the best in Europe.

In the few seconds that remain, I wish to refer to the extraordinary intellectual confusion that reigns on the Opposition Front Bench. We know where the Opposition used to stand on the European Community. They were opposed to it in constitutional principle because they believed that membership of the EEC overrode the power of this democratic Parliament. The right hon. Member for Chesterfield (Mr. Benn) and others still believe that, but the hon. Members for Hamilton (Mr. Robertson) and for Carrick, Cumnock and Doon Valley are tentatively and partially in favour of certain aspects of the Common Market. It is interesting that they are in favour only in respect of social policies, by which they mean the very policies that this Parliament and the British electorate will not endorse. They look to the continent for allies in trying to secure the implementation of policies that the British people have three times rejected through this Parliament. By contrast, the Government seek to pursue in Europe the same policies that we have applied with such great success—electoral as well as economic—in this country.

The British Government's position on Europe is very clear. We believe that a Europe with less government is good, a Europe with more freedom for its citizens to trade, travel, meet and compete with each other is better and a Europe that is open to the world is best. By and large, that is the philosophy behind the measures incorporated in the document, which are being pursued with the development of the single market. There are, of course, always difficulties and tendencies in the other direction. That is why my right hon. Friend the Prime Minister sounded the alarm at Bruges and warned against moving away from that path. We believe that a Europe with more government would be bad, a Europe with more government and more centralised government would be worse, and a Europe with more centralised and protectionist government would be worst of all. We can win in warding off those dangers, and most of the battles against regulation and supranational edifices, and against a fortress Europe.

Question put and agreed to.

Resolved, That this House takes note of the White Paper 'Developments in the European Community January-June 1988' (Cm 467).

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