Skip to main content

Lords Chamber

Volume 741: debated on Monday 17 December 2012

House of Lords

Monday, 17 December 2012.

Prayers—read by the Lord Bishop of Lichfield.

NHS: Research and Development


Asked by

To ask Her Majesty’s Government what proportion of funding allocated by the National Health Service for research and development at major teaching hospitals is provided to (1) the researchers themselves, and (2) administrators of funding.

My Lords, the National Institute for Health Research awards funding transparently and competitively for research of high scientific quality that has relevance to the NHS and represents value for money. We therefore expect that the maximum is spent on research rather than on administrative overheads. Trusts with teaching hospitals received a total of £500 million from the NIHR in 2011-12.

I appreciate that funds go directly to the researchers from the body that the Minister mentioned and from the Medical Research Council. What I am concerned about is that I am told by those working, and possibly doing research, in these teaching hospitals that the bulk of the money is paid to the person doing the governance of research and development, and not a penny of that money is actually going to the researchers, who are funded in the way that the Minister has said. Ever since 2006, when that was set up, there has been a great growth of these people doing nothing but checking on the work of the real researchers.

My Lords, every NHS trust or foundation trust has to oversee the governance of the research taking place within it. That is an inescapable part of the process. I do not think there is any confusion in anyone’s mind between support for research governance and the actual research itself, which is done by academics and clinicians working in academic and clinical departments. It is up to each trust to determine how its budget for research is allocated, but I can reassure my noble friend that the money is getting to where it needs to go.

My Lords, would the Minister agree that since Sally Davies took charge of how research is done within trusts, there has been a significant improvement in insuring that more of this money actually goes to serious translational research, which is an area that the health service really needs to concentrate on? I hope that the Minister will agree that that job has been done rather effectively.

I do agree with the noble Lord. Before the creation of the NIHR, research allocations to NHS hospitals were made essentially on a historical basis, with no assessment of quality or value and no ability for the funding to move in response to competition. The NIHR undoubtedly changed all that. The NHS funding for research is now awarded transparently and competitively and robust systems are in place to ensure that it is used only to support research rather than being diverted for other purposes.

Does the Minister agree that the biomedical research centres established by NIHR funding are more likely to develop and deliver on the Government’s innovation strategy in health science and on the life sciences strategy?

I agree with the noble Lord. The Government are providing a record £800 million over five years for NIHR biomedical research centres and units as from April of this year. The centres are based within the most outstanding NHS and university partnerships in the country; they are leaders in scientific translation; and they will play an integral part in the life sciences strategy which the Government published last year.

My Lords, may I declare an interest as a surgeon and say that surgical research attracts less than 2% of the total funding that goes into research? There may be those in this House who feel that surgeons just cut and do not actually do an awful lot of laboratory work, but the truth is that research is an integral part of surgery. We are there to bring translational research from the lab to the patient and to produce results, particularly in the field of cancer. I would therefore be grateful if my noble friend could assure me that there will be much greater emphasis on providing support for surgery?

I agree with my noble friend about the importance of surgical research. The NIHR funds extensive research in surgery across a wide range of funding streams. The most recent estimate of its spend on directly funded research relating to surgery was £7.3 million, but that is a rather historic figure which goes back to 2009-10. In February this year, the NIHR issued a call for research on the evaluation of technology-driven implanted or implantable medical devices and decisions will be made on that next March. Twenty million pounds has been invested in the NIHR Surgical Reconstruction and Microbiology Research Centre, which is an initiative between my department, the Ministry of Defence, the University Hospitals Birmingham NHS Foundation Trust and the University of Birmingham. I hope that my noble friend will agree that that is a positive development.

My Lords, the Minister said very clearly in his Answer to the first Question that it was a matter of “value for money”. Is there not a danger that the Government will cost the exercise at the expense of the care that should be had by patients in this country?

No, my Lords. The very point that I made to the noble Lord, Lord Winston, was that by the creation of the National Institute for Health Research, we were avoiding the very thing which used to happen in the past. Now, we can be quite certain that research money from the NIHR will be used to support research and not be diverted into other places.

My Lords, we welcome the greater emphasis that the Government are giving to NHS research and the commitment to the National Institute for Health Research. However, there is an acute shortage of clinical academics who are both medics and front-line researchers. What steps are the Government taking to rectify this situation so that we can get better links between research and patient outcomes?

I share the concern of my noble friend, although he will be pleased, I am sure, to know that through its integrated academic training programme, the NIHR has taken a lead in reversing the decline that we have seen in recent years in clinical academic careers. Around 250 NIHR academic clinical fellowships and 100 NIHR clinical lectureships are now available annually for medics, which is good news. I also think that intercalated degrees play a very important part in developing the next generation of clinical academics, as does the INSPIRE programme from the Academy of Medical Sciences.

My Lords, does the Minister agree that some exciting research is being done, such as that which treated a paralysed dachshund with stem cells and enabled it to walk?

The noble Baroness is absolutely correct. Some exciting research is going on in the field of regenerative medicine and the NIHR has a funding stream to support that.

Magna Carta: 800th Anniversary


Asked by

To ask Her Majesty’s Government what plans they have to commemorate the 800th anniversary of the sealing of Magna Carta on 18 June 2015.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I confess to an error I made, because the date should be 15 June, not 18 June.

My Lords, I understand there are a lot of anniversaries in 2015. We plan to celebrate the 800th anniversary of the sealing of Magna Carta in June 2015. Work is being co-ordinated by the Magna Carta 800th Committee of the Magna Carta Trust, an independent organisation chaired by Sir Robert Worcester. I keep in close contact with the trust and its plans.

My Lords, I thank the Minister for that reply. Some interesting things are happening, but maybe we can do even better. The late Lord Denning called the Magna Carta,

“the greatest constitutional document of all time—the foundation of the freedom of the individual against the arbitrary authority of the despot”.

The great charter is the very essence of what we are as a people. Its octocentenary should be celebrated with all pomp and international ceremony. I have a suggestion for the Government. Why not exhibit all four remaining original documents in one location? It would be the first time that they have come together since they were sealed at Runnymede in 1215. Maybe that location should be here, in Westminster Hall. Why not invite the world to London to celebrate this magnificent anniversary and all it stands for?

My Lords, I am sure that Sir Robert welcomes all suggestions. That sounds like a very good one. In addition, a lot of work is being done, not least by the towns and cities of the United Kingdom which have historic relations with the Magna Carta, and in other parts of the Commonwealth and English-speaking world. The noble Lord is right: the 800th anniversary will be a great celebration and work is well under way to make it so.

My Lords, is the Minister aware that at about the same time or maybe sooner, what might be called a maxima carta will be signed and sealed, upholding the rights of 2 billion citizens across the entire Commonwealth network? Will he ensure that when it is signed, quite shortly, it also gets appropriate commemoration and possibly full approval and validation in this House?

Again, I sincerely hope so. I also know that the Magna Carta committee is determined that the celebration of the 800th anniversary will be a Commonwealth celebration, since Magna Carta means so much to so many Commonwealth countries.

My Lords, as Archbishop Stephen Langton largely wrote the Magna Carta, and as the freedom of the church to serve the nation is such a prominent theme in the great charter, will the Government approach the right reverend Prelates Archbishops of Canterbury and York to see how church and state might work happily together on this important anniversary?

Most certainly. However, as a resident of St Albans, I understand that the Magna Carta was much drafted in the Abbey of St Albans. One of the advantages of the charter may be illustrated by the fact that celebrations are planned in St Albans, Bury St Edmunds, London, Canterbury, Oxford, Hereford, Salisbury and Durham. It seems to have been a rather peripatetic document, with quite a few claims to authorship. However, I am absolutely sure that preparations to be part of the celebrations are already well in hand in Lincoln and Salisbury, led by the cathedrals in those two great cities.

My Lords, does the Minister agree that it might be appropriate if this House cleaned the figures of the signatories to the Magna Carta? That would be a nice gesture, would it not?

For one minute, I thought that I was going to be dragged into Scottish politics. My brief tells me that Scotland did not sign the Magna Carta—neither did King John, before anyone corrects me on that. Every time we have this Question on the Order Paper, another good suggestion comes forward. I must say that the suggestion of the cleaning is an excellent one.

My Lords, does the Minister accept that although, at the request of King John, three months after the sealing of Magna Carta, the charter was annulled by His Holiness the Pope, it nevertheless remains one of the most noble documents of human history, representing as it does the interface between principle and power and, indeed, the challenge of the rule of law to raw authority; and that, in that respect, it has much in common with the European Convention for the Protection of Human Rights?

I like the definition of the late Lord Bingham, which was that the great thing about Magna Carta was not so much the absolute political detail—yes, it was repealed about three months afterwards—but that it remained part of the DNA of this country for 800 years. People know what we mean by Magna Carta. When Eleanor Roosevelt announced the UN Declaration of Human Rights, she said that it was a Magna Carta for all mankind, and “all mankind” did not need a translation; she knew what it meant. I share the views of the noble Lord about the European Convention on Human Rights.

Democratic Republic of Congo


Asked by

To ask Her Majesty’s Government what action they will take bilaterally with the government of the Democratic Republic of the Congo, Rwanda and Uganda, and as a member of the United Nations Security Council, to encourage a long-term solution to the conflict in eastern Democratic Republic of the Congo.

My Lords, the UK remains deeply concerned about the situation in eastern DRC. To work for a sustainable peace in eastern DRC, we will build on the Prime Minister’s and Minister for Africa’s contact with the presidents and other leaders of Rwanda, the DRC and Uganda to promote dialogue. We will seek ways to support regional efforts to resolve the crisis, both bilaterally and with key partners, and we will work with partners in the UN and the EU to drive forward action to help to build long-term stability and prosperity in eastern DRC.

My Lords, as I tabled this Question, the international conference of the Great Lakes, all 11 member states, endorsed the moves toward peace talks and the need for a regional solution. Unfortunately, those peace talks look to be stalling and there are already many tensions that could result in the violence starting all over again in an area where, despite the DRC being one of the richest countries in the world, it is 187th out of 187 countries in the UN development index.

Will the Government insist in every discussion in the international institutions—the EU, the UN and elsewhere—in their role as a key leader of international donors, and, critically, in the bilateral discussions that we have with every country in the region, on a regional solution that does not just allocate blame where it is deserved but looks to involve everyone in a long-term, peaceful approach that can deliver real change in the eastern DRC and across the region for the future?

The noble Lord makes extremely important points and comes to this matter with great expertise, having served as the Prime Minister’s special representative on conflict resolution and having had a great deal of involvement in the region. He will be aware that the Minister for Africa took part in an emergency visit to the region at the end of November. He visited Uganda, Rwanda and the DRC. He met with the presidents and foreign ministers of all those countries and was there the day before the Great Lakes conference. The noble Lord will be aware that this conflict has been going on for many years, but we continue to push, both bilaterally and in wider fora, the need for a peaceful settlement.

What was the Government’s reaction to President Museveni’s comments to SADC that the MONUSCO peacekeepers were merely military tourists in the DRC, given that this country contributes $60 million a year to the upkeep of that mission? Will the Government continue to press in the Security Council for MONUSCO’s mandate to be uprated from being mere peacekeepers to peacemakers, with all the resources that are needed to deter the criminal elements of the M23 and their Rwandan backers?

My noble friend is aware that MONUSCO’s mandate does not permit it to engage in more than a supportive role at this stage. However, I take his concerns on board. He is right that there are 19,000 MONUSCO troops in the area and the UK has committed £69 million to those troops this year. He will also be aware that the deputy force commander of MONUSCO is a Brit, who will continue to ensure that it is as effective as it can be with a correct mandate.

My Lords, does the Minister agree that if the violence rape and humanitarian crisis in the DRC are to end, it is essential that international and regional partners, which have been discussed during this Question, move away from what I can only call a reliance on short-term fixes? Does she further agree that, in order to achieve durable solutions, the UN Secretary-General should appoint a special envoy to engage with Kinshasa, regional Governments and civil society, and especially with the women of eastern DRC?

The noble Baroness makes important points. I, too, am familiar with the great challenges in the region, especially around the issue of rape and sexual conflict. In fact, the Foreign Secretary’s initiative is to focus on that region as one of his department’s main areas. However, the noble Baroness will also be aware that this matter has been ongoing for many years, despite many initiatives, and continues to be a great challenge for the international community. A United Nations Special Envoy is something we have been calling for.

My Lords, the Minister did not answer my noble friend’s question about the mandate of MONUSCO and enabling it to take a proactive role in solving conflicts in eastern DRC. Could she now address that point?

My noble friend is aware that some commentators have been critical of the UN peacekeeping force, which they felt did not fight to protect Goma. However, I go back to MONUSCO’s first priority, which is the protection of civilians. It is mandated to support the DRC army. If the mandate is to change then that is something we will have to go back to, but I will take back the comments that my noble friend makes.

The Minister and my noble friend mentioned the sexual and domestic violence that is taking place in the region. What are the Government are doing to try to ensure that women in the region are properly involved in both peacekeeping and peacemaking initiatives?

My Lords, sexual violence in that region has been of the most horrific kind. It is why the Foreign Secretary, in relation to a specific initiative, has focused on working on sexual violence being used as a weapon of war. The noble Baroness will be aware that up to now there has been a culture of impunity in relation to these matters; they are just seen as a by-product of these conflicts. We try as far as possible to ensure that women are a part of all the interactions that we have with the region.

Health: Hearing Loss


Asked by

To ask Her Majesty’s Government what plans they have to introduce a screening programme for hearing loss for those over the age of 65.

My Lords, the United Kingdom National Screening Committee, UKNSC, advises Ministers and the National Health Service in all four United Kingdom countries about all aspects of screening policy. The UKNSC reviewed the evidence for screening for adult hearing loss in 2009 and recommended that there was currently insufficient evidence to warrant a screening programme. In line with its three-yearly review policy, the UKNSC is currently reviewing the evidence for screening for adult hearing loss.

I thank the Minister for that reply. He will be aware of the huge level of undiagnosed hearing loss in the UK and the impact this can have on other conditions. It is estimated that at least 4 million people who need a hearing aid do not have one. Not only does unaddressed hearing loss increase social isolation and depression, but there is increasing evidence that there is a link to dementia. People with mild hearing loss have nearly double the chance of developing dementia. Given that there is an average 10-year delay between someone identifying that they have a problem and seeking help, will the Government take early action to ensure that hearing loss is addressed early by introducing a screening programme?

My Lords, the noble Baroness’s comments relating to the features that can often accompany hearing loss, such as depression and other forms of mental illness, are absolutely to the point and I recognise all that she said in that area. The national screening committee had a number of reasons for feeling that a universal screening programme would not be appropriate. First, it was not clear to it what the test should be. Secondly, it was unclear about what agreed time or schedule there should be for doing the testing. Thirdly, it felt that if there were a realistic proposal for screening, there should be randomised trials of screening beforehand. However, it is reviewing its decision of three years ago and we will have to await the results of that.

My Lords, the Minister referred to the screening authority, which recommends screening for many different ailments. Is he aware that screening notification, which goes out to all eligible citizens, stops at the age of 70 whereas it is necessary to be screened for many of these ailments after 70? Indeed, when you are over 70 you need reminding more often than when you are younger.

My Lords, that is why we are sure that it is for general practitioners to prompt their patients, when appropriate, on having an audiology assessment. The noble Baroness is right that people need prompting but there is more than one way of doing that.

My Lords, as someone who has had hearing problems since the birth of our children—a hearing loss which is now being considerably worsened by my own ageing process—I know how important it is to persevere with actually using hearing aids, once the right ones have been agreed with a specialist. I very much hope that the national screening committee will agree to my noble friend’s suggestion that there should be a definite age, with a follow-up to the screening. What plans does it have to help those who have hearing aids assessed for them to persevere with the use of those aids, since that is absolutely vital to their well-being in the future?

The noble Baroness is quite right. Clinicians have found very often that patients who receive hearing aids decide, for one reason or another, not to use them. That is of course very serious; it is a waste of resources but, perhaps more importantly, it is potentially damaging to or indeed dangerous for the patient. Compliance is undoubtedly an issue. In the end, however, nobody can be forced to wear hearing aids but, once again, we believe that there is a role for audiology specialists and general practitioners in encouraging the proper use of hearing aids.

My Lords, is my noble friend aware that of all the soldiers who went south to the Falkland Islands in 1982, approximately one-third came back with permanent hearing damage? Will he ensure that the arrangements he has described will fully take into account the needs of that group of people?

My Lords, I am grateful to my noble friend for raising a very important issue about war veterans. My department is doing a lot of work in this area. I will write to him if I have anything more specific.

My Lords, I note what the Minister said in terms of the previous review but we now have an increase in retirement age and people are working longer. Hearing loss is not simply a personal health issue; it also becomes a bigger public health issue and a health and safety issue. Can the Minister therefore better understand the importance of national screening?

My Lords, the Government fully recognise that hearing loss is not just a health issue. For example, it can lead to isolation and loss of independence; it can impact on education and employment; and it can impact in the various ways mentioned by the noble Baroness, Lady Wilkins, in her earlier question. We believe that health outcomes for people with hearing loss should be among the best in the world. To achieve that it is necessary to think and act differently. Therefore, we are developing a cross-government strategy to maximise the current effort to prevent hearing loss and to support those suffering from it. In particular, that will focus on identifying the potential better to join up services provided by the different agencies.

We have a generation of deaf people in this country produced by loud noise and music. What about preventing it in the first place?

My Lords, I am sure the Health and Safety Executive will take my noble friend’s comments to heart.

My Lords, given the prevalence of hearing loss among our ageing population, will the Minister say what is being done to ensure that hearing loss is being effectively managed in residential care homes for the elderly? What steps are the Government taking to work with the regulator to ensure that providers are being held accountable for responding to the needs of people with hearing loss?

My noble friend raises a very important point about care homes. There have been considerable improvements in services for people with hearing loss over recent years. The waiting times for assessment and treatment for hearing problems in adults have been considerably reduced. The health and social care reforms provide opportunities to improve services further. For example, two-thirds of PCT clusters have chosen adult community hearing assessment services as a priority area in which to extend patient choice of provider. We expect that work to continue when CCGs take over.

Charging Orders (Orders for Sale: Financial Thresholds) Regulations 2012

Motion to Refer to Grand Committee

Moved By

Motion agreed.

Financial Restrictions (Iran) Order 2012

Motion to Approve

Moved By

That the order laid before the House on 21 November be approved.

Relevant document: 12th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 11 December.

Motion agreed.

Animals (Scientific Procedures) Act 1986 Amendment Regulations 2012

Motion to Approve

Moved By

That the draft regulations laid before the House on 29 October be approved.

Relevant documents: 12th Report from the Joint Committee on Statutory Instruments, 14th Report from the Secondary Legislation Scrutiny Committee, considered in Grand Committee on 13 December.

Motion agreed.

Caravan Sites Bill [HL]

Third Reading

Bill passed and sent to the Commons.

Statute Law (Repeals) Bill [HL]

Third Reading

Bill passed and sent to the Commons.

Public Bodies (Abolition of the Railway Heritage Committee) Order 2013

Motion to Approve

Moved By

That the draft order laid before the House on 29 October be approved.

Relevant documents: 10th Report from the Joint Committee on Statutory Instruments, 15th Report from the Secondary Legislation Scrutiny Committee.

My Lords, I welcome the opportunity to say a few words in prime time about the draft order to abolish the Railway Heritage Committee and transfer its functions to the board of trustees of the Science Museum. The need for the order arose from the Public Bodies Act taken through your Lordships’ House by my noble friend Lord Taylor of Holbeach.

First, the Government fully recognise the valuable work that the RHC has carried out over a number of years in indentifying and designating railway artefacts and records of historical significance so that they can be preserved for future generations. During its life, the RHC has designated more than 1,300 artefacts and many thousands of important historical documents, including the Brunel drawings of the Great Western Railway, the collection of British Transport Films, paintings by Terence Cuneo, coaches from the Royal Train, a travelling Post Office sorting van and the GNER archive.

Apart from its secretary, the members of the RHC are unpaid, giving their time free of charge. Their passion and enthusiasm are noteworthy, providing a good example of the volunteering spirit that is so vital in preserving this country’s rich railway heritage. As your Lordships will be aware, the Government were originally minded to abolish the designation function along with the RHC on the basis that no equivalent protection exists for other transport sectors. However, the Government do listen and were persuaded of the unique position that railways play in this country’s heritage and, as a result, agreed to the suggestion of the noble Lord, Lord Faulkner, during the legislative passage of the Public Bodies Act that the RHC’s designation function should not be lost but instead transferred to the board of trustees of the Science Museum.

There are many benefits to that approach, not least of which will be the streamlining of the process by transferring it to a larger group, the Science Museum Group, where economies of scale can be utilised by employing resources across a wider range of duties. The Government carried out a targeted six-week consultation which revealed that, although there was significant support for the RHC, the majority of respondents appeared to be pleased with the proposal to maintain the designation function and transfer it to the board of trustees of the Science Museum. Many recognised the need for rationalisation of the functions or expressed a view that the exercise of the designation function is more important than the vehicle through which it is delivered. There was strong support for the board of trustees of the Science Museum being ideally placed to take on the role in future, especially if it appoints external panel members to ensure that there is no conflict of interest between it carrying out the designation function and its role as a governing body of the National Railway Museum.

The Government are determined to reduce unnecessary bureaucracy, overheads and management layers wherever possible, and believe that this is a good example of where these objectives can be achieved. The RHC’s main committee and three sub-committees will be replaced by a railway heritage designation advisory body with a chair and around 10 members, a number of which will be drawn from the RHC to ensure a smooth transition of expertise. I am pleased to report that a shadow version of this advisory board has already been set up, with its first meeting having taken place on 22 November. Also, once the designation functions have been transferred to the board of trustees of the Science Museum, they will be governed by the provisions of the National Heritage Act 1983, which should allow the board of trustees greater flexibility to create a more efficient organisation.

The cost of running the RHC is currently about £100,000 a year, which would be largely reduced and absorbed within the existing budget of the Science Museum Group. The back-office functions will be more streamlined, as they will be absorbed within the existing structure of the Science Museum Group. It is anticipated that the appointment of the external, non-Science Museum Group members to the advisory board will negate any potential conflict of interest between the board of trustees of the Science Museum carrying out the designation function and its role as the governing body of the National Railway Museum. We are confident that this will ensure that the National Railway Museum does not receive unfair preference. I understand that most members of the new advisory group will be external to the Science Museum Group and will include representation from Scotland and Wales.

We are aware from the consultation and other entreaties—including the amendment of the noble Lord, Lord Faulkner, to today’s Motion—that there is some appetite to extend the scope of the designation function to members of industry who are not currently within the scope, and to introduce some further simplification of the process. The Government looked at this matter very carefully but there were a number of reasons why we were not able to use this order to bring additional bodies within scope, including the fact that an order under the Public Bodies Act 2011 is subject to an affirmative procedure, whereas an order to extend the scope of the designation powers would have to be made under the Railway Heritage Act 1996, which would be subject to a negative resolution procedure. Also, it is not possible to combine in a single statutory instrument provisions that are subject to different parliamentary procedures. An extension to the scope of the powers could therefore be achieved only through an additional SI, which would undoubtedly have put at risk the target date of April 2013 for the transfer of powers to the Science Museum Group, which I am sure noble Lords would not wish to do. It would also have been necessary to give further consideration to the bodies to be included with a new consultation and to consider whether further changes could be made to the procedures under the Railway Heritage Act in order to reduce the burdens on industry, as was suggested by one of those consulted in this year’s consultation.

The Department for Culture, Media and Sport, the government department responsible for the Science Museum Group, will carry out a review within three years in order to establish whether further bodies or classes of bodies should be included within the scope of the Railway Heritage Act 1996 and whether the burden on bodies as a result of the exercise of the designation function can be reduced. Until then, there is nothing to prevent interested parties reaching voluntary agreements. For example, I understand that Transport for London will be co-operating with the Science Museum Group to establish voluntary arrangements to ensure that London Underground’s rich heritage is preserved for future generations.

In conclusion, the Government are confident that the transfer of the designation power to the Science Museum Group will streamline the process by including it in a larger group where economies of scale can be identified and future efficiencies realised. As a result, we are confident that the preservation of an important part of our nation’s heritage will be secured for future generations. I beg to move.

Amendment to the Motion

Moved by

As an amendment to the above Motion, at end insert, “but that this House, whilst welcoming the Government’s acceptance that the heritage of Britain’s railways is sufficiently special to justify the continuation of the Railway Heritage Committee’s powers of designation and their transfer to the Trustees of the Science Museum Group, regrets that the opportunity was not taken to bring within scope those railway organisations wishing to be covered by the new designation arrangements”.

My Lords, I congratulate the Minister on the way in which he has introduced the debate and set out the proposed new arrangements, and I thank him for the kind comments he made about me. I shall reciprocate by saying some nice things about him and two of his ministerial colleagues in a moment.

I start by declaring some relevant interests, all of them unpaid. Until 2009, I was chair of the Railway Heritage Committee. I am president of the Heritage Railway Association and I am a trustee of the Science Museum Group and serve as chair of the newly-established Railway Heritage Designation Advisory Board, to which the Minister referred. I am also an officer of both the rail and heritage rail all-party groups. As the Minister said, the order provides for the statutory designation powers of the Railway Heritage Committee to pass to the Science Museum next year, assuming of course that this House and another place pass this order.

This has been a bit of a tortuous journey, but it is one which I hope will have a happy ending. It started badly. The first anyone knew of the Government’s intention to abolish the Railway Heritage Committee came in a leak to the Daily Telegraph on 23 September 2010, which listed all the public bodies down for abolition. This was followed on 14 October by a statement from the Department for Transport saying:

“The Government believes that the RHC cannot be justified as no equivalent protection applies to the heritage of any other transport sector”,

and that the RHC will therefore be abolished. That was it. There was no consultation whatever leading up to that decision, but this was followed by a huge outcry in the specialist press and in the heritage world, and scores of letters were written to Ministers and MPs asking the Government to think again. Interestingly this unease appeared to be shared by no less a person than the Prime Minister. Writing to one of his constituents on 25 October, Mr Cameron said:

“I understand the significant role railways have played and continue to play in the life of the nation. I also recognise the value of preserving evidence significant to our railways heritage”.

The continuation of statutory powers of designation is of particular importance to the heritage railway movement. This covers around 111 working heritage railways and tramways, as well as 60 steam museum sites. There are more than 399 stations on these lines—more than on the Underground network—and there is a fleet of around 800 preserved steam locomotives. Artefacts that are designated, and thus preserved, often find a new life on the heritage railways, and that brings many benefits to local communities and to local employment, skills training and tourism.

The Railway Heritage Committee’s existence and operation stemmed from three distinct Acts of Parliament, two of them passed by Conservative Governments and one by the recent Labour Government, each supported by all political parties. The Railways Act 1993 set up the Railway Heritage Committee at the time of the railways privatisation. The Railway Heritage Act 1996 brought artefacts and records that had passed into the private sector back into the scope of the committee after attempts by Ministers to set up a voluntary scheme was seen to be unsuccessful. That is a point that we need to bear in mind when we hear about voluntary arrangements in future. The Railways Act 2005 conferred NDPB status on the committee following the demise of the Strategic Rail Authority, and the 2005 Act also brought military railways owned by the Ministry of Defence within its scope.

The principle that the nation’s railway heritage is worth preserving goes back a long way. At the time of the railways nationalisation in 1948, the big four private railway companies were meticulous in passing over their principal heritage items to the newly established British Railways. Section 144 of the Transport Act 1968 transferred responsibility for the British Railways Board’s historical artefacts and certain of its records to the Department of Education and Science, and in 1975 the National Railway Museum was established in York. Had the abolition of the RHC gone through as originally intended, much of that good work would have been lost. Not only would nothing of significance to the nation’s railway history have been preserved in future but all 1,300 artefacts and thousands of important historical documents previously designated would have had to be de-designated, with many of them being put at risk.

Fortunately, it was possible to discuss these matters sensibly with Ministers, and I am happy to praise the noble Lord, Lord Taylor of Holbeach—I am pleased to see him in his place—who sought me out after the Second Reading debate on the Public Bodies Bill, and also Theresa Villiers, the then Minister of State for Transport. I should also mention in dispatches the noble Earl, Lord Attlee, whose role in this was also extremely helpful. Quite quickly, we were able to agree an alternative way forward which retained the statutory powers of designation by transferring them to the trustees at the Science Museum, and this is provided for in this order.

There is, however, one aspect of the new arrangements which is not entirely satisfactory and it is the reason I am moving this amendment to the Motion. This is the question of scope. The list of organisations covered by the statutory powers of designation does not adequately cover the modern railway industry. The previous Government recognised this when my noble friend Lord Adonis was Secretary of State. In 2008 and 2009, the DfT carried out an extensive consultation exercise to gauge the degree of support for extending the scope of the RHC following changes in the structure of the railway industry since 1996. There was virtually unanimous support for this proposition. Indeed, Transport for London specifically asked that London’s Underground railways should come within the committee’s scope, as did, perhaps surprisingly, the railway trade unions, which, whatever their discontent with the privatised industry, very much saw themselves as part of the railway family. As a result, a new statutory instrument was drafted and circulated in 2010 but, sadly, was never tabled following the change of Government.

Reverting to where we are today, the Minister has referred to the consultation on the new arrangements that the department undertook earlier this year. This produced almost unanimous support for retaining the powers of designation and transferring them to the Science Museum. One reason why there is so much support within the railway industry for the RHC is that it has always worked happily with the industry and with the grain of the industry. The industry members see it as a helpful partner which not only relieves them of much of the burden of worrying about preservation matters but complements their own very serious commitment to railway heritage.

Writing to Theresa Villiers on 1 August this year, Peter Hendy, the Commissioner for Transport for London, repeated that TfL would welcome inclusion under the scope of the new designation arrangements. He said that he made this point for a number of reasons. I received his permission this morning to quote directly from his letter, which states:

“First it demonstrates the strength of commitment we in TfL have towards our unique railway heritage, and our determination that nothing of significance to the nation’s railway story should be lost. Secondly, bringing TfL within scope would solve an anomaly, in that some of TfL’s operations, having formerly being British Rail services, are in-scope—for example, London Overground—whilst the Underground is not. Thirdly, not being in-scope adds to our regulatory burden, because management time has to be expended unnecessarily on dealing with requests from members of the public—especially railway enthusiasts—to preserve artefacts, when it would be much more efficient and cost-effective to refer such demands to an independent body possessing statutory powers, able to judge objectively what is important”.

These seem to be pretty compelling arguments. They were good enough to persuade Mrs Villiers repeatedly to ask her officials to come up with a formula which would achieve what Mr Hendy and the rest of us wanted. The noble Earl, Lord Attlee, was not unsympathetic either in conversations with my noble friend Lord Davies of Oldham and me.

The legal advice seemed to rest on the fact that to extend scope required a negative statutory instrument, while the abolition of the RHC had to be done by affirmative order. However, bearing in mind that a draft SI had already been prepared in 2010 to achieve exactly what is needed now, it seems to be a pretty feeble reason for not taking the steps before the designation powers transferred to the Science Museum. Mrs Villiers never sent a reply to Peter Hendy or me because she was promoted in the government reshuffle on 4 September. Instead, it seems that within hours letters were put in front of the new Ministers saying, effectively, “Nothing doing on the scope issue”, and they were signed by Simon Burns and Stephen Hammond and sent to Peter Hendy and me.

We are advised to rely on voluntary agreements with organisations wishing to come within scope. The advisory board which I am chairing at the Science Museum will do its best to come up with a suitable short-term solution. However, the Minister knows very well that this cannot be permanent and that a new SI will be needed before long. This amendment to the Motion is about a missed opportunity to get this right from the start. However, I stress that the decision to retain the RHC’s existing powers of designation is warmly welcomed, and I thank the noble Earl for his part in achieving it. I beg to move.

My Lords, I will add to what the noble Lord, Lord Faulkner, has said. I have a feeling that many people might think that we are interested only in collecting engine numbers, steam trains and old things. I was present at the National Railway Heritage Awards last week, and among the winners were some remarkable feats of engineering and advanced technology. These included the repainting of the Forth Bridge in such a way that it should not need doing for 25 years, and the magnificent fourth span at Paddington station which pushed technology a long way. I also mention that much of this work is supported by the industry itself and by a huge number of volunteers. It pushes science and preservation forward and, because of the attractiveness of a lot of this to tourists and our own people going about the country, it is worth preserving for reasons other than sheer nostalgia.

My Lords, I will take the opportunity first and foremost to congratulate my noble friend Lord Faulkner on his unremitting commitment to this subject, on his many years of service on the committee and on the relentless way in which he has turned the issue around. I am sure that the Government must regret publishing their long list of bodies to be abolished, only to discover a little late in the day that many of them were doing incredibly useful work that was much valued not just by the people directly involved but by the community at large. That is the point I will make about railway heritage. As the noble Lord, Lord Bradshaw, said, the issue is important not just to those of us—of whom I am not ashamed to acknowledge that I am one—who are rail enthusiasts. The income of several generations of my family depended on the rail industry, but the importance of the work of this committee goes much wider.

There can be few countries worldwide where one cannot find examples of British railway engineering. We not only invented the railways but in many countries of the world built them, along with the locomotives that ran on them. I will mention the railways of Paraguay and Zambia because I have seen them. Companies from Birmingham, Wolverhampton, Glasgow and Manchester make the equipment that built their locomotives and that maintains their railways. I do not want to indulge in hyperbole but I imagine that there are few countries in the world where there is no British railway engineering. This is an achievement we should celebrate. It is a national issue, rather than one simply for people interested in railway heritage.

Perhaps I may be forgiven for being slightly parochial in drawing the attention of the House to Coalbrookdale in the Ironbridge Gorge, Telford, the birthplace of the Industrial Revolution. It was the marriage of Richard Trevithick and the Coalbrookdale Company that produced the steam locomotive that ran on iron rails in the first decade of the 19th century. There is a replica in the Ironbridge Gorge Museum. The tradition that it celebrates is a wonderful example of something that is of tremendous interest—I repeat—to many more people than simply those who are interested in railways. Half a million people visit the Ironbridge Gorge Museum every year.

I conclude by saying that it is not just history that we should celebrate. The rail heritage industry—perhaps it is not so much an industry as a movement—is of real relevance to our economy today. Engineering activities are taking place in a number of centres that are keeping skills going that otherwise would be lost. Locomotives are being built at Boston Lodge in north Wales, and there are engineering apprenticeships at Crewe that even today are keeping going skills that might otherwise be lost. That is of tremendous importance. Finally, the subject is of great importance to the tourism industry. Members of the other place who have a heritage railway in their constituency know that it attracts visitors and brings strength to the economy.

My noble friend has embarked on a noble exercise to ensure that the committee’s functions are maintained. As this is an amicable debate I will not introduce a sour note, but perhaps I may send a gentle and friendly memo to this Government and to what I hope will be the subsequent Labour Government, suggesting that before they abolish something they should check whether it is doing something useful.

My Lords, I add my congratulations to my noble friend Lord Faulkner. He has worked tirelessly on railway heritage. If it was not for him, we would now be in a complete mess. I was very surprised to hear the Minister say that the Railway Heritage Committee was a good example of voluntary work that has now been moved to the Science Museum. He said that it had had a bit of administrative support from the Science Museum before, or that it now has it. I cannot see what the difference is between them. It is moving the deckchairs for the sake of it. I suspect that it will cost more and do exactly the same thing; where is the benefit? My noble friend Lord Grocott talked about old steam engines. A month ago I went round the National Railway Museum in New Delhi, where most of the engines, as he said, were built in this country—largely in Glasgow—and they were very fine. I hope that this tradition continues. Of course, they now build very good engines of their own in India.

Having listened to the Minister’s explanation, which I believe lasted a good seven minutes, and to the story that my noble friend Lord Faulkner told about the work that he had to do just to move things across to the Science Museum, I am afraid that my only conclusion is: thank God he was there to do it. It will be fine in the future when the next Labour Government make things better, but this is a classic case of dogma ruling brain when it started. As my noble friend Lord Grocott said, I hope that it is not repeated.

My Lords, I, too, join in the general chorus of discontent about the actions of the Government today. I support my noble friend Lord Faulkner and agree with his very able speech about the need to care for railway artefacts and his description of the work that the Railway Heritage Committee has done over the years. I have no personal interests to declare except that in the 1980s, along with the late Robert Adley, I served on the advisory committee to the Railway Heritage Committee, which was newly formed at that time. The work that it has done over the years is enormously commendable.

Some of the reminiscences—if I may put it like that—of my noble friend Lord Grocott apply to railway installations all over the world. However, there are many such installations still in the United Kingdom, which the Railway Heritage Committee would have been interested in seeing properly preserved. I do not suggest for a moment that transferring these matters to the Science Museum will necessarily adversely affect the future of railway heritage. However, I am conscious, as your Lordships will be conscious, that the Science Museum has lots of other things with which to concern itself. The great thing about the Railway Heritage Committee is precisely that it was concerned about our railway heritage, and worked to preserve that which we still enjoy at present and which future generations should also enjoy. I deplore and regret any diminution of that concern for our railway heritage as a result of this order.

I suspect, as did my noble friend Lord Grocott, that some civil servant somewhere drew up a list of quangos to be abolished and this one found itself on there. Even at this late hour, I urge the Government to think again. As a railwayman myself, and the son of a railwayman, I feel strongly about our railway heritage. I have bored your Lordships previously with stories about my own railway career. I point out that there are still artefacts—they can still be regarded as such—in use on the present-day modern railway which are well worth preserving. I am not sure I would have the ability, or that the Science Museum would have the time or patience, to listen to the case for preserving them. For example, there are signal boxes in the Stockport area, where I spent the early part of my career, which were built by the London and North Western Railway in the 1880s, and which still signal trains today. Do I approach the Science Museum when eventually those signal boxes are abolished, to say that these are part of our railway heritage, and ought to be kept?

I might say in passing that, although those of us who travel regularly on the west coast main line are familiar with the litany of equipment failures—“failure of lineside equipment” seems to be the stock response to any delays—that does not happen in the Stockport area. Thanks to the London and North Western Railway, which installed those signal boxes in 1888, they still do not have any problems, all these years later, in passing Pendolino trains through the town of Stockport. If we are properly to preserve that sort of railway heritage, we might need a wider scope than saying, “We will leave these matters to the Science Museum”.

So I ask, even at this late hour, for the Minister to reflect again. The abolition of quangos is not necessarily a bad thing, but the old proverb about babies and bath water certainly applies in this particular case.

My Lords, as president of the All-Party Parliamentary Arts and Heritage Group I would like to add one brief comment. First, I pay tribute to the noble Lord, Lord Faulkner, for what he has done. Secondly, it is self-evident that the work of this committee must carry on. It is often better to allow a group of enthusiasts, who are totally dedicated to a specific thing, to carry on rather than have it subsumed within a larger organisation. I have seen this happen with the subsuming of the Historical Manuscripts Commission, on which I sat for almost 25 years, into National Archives. Although I pay tribute to what National Archives seeks to do, the specialist knowledge and specific determination that were embodied in the commission have largely gone.

When there are relatively small and perhaps even obscure groups doing a very good job, it is a pity to sweep them away in the name of quango-clearing. This was not a costly quango: it was a body of dedicated enthusiasts doing a good job.

My Lords, I am somewhat surprised that the Minister did not think that there would be a view from the opposition Front Bench on this issue, particularly given the Government’s record in handling this matter. Speeches from both sides of the House have clearly stated the advantages of preserving volunteers and their work, the spirit that they bring to that work and their achievements, which are on record. When they swept this particular element of largely volunteer work and constructive work by communities, the Government were seeking to establish the great society.

The big society. I am not quite sure where the big society has gone in the mean time but this particular legislation, the Public Bodies Bill, was about reducing contributions to the so-called big society. It engaged in a whole plethora of activities people who were knowledgeable, committed and able to do their work well because of their enthusiasm.

Of course the Public Bodies Bill did not go through this House unscathed, and I make no apologies for the fact that the Front Bench had inevitably to identify a large number of public bodies that were being swept away. After all, basically each government department had to produce a sacrificial list for the Government to show that it was playing its part in getting rid of public bodies. We were bound to concentrate on the big issues. When this Bill was abolishing the chief coroner, for instance, we sharply debated that dimension of the Bill, and we did the same when the Agricultural Wages Board was abolished. One can understand that an organisation such as the Railway Heritage Society, which was receiving only £100,000 in support for all its work, was bound to come lower on the order of priorities as far as our general concerns for the welfare of society were concerned.

Thanks to my noble friend Lord Faulkner, the Government have a real case to answer today. I very much approve the extent to which the Government have been persuaded to move. As my noble friend indicated in his speech, under their designated position the movement by the Government is so marginal that it is leaving out very important parts of our railway inheritance, and that will be at a potential cost to us all.

I thank my noble friends who have spoken about the railway industry. As we are all too well aware, interest in railway history is particularly pronounced. The National Railway Museum at York is one of the most successful institutions in the country. York is a very fine city but it makes no bones about the fact that one of its greatest tourist attractions is the museum.

Railways clearly engage the interest of the public. There is one major railway TV programme on at the present time, which consists of three episodes about the historic nature of our railways on a major channel. Even Michael Portillo has moved on from politics to show his enthusiasm for bringing Bradshaw’s up-to-date with his “Great British Railway Journeys”. In doing so, he identifies changes over the historical period that have occurred as far as those railway journeys are concerned.

Would my noble friend accept that Michael Portillo, who became Minister of State in the Department of Transport with very much a right-wing image, with a brief at the time to close the Settle and Carlisle line, spent a bit of time with railway men, went to see it for himself, became the more humane character that he is today and saved the Settle and Carlisle line as a result?

I am grateful to my noble friend, but he will forgive me if I feel that the challenges that we ought to put down today are not to former members of the Cabinet but to Ministers who speak in this House on behalf of members of the Cabinet still exercising power at present. The Minister should recognise that the contributions today have shown how necessary it was for him to make the shift that has been made regarding the original intention of abolition, and not to care little about what happens subsequently. It is quite clear that the Government have understood that necessary work needs to go on, but my noble friend Lord Faulkner has identified where they are still falling short of giving a guarantee that this work will be carried out as thoroughly as it has been done in the past. I hope, therefore, that the Minister will give some clear answers to my noble friend, because the anxieties of the House are manifest.

My Lords, I am grateful for the kind words from the noble Lord, Lord Faulkner of Worcester. Noble Lords supporting him seemed to be a bit more strident than the noble Lord himself. As your Lordships will be aware, I am also very keen on the preservation of our country’s transport heritage, particularly road transport vehicles. Sadly, I do not have enough time to get involved with railway preservation. However, no one should underestimate the sterling work of the noble Lord, Lord Faulkner. You can have thousands of volunteers on the ground, as referred to by the noble Lord, Lord Davies of Oldham, but you need the support of people such as the noble Lord to skilfully interface with central government.

In moving his amendment, the noble Lord talked about the scope of the order. The noble Lord will know that Ministers gave very careful consideration to these matters but, for the reasons outlined in my opening remarks, it was not possible to accede to his request. However, we recognise that the structure of the rail industry has changed in recent years, and indeed a number of respondents to the consultation indicated that they should be included in the scope of the designation powers.

Wider changes to the way in which the designation process operates, which would require changes to the 1996 Act, would also be beyond the scope of what can be done in relation to the RHC under the Public Bodies Act. The Department for Culture, Media and Sport will carry out a review within three years, after the designation function has transferred to the board of trustees of the Science Museum, in order to establish whether further bodies, or classes of bodies, should be included within the scope of the 1996 Act and whether the burden on bodies, as a result of the exercise of the designation function, can be reduced.

The noble Lord referred to the problem of well meaning members of the public and the benefits of having the RHC, or an equivalent, to determine these designation matters. I agree entirely. The noble Lord, Lord Grocott, with whom I have never debated before, spoke about the work and the need for the designation function. He is quite right—that is why I was able to persuade my right honourable friend the Secretary of State to retain the designation function.

The noble Lord, Lord Snape, made a great speech but seemed to have missed the point that his noble friend had saved the designation function. It will carry on, as requested by my noble friend Lord Cormack. The noble Lord, Lord Berkeley, asked what the difference was between the RHC and the Science Museum Group. It is not just about the costs but about improving efficiency and effectiveness.

I hope that the noble Lord, Lord Faulkner of Worcester, will feel free to withdraw his amendment and that the House will agree my order.

My Lords, it has been a very interesting debate and I thank every noble Lord who has taken part in it. In all parts of the Chamber, there have been impressive demonstrations of support for the work of the Railway Heritage Committee, for the cause of railway heritage as a whole and, indeed, for the role of our railways in our society. I thank every noble Lord who has participated.

As I shall be playing a part in the work of the Science Museum advisory board, I hope very much that I will be able to satisfy the noble Lord, Lord Cormack, and my noble friend Lord Snape that in future we will do as good a job as the Railway Heritage Committee has done. I am particularly pleased that there has been such praise for the work of the Railway Heritage Committee, which I have not been a part of for the past three years. I am sure that the members of that committee will be very gratified that there is such support for the work that they have done and that their efforts are being appreciated. I have to tell noble Lords that back in 2010 they did not feel that they were being appreciated and it appeared that the committee was being abolished almost by a stroke of the pen.

My noble friend Lord Snape referred to the sterling work by Mr Michael Portillo in saving the Settle to Carlisle line. If he is interested, and if I might be allowed a small commercial, your Lordships will find in the Library a book, of which I am the co-author, that was published last week called Holding the Line: How Britain’s Railways Were Saved, in which the saving of the Settle to Carlisle line is described in some detail.

The noble Lord, Lord Snape, has a very good mention in it, which I hope that he will appreciate; not least because he was the source of information that has subsequently appeared in it.

The Minister has asked me not to press my amendment. I am getting pressure from behind me to do that but, in view of the fact that the Government have moved a very considerable distance, and I certainly do not want to fall out with the Minister, who has been extraordinarily helpful, as has his colleague the noble Lord, Lord Taylor of Holbeach, I do not intend to press it this afternoon. I will read very carefully what the Minister has said about the review to be conducted by the DCMS within three years; that is the first time that we have heard that. We will study those words very carefully, and if this can lead to a future new statutory instrument, then that will solve the problem. It is a missed opportunity but it is a great deal better than where we were in 2010. I beg leave to withdraw.

Amendment to the Motion withdrawn.

Motion agreed.

EU Council


My Lords, this may be a convenient moment to repeat the Statement that was made in another place by my right honourable friend the Prime Minister a few moments ago on the European Council. The Statement is as follows.

“I am sure that the whole House will join me in sending our deepest sympathies to President Obama and the American people, following the desperately tragic shootings in Connecticut on Friday. Our hearts go out to the families and friends of all those involved.

Last week’s European Council discussed further economic and monetary integration for the eurozone. It endorsed new safeguards that will protect the interests of those countries outside the eurozone. It also reached new conclusions on our response to the crisis in Syria, and there were discussions on growth and defence. This was the seventh European Council of the year. It was in no way a landmark Council, so let me address these points briefly.

First, on the eurozone, the problems of the eurozone are driving heated discussions between its members and leading to potentially significant changes inside the European Union. There are calls from some for greater solidarity and burden-sharing, and from others insistence on tough rules for fiscal discipline. These arguments raise far-reaching questions of national sovereignty, and it is yet to be determined how far or fast the changes will go, but it seems likely that we will see a process of some further integration for members of the eurozone.

Britain will not join the single currency; nor will we join the deeper integration now being contemplated. But these changes driven by the eurozone will alter the European Union for all of us, so they need to be done in the right way. That should mean flexibility over how Europe develops to accommodate the interests of all member states: those inside the euro, those which might one day join and those, like Britain, which are outside and have no intention of joining.

It also means that as eurozone members make the changes they need, so we in the UK will have the ability to argue for the changes that we need in our relationship with a changing European Union to get the best possible deal for the British people. The banking union, elements of which were agreed last week, is a good example of this. A single currency needs a single system for supervising banks, so Britain supported the first steps that were agreed towards a banking union. But in return, we—and others—demanded proper safeguards for countries that stay outside the new arrangements. So the Council agreed a new voting system, which means that the eurozone cannot impose rules on the countries outside the euro area, like Britain, without our agreement. There is also an explicit clause that says that no action by the European Central Bank should directly or indirectly discriminate against those countries outside a banking union. This is vital for our financial services industry, which must continue to be able to provide financial products in any currency. The Bank of England and the ECB will have a statutory memorandum of understanding that will ensure that they work co-operatively and openly to supervise cross-border banks. These safeguards set an important new precedent in terms of giving rights to countries that choose to stay outside the euro.

In winning this argument we have demonstrated how a change necessary for the eurozone can lead to a change for countries outside the eurozone, which can help us to safeguard the things that matter to us in Britain, in particular the integrity of the single market. As the eurozone makes further changes, I will seek every opportunity to get the best deal for Britain and for the single market as a whole.

On growth and competitiveness, this year we have already secured a proper plan with dates and actions for completing the single market in services, energy and digital; a commitment to exempt small businesses from new regulation; the establishment of a European patent court with key offices in London, which will save businesses millions of pounds; a new free trade agreement with Singapore; and the launch of negotiations on a free trade agreement with Japan that could increase EU GDP by €43 billion a year. The conclusions from this Council have the additional benefit of referring to Commission plans to “scrap” some of its own,

“regulations that are no longer of use”.

On defence, we are clear that NATO is the cornerstone of our defence, and EU co-operation should avoid costly new bureaucracy and institution-building. We will never support a European army. The focus of the Council conclusions is entirely consistent with this, referring to practical co-operation to tackle conflict and instability in places such as Kosovo and the Horn of Africa. In addition, the conclusions welcome proposals to open up closed defence markets in Europe, which will be to Britain’s benefit.

I turn finally to Syria. As a result of Assad’s brutality, a humanitarian crisis is unfolding in Syria on our watch, with more than 40,000 dead and millions in need of urgent assistance as a hard winter approaches. There is a moral imperative to act, and Britain is doing so as the second largest donor in terms of humanitarian aid. But there is also a strategic imperative. Syria is attracting and empowering a new cohort of al-Qaeda-linked extremists. There is a growing risk of instability spreading to Syria’s neighbours and a risk of drawing regional powers into direct conflict, so we cannot go on as we are. The Council was clear, as Britain has been for many months, that Assad’s regime is illegitimate. It committed to work for a future for Syria that is democratic and inclusive, with full support for human rights and minorities. We will continue to encourage political transition from the top and to support the opposition, who are attempting to force a transition from below. This will include looking at the arms embargo. The conclusions make it clear that we must now explore all options to help the opposition and to enable greater support for the protection of civilians.

So, progress on Syria, our objective on banking union secured, and the principle established that changes in the eurozone require safeguards for those outside. I commend this Statement to the House”.

My Lords, that concludes the Statement.

My Lords, I join the Leader of the House and the Prime Minister in sending deepest condolences to President Obama and the people of the United States. The Connecticut shooting was an appalling tragedy, and all the families affected are in our thoughts as they cope with their loss and grief.

I am grateful to the Leader of the House for repeating the Statement on the European Council given to the other place by the Prime Minister. I shall touch upon three main areas: Syria, banking union and the wider context of treaty change.

Let me associate these Benches with the concern expressed in the Statement about the ongoing loss of life in Syria. The international community must continue to work together to end these atrocities immediately and speak with one voice in favour of a transition to a new Government. The noble Lord mentioned the arms embargo while also noting that Syria is attracting,

“a new cohort of Al Qaeda-linked extremists”.

In that context, are the Government urging the EU to end its arms embargo or merely to amend its terms? Do the Government recognise the dangers inherent in this?

We welcome the agreement on the next steps on banking union. It is right for the European Central Bank to have a supervisory role in the eurozone. However, does the Leader agree that the most important issue is not who supervises which banks, but who takes responsibility for bailing out failing banks in the euro area? That is what will deliver the firewall that we need between bank and sovereign risk. Did the Government make the case for urgency on this matter at the Council?

It is good that progress was made to protect the integrity of the single market. Was there discussion at the Council of how the new system will cope in the event of changing circumstances; for example, if more countries join the banking union and, in particular, if EU members currently outside the eurozone join the banking union and the “out” group shrinks to three or four member states?

Beyond questions of banking, is not the real issue for Europe the failure to deliver a plan for growth? The Minister mentioned a list of disparate steps, but on a real comprehensive plan for growth, we saw no progress, just as we saw no progress on wider eurozone political and economic integration. All the Council did was set a timetable—June 2013—to set a timetable.

For some considerable time we have been promised a long-awaited speech on Europe by the Prime Minister. We are now told it is being delayed again—that is three times. First it was set for the Conservative Party’s autumn conference, but we understand the FCO intervened. Then it was set for before the EU budget negotiations and now we hear that he has delayed it again, this time until the new year. In the absence of the Prime Minister’s speech, will the Leader of the House answer three simple questions?

First, the Foreign Secretary has said about an in/out referendum,

“this proposition is the wrong question at the wrong time … It would create additional economic uncertainty in this country at a difficult economic time”.

We agree with the Foreign Secretary. Does the Conservative Party? Secondly, the Prime Minister said last week:

“I don’t want Britain to leave the European Union”.

We agree with the Prime Minister, but why does he let member after member of his Cabinet brief that they are open to leaving the EU, including most recently the Education Secretary? Thirdly, British business is deeply concerned that the drift in the noble Lord's party and the direction of its policy mean that we are sleepwalking towards exit. We share that deep concern. Do the Government? The repeated postponement of the Prime Minister’s speech catches the point about the Government—at least the Conservative part of the coalition—on Europe. They are caught between the national interest for staying in and the Conservative Party, so many of whom want out. Britain deserves better.

My Lords, I thank the noble Baroness for what she said at the start of her speech, joining us—as I am sure the whole House does—in sending our deepest condolences after the horrors and tragedy that occurred in America. Our hearts must go out to these families and to the nation as a whole. As for the questions that the noble Baroness raised about Syria, particularly the arms embargo, I am glad to say that we think it is right to look at the arms embargo and seek to amend its terms. It is right to keep the embargo against the regime. We will see how matters unfold over the next few weeks and months, and join our colleagues and partners in the EU and beyond in making sure that we come to the right decisions on this question.

The key to the noble Baroness’s speech was what happened at the European Council, particularly on banking union and the future relationship between this Government and the EU. The most important aspect of the banking union is that there has been a big breakthrough: non-eurozone members will have a say on eurozone rules that could affect them. Before this council, many people said that we would not achieve that. As for the important question about changing circumstances, we have agreed that there should be a review of the decision rules when the number of non-participating members reaches four. That could be some time away. Subsequently we have ensured that this review will report to the European Council, where the decision about what to do next will be taken by consensus.

The noble Baroness asked what we were doing about growth. It will not be news to this House that all countries in Europe have immense fiscal challenges and we must focus on what can help best. We believe that some of the changes that we have effected over the past two and a half years, on international trade deals, deregulation and completing the single market are not designed just to help us here in Britain, but also the rest of Europe. There is good news on some of this; at least in the United Kingdom. There are more people working in the private sector than ever before and the number of those claiming the main out-of-work benefits has fallen by almost 200,000. That is all a step in the right direction.

The noble Baroness went on to ask three simple questions—she might have thought that they were simple, but they raise important issues for the future. On the question of an in/out referendum and what the Foreign Secretary has said, I do not think that any of that creates a great deal of uncertainty. It is an issue that is live in the country today. People are asking about it. I very much believe that neither option—in or out—is the right question to ask. Europe is in a state of flux. Enormous changes are going on as a result of the eurozone that will give us and people who think like us an opportunity to look ahead and gently to forge a Europe that will serve all the people of Europe in future.

The noble Baroness also most unfairly criticised the Prime Minister and the Government for not doing what British business wanted us to do. She felt that we are drifting towards the EU exit and that British business was uncomfortable with that. I do not accept either premise. We are not drifting to an exit from the EU; therefore, British business is not concerned about that. British business is concerned about increased regulation, centralisation and bureaucracy. Those are all things that we can agree on. The noble Baroness shakes her head, but when you talk to British businesses, those are the things that they are concerned about. They do not believe for one moment that we are about to leave the EU; and nor are we.

My Lords, can my noble friend tell us about the discussions on Syria and, in particular, whether the United Kingdom has changed its position on lifting the arms embargo and is thinking of starting to get involved in arming either side of the conflict, not least the new coalition?

Apropos the European Council conclusions, the Leader of the House told us that the Bank of England and the European Central Bank are to have a statutory memorandum of understanding detailing their relationship. Can he tell the House a little more about what that will contain in terms of its legal underpinnings and when that might come about?

My Lords, those are two useful questions. First, on Syria, we are all deeply concerned by the escalation of violence and its increasing impact on the wider region. We very much welcome the increased support for the national coalition following the Friends of Syria meeting in Marrakech on 12 December 2012, and we are working with others in the international community, including within the EU, to seek an end to the violence and a political solution to the crisis. On sanctions, we have led the way in introducing EU measures against the Syrian regime. The latest round, the 19th, was adopted on 15 October, and we successfully negotiated a three-month rollover of the EU sanctions measures, including the arms embargo, last month. However, there is a fast-changing situation in Syria, and we need to keep it constantly under review.

My noble friend asked a second question about the banking union, the role of the relationship between the Bank of England and the ECB and, in particular, the role of the memorandum of understanding. I confirm to my noble friend that there is a statutory requirement in ECB regulations to have an MoU between the ECB and the Bank of England that secures co-ordination of supervision of cross-border banks and activities. There is no deadline for the MoU to be signed, but ideally it should be in place before the single supervisory mechanism kicks in, which should be by June 2014.

My Lords, through the Leader of the House, I thank the Financial Secretary, Mr Clark, for keeping my committee, which concerns itself with EU economic and financial affairs, alert to what was going on last week, both on the publication of our report of the emerging conclusions—published early to help the Government—and in the aftermath, when he reported back through me to Sub-Committee A of the Select Committee chaired by the noble Lord, Lord Boswell.

However, there are residual questions which we will test in the early months of next year, including with the Financial Secretary. With regard to the MoU, I would like the Leader of the House to take back to his colleagues a better and more profound scrutiny of the position the United Kingdom finds itself in, as countries begin to enter the European banking union, so that the protection of those who are the current “outs”—although many want to join the European banking union in a way that the United Kingdom does not—is not compromised by endorsing the supervisory board which reports to the governing body of the European Central Bank. That may imply, ultimately, treaty change. Would he be alert to that?

I have another question. The single market is the butt of what we are attempting to do in this country to protect the UK’s interest. Will he listen to the voices outside, and from British business, who say that financial services in particular, but the single market as a whole, are imperilled by our standing outside this close integration?

My Lords, I have yet to meet many businesspeople who think that it was wrong for us not to join the euro when it was created. Many businesses—in fact, all—that I meet are very keen on the single market and on how it operates. The Council has safeguarded the interest of British business and the City in particular. We believe that those safeguards are extremely important. The noble Lord, Lord Harrison, mentioned the distinguished report from the committee that he chairs. It is a valuable and important report. There is a lot of it; it will require digesting by the Government. However, there are some useful pointers here. On the parts of his questions to do with treaty change, which I will not answer in detail now, these are exactly the kinds of issue we will need to consider before coming up with conclusions.

My Lords, the monitoring and supervision of the large banks within the eurozone is coming in the so-called European banking union. It is obviously imperative that the group of 17 eurozone members cannot take over, in effect, the European Banking Authority which sets standards for the 27. In order to avoid that and to protect the EBA from risk, will the noble Lord comment on how watertight is the proposed requirement that there must be a simple majority of states, both in the eurozone and outside it?

My Lords, the noble Lord, Lord Williamson of Horton, asks a straight question: how watertight is the agreement on the requirement to have a majority? If I may mix my metaphors, the agreement that was struck in this council is absolutely rock hard. I do not think that I can put it more strongly than that.

My Lords, can the noble Lord go a bit further into banking unions? A banking union must contain two things. One is a supervisory regime, and it is clear what has been agreed there; it is perfectly satisfactory. However, it must also contain provisions for bank resolution. Can the noble Lord tell us in greater detail how this will work? In particular, if the ECB has to bail out an institution in the future to prevent a systemic threat, where will the requisite funds come from and what arrangements have already been made to ensure that those funds will be available on the day they are required?

My Lords, that is a good question but I will not be tempted to get into the details of this, because they have not been finally agreed within the eurozone. Final conclusions on that will need to be come to over the course of the next few months.

My Lords, first, I wonder whether the noble Lord has seen a report that the Bundesbank’s lawyers have found that the eurozone banking union lacks a sustainable legal basis and that there is a lack of clarity over the new safeguard powers. Is he able to comment on that? It is a very serious statement. Secondly, on page 4 the Prime Minister says:

“We will never support a European army”,

but we have an Air Force and a Navy as well, so presumably the “army” also includes those two forces. Perhaps the wording ought to be reconsidered in future. Thirdly, on Syria, I find it very worrying that the Government are urging that the arms embargo should be lifted by the European Union. Arms mean more deaths, surely. Will the Government not embark upon a peace process rather than a war process, given the support of some elements in Syria which are nasty, vicious and should not be supported?

My Lords, on the question of the Bundesbank and its lawyers’ view of the safeguards, the noble Lord has an advantage over me. I have not seen that but perhaps I could ask my officials to look into it and I will send him a letter. As far as I am concerned, when the Prime Minister said that Britain will not join a European army, he meant the European armed forces. Why do I say that with such confidence? Because I know that what he believes in is co-operation between our nations and their armed forces, which we have done very successfully, particularly with the French, and no doubt that will continue. On Syria, I agree with the noble Lord that it would be premature to lift the arms embargo but it is also right to keep it under review, and that is what we are doing.

My Lords, in the Statement there was a phrase to the effect that we will never be part of a European army, but was there a serious proposal at the summit to create such a European army? If not, why was it felt that that statement needed to be included?

No, my Lords, there was not a firm proposal that there should be a European army but there was an early discussion about a series of councils that will take place next year to discuss common defence and security policy. It is important for the Prime Minister to lay out his position as early as possible. After all, if he does not, that is how rumours start—such as the one propagated just now by the noble Lord, Lord Stoddart, who also gave me an opportunity to put the record straight.

My Lords, will the noble Lord revert to the question of the noble Lord, Lord Williamson, and his own exegesis of the sentence in the Council conclusions that says,

“the Council agreed a new voting system which means the Eurozone can not impose rules on the countries outside the Euro area”?

Does he agree that that sentence means that the Council agreed a new voting system for the EBA, not for the Council? Does he agree that that voting system depends on there being four non-members of the European single supervisory mechanism for its survival?

Yes, my Lords, the noble Lord has made an important clarification. I hope that nothing I have said has given the impression that I did not think that is what it meant—I am glad to have the noble Lord’s confirmation of that. It is absolutely right that those are the two locks. It is the first time that we have been able to get agreement that any changes require the agreement of a majority of those countries that are not in the eurozone.

My Lords, there were discussions at the Council on a potential free-trade agreement between the European Union and Japan. The noble Lord the Leader of the House will be aware that in parallel there are discussions between the United States and Japan. What, if anything, was said about the third part of the triangle—a free-trade agreement between the European Union and the United States?

My Lords, there is nothing I can add to what I have already said. However, being a believer in free trade. which I think the noble Lord is too, we should very much welcome the agreement between the EU and Japan. If the United States and Japan can make a similar agreement and commitment to free trade then that is a very good thing, and in the long term we should look to furthering free-trade agreements between the EU and the USA.

My Lords, the Statement brings us the surprising news that the Commission has promised to scrap some of its own regulations that are no longer of use. What is the anticipated timescale and volume of this exercise? Are the Government confident that Brussels is acting in good faith when it makes this promise? What legal mechanisms will function at the national level? Will the Government have any input into this process? Above all, will the Government keep noble Lords up to date as these regulations are scrapped?

My Lords, the noble Lord, Lord Pearson of Rannoch, is entirely right to raise this issue. The best way of keeping both the Government and the European Commission up to the mark is for the noble Lord, as I know he will, to constantly ask questions about how it is going. He asked about timing. I do not think there is a timescale for it. The important change is that in the Council’s conclusions there was an absolute recognition that there are some unnecessary regulations that are no longer needed and need to be scrapped. The noble Lord, Lord Pearson, his friends and many others in the House may start proposing which ones they should be, in which case they should write directly to the Commission.

My Lords, the creation of an EU bank regulator, of which the UK will be independent, is certainly good news. Can my noble friend say something about the position of the UK operations of EU banks? Will there be pressure for them to be subsidiaries, rather than just operating branches, so that the Bank of England can more closely regulate them?

My Lords, I do not have the immediate answer to that question. It raises all sorts of questions about the relationship between bank branches in the United Kingdom and their parent companies in the EU, most notably those headquartered in eurozone areas. I am not sure if there is a definite answer at this stage, but if there is I will let the noble Baroness know.

My Lords, I was disappointed the Prime Minister chose to be so negative and parochial in his Statement today about what is actually quite a positive statement on the common security and defence policy in the conclusions of the European Council meeting. The European Council meeting talked about enhancing and strengthening the common security and defence policy—one that was begun under a Conservative Government in the UK and has been maintained under Governments of all colours since.

I was also a bit disappointed that the conclusions, in talking, rightly, about the comprehensive approach to security, did not mention development alongside the importance of crisis management and stabilisation. I wonder if, in the discussions that will take place over the next 12 months, the UK Government will ensure that the important role of development alongside diplomacy and defence is recognised as we work towards refreshing this CSDP in December 2013.

My Lords, I do not share the view that the noble Lord has propounded that my right honourable friend the Prime Minister’s Statement was negative on this matter. There are many people in this country who will regard the British Prime Minister saying that we will not join a European army as an extremely good and positive thing. I would have liked to have seen the noble Lord agree with that.

However, on the common security and defence policy, of course we are fully behind proposals to increase our international security. As I said to the noble Lord, Lord Stoddart of Swindon, a few moments ago, our policy is based very much on international co-operation. NATO is the cornerstone of our defence process, but we also have bilateral relationships with individual countries that are to the benefit of us all.

I cannot believe that the noble Lord, with all his experience, knowledge and background in development, particularly development in Africa, would think that this Government would ever shirk from talking about their development record, most notably the record amounts of money that we now spend, and focus extremely effectively, in the parts of the world with greatest need. That is something that the Government are very proud of. I am sure that future Councils will refer to development whenever they get around to discussing it.

My Lords, has it not been a cardinal principle of British foreign policy for hundreds of years to maintain our influence with powers on the Continent of Europe the policies of which are crucial to our interests? The Statement spoke somewhat vaguely about safeguards; the noble Lord has declined to be drawn on details. Will he explain to the House how, as European Council follows European Council, and as those countries that manage to survive as members of the eurozone continue to deepen their fiscal and political integration, the Government’s engagement with those core European powers, which will be concerting their polices to powerful effect, can be increasingly other than tangential?

My Lords, perhaps there is a philosophical gap between the noble Lord and the Government on this issue. We completely support the idea of a banking union within the eurozone; it is key to the eurozone succeeding in the longer term, and we have long supported it. At the same time, we wanted to have safeguards within the single market—which I know that the noble Lord supports—to ensure that there was non-discrimination. In the communiqué, we have an absolute commitment to non-discrimination within the single market for countries that are outside the eurozone.

I am bound to say, despite the rhetoric that sometimes comes from opponents of this Government’s policy on Europe, that this European Council—the last of seven of this year—has been a resounding success. I very much hope that it will set a good pattern for the course of the next few months.

Business of the House

My Lords, 34 speakers have signed up for the European Union debate today. If Back-Bench contributions are kept to around seven minutes each, it would allow the Question for Short Debate to start at around 9 pm and for the House to rise at the target rising time of 10 pm.

I am most disappointed by that statement. We are discussing some very important matters. To expect Members to confine their remarks to seven minutes and to expect the House to finish by 10 pm, when, since we had a relevant debate, we have had two Bills and the developments in the EU over the past six months at least, is, quite frankly, a disgrace. I was minded to oppose these matters being discussed, but I know that I would be defeated and would therefore be wasting the time of all those speakers, including myself, who wish to speak in the debate. Having made my view known, I assure the House that I will not abide by the seven-minute suggestion when I speak third-to-last tonight.

My Lords, I recall many years ago interrupting the late Lord Shore as he got into his 26th minute in one debate. I trust the noble Lord will be more modest in his approach.

European Union: Recent Developments

Motion to Take Note

Moved By

My Lords, I am looking forward to a very long afternoon and evening. We are here to discuss recent developments in the EU, a topic which is never far from the headlines and is of significant interest to Members of this House.

My right honourable friend the Prime Minister and my noble friend Lord Strathclyde have just provided a full and informative report, to this House and the other place, of some of the most recent developments in last week’s European Council. I am also pleased to bring two Bills before the House this afternoon. The provisions in both Bills are technical in nature but will, in their own way, play an important role in the future shape of the EU.

The first is the European Union (Croatian Accession and Irish Protocol) Bill which provides for the necessary parliamentary approval to allow the UK to ratify Croatia’s accession to the EU and the transitional immigration controls to be applied post accession. The Bill also provides for approval of a protocol on the concerns of the Irish people which is to be added to the EU treaties. I introduce the second on behalf of my noble friend Lord McNally: the European Union (Approvals) Bill simply provides for parliamentary approval of three draft EU decisions. I will return to the two Bills in some detail later. Members of this House will no doubt wish to discuss areas of their own particular interest during the debate. If noble Lords will permit me, I will use the two EU Bills, which represent just a few of the recent developments in the EU, as a starting point for the debate.

Membership of the EU has brought, and continues to bring, real benefits to the UK. Enlargement and the establishment of the single market are two of the EU’s greatest achievements. The single market is the largest market in the world with more than 500 million consumers and 21 million companies. It has opened up prosperity and opportunity to hundreds of millions of people. The challenge we face now is to maintain those benefits in the face of global financial challenges.

The European Union, alongside NATO, is an instrument of peace and reconciliation that has helped to spread and entrench democracy and the rule of law across Europe, and has helped to make armed conflict between its members unthinkable. This has recently been recognised with the award of the Nobel Peace Prize. That is why we support further conditions-based enlargement. Croatia’s accession will further demonstrate the transformative power of enlargement, marking a historical moment, with the joining of the first of the western Balkan countries involved in the wars of the 1990s.

We recognise that the EU needs to do better in much of what it does and that people across Europe want more of a say in how the EU does its business. The House of Lords EU Select Committee has done a great deal in examining the work of the EU. I am grateful to the committee for its ongoing scrutiny of EU decision-making. Most notably in the context of the accession Bill, I welcome its current inquiry on EU enlargement.

When they came into office, this Government committed to give Parliament a greater say in the EU decision-making process. In order to do that, we introduced the European Union Act 2011, which puts Parliament at the heart of the process. That is why we have these two Bills before the House today, both of which have been introduced under the provisions of the European Union Act 2011.

The European Union (Croatian Accession and Irish Protocol) Bill provides for parliamentary approval of the Croatian accession treaty and of the Irish protocol, which is to be added to the EU treaties. The Bill also provides an enabling power to allow transitional immigration controls to be applied on Croatian workers exercising their right to free movement.

Croatia is expected to join the EU on 1 July 2013. Meanwhile, we expect Croatia to sustain the momentum of six years of significant reform, particularly on judiciary and fundamental rights issues, so that it meets fully all EU requirements by the time of accession. Croatia’s accession will represent the achievement of a historic goal, not only for Croatia but for the EU. Croatia’s accession will set the bar for other countries of the region in pursuing their own European future and demonstrate clearly what can be achieved in the region.

The enlargement process continues to evolve with each accession and Croatia has faced the toughest negotiations yet. It was the first to negotiate under the new Chapter 23 that deals with the judiciary and fundamental rights, rightly putting the emphasis of the accession negotiations on the rule of law. It is the first to make full use of opening and closing benchmarks within the negotiations of each chapter to ensure results before chapters were closed. It is the first to experience pre-accession monitoring, a process designed to ensure that it is ready in full before it accedes. Croatia will join the EU better prepared than any previous candidate has been.

Croatia has already largely met the strict pre-accession criteria. It has made significant progress in tackling corruption and organised crime and in protecting fundamental rights, as recognised in the two most recent Commission monitoring reports. It has also made considerable progress in dealing with the legacy of the Balkans wars in areas such as war-crimes trials and refugee returns, and it continues to tackle these challenges.

Croatia’s full co-operation with the International Criminal Tribunal for the former Yugoslavia was a requirement for closure of Chapter 23. This will continue to be assessed as part of the Commission’s monitoring up until the date of accession. However, let me be clear: while the Commission’s monitoring helpfully identifies these outstanding issues, it also states clearly that it expects Croatia to be ready on time. This is an assessment that we share.

With its modest population of some 4.4 million people, the potential impact of Croatian migration is relatively small, but the UK remains vigilant to that impact. Furthermore, we have not identified any victims of trafficking from Croatia in the UK. In the US State Department Trafficking in Persons Report 2011, which ranks countries in terms of their capacity to tackle trafficking and protect victims, Croatia was designated as a tier 1 country alongside the UK. As a safeguard, the Government will be putting measures in place to minimise any possible impact of opening the British labour market to workers from Croatia. I can assure noble Lords that the Government are committed to applying appropriate controls on the free movement of Croatian workers in order to safeguard the UK labour market.

The accession treaty sets out the framework within which member states may apply transitional immigration controls to Croatian nationals who wish to work in their country. This Bill transposes the legal framework for transitional immigration controls in the accession treaty into UK law. The Home Office will bring secondary legislation before this House in order to apply those controls under UK law. The intention is to retain the current immigration controls applied to Croatian nationals for a transitional period following accession. The Home Office has published details of the proposed transitional controls in a statement of intent. All the necessary legislation will be in place when Croatia joins the EU.

My Lords, it is anticipated that the transitional period could be up to seven years, but I am sure that the details of that will come out during further debate this afternoon.

The Bill also deals with the Irish protocol. This is, in effect, a clarification of Ireland’s understanding of certain aspects of the EU treaties in relation to its constitution. It does not change the content or application of the treaties. The Irish protocol is important to the Irish as it will enshrine in EU law the legal guarantees given to Ireland by EU member state Heads of State or Government. It was agreed as a condition of Ireland’s ratification of the Lisbon treaty.

The protocol confirms that neither the European Charter of Fundamental Rights nor the freedom, security and justice provisions of the Lisbon treaty affects the application of the Irish constitution on the right to life, the protection of the family and the protection of rights in respect of education. The protocol also confirms that the Lisbon treaty does not make any change, for any member state, to the extent or operation of the competence of the EU in relation to taxation. Furthermore, it confirms that none of the provisions of the Lisbon treaty affects or prejudices Ireland’s traditional policy of military neutrality. It also sets out clarifications in relation to a number of specific defence-related matters.

The protocol must now be ratified by all 27 member states before it can enter into force. Here in the UK, approval of the protocol requires primary legislation; thus, provisions to do just that have been included in this Bill.

The second Bill is the European Union (Approvals) Bill, which provides for parliamentary approval of three draft EU decisions: first, the proposal to give legal effect to the electronic version of the Official Journal of the European Union; secondly, the five-year work programme—the multiannual framework—of the EU fundamental rights agency; and, thirdly, the draft European Council decision to maintain the number of EU Commissioners at the equivalent of one per member state. Parliament must grant its approval before the UK may agree to the decisions in Brussels.

Looking at these matters in turn, I will give a brief outline of the proposal on the electronic version of the Official Journal of the European Union. This is the gazette of record for the EU, which is published every working day. It records the decisions made by and the legislative acts of the EU institutions. The electronic official journal has existed in parallel with the print version for some years. However, a European Court of Justice judgment found that only the printed version of the official journal is authentic. EU legislation is therefore necessary to give the electronic version legal effect.

I turn now to the work programme of the fundamental rights agency. The agency was established in 2007, and its role is to support the European institutions and member states, when they are acting within the scope of EU law, to take measures and actions which respect fundamental rights. It also has a role in communicating about, and raising awareness of, fundamental rights. The agency’s work is regulated by a five-year work programme which sets out the thematic areas of the agency’s activity. These must include the fight against racism, xenophobia and related intolerance and be in line with the European Union’s current priorities. The agency’s first, and current, work programme covers the period from 2007 to 2012 and will expire at the end of this year. In December 2011, the Commission brought forward a proposal for a new work programme to cover the period from 2013 to 2017. The themes set out in the work programme very much continue the themes of the current one. Although there are some adjustments in the terminology between the two work plans, the changes will not alter the work that the agency has been doing. Nor will they change the role or functions of the agency.

Finally, I turn to the draft European Council decision to maintain the number of EU commissioners at the equivalent of one per member state. The EU Commission currently comprises 27 commissioners, one from each member state. The Lisbon treaty provides for a reduction by one-third in the size of the Commission from 1 November 2014. However, the treaty also allows the European Council to alter the number of commissioners, subject to unanimous agreement. The proposed reduction in the size of the Commission, and the subsequent loss of a guaranteed commissioner, emerged as a concern of the Irish during the ratification of the Lisbon treaty. In order to secure Ireland’s ratification of the treaty, it was agreed that a decision would be taken to maintain the number of EU commissioners at the equivalent of one per member state. From our perspective, this decision will ensure the retention of a UK commissioner, and will mean that a UK voice continues to be heard within the Commission.

In conclusion, the Government remain committed to being a key player in the EU. Our relationship with the EU is not, however, an unquestioning one. We need to protect UK interests while supporting our neighbours and allies across the continent to achieve their own aims. The Government have set out the steps that they are taking to assess the UK’s relationship with the EU. We have also put in place legislation to ensure that Parliament has its say in decisions that will shape the EU. That is why I have brought the two Bills before this House today. The content of the Bills will have a limited impact on the UK in comparison to the greater benefits they will bring to other member states, both existing and future, and to the EU as a whole. They are, however, in the interests of the UK, which is why the Government give them their whole-hearted support. I beg to move.

My Lords, first, let me make it clear that the Opposition support the two Bills that have their Second Readings today. We do not intend to move any amendments either in Committee or on Report. I hope that the Government regard this approach as constructive. I have two brief points on the Bills. The European Union (Approvals) Bill points to one of the areas where the previous Labour Government fought hard to achieve reform but failed to succeed—to reduce the size of the European Commission. I understand why, in a Union dominated by the large member states, every member state wants to keep its own Commissioner. However, this is neither efficient—in terms of the transaction of the Commission’s business—nor is it a proper understanding of the role of the Commission, which is to speak for the interests of the Union as a whole, not the interests of individual member states. I am sure that debate on this issue will return in future. Secondly, on the Croatian accession Bill, it is worth remembering that, for all its tribulations, this is a European Union that many millions of people still want to join. Those who want to leave should take note of that.

This has been an opportunity for the noble Baroness, Lady Warsi, to present her first tour d’horizon of the state of the Union. I agreed with many of the positive things that she said but would have liked to hear more. The big question that she has not answered is: what is the Government’s policy for the future of Europe? In his Daily Telegraph article of 1 July this year, the Prime Minister wrote of the need for a fresh settlement with fresh consent. He wrote that,

“far from there being too little Europe, there is too much of it”,

and argued that:

“Whole swathes of legislation covering social issues, working time and home affairs should … be scrapped”.

To advance this agenda he wrote of opportunities to come in future—probably future treaties—where we will be able to take forward our interests. His fresh settlement would require the full-hearted consent of the people. In a statement of ringing clarity, he wrote that for him the words “referendum” and “Europe” went together—whatever that means.

It is our first duty as the Opposition to clarify what the Government’s policy on Europe is and, when we have done that, to say what we think of it. What is the nature of the new settlement that the Conservative Party is seeking? How radical a change is the Prime Minister seeking to make? One relatively modest interpretation of the Prime Minister’s statements is that he is seeking to exercise our justice and home affairs opt-out and to reintroduce an equivalent of the Social Chapter opt-out that John Major negotiated at Maastricht, extended to cover the health and safety measures that provide the legal basis for the working time directive. Is that the minimum change or the maximum change that the Government would like to see? We on this side of the House are clear that even if it were to be the maximum, we would have very grave reservations about it. According to police and intelligence chiefs, the exercise of the general JHA opt-out would be damaging to Britain’s security. As the European Commissioner responsible recently pointed out, there is absolutely no guarantee that Britain could opt back in to individual measures.

On the social opt-outs, is it the Government’s aim that directives such as those on parental leave, agency workers, information and consultation would no longer apply in the UK? Do the Government object to every single aspect of the working time directive—for example, minimum holiday entitlements—or simply to the 48-hour maximum working week provision? What other health and safety measures does the Prime Minister find objectionable? Is it proposed that, should the opt-out be achieved, equivalent domestic legislation would be introduced? Or is the government and Conservative position that all the social protections that the EU presently offers working people are an unnecessary burden on business that, in order for Britain to succeed in what they call the “global race”, must now be scrapped? I will happily give way if the noble Baroness would like to clarify the Government’s position, but I suspect that she will not. However, does she agree that the people of this country, many of whom work very hard with very basic protections, have an entitlement to know what her party’s policy is?

Other Conservatives go much further. Boris Johnson, the Mayor of London, talks of a Europe pared down to the single market. What would a Europe pared down to the single market look like? As the Prime Minister said, the single market is much more than simply a free trade area. It includes the removal of barriers that exist behind borders, as well as the removal of tariffs and quotas. That requires common regulatory standards, without which there can be no free flow of goods and services in the market that accounts for roughly half our trade. Can we be clear about this? If the Prime Minister accepts that the single market amounts to more than simply the absence of tariffs and quotas at the border, does he accept the necessity for common regulatory standards that cover issues such as consumer rights, environmental standards, health and safety rules under which goods can be made and services offered, drug testing, food safety, packaging, and waste disposal? Would a Europe pared down to the single market still include these protections? What is the answer?

We are not saying that the way the EU presently makes laws and regulations is perfect. The acquis of European legislation needs constant review. In my view, this should be done independently. In managing the single market the Commission should give greater weight to the economic effects of national differences in regulation and not pursue harmonisation for its own sake. However, this is an agenda for the whole EU, not one that seeks special opt-outs for Britain and a so-called “renegotiated relationship”. Frankly, that agenda is unnegotiable. Will Ministers tell us how we can expect to maintain access to the single market and negotiate an à la carte Europe at the same time?

We must look at realities. If Peugeot and Fiat already have difficulty competing with Volkswagen, which they do, why should national Governments agree to arrangements that in their mindset would allow British-based manufacturers to scrap regulation, cut costs and gain an unfair competitive advantage? On the continent they already think that because we are outside the euro we have enjoyed an unfair advantage as a result of sterling depreciation. Can the Minister not see that what is being suggested would be completely unacceptable to our partners?

Nor, in our view, is this argument right in principle. It is neither wise nor legitimate. Who in this Chamber seriously believes that a credible growth strategy for Britain in this global race can be pursued on the basis of cheap labour, bad safety standards and environmentally shoddy goods? We need to take the high road to competiveness. If the Germans, Dutch and Swedes can compete successfully in global markets on the basis of high European standards of regulation, why cannot the British do so as well?

This policy has high risks. The very mention of renegotiation and an in-out referendum will deter inward investors, perhaps from China and India, who are looking to the UK as a long-term basis for their operations in Europe. If the renegotiation fails—because, as any objective person must assume, its objectives are essentially unattainable—Britain will quickly move down a slippery slope towards exit.

Britain’s policy for the future of Europe should be based on reform, not renegotiation. Yes to a reformed EU budget, yes to a reformed Commission, yes to a reformed law-making process with reviews of the acquis and to a bigger role for national Parliaments. Most of all, yes to a Europe with the collective means to pursue a reformed economic policy that replaces collective austerity with investment in the future, and to a Europe that is strong enough to represent our values and interests in a world where Britain on its own will have progressively less clout and leverage.

On 10 December the EU received the Nobel Peace Prize in Oslo. Most of the leaders of Europe attended; shamefully, Britain’s did not. I end by quoting something that President Van Rompuy, president of the European Council, said on that day because it is relevant to Britain. He said:

“When prosperity and employment, the bedrock of our societies, appear threatened, it is natural to see a hardening of hearts, the narrowing of interests, even the return of long-forgotten fault-lines and stereotypes. For some, not only joint decisions, but the very fact of deciding jointly, may come into doubt. And while we must keep a sense of proportion—even such tensions don't take us back to the darkness of the past—the test Europe is currently facing is real … We answer with our deeds, confident we will succeed. We are working very hard to overcome the difficulties, to restore growth and jobs. There is of course sheer necessity. But there is more that guides us: the will to remain masters of our own destiny, a sense of togetherness, and in a way, speaking to us from the centuries, the idea of Europa itself. The presence of so many European leaders here today underlines our common conviction: that we will come out of this together, and stronger. Strong enough in the world to defend our interests and promote our values. We all work to leave a better Europe for the children of today and those of tomorrow. So that, later, others might turn and judge: that generation, ours, preserved the promise of Europe”.

That is a promise many of us in this House will fight to our last breath to keep.

My Lords, I support the European Union (Croatian Accession and Irish Protocol) Bill, which is anticipated to be uncontroversial and a welcome measure of the progress made by Croatia in getting to this point.

The past few years have seen a consolidation of democratic norms and political stability in that country. My only concern is about the rule of law and the backlog in dealing with cases related to war crimes, but I note that the Government remain confident that this will be resolved by the expected accession date.

On the Irish protocol, again there is nothing exceptional about this being given legal form through attachment to the treaty on the European Union and the treaty on the functioning of the European Union. What is nevertheless alarming, however, is that some Members in the other place believe that the negotiation of the Irish protocol somehow serves as a model for what the UK might wish to do in future. They do not seem to notice that its extremely limited guarantees, as they see them, are in no way comparable to what they might wish to seek in a much changed EU after 2008, when that protocol was negotiated.

I am pleased to have an opportunity to discuss developments in the EU, particularly as there have been significant changes since our debate in February this year. Two of those developments stand out. There has been progress within the eurozone countries in reducing debts and stabilising the banking systems. The architecture of a new regulatory regime is emerging, as we have just heard in the Statement on the European Council, albeit very slowly indeed.

The other development has been here in this country—the speed with which we have embarked on a new tone in the debate about our relationship with the European Union. We now have a situation where opinion polling on the EU, always a minority interest in the past, is carried out regularly in our media and shows significant support for a referendum on Britain’s relationship with the EU. That is a marked change over the past decade.

I do not find this particularly surprising. Developments in the eurozone are bound to impact on our own calculations. When 17 or a smaller number of countries move to a full fiscal and budgetary union with strong political underpinnings, it is inevitable that we will be affected. For an outward-looking, open-trading nation such as Britain, if there is a fundamental change to the architecture governing finance, capital, investment and labour, we certainly have skin in that fight.

A cursory glance at the figures reveals a lot. Since the 1980s, the UK’s bilateral trade with EU members has more than trebled. More than 45% of UK exports are to the EU. The single market, one of the more remarkable achievements of the past few decades, has given us access to a market of more than 500 million consumers. The UK attracts one-fifth of all foreign direct investment in Europe—mainly because of our membership, one assumes. While these arguments about protecting our national interests are familiar to all those across the House who clearly see what is at stake in the calls for an “in or out” referendum, I will explain where the opponents of proactive participation are coming from.

We have on the one hand those who believe that they are enhancing the UK’s negotiating position by threatening a referendum. In their book is the naive proposition that other European countries will be so cowed by the mere prospect of the UK departing that they will put up no resistance whatever in granting the UK exceptions, and that will undermine their own countries’ interests. Hence these people strike impossible bargaining positions and votes in the other place, confident that triangulation will work. This is a cynical and dangerous game and prone to failure, which is why it is so sad to see the Labour Party on the Benches opposite legitimising that position in the other place as recently as the Budget negotiations.

The second group are those who genuinely believe that we should leave the EU, and that the consequences will merely place us alongside Norway or Switzerland. This group are not just naïve; they are simply deluded. To posit an equivalence with Norway, which rides on its massive US $600 billion sovereign wealth fund and vast reserves of oil and gas, which protect a population the size of Scotland, is simply not to understand the challenges that this country faces.

Most of us who want to leave do not equate our position with Norway, or indeed with Switzerland. We believe that we want to run our own affairs independently, so please let us not run the canard of being like Norway or Switzerland. That is not the case for those of us who want out.

The noble Lord cannot have been listening very carefully. If he had been, he would have noticed that I did not name any particular players in this regard. They come from all sides.

Norway’s membership of EFTA and the EEA is about as close to the EU as it is possible to be without actually belonging. It is bound by most EU rules and regulations and pays a significant amount into EU coffers. Norway depends on other countries to fight its corner, not least on Britain and Sweden. As the Economist describes the relationship:

“It would be as though Britain maintained a golden fax machine linked to Brussels, which cost billions of pounds a year to run and from which regulations issued ceaselessly”.

Indeed, the Norwegian Government have carried out its own assessment, which found:

“As a result Norway has implemented nearly three quarters of all EU legislation, 99.6% of all single market legislation (some 1,700 EU directives), and is ranked 4th best performing country”.

That also includes the working time directive, the supposed cause of so much frustration in the UK.

The Swiss model would probably not be available, as the EU would be unlikely to extend EFTA privileges to as large and significant a country as the UK without requiring convergence across a range of areas. Switzerland is implementing most EU financial services legislation to avoid being locked out of the single market. With 50% of British trade within the EU, and single-market access so essential for attracting foreign investment, the UK would end up in the same position: implementing EU laws but with no say over them. No British votes, no British Commissioner, no British MEPs—a substantial democratic deficit.

It is instructive that even Open Europe, whose lack of enthusiasm for the EU is well known, has found that:

“EU membership remains the best option for the UK.”

All the alternatives come with major drawbacks and would all, except the WTO option, require negotiation with the agreement of the other member states, which would come with unpredictable political and economic risks. This means that negotiating a new UK relationship with Europe outside the EU treaties—that is, leaving the EU—would present similar difficulties as renegotiating membership terms while remaining a member of the EU.

The position of both camps, along with elements of the Labour Party, assumes that there is the possibility of cherry picking items for removal from the UK’s obligations. This unilateralism is wrong-headed and was clearly identified as such by Mr Damian Green just last week, when he said:

“There is a fantastic vision of an EU which remains a single market, including the UK, but which in all other respects allows the UK to be outside … This is a fantastic vision precisely because it is a fantasy. What is in this for those on the other side of the negotiation?”.

If one read the French, Italian or indeed the Polish newspapers, one would find that the answer to Mr Green’s question might be, “Nothing”, accompanied with the word “Goodbye”.

If ever there was a time for serious reflection and for all political sides to weigh carefully where these calls will take us, it is now. We need to be clear-headed about a call for a referendum, which, if necessary at all, will be so only after a future treaty change that significantly shifts competences to the EU institutions at some date in the future. An abstract discussion on whether Britain is in or out does service neither to democracy nor to the national interest. One can either be clear that there is something substantive on the table, with readily understood pros and cons, or one can play the Alex Salmond card, which is to act first and fill in the blanks later, with resulting confusion and obfuscation.

For our part, the Liberal Democrats are entirely clear. In the coalition agreement, we have agreed to hold a referendum only when there is a treaty change. However, we are clear too that the United Kingdom’s best interests lie in being an active participant in the EU, being at the table, championing our cause, making common cause with others who are like-minded, building alliances where we can and standing firm when we must—well grounded, secure and well placed in the club of 27.

My Lords, I declare an interest in that I spent a good part of my career in the British public service on European affairs and some part of it in the European Commission. I am sure that the Minister will agree with me that the wisdom of ancient China sometimes has a lesson for us today. For example, on the current soul-searching about the economic state of the eurozone, I have in mind the phrase in the Tao Te Ching, written many centuries ago:

“I let go of economics, and people become prosperous”.

Of course, I shall say a little about the economics of the eurozone and about the course that, in my view, the United Kingdom should steer in consequence. However, I also want to let go a little of economics and say something about other developments in the European Union, which risk being forgotten but which can help people to become prosperous.

I begin with the economic situation in the EU. It is always important to keep in mind that the EU is the world’s largest single market and is an economic zone larger than that of the USA and Japan combined, with a total GDP of around £11 trillion. This single market of 500 million people—I am very glad to see that it is about to be increased, by the Bill that is before us today on the accession of Croatia, to over 500 million, which I very much support—provides a relatively level playing field for British business to trade in without customs duties and tariffs and with a common set of rules that avoids 27 different sets of regulations in the member states. Of course, if the UK had a different relationship with the rest of the EU, the single market would not vanish away. But what we should do now is to clock up the single market on the plus side of membership and ensure that any future developments, particularly in the area of financial services, remain open and favourable to the UK and, importantly, that we maintain the capacity to influence them.

I am always amazed how quickly people have forgotten what trade and travel was like before UK membership of the EU. In that protectionist world, now long since vanished, when I was first living on the continent, a kind friend sent me an English cheese. However, by the time I had got through all the hurdles to get it out of customs, it had gone completely bad. That was a mouldy cheese and a mouldy system, but the introduction of the single market was marked by the biggest bonfire of forms and regulations in European history.

Now in the eurozone we have the inflexibility of the single currency and, at the same time, the two principal problems damaging the economic performance of the euro member states. First, there is the continuing fallout of the great big recession made in the USA, which brought down important banks and financial institutions or made it necessary for Governments, including our Government, to bail them out with public money. At the heart of all this was the taking of excessive risks by the private sector—for example, sub-prime mortgages in the US, but actually far more widely than that—notably excessive optimism regarding demand for new housing, so clearly visible on the ground in Spain today. This is, of course, the origin of the recuperative measures under way in both the UK and the eurozone, including more effective measures against risk and greater monitoring of banks and other financial institutions. As we have heard from the latest European Council, our situation now, as a non-member of the eurozone, is that we do not participate in the so-called banking union, but there will still be some consequences. This remains important for us, particularly the need to ensure that the voting rules in the European Banking Authority give us adequate protection. I assume that branches of British banks in the eurozone, if large enough, would be covered by the banking union.

The proposals for safeguarding banks in the Commission’s document of June 2012 seem quite straightforward and in some respects reflect our own banking legislation. These proposals cover the power to plan for, and preferably prevent, the possible failure of a financial institution, including the drafting in, if necessary, of a special manager. That has been dealt with at this most recent European Council and I believe that it is going to go forward. The second half of the document deals with insolvency and resolution powers, including, if necessary, a bail-in—that is, a requirement on bond holders to take a loss on their investment—in order to keep a financial institution solvent. That remains to be dealt with, and it will be important for us outside the banking union still to have that under sufficient scrutiny.

For some eurozone member states, the “banking element” is the dominant part of the current economic problems. For example, in the Republic of Ireland, one of our most important commercial partners, the cost of the bailout of Anglo Irish Bank is, I believe, broadly equivalent to the bailout funds received from outside the country. I remain quite optimistic about the greater “safety first” in banking and the gradual elimination of the overhang of toxic lending, and that it will be successfully achieved in both the UK and the eurozone.

The second element of the eurozone problem is more intractable. This is the overhang of excessive public debt and continuing public deficits in many EU member states. Of course, public expenditure has to come down in most EU countries, but in the mean time public debt, much of it predating the euro, has to be financed; hence the crux of the immediate problem. I love Greece dearly, but it is a tiny part of the EU economy and I will not mention it again today. If, however, there was a crisis—not the current half-crisis but a real crisis—in the larger member states, Italy and Spain, that would be serious. Evidently a guarantee given by the eurozone as a whole to the lender of last resort, presumably the ECB, would be a solution, once again demonstrating that the EU is ruled not by bureaucrats but by independent sovereign states, but that has been ruled out by Germany and some other member states.

However, the ECB has made real progress in recent weeks in restoring some confidence to these markets. The interest rate on Italian 10-year bonds, even after the reappearance of Mr Berlusconi in the political field, still remains close to an eight-month low of about 4.8%, which is sustainable. We have to accept that the correction of past overexpenditure—debt-financed—on public account will take time. Efforts should be made to stimulate growth in the eurozone as in the UK, but I am not unduly optimistic.

So what course should the UK be on? Clearly we need to maintain the advantages provided by the single market, not just in the narrow sense but also, for example, in relation to reductions in the cost of air travel, mobile communications, patents and so on. It is also evident that, given the current state of British public opinion and in the light of our correct decision not to participate in the euro, we have to look for opting out of most of the financial measures being proposed or implemented for the eurozone. We should not elevate this to a theological argument. The EU is a living organism and there are already a good number of opt-outs and not only for the UK. For example, I am glad to see in the European Union (Approvals) Bill before us today a decision to continue with one Commissioner per member state. That is perhaps not a very good decision, but it was originally foreseen to reduce the number. That was not acceptable to the Republic of Ireland, hence the Bill before us today demonstrating that point.

Leaving aside economics for a moment, it is important to remember that changes that have taken place in the EU in recent years are extremely favourable. Working and travelling abroad have been made immeasurably easier and 1.6 million Britons live in the EU outside the UK. Other changes include the mutual recognition of qualifications, no visas for three months, and the common EU driving licence and EU health insurance. Telecom monopolies have been abolished. The cost of 10-minute calls has gone down by 74% and the price of texts from 25p to 9p. All these things need to be quoted, for we have to think a bit about ordinary people in this debate as well as businesses, bankers and summit meetings.

My Lords, it is a pleasure to follow the noble Lord, Lord Williamson, who understands the complexity of the matters that we are addressing better than most.

In my view, to handle the European Union issue successfully in the light of current developments, our policy framers and advisers, and their critics, need a new mindset. Compiling a wish list of things that we want to grab back from the EU, and then trying to negotiate to stay in the single market, which some less experienced MPs and others seem to think we should be doing, will lead nowhere. We have been round this course before and in the end it does not work. The case needs to be made for greater differentiation within the European Union and this should be put forward as a positive policy for the EU as a whole rather than as a form of special pleading for UK “exceptionalism”.

As the ongoing budget saga has confirmed, we are not alone in wanting new directions for the European Union. We do have allies, both among member state Governments and, I suspect, even more among member state peoples, as recent German popular support for a different Europe has indicated. The isolation or marginalisation argument that we hear so much of is complete nonsense.

A successful approach requires a challenge at its roots to the outdated 20th-century integrationist philosophy inside the EU, commonly called “more Europe”. This challenge should be in the interests of Europe as a whole, not just the British, and, if properly formulated, will have many allies around the Union. The old “more Europe” doctrine is still being attempted with the fiscal pact, as we have already heard today. Time will show that this, too, will no longer work, not least because of the huge and still growing divergences between eurozone economies within the eurozone.

To make the case effectively and profoundly for an alternative path or model for the EU, we need to draw on disciplines far outside the normal confines of diplomacy. Scientists tell us every day that this is now an age not of centralism, top-down plans and blueprints but of self-assembly, self-replication and legitimacy built from the bottom up. The same applies, I suspect, between peoples. As the Prime Minister put it a year or so ago, in today’s world, we need,

“the flexibility of a network, not the rigidity of a bloc”.

As I have said, the key concept that we need in establishing the relationship between member states and the EU institutions is differentiation. The treaties invite us to think of powers and competences in chunks and groups which are frankly out of date. Areas such as social policy and employment policy are 20th-century categories. In today’s world, they can be far more separated and disaggregated in deciding which functions should be of common concern, which should rest at national level—where the subsidiarity concept can be effectively applied, which it has not been in the past —and which should be tackled at a far-wider-than- Europe level. The same could apply to agriculture and environmental policies, which nowadays break down into all sorts of new categories.

I am frankly puzzled by some aspects of the steps being taken towards a banking union within the eurozone countries. They are by no means guaranteed success. This is one more attempt—there will be many to come—to cope with the chronically sick euro system. In fact, a supervised banking union is a classic example of a set of functions that need to be handled globally, not regionally, as our financial experts in the City of London know well. That is why we have had Basel I, II and now III, to police and regulate banking practices the world over. I am glad that we are keeping our own globally-related financial system well clear of this narrow banking union endeavour, although with the appropriate safeguards against discrimination within the single market, as we heard from the Minister.

There is no reason at all why a policy of much more detailed differentiation in the treatment of various functions should lead to a two-tier Europe, as I fear that the present drift of events is leading. On the contrary, detailed unbundling and dissection of blocks of competences could lead to a far more varied and less divisive Europe than we have today. The gurus who keep telling us that there is no alternative either to locking ourselves into the integration process or withdrawing are quite wrong and out of date. I congratulate more clear-thinking experts like Frank Vibert at the London School of Economics for opening our minds to this second front in EU policy development in an age of complexity. We should not be afraid of taking the intellectual lead in EU policy. Many people around the union are waiting for us to do so.

We should not be afraid of showing that the Lisbon treaty was based on a deeply flawed understanding of how the connected world now works, as many of us argued at the time. We should not be afraid of laying the groundwork for a new treaty and calling a new IGC to carry it forward. Nor should we delay while the search for a solution to the problems of the euro goes through endless false starts and unsustainable initiatives. The euro will continue to require constant and very expensive treatment to survive. Meanwhile the European Union needs to be saved, reformed, updated and put on a far more secure basis of legitimacy and political support than it has in its present dysfunctional state. In turn, that will give us in this country, as well as many other states, sensible and sustainable relationships with all our neighbours and friends within the EU and with the EU as a whole. It will also give us a modern and realistically differentiated breakdown between national and supernational powers, bilateral alliances and collectivism in Europe, which will command popular support in any referendum, where we can rely on the shrewd and unconventional wisdom of the British people.

Let us put aside shopping lists and unrealistic want lists and boldly come forward with strong pan-European ideas and proposals for a healthier union in a new global landscape which is taking shape. If, as we are told, treaty changes in the European Union lie ahead anyway, let us ensure that we take the initiative in shaping them and helping to redirect Europe in a sensible, workable and relevant direction to the benefit of all member states, including ourselves.

My Lords, it is a pleasure to follow the speech of the noble Lord, Lord Howell, at least some of which I agree with, especially the beginning and the end. It was good at least to hear him mention the London School of Economics. I begin by noting the curiously male dominated nature of debates in your Lordships’ House about the European Union. This one is no exception. Apart from the Minister, only two noble Baronesses are contributing, and one has conveniently been placed at No. 32, propping up the list of men. Perhaps the noble Baronesses present would get together informally and see whether anything could be done about this in future.

I want to concentrate on the economic situation of the eurozone and the EU. I base what I have to say on what is probably the most comprehensive and objective report on the state of the pan-European economy, produced under the auspices of the Lisbon Council and the Berenberg Bank, which is referred to as the Euro Plus Monitor. This year’s report is appropriately entitled, The Rocky Road to Balanced Growth. Rocky road or not, the results in the report stand out sharply from the despairing tone of many commentators, particularly in the British press. The report shows that fiscal deficits in the eurozone countries are being slashed at what it describes as impressive speed. The countries that have received financial backing—Greece, Ireland, Portugal and Spain—have all moved up the scale of indicators that the report provides in the reforms that they have instituted. These are real, not formal or promised, reforms. Greece is No. 1 on the scale, Ireland No. 2, Spain No. 4 and Portugal No. 5. The one in between is Estonia, which is No. 3.

The authors state, and I agree, that it is a mistake to counterpose austerity and growth in a simplistic way. Austerity can be a potent medicine, but should be in the service of clearing the way for economic growth. As with any other medicine, refusing to take it can add to the travails of the sufferer—indeed, lead to their demise—but so can an overdose. The latter, the authors say, is what is happening in the UK, and in a much more dramatic way in Greece, which risks entering a death spiral because of the strength of the dosage being forced down the patient. Greece may be No. 1 in terms of real reform, but starts from such a low base that it ranks at No. 17 in the eurozone on the other economic scale used in the report, a scale of overall economic health.

Another tranche of support for Greece has just been concluded, but I have to agree with the authors that, from this point on, the debate about Greece should shift towards long-term pro-growth reforms. Contrary to what many say, Greece is not likely to exit the euro and it is important, as the authors say, for the European Union to produce a specific plan for the future of that country at this point.

There are some very interesting further results in the report, which to many commentators will be counterintuitive. As for measures of economic health, the study shows a dramatic increase in external competitiveness as measured by a range of indicators, especially among most of the southern countries. In my view, that is an extremely important finding. It means that economic convergence is occurring under the pressure of change in the EU, something which the Lisbon agenda manifestly failed to achieve, economic convergence being a key condition for a return to health on the part of the eurozone economy.

The report shows amazingly widespread restructuring. It is going on almost everywhere. The authors also make the point that parallel changes to those transforming the eurozone are not happening in the United States or Japan, countries which are even more indebted than the eurozone average. If the eurozone countries can stay on the path of reform, the authors say, they could emerge as the most dynamic of Western economies. That is a big if, of course, but in the light of the data that the authors provide, it is no longer wholly implausible.

The analysis of the UK is both interesting and salutary. The UK, the report stresses, sees itself as an economy apart, with its own currency and so forth, pulled down by the fallout from the euro crisis. If the UK left the EU, it is often thought that it would be far more successful. The findings of the report do not bear that out at all. The UK is, in several ways, more vulnerable than most members of the eurozone. That is documented in detail in the report. For instance, the UK has one of the weakest fiscal positions of any EU country. Its ranking in terms of external competitiveness is no more than average, and a pretty weak average at that. In the second half of 2013, the report concludes, average growth rates in the eurozone are likely to be higher than those in the UK.

I hope that the noble Baroness will comment on those findings, based as they are not on supposition but on detailed economic analysis. I trust that her response will not consist of truisms or banalities but will be based on economic analysis in comparing the UK with the countries in the eurozone.

My Lords, I begin by saying how much I welcome our consideration of the legislation which will permit the accession of Croatia as the 28th member of the European Union. That is an important development and, as the Minister said in introducing the debate, the process of negotiation carried out for Croatia was very important, and more rigorous than some of the earlier ones. I therefore hope that its membership will be more successful.

As the noble Lord, Lord Liddle, suggested, it must be surprising for those arguing for minimalist membership of the United Kingdom to see that there is a continuing queue for full membership of the European Union, with no opportunities for opt-outs. I very much hope that ratification will be completed in all the member states so that accession can take place in the middle of next year, and that remaining bilateral problems will not provide obstacles.

My Lords, as the noble Lord, Lord Liddle, mentioned this phenomenon as well, and turned and wagged his finger at me with great energy when he said that millions of people want to join the European Union, do those noble Lords agree that that wish is guided by the political classes in those countries far more than by the people? It is, of course, the political classes who stand to get at least 10 times their present salaries on the EU pay scale either at home or in Brussels?

As we have been constrained to keep to seven minutes, I shall say no more than that in almost all of the countries that have acceded recently, there have been referendums and that, therefore, the people of those countries have given their consent to the process of accession.

Turning to the Prime Minister’s Statement, which we heard earlier, the agreement in ECOFIN and then in the December European Council on the method of guaranteeing the interests of the non-members of the eurozone as the banking union develops, is, I believe, very satisfactory, and suggests that it will be possible to find effective arrangements for those member states outside the eurozone as economic and monetary union develops to preserve the integrity of the internal market in financial services. On the other hand, it must be said that the progress towards achieving an effective road map at the European Council to develop such an economic and monetary union was very limited, and suggested that it will take rather longer than expected.

We are approaching the 40th anniversary of British accession to the European Union, and we should, I believe, be celebrating the contributions of the UK Commissioners and officials from the UK who have played a part in that development. We have heard from one, and we will hear from another shortly. Instead, we are being exposed to competing proposals for less or more repatriation of competences to London from Brussels. This was referred to in only general terms by the Prime Minister in his press conference on Friday, but may be made more explicit in his much awaited European speech.

It is difficult, on one level, to equate such proposals with the view frequently stated in this country that we should operate on a level playing field, because this seems to be an attempt to make the playing field not level. Even before President Hollande’s categorical remarks on Friday, it is very difficult to see that they would be acceptable to the other member states. Indeed, President Hollande echoed remarks made earlier this year by the German ambassador. The idea that the United Kingdom could bargain such repatriation against our support for the constitutional changes needed for full economic and monetary union and putative political union is not plausible. The other members would follow the precedent of last December and proceed with a treaty among themselves.

This is not to say that there are not many unsatisfactory aspects of the current operation of the European Union and that there is not considerable validity in many of the criticisms of it. However, we need to find other ways to implement a reform agenda. I believe that the way is to work within the union to make changes that would then apply to all member states. The coalition Government have already had some success in this and should pursue it.

For instance, we strongly supported the proposals of Commissioner Damanaki, first considered in July this year, which, when implemented, will fundamentally overhaul the common fisheries policy. Incidentally, they follow very closely the proposals in your Lordships’ European Union Committee’s report on the common fisheries policy, which was produced in July 2008. They would involve devolving powers over the design of sustainable fisheries to a regional and national level, so that they can design innovative and tailored policies for their seas within the overall CFP.

In another example, when he was a Minister in BIS, my right honourable friend Ed Davey, working with a group of like-minded countries, negotiated the first exemption for small businesses from European Union accounting rules, saving small businesses £400 million a year. This has led to an EU commitment to exempt small businesses from all new EU regulations wherever possible. More recently, my right honourable friend Vince Cable has put forward, together with 12 other member states, a 10-point plan for smarter regulation.

The same approach can be seen in, for example, making changes to the working time directive. These examples demonstrate the opportunities for working within the European Union to deal with problems, rather than seeking unilateral repatriation.

Finally, the balance of competences review which the coalition Government have set up may discover examples where the principles of subsidiarity and proportionality have not been followed in the past. In these cases it would seem very useful to raise them within the various institutions, with a view to changing the European Union legislation concerned. We have significant opportunities for effective reform within the Union, but not by unilateral repatriation.

My Lords, with regard to the two pieces of legislation before us this evening, I often wonder whether the European Union is getting too large to manage. That concern applies to those current practitioners who are in Brussels on a regular basis. With regard to the Irish protocols, I would draw the attention of the noble Baroness, Lady Falkner of Margravine, to the fact that these exceptions were brought in to persuade the Irish electorate to support the recent treaty—as the Minister conceded. To some extent, the Irish received the assurances lest they go and vote against the proposals; to some extent they were rewarded, therefore, for their opposition.

When we discuss Europe in your Lordships’ House, I often think that the wisdom of Solomon would be insufficient to allow one to navigate through the different processes and views. However, I want to mention one thing—the general rhetoric around Europe at the moment. The front pages of the press scream various things from time to time about what is wrong in Europe or what Europe is doing to this country, but they do not trace back from that point to why these things are being done. These things are being done because successive Governments and Parliaments have agreed to them. The European Commission has not come here and stolen the powers that it has taken away—we have agreed to these things, in our wisdom or otherwise. Successive Governments have put their hands up for them, voted at 4.30 am and done all that they do in these summits. When it was given the opportunity—which was rarely, it has to be said—this Parliament agreed to them. So when the headlines scream and we wish for someone to blame—those to blame are the people who agreed to these things. Europe is not stealing anything from this country; we gave it. When someone is given a power, we can hardly claim shock or horror when it is exercised. The blame, if you like, for where we are today is our own.

The last time people had an opportunity to have a say—when we started off in the European Union—they voted for the Common Market. My worry is this: there are certain things that it is common sense to do collectively. I cannot imagine what it must have been like for the generations that witnessed the wars and the horror in Europe; it is obvious that people would have wanted to avoid repetition of that. In addition, there is a whole range of things—the environment, air quality—where it is sensible to work collectively with your neighbours. There is nothing wrong with that. The fundamental dishonesty underlying all this, however, is that there are two thought processes here. One process looks to the market and wants to follow the open market as the main reason for doing all this. There is another, federalist group, which believes in a Eurostate. That is a perfectly legitimate thing to believe in. However, there is a fundamental dishonesty, which led to the euro crisis, because countries that were never fit for it were admitted to that currency. Indeed, even the Germans and the French broke the rules. Germany was able to recapitalise at interest rates that were entirely suitable for it, but were the ruin of some of the other eurozone countries. There is this fundamental tension. It is dishonest, because we are sitting, allegedly, among partners at the table, some of whom are plotting in another direction from ourselves. This needs to be opened out into a proper and honest debate.

The noble Lord, Lord Liddle—in a bravura performance—said that his job was to challenge the Government and see what they actually were doing. He did not burden us with enlightenment as to his own party’s position, but it seems to be in a swither and I do not know how it will end up. However, there is another thing: we undermine public confidence in the European Union in this country by pretending that things are not happening. For instance, on immigration, I asked a number of recent Written Questions. I was told that we do not routinely assess the likely number of people who will come to this country. Why not? How can it possibly be that a Government are not assessing as significant a thing as that? It is this fear of discussing something hugely significant, such as the importation of large numbers of people—as if that will not have an impact on our community—and things like that, which is undermining people’s trust. As the noble Lord, Lord Howell, said, we have to have a completely new debate with new ground rules, which has to be open and honest.

Above all, the fundamental fault line is whether we want ultimately to go to a federalist solution with a state, having already started to put some of those institutions— such as the presidency and the nonsense of a foreign affairs service—into place, or whether we are a trade body with bits added on. We need to solve that. However, regarding the rhetoric about how awful Brussels is, which has been in the press for years and which not only this Government but others are now taking up, your Lordships should bear in mind that Brussels does what we have allowed it to do.

We need a complete rethink. We have the re-emergence in some of the southern European states of fascist parties, and we have countries such as Spain with 25% unemployment and more than 50% youth unemployment. Can your Lordships imagine what this House and the other place would be like if we had those figures? That is not the sustainable basis for democracy in the long run. I wonder whether, in order to pursue this dream that some people have, we are pushing some of these countries towards destruction by insisting on this. We need an open, honest debate but the first people who we have to be honest with are ourselves because we have agreed to all the powers that Brussels is exercising.

My Lords, I declare an interest as I was a European Commissioner for some eight years. Watersheds in politics generally become apparent only with hindsight but I suspect that 2012 will prove to have been one for the European Union. It has of course been dominated by the crisis in the eurozone. The eurozone has survived in one piece but at a very heavy price. Not so long ago, the European Union was admired as a model for post-modern interstate relationships from which Asians and Latin Americans wished to learn, but that is certainly no longer the case. Indeed, it is the reverse as Asians compare the way in which the EU has been dealing with its problems with the way in which they handled theirs a few years ago. It has also damaged very considerably the EU’s relationships with its main trading partners in the United States and elsewhere.

Worse still is the price being paid within the eurozone itself. Although the deficit countries have made more progress than they are often given credit for in improving their competitiveness and trade balances, the burden of austerity grows ever heavier. This embitters relations between the peoples of the member states, with anti-German feeling now strong in the Mediterranean and resentment and bailout fatigue growing in Germany and elsewhere in northern Europe.

Such a situation cannot continue. To many in leadership positions in the EU institutions and in other member states, the response is to transform the eurozone from a currency union into a fully fledged fiscal and economic union. That has been the case for some time but this is the year in which those aspirations have taken physical form, with the President of the Commission and the President of the European Council both producing blueprints that would, in effect, place ultimate economic and budgetary control within the European institutions.

I know that not very much progress has been made down that road. At the recent EU summit there was a banking union agreement, but a very partial one. I realise, too, that there are those among the eurozone members who baulk somewhat at the consequences of what is being proposed. However, it is the route map that has been set and it is one that Britain cannot go down. There are other EU members outside the eurozone who cannot do so either. Yet it would be contrary to our national interest to leave the EU and contrary to the national interest of all members, whether within the eurozone or not, for the EU to break up.

The challenge facing all EU Governments is therefore to find a way to maintain the EU in such a way that it can embrace both those who want closer integration and those who, within an overarching framework, want looser and more flexible arrangements. It is to this task that I urge British Ministers to direct their energies. I urge them to seek ways to maintain the single market, the common external trade policy and their supporting structures, from which we derive great benefit, so that they work as effectively as possible in the interests of both the euro-ins and the euro-outs. Likewise, I hope they will seek to maintain and improve the mechanisms for co-operation in foreign policy and security matters. I was encouraged by what the noble Lord the Leader of the House had to say on that subject earlier today.

As the largest of the non-euro countries, Britain is well placed to rally all those outside the eurozone behind proposals to reconstruct the EU along these lines in the interests of both groups. Of course, British Ministers will have an agenda of particular objectives that they wish to achieve; so will others. However, we are far more likely to achieve our objectives if they are presented within such a context rather than on their own or as part of a general resistance to the ideas of others.

Within the eurozone there will be those ready to respond to such an approach, contrary to what the noble Baroness from the Liberal Democrat Benches said earlier. Only last month the new Dutch Prime Minister, Mr Mark Rutte, called for the EU to carry out a review of its powers and consider returning some to the member states. He said:

“What we want to do is have a debate at the level of the 27 whether Europe is not involved in too many areas which could be done at the national level”.

While calling for “more Europe” on budget discipline and in handling Europe-wide financial issues he said that he is,

“not in favour of a federalist European state”.

I have one last point. It is not only in order to enable the euro 17 and those who want a looser involvement to work together in constructive harmony that a British plan for the reconstruction of the European Union is required. We must also bear in mind that there is no guarantee that the eurozone will hold together. Everyone, including us, needs to have preparations in place to ensure that the EU and its core structures can be maintained in the event that not all current members of the eurozone can live within its disciplines or, perhaps, within its aspirations.

My Lords, and now for something completely different: I shall confine my remarks exclusively to Croatia’s accession to the European Union. In doing so, I declare an interest as secretary of the All-Party Group for Croatia. I am also a trustee of the Dundee Trust, an initiative of the noble Earl, Lord Dundee, which has been active in supporting community projects in that country. I have taken a close interest in Croatia since, as chairman of Sub-committee A of the European Union Select Committee at the time, I took members of the committee to three western Balkan countries in 2002 to review the effectiveness of EU economic aid in that region. That was seven years after the terrible war in the former Yugoslavia had finally been brought to an end, but the damage done was still very visible.

By 1991 Croatia was in control of only two-thirds of its territory. Only after a decisive victory in August 1995 could the process of restoration of occupied areas be completed. This small country and its people had suffered enormously. The massacres of Osijek and Vukovar will not quickly, if ever, be forgotten. However, the Croatians are a resilient people and now, 17 years later, they stand at the door of the European Union. One year and eight days ago Croatia finally signed the treaty of accession, since when it has been fully focused on its final preparations for membership.

As the Minister reminded us, the six-year-long negotiation process was far more complex and demanding than any of those in earlier rounds of enlargement. The more rigorous and more technically complex process is best reflected in the introduction of a new methodology, benchmarking. Some 127 benchmarks were defined in detail and their fulfilment closely monitored, resulting in far-reaching and irreversible reforms in all areas of Croatia’s economic and social activity. The number of chapters to be opened and closed—31 at the previous enlargement—had risen to 35, each containing a larger than hitherto volume of the acquis to be transposed in national law and then implemented. For the first time during an accession process the Act of Accession sets out detailed provisions regarding pre-accession monitoring, with six-monthly assessments by the EU Commission of progress achieved. The Commission’s November report, while noting substantial progress, pointed to three areas in which Croatia needed to do more: competition, judiciary and fundamental rights, and security and justice.

At Second Reading in another place of the European Union (Croatian Accession and Irish Protocol) Bill, the Minister for Europe, David Lidington, rightly called on Croatia to sustain the momentum of six years of significant reform, particularly on judiciary and fundamental rights. He had been in Zagreb in July and now reported:

“I was impressed with the dedication in evidence, particularly from the Foreign Minister and the Justice Minister of Croatia. They are very aware of the challenges that face their country and they are keen to prove to us as their neighbours and friends, and to their own citizens, that they can make a success of accession”.—[Official Report, Commons, 6/11/12; col. 761.]

That, as an active observer of their progress, is also my firm impression.

However, there are, of course, still problems not yet fully resolved. More resources are needed to deal with the handling of domestic war crimes by specialist tribunals but, happily, the inadequate pace of progress has of late been accelerating. The backlog of civil cases in the courts remains a problem, but the backlog in criminal cases continues to fall. On the competition front, Croatia must make progress on the necessary market reforms of its shipbuilding sector, and it is working hard on that.

I turn now to immigration. Croatia is a small country, with a population of fewer than 4.5 million people, which incidentally makes it all the more remarkable that it should carry off three gold, one silver and two bronze medals at the London Olympics. Siren voices among Eurosceptics in Parliament and in some quarters of the media would have us believe that Britain will eventually be flooded with job-seeking and benefits-seeking Croatians despite the transitional controls which members states can apply under EU law for a seven-year period from accession. They ignore Croatia's economic readiness to join the European Union. Over the past decade, its per capita GDP has reached 61% of the EU average, surpassing several new EU member states. The Government are firmly committed to boosting economic competitiveness, sustainable growth, and an economy based on innovation and high technology. The World Bank categorises Croatia as a “high income economy” and it is one of the rare European countries to maintain and even improve its international credit rating. I do not see Croatians in seven years’ time desperate to leave and queueing up for entry into Britain. The traffic might even be in the opposite direction.

The shadow Minister for Europe, Emma Reynolds, speaking during the Second Reading debate in another place, underlined the cross-party support for EU enlargement. She said:

“The process … has provided, and continues to provide, an incentive for peace, democratisation, economic reform, the promotion of human rights, and the development of anti-discrimination legislation”.—[Official Report, Commons, 6/11/12; col. 769.]

How right she is. As she emphasised, there is also the economic case—the largest single market in the world, with 500 million consumers, grows with each enlargement. That is good news for British companies and therefore for the British economy.

Finally, the most important benefit from Croatia’s accession will be the degree of added stability that that can bring to the western Balkans. If Croatia, a once war-torn post-communist state, can transform itself through the accession process into a fully-functioning parliamentary democracy and market economy, not to mention its participation in more than a dozen UN, NATO and EU peacekeeping missions all over the world, so can the other states of this once embattled region. The example has been set. If they follow it and Croatia, drawing on its own experience, is already making great efforts to help its neighbours to do so, we will all be winners. Let us therefore fully support this Bill and give Croatia the place in the European Union it richly deserves.

My Lords, I shall also concentrate on one issue—justice and home affairs. What are the Government’s reasons for exercising the block opt-out? Two reasons were given at a recent Law Society conference. The first was that the European Court of Justice will impose a Europe-wide criminal justice system and will erode our common law. This was also an argument advanced by the chairman of the Conservative Party and Mr Raab’s paper. The second argument presented by Mr Booth, who wrote the definitive paper for Open Europe on the subject, was that the present arrangements—as far as the police and crime questions were concerned—promoted an unnecessary supranational approach to cross-border police co-operation when bilateral arrangements could do just as well.

At this meeting, the view of the Law Society on the first point was unanimous: fears of the European Court of Justice were unjustified. The idea of a Brussels plot to impose a single common justice system on the whole of the European Union was a Euro-myth, rather like the stories that appeared in the Eurosceptic press that Brussels would ban corgi dogs, double-decker buses, barristers’ wigs and the burial of pets in gardens unless they had been pressure-cooked beforehand.

On the second question, the police were unanimous in their opposition to the opt-out. Britain has played a leading role in the development of EU police and crime institutions and initiatives and in developing—something very important—EU-wide databases. The British police and their methods are greatly admired and respected on the continent. A British policeman is the head of Europol. Britain hosts the training college for Europol at Bramshill. Britain has led many major transnational criminal investigations and has played a major role in the institution of the joint investigation teams.

Serious crime has increasingly become a cross-border activity and can be dealt with effectively only by cross-border policing, Europe-wide, not just through bilateral national co-operation. That is surely so obvious that it is unarguable. It is true of the porn trade, paedophilia rings, people trafficking—of children and prostitutes—drug dealing, money laundering, terrorist financing, cybercrime and a lot of financial fraud. There are any number of activities in which criminals are becoming ever more sophisticated and operate ever more across national borders.

Look at the successes of Europol and Europe-wide police activities. Paedophile rings have been broken up; people managing the smuggling of thousands of illegal immigrants have been stopped; a crime ring smuggling children into Britain has been broken; and people promoting the cross-border trade in prostitutes have been stopped. The list is much longer than that.

The European arrest warrant has proved a considerable benefit. It has dramatically reduced the time and cost of bringing back criminal suspects who have fled to different parts of Europe and of sending back from Britain those wanted for crimes committed abroad who would otherwise be committing their crimes here. There were some serious flaws in the warrant, that is perfectly true, but these have been addressed and, according to the Baker review, are being remedied. If we are to play a part in seeing that the reforms are the right ones, the last thing that we should do is opt out.

The opt-outers say that we can opt back into the anticrime activities. That would be much less simple than is claimed. There will be objections, and there will certainly be delays during which British staff will have to leave the agencies. How stupid we will look if we withdraw from activities of which we have been one of the main promoters. If we seek to opt back in to them once we have withdrawn, it will destroy our reputation in an important area where it is now high. If we do opt back into these activities and institutions, what happens then? They will once again come under the jurisdiction of the European Court of Justice. So much for one of the main objections to the justice and home affairs provisions, and for the opt-out from them.

The Government would be wise to take note of two normally conservative institutions: the Law Society and the police. Both are against the opt-out. Neither is notable for euro-fanaticism. The police in particular take a very pragmatic line. Who would benefit from the opt-out? Those who benefit would be the paedophiles, the porn merchants, the people traffickers, the child exploiters, the drug dealers, the clever fraudsters, the money launderers and, indeed, the terrorists. One of the prime duties of a Government is to protect their citizens from crime. How will the opt-out help? Who knows better about that than the police? The opt-out would prejudice the safety of the British people.

I hope that my noble friends on the Conservative Benches will note what the current head of Europol, Rob Wainwright, wrote in a paper in May:

“in my world, the EU works”.

I end with a quotation from that well-known Eurofanatic, the noble Baroness, Lady Thatcher. She said in her Bruges speech:

“I want to see us work more closely on the things we can do better together than alone. Europe is stronger when we do so”.

My first task is to commend to the House the EU Select Committee’s timely report on European banking union. I do so in the absence of the noble Lord, Lord Harrison. This is a riveting report and a riveting read. Clearly, the Leader of the House, given his polite remarks about it, has already studied every word closely. I congratulate the noble Lord, Lord Harrison, whose sub-committee produced it, on his sagacity. He had to deal with some pretty intractable material; I do not mean just me and the noble Lord, Lord Hamilton of Epsom, but the issues, which are quite difficult. They certainly engaged ECOFIN and the European Council last week.

We spent the autumn taking evidence from, among others, the president of the European Council, the Commission vice-president, the vice-president of the ECB, the chairman of the EBA and the Financial Secretary to the Treasury. Our conclusion was that, given the urgent need to break the vicious circle between banks and sovereign states, there was much sense in the Van Rompuy three-pronged approach: a single supervisory mechanism, a common resolution mechanism and a common deposit insurance scheme. We were concerned that the second and third elements had been consigned to the back-burner; we thought all three were necessary. However, we thought that the SSM proposal—the supervisory mechanism—was an important first step, and we accepted that the ECB was the appropriate institution to take on the role.

We stressed the need for triple safeguards, first, to deal with possible conflicts in the ECB between the requirements of monetary policy and concern for the banks under supervision; secondly, to ensure equality in decision-taking between euro-area countries and those non-euro-area member states which wish to participate; and, thirdly, while respecting the ECB’s independence in its monetary role, to provide for effective accountability in the supervisory role, including to national parliaments as well as the European Parliament.

The agreements reached in Brussels last week are only partial and will be reviewed in the European Parliament this week in respect of the EBA. However, I note that the first two safeguards, which we thought important, appear to have been secured; there will be strict separation of supervisory and monetary policy tasks; and the eurozone and non-eurozone member states participating in the mechanism will have full and equal rights. I also note that the new regime will, at least at first, apply only to a small minority of participating member states’ banks. In our report, we thought this realistic. We thought it unrealistic to envisage the ECB taking on intensive supervision of 6,000 banks straight away. We suggested that it should focus on the largest cross-border, systemically important banks, but with the power to step in quickly in respect of others if need be. Possibly for slight different reasons, Mrs Merkel seems to have taken the same view.

In our report, we noted that though—I would say “because” but the report says “though”—the UK would not participate, UK interests could be affected, with a significant risk of our becoming marginalised as others move towards closer integration. We thought that the EBA, the organisation tasked with building a rule book for all member states, could itself be marginalised, or find its decision-taking predetermined in the ECB or by caucusing among SSM member states. We called on the Government to do all in their power to ensure that London’s pre-eminence was not imperilled. It is clear that the Government took these risks seriously. They have secured Council language promising a level playing field between member states that take part in the SSM and those that do not. They have also secured the double-majority voting system for the EBA, which the noble Lord the Leader of the House described and the strength of which he said was rock solid. My noble friend Lord Williamson asked whether it was watertight; some think that it looks a little fragile. That is no doubt one of the points to which the Committee will return as we go on watching developments in banking union in the weeks and months ahead.

Until now, in speaking of the report of the noble Lord, Lord Harrison, I have tried to emulate his admirable even-handedness, breaking with the habit of a lifetime. I will now add two more personal and more partisan points of my own. They are gloomy predictions. I know Cassandra’s fate, but her track record, sadly, was very good.

First, although there is disagreement across the EU—including, strikingly, between Paris and Berlin these days—about the appropriate pace, there is near-unanimity on the direction of travel. The papers which the European Council considered last week made it clear that the SSM, the banking supervision arrangement,

“will constitute a first step towards a financial markets union”.

For most member states, what is envisaged is the deepening, the further integration, of the single market. Our Government take a different view, as our Prime Minister explained after the October European Council:

“you do not need a banking union because you have a single market; you need it because you have a single currency—so Britain should not, and will not, be part of that banking union”.—[Official Report, Commons, 22/10/12; col. 699.]

After this European Council, the Government take pride in having secured a promise of,

“full respect for the integrity of the single market”.

However, those words have a different meaning for those who see the single market not as a finished artefact to be preserved, but as a process to be pressed forward in everyone’s interests. That is what we used to think, because we believed that the general EU interest in open, competitive markets coincided with the UK interest, including in the health of the City of London. That is why the noble Baroness, Lady Thatcher, fought to obtain qualified majority voting for single market legislation. That is why UK Governments and UK commissioners drove the process forward. They were right; London did benefit, strengthening its lead as Europe’s pre-eminent market.

However, looking ahead, as eurozone Finance Ministers meet more and more often with their other fiscal and banking union colleagues, but without us, it seems reasonable to suppose that they will from time to time discuss financial market legislation. When such legislation comes to Council, they will have their qualified majority. As the Leader of the House clarified, the double-lock majority system, about which my noble friend Lord Williamson was a little sceptical, applies only to the EBA, not to the Council.

The French say, “Les absents ont toujours tort.” I wonder whether it is plausible that those envisaging and working for a financial markets union will always agree that its principal location should be for ever offshore. What we have been hearing from Paris from Monsieur Noyer in recent weeks could be a harbinger of real perils ahead.

My last point is that talk of a “new deal” to be negotiated after the election alarms me, whichever side of the House it comes from. I was encouraged by many aspects of the speech made to the CBI on 19 November by the leader of the Labour Party, although, for me, it did not excuse the irresponsible alliance of opposites struck with Eurosceptic Conservatives to seek to embarrass the Government on the EU budget. But even Mr Miliband spoke of working,

“to ensure that this more flexible European Union, where some countries pursue deeper integration and others don’t, still benefits all”.

In my view, the others he speaks of are very few and not very popular.

In his October Berlin speech, the Foreign Secretary spoke of many countries wishing different kinds of integration. Most member states actually want to stick together, in my view. We in Britain resist the idea or talk of a two-tier Europe; we prefer to talk of multi-tier or variable geometry or flexibility. Yet our friends abroad are sadly noting that a common feature nowadays of the groups who opt out—or choose to stay out—is that Britain is in them all: monetary union, banking union, fiscal union, Schengen, and now apparently justice and home affairs. We used to try to shape EU developments. In US football parlance, we played offence. Now we play defence. Our aim is to stop further integration, or at least to ensure that we do not have to comply with it. We used to look for opportunities; now we see only threats, perhaps because we are always looking over our shoulders at UKIP, whom I look forward to hearing from later in the debate.

Against that background, I think we have to recognise that we are losing our friends in Europe. Supposing we turn up after an election seeking a “new deal”, which would mean that we would remain full members of the single market, although we are perceived as obstructing or opting out from its further development, while trying to insist that EU laws affecting social policy, or labour costs, or fisheries or agriculture would not apply to us, or brandishing a totally new blueprint of the kind recommended by the noble Lords, Lord Howell of Guildford and Lord Tugendhat. Is it realistic to expect that such proposals would win the necessary unanimous support of all other member states? Unanimity is required to change the treaties. What we heard from Paris, from President Hollande, last week may be indicative. I think we might well be told to make up our minds, either out or in.

As the Prime Minister prepares his long-awaited EU speech, I really hope he will avoid the temptation to hold out a false prospectus. One should not talk about “new deals” unless one is sure that they are realistic. Better still, when thinking about UKIP, remember Kipling and his warning that the trouble with paying the Danegeld is you never get rid of the Dane. They will always come back for more. You have to stand up to them and make to the people of this country a realistic, positive case for Britain’s EU membership.

My Lords, I always enjoy listening to the noble Lord, Lord Kerr, and today was no different. However, for a few minutes I intend to talk about something quite different and perhaps much more humble. I shall respond to the views of some of the Conservative Party, not obviously in this House, but in the House of Commons, who wonder whether we should be in the European Union at all. We have not heard anything of that today, but I know that it is muttered about a good deal in the House of Commons at the moment.

I regard not being at the heart of the European Union as unthinkable and dangerous to our prosperity. I make no bones about this. I have always been a strong believer in the value of the European Union and in Britain’s full participation. I was influenced in this by having a Spanish great-grandmother and a German grandmother. Perhaps they drove me on. I followed Ted Heath in the 1970s and Ken Clarke in the 1990s and I have always thought that the pathway for the United Kingdom should be a leading role in the European Union.

I still have no doubts about that but I realise that, if I look ahead 20 years, say, I can see China close to the USA in its strength and ability to dominate trade throughout the world and it is followed by Russia, India and Brazil. Where will we be if we are by ourselves, with just 60 or 70 million people? We certainly will not be dominating the international banks as we do now, or leading the United Nations assistance to Africa. If we are to be effective as a country in the years ahead, I believe that we will need to have a leading and active part in a European Union which has country members stretching from Poland to Bulgaria and, because of the size of our collective trade, our voice will be listened to and followed.

Clearly, there is a danger ahead, for the reasons I gave at the beginning of my speech. I would very much like to see more direct discussion with our parallels in the European Parliament and in other European member countries. This simply does not happen enough at the moment. I have served on three sub-committees of our EU Select Committee—I am a member of one of those committees now—and I have been on the main committee. We have produced wise and thoughtful reports, but they are always British reports and I do not think that they are read by anyone outside this country—or certainly by very few people. Surely we need to change this. We need to make reports and decisions collectively with our European colleagues so that we talk and agree together about how to increase the trading strengths of the European Union.

The important point at the moment, of course, is the discussion about the budget for the European Union Commission for the next seven years—2014 to 2021. This budget is being discussed at the moment and questions about how much it will go up and whether it will go up at all are on the table. However, who among us has had the opportunity to talk to colleagues in Germany, France and Poland about the amount of money being made available to the EU over the next seven years and how it should be spent? That surely should be our challenge at the moment. All of us who support the European Union should surely be beating the door to the Commission and demanding involvement in the vital financial decisions that are ahead. We should be taking part in establishing the crucial programmes in the new budget and which ones could be dropped, because there are some of those too.

The Commission plays off one against another, determined to increase the amount of money it is going to get from the 27 countries that are now members of the EU. A balance needs to be struck. Surely there has to be more involvement and more discussion among the members, not with the intent of destroying the European Union but, rather, with a view to being determined to make it work better and more effectively in the years ahead. That should be our challenge. If we can succeed in that, our success will be blessed by our descendants.

My Lords, I start by declaring an interest. I act from time to time as an unpaid adviser to the President of the European Commission.

I certainly welcome this debate. It is very timely and inevitably it is centring on the UK’s awkward relationship with the European Union. As we have heard, the Prime Minister is poised on the verge of a major speech that will define future policy—at least, that of the Conservative Party—towards the EU. I am not sure whether this speech will pre-empt the current review of the balance of competences, which is a major government exercise, and I should be grateful for clarification on that. Whenever he gives the speech—perhaps over the next few months—will the PM not be jumping the gun? He will no doubt seek to differentiate between his role as Prime Minister and his role as leader of the Conservative Party, but will others understand this distinction? Will the Liberal Democrats, for a start, understand it? I certainly do not think that other EU leaders will, and there will be the inevitable risk of a further deterioration in UK relations with the EU. As I said before, should not the PM at least wait for the completion of the review of competences exercise?

I recognise the pressures on the Prime Minister. Those who yearn for a UK free from and unfettered by ties to the EU continue to push him towards a voluntary Dunkirk. They see the world through a sepia lens, clouded with nostalgia. They ignore some uncomfortable truths, such as the extent of foreign ownership of the UK economy, some of which is here to take advantage of the EU single market. They do not address the issue of whether UK companies are perhaps too vulnerable to foreign takeovers, especially as they become cheap following devaluations of sterling. For example, when Cadbury fell to Heinz, we could have done with more pressure on that American company. Where were the nationalists then? I never heard a squeak. Nor do they address the question of what an exit or a transfer to a new semi-detached status for the UK would mean for social policy. As my noble friend Lord Liddle said so well, the working time directive is a frequent target, but the UK—wrongly, in my view—already has an opt-out from the 48-hour week. What more is required? Do they mean the minimum entitlement of four weeks’ paid holiday? That was a big step—perhaps the biggest social step that Europe took. So when there are remarks about all this social nonsense, that is what they are talking about: a minimum entitlement of four weeks’ paid holiday. Before that, the entitlement for many workers was less than three, and the average was about three weeks for manual workers.

So what are we actually on about? Are we talking about the underpinning of maternity rights, the right to information and consultation on major decisions, or the European Works Councils, with which about 450 British companies are entwined at present? I could go on. What do the Eurosceptics mean in relation to social policy? By the way, all these measures are gladly accepted by the Eurosceptics’ current pin-up, Norway, and the noble Baroness, Lady Falkner, gave further details about Norway’s entanglement with the EU.

More fundamentally, the Eurosceptics fail to see that Governments in the West and elsewhere have been weakened by globalisation, by the rising power of multinational companies and by foot-loose capital and the bond markets. This is highlighted very well in the recent report from the United States National Intelligence Council. These constraints on national freedoms are far more significant than our obligations to the EU. However, what do we hear from the nationalists and the Eurosceptics? Not a squeak. Indeed, the EU offers a better opportunity of standing up to the dark side of globalisation than any individual member state can have, yet the UK continues to seek opt-outs from measures such as a financial transaction tax and, now, a peg on bankers’ bonuses. Despite our claims of affection for the single market and our love of free trade, we seem to be protectionist when it comes to the City of London.

I am critical of the EU from a different perspective. It has seemed that the EU has often tried to reduce labour costs to German levels, and initially it used the economic crisis as an opportunity to do so. Instead of treating Greece as the US did after World War 2, initiating the Marshall Plan, or treating Greece as the EU, including the UK, did in relation to failing banks, it applied moral hazard—a punishment of almost Old Testament class—and extended this to Ireland and Portugal. This approach, I am pleased to say, has now softened, and it is important that it does. A transfer union is slowly emerging. Reading last Friday’s conclusions of the European Council, I note that there could be some return to the concept of “social Europe”. Do noble Lords remember that? It made Europe popular, at least on the left side of politics under the presidency of Jacques Delors and certainly in the trade union movement. I believe it is about time that we revisited the lesson that a single market needs some good and popular tunes.

I hope we will see some of these social issues being tackled, including at European level, and I hope very much, too, that we move on the issue of mobility and collective agreements. I do not have time to explain that at present but will do so on a future occasion.

In conclusion, surely we should look to learn some lessons from the other side of the North Sea—from the other countries which are successful in Europe. We must stop turning away from the central part of the EU towards the fringes and to some mirage—or perhaps it should be called a “Farage”.

My Lords, before the start of this debate, we heard from the Leader of the House that Europe is in a state of flux, and that is clearly so. I think it is necessary not just to reconsider the incidents that have made this such a frightening year for those who see the future of Britain as being properly tied to the European Union but to reflect on the reasons why we went into the European Union. It appears to me that we have lost sight of that. Harold Macmillan clearly had the view that this was the way to prevent Britain falling into isolation. Harold Wilson iterated the possible alternatives: isolation or perhaps an Atlantic free trade association. In passing, it is interesting that that possibility is being considered at the institutional level in the European Union. Then there was Edward Heath. Perhaps one of the most clear-headed observations was made by Harold Macmillan’s Chancellor of the Exchequer, Derick Heathcoat-Amory, who described membership of the European Economic Community as a,

“political act with economic consequences”,

and not the reverse.

We have heard experts on the economy in the debate this afternoon, but there has been very little consideration given to the political consequences of our trying to carve out a special position for this country alone. It seems that we, as a Government, have bumbled along this route. The veto on the fiscal pact about a year ago has begun to turn European Governments into a state of hostility, rather than them being our allies or friends, or agreeing to understand our positions. We did not help the process of maintaining a closeness from which we can influence outcomes much better by the vote which took place in the House of Commons on the European Union budget; nor have we done so by repeated references to a referendum on a new deal. Frankly, we are at risk of making our negotiating position in the European Union almost impossible to discharge. For that, I am afraid I take the view that the Prime Minister himself has a high degree of responsibility.

We have seen divisions in the ranks of the Conservative Party in another place. The way to deal with that is surely to talk to the British people about the advantages of membership of the European Union, instead of constantly harping on about what is under the microscope at present. It has not worked with the rightward-leaning half of the country. We have seen, at Conservative expense, the growth of UKIP, whose European Parliament members have a rather remarkably absent position in the Parliament to which they have been elected by their constituents to do some good. How many of them, including their leader Mr Farage, have been there for the critical votes? That will become very clear at the next elections to the European Parliament. We will draw attention to the absence of the UKIP voice in Brussels and Strasbourg.

We must also put up with an anti-European media. This is another reason why it is so important that politicians speak to the political consequences of the dangerous course that we are following. In this short debate, I suggest that we need reform in the European Union: we need to focus on what Europe can do and to transfer the powers accordingly for things that can be done only at European level, such as arranging a negotiating position on global warming—something that we singularly failed to do in Copenhagen—or on security of energy supply. Those are the sorts of things that we must make sure that the European Union is able to take on board and deal with.

The influence of Britain in and through the European Union can be much stronger. We will see greater investment in our country in the decades ahead if we strengthen, rather than weaken, our position there. The prospect of being isolated—of “brexit”, as it is called—is hideously fearful. We are seeing the growth of China, India and Brazil but, if we leave, their investment will not come here. These are simple political truths that the public must take on board.

My Lords, I am another who views Euroscepticism in the Tory party with concern, partly because it is based on pure fantasy. Beyond the single market and a remote supervisory banking role, the UK will never have anything like a fiscal and monetary union. It is absurd that a referendum should be called on that basis. It is an Aunt Sally—or, as the noble Lord, Lord Monks, described it, a Farage—and the electors will obviously reject it.

The Economist last week said that:

“Britain's position in Europe may become untenable”,

if the eurozone countries are bound much more tightly. This is a gloomy and unlikely forecast, but I agree with the conclusion that,

“the best course is to stick close to Europe, and try to bend it towards Britain”.

We all know that politicians play largely to their own crowd. The dangled referendum is a card played, not a serious proposition. I see the Government’s review of competences as a cumbersome exercise, but also a rather clever political attempt to shore up the coalition and postpone the referendum until such time as they see that people understand what Europe is really about, because it is about a great deal more than the euro: it is about the stability of a whole continent, as we heard indirectly from the noble Lord, Lord Grenfell.

While in Brussels a fortnight ago, I was much less worried because for the moment we have a lot of friends in Europe. I believe, paradoxically, that we are at the centre of a much wider and more interesting Europe and have been for some time. This is the Europe of enlargement, in which we have played a prominent part from the very beginning. Enlargement is happening. I declare an interest as a keen member of the EU Committee currently conducting an inquiry into enlargement. From what I have heard so far, I derive a lot of encouragement, as the Prime Minister should, from the leadership that this country has demonstrated in the EU in foreign policy over many years, and notably in the opening up of eastern Europe after the Cold War and then the western Balkans since the break-up of Yugoslavia.

Four of us from the Committee met Commissioner Štefan Füle as well as Ambassador Drobnjak, who was previously Croatia’s chief negotiator on accession. We learnt that while Croatia is now seen as a success story, having dressed all its wounds of war, its accession process has become much more individualised and more gradual compared to that of, say, Bulgaria or Romania. This more complicated process will have—and already has—implications for the countries currently in the queue, such as Serbia, Kosovo, Montenegro and Macedonia, and how they progress towards candidate status and eventually, they hope, membership of the EU. Our report is likely to be published in March, and we hope that anyone with an interest in this area will want to read the report and debate it in due course.

We were with Commissioner Füle just after there had been a breakthrough in the dialogue between Serbia and Kosovo. The two leaders, Kosovo’s Prime Minister, Hashim Thaçi, and his Serbian counterpart, Ivica Dacic, agreed to implement the integrated border management agreement along their common frontier. This sounds very technical, but means in practice that, in spite of considerable local protests from the Serbs, the double checkpoints at Jarinje and Merdare have been combined under one roof. Two more will be operational at the end of the month. This is a significant development. For the first time Kosovar and Serbian police, previously 10 metres apart and observed by EULEX officers, will jointly control these border crossings. There will be much more to discuss when the two leaders meet again next month, notably the issue of law and order and how the northern enclave can be made safe. The EAS, under the noble Baroness, Lady Ashton, has made this dialogue a priority, but it is painfully slow.

It is said that after Croatia, accessions may seize up because of enlargement fatigue. I doubt that this will be the case. One reason is that conditionality is no longer one size fits all. It has variable geometry—or, as the noble Lord, Lord Howell, said, differentiation. Like English case law, it rolls like an uneven snowball, collecting different models as it goes along. As well as compliance with the Copenhagen principles and the acquis, we now have co-operation and verification, stabilisation and association, bilateral issues, opening and closing benchmarks and the new emphasis on the rule of law. These are all the clothes of enlargement, and from now on if they do not fit the client, the client will have to remain a neighbour or partner until they do.

Bilateral issues are not supposed to slow down the accession process, but if they are as fundamental as those between Serbia and Kosovo, how can they not? Croatia, on the other hand, has only minor bilateral issues remaining, and its performance on the issues of the tribunal and Chapter 23 has won widespread approval. So enlargement will not seize up but will roll slowly and uncertainly forward. It could be eight to 10 years before another Balkan or neighbouring state becomes a full member. Meanwhile, the UK will earn brownie points by continuing to foster the process in countries such as Bosnia, Herzegovina, Serbia and Kosovo. If the EU truly deserves its peace prize, it must stay the course in countries that were born out of ethnic conflict not so long ago—as the noble Lord, Lord Owen, will perhaps remind us—and that still carry the scars of genocide and persecution.

We should not forget that we stood by—and fought by—these people in the Second World War while they endured yet another tyranny. Kosovo, for example, is one of those historic touchstones of conflict in the Balkans that has to be nursed very carefully towards peace and stability. Enormous efforts and resources have already gone into the EULEX project and, not surprisingly, the auditors say quite bluntly that not enough has come out the other side. The paradox is that either Kosovo is a post-conflict country—perhaps the poorest country in Europe—with many destitute people needing aid and basic necessities; or, as its leaders claim, it is a modern European state in the making, seeking full recognition and proceeding through the stabilisation and association process towards EU membership. Which is it? We may like to think that it is the latter, but several countries will not agree because of their own fears about internal secession.

The UK has closed its official DfID programme but is rightly giving a lot of behind-the-scenes political and parliamentary support, and our own clerks have been lending expertise. The Foreign Secretary has recently shown his commitment by travelling in the region. Surely the Prime Minister can claim the high ground on enlargement while he is performing his pas de deux with Chancellor Merkel around monetary and economic union. Will the Minister at least confirm that the Government will make a little less play of union and a little more of enlargement?

Finally, what will happen to the outer ring of countries such as Georgia and Ukraine? The neighbourhood policy is the only way forward; perhaps it should not be defined too sharply. Iceland already has advantages and will try to jump the queue. Georgia and Ukraine have a long way to go. Turkey seems to be on an eternal wheel, gently encouraged by the EU’s “positive agenda”. The point is that, in this voyage of enlargement, there can be no horizon.

My Lords, I was particularly interested in the noble Earl’s speech and will return in a few minutes to the problems of the western Balkans. First, I refer to a theme that has run through the debate: how we might change our relationship with the European Union, and how the European Union itself might change in future. I wonder sometimes if those who see little good in the European Union realise what the effect is of the continual drip of the slagging-off of the endeavour on the United Kingdom’s effectiveness within the EU. What is forgotten is that if we want changes in our relationship with the EU, it is important that as many other people within the EU as possible are sympathetic to us. Sometimes the way this is carried on has the opposite effect.

Years ago, I had experience on the Agriculture and Fisheries Council. I followed a series of Ministers including Peter Walker, Fred Peart, John Silkin and Cledwyn Hughes, most of whom were less than sympathetic to what was then the EEC. All my life I have felt that membership of the Union is in Britain’s interests, in spite of some of the daft things that it does from time to time. It is 55 years since I proposed a motion on Europe at the Conservative Party conference. That was the first time that the party discussed Europe.

On the council it took me quite a time to convince some of my colleagues that I was sympathetic to the whole enterprise. Once they realised, I found it a great deal easier to get them to listen to my problems. That is what I mean when I say that I am concerned that with the torrent of abuse of the EU from some quarters, we are shooting ourselves in the foot and making things much more difficult than they need to be. I suppose that those who say that we must come out of the Union altogether may consider what I say as grist to their mill. However, those who would like to continue to be part of the Union—but with changes—might recall my experience. I will give a further example. In the past few days I heard a report from an official connected with Brussels who said that he saw no point in answering some of our questions because the United Kingdom was so detached. The word he used was “parochial”.

I come back to the speech of the noble Earl and will speak about EU expansion. In recent years in particular, the accession of Romania and Bulgaria prompted a great many people to ask questions such as: was it too quick? Were the conditions that the European Union demanded for membership properly executed? The Minister told us, on the subject of the Croatian accession, that never had more stringent conditions been imposed. I was very glad to hear it, but the implication was that some of the earlier accessions were squeaked through without an insistence on the full meaning of the conditions.

The difficulty is, of course, that once a country has become a member state of the EU, it becomes much more difficult to demand that the standards that were originally insisted on are introduced. We heard in a speech from the noble Lord, Lord Grenfell, that Croatia will shortly join the Union. I have visited Croatia twice in the past two years, and it feels like a European state. I hope that the conditions that we imposed have been enforced.

During the past year I have visited Bosnia, Serbia and Kosovo, where there is much instability. Progress in Bosnia is hampered by the existence and the obstruction of the Serbian enclave in Republika Srpska, based around Banja Luka, which I have visited. In Kosovo, which I visited only a few months ago, progress is likewise hampered by another Serbian enclave in the north, which is based around Mitrovica.

The various leaderships, in Sarajevo, Belgrade and Pristina, as well as those in Banja Luka and Mitrovica, are all, as we know, still capable of serious political mischief-making. The continuing disputes in that region of the western Balkans could so easily turn much worse and revert to the dreadful bloodshed of only a few years ago. However, the factor common to all those countries is that they are dead keen to join both the European Union and NATO. I hope, therefore, that there will be no fast-tracking at all of the negotiations over the entry of Serbia, Kosovo and Bosnia.

We have the opportunity to use the prize of European Union membership to insist that the obstruction and hatred which surround these places are set aside by permanent commitments and settlements of their differences, quite apart from our insistence on European Union standards. I understand that some of the reasons for their differences can be seen in their recent history, which has been dreadful and bloody. However, we have the opportunity to use our strength to insist that they be settled on a permanent basis if we have the strength to broker a peaceful future in this war-torn region. We should make the best use of it.

My Lords, I start by referring to my register of interests and my education work in Croatia. I welcome today’s debate. I hope, given that it is included with the debate on the two Bills before us, that we will perhaps have another opportunity in the new year—maybe after the Prime Minister’s much-heralded speech on Europe, that which we seem to be looking forward to—to have an even longer and more detailed discussion on these important topics.

In relation to the two Bills, we clearly need to accept the decision that there should be a commissioner for every member state, at least in the mean time. However, that should not stop the United Kingdom from continuing to press for reform within the Commission, even with a commissioner for every member state. The next Commission should operate in a different way from the current one, which has so many departments and acts in such a wasteful fashion.

On the other issue before us in legislation today, the accession of Croatia, I welcome every word that has been said by the noble Lord, Lord Grenfell. The Croatians strike me, in my experience of them over recent years, as having some of the strongest national pride and belief in freedom of almost any people that I have met anywhere in the world. They have an incredible history, particularly the former city state of Dubrovnik but elsewhere in Croatia too. Modern-day Croatians have a sense of nationalism and national pride that as a Scot I found almost exhilarating; it was even greater than anything I had experienced at home. Yet that country, which has that sense of freedom that it fought for not long ago, and which sacrificed thousands of lives in order to secure the freedom that it wanted from the former Yugoslavia, voted last January by a majority of two to one to join not only the European Union but the euro as well.

The Croatians voted to join the second most successful voluntary union of nations ever in history—the first, of course, being the United Kingdom. They did that not because they are naive; the young people of Croatia are not naive but just as cosmopolitan, outward-looking and smart as young people anywhere else. They are excited about this but also very pragmatic. They recognise that in today’s world the pooling of sovereignty—not just the seat at the table, or the benefits that come from the odd grant from the European Commission—is an essential part of contributing to today’s world and looking after our common and individual interests. That is why there is a queue of countries, not just in that part of Europe but elsewhere, that want to join them too.

I will say, very specifically, that in these debates in the UK over the past decade or so, far too often we get into a debate about what is the actual material or even sometimes political benefit, in a very parochial sense, of being at the tables of the European Council. That is not the main issue here, which is: do we want to live in isolation as the United Kingdom, or do we want to live as part of a pooled group of nations that work together not only in their internal interests but externally? In the areas of justice, home affairs and the economy, for which there is that common responsibility, as well as in the area of external relations, there is of course a case for pooled sovereignty in today’s world. That sometimes has to be backed up by laws passed at the European level. We should show leadership in this Parliament in making that case to the people of Britain, not shy away from it.

There are, of course, negatives about the European Union, which we would be foolish to ignore, in the same way that Scots would be foolish to ignore the negatives about the United Kingdom. In the European Union you have waste and a flawed Lisbon treaty—the most recent attempt to try to modernise and reform. You also have the problems with the euro, though at present most of those are problems with the bad financial management of national Governments within the euro. There are positives too, though, such as the peace that has existed in western Europe and now across the rest of Europe too; the single market and the social benefits that have come alongside that in a balanced approach; and the global impact that the EU has had on aid, trade and the environment.

I make a plea to the Government. Political leadership is not only about tactics. I must say that this is true in all three parties at the moment. It is not only about trying to get the better of the other parties in relation to a referendum or any other immediate tactical issue. It must also be about vision, setting out a case for our rule in the world and in Europe and working out how the two go together and how we can then make the best use of them.

I will touch on one other issue: the EU’s aid budget, which might be an almost unintended casualty of the current debates on the EU budget. Whoever is responsible for the current financial crisis in Europe and the Brussels overspend, it is not the people who live in the poorest parts of Africa, Latin America or Asia, who currently benefit from the EU aid budget. The UK has made a proposal to freeze the budget, which I do not necessarily disagree with, but if cuts are made proportionately across all budgets, there will of course be an impact on the aid budget as well. The permanent President of the Council made an outrageous proposal that cuts to the EU aid budget should be disproportionately high in comparison with cuts in other departments, in order to save the subsidies for some of the waste that goes on in the departments that he and President Barroso are responsible for.

For me, this is both morally wrong and makes no logical sense. In the UK, every penny that we take out of the EU aid budget will simply have to be put back in again from our own DfID budget because we have committed to the 0.7% international target. If other countries in Europe want to cut the budget, they will have to do the same thing in their national budgets because the EU spend contributes to our own aid and development assistance target.

Here we had our own aid review. DfID and the former Secretary of State, Mr Mitchell, undertook a multilateral aid review that showed, in an analysis that was quite hard and took money away from a number of multilateral organisations, that in meeting the UK’s aid objectives the European Development Fund was rated strong. In having organisational strengths to use that money effectively, the fund was strong and, in its ability to change and reform, which it is currently doing, it was more likely than most to do that. It would be a terrible signal, in a year when the G8 comes back to the UK, for us to lead an initiative on the budget that led to a cut in the EU aid budget.

Whatever views we might have across this House and the other place on the EU budget, whatever differences we might have over the coming weeks, the one thing that I hope we can all agree on, because it makes moral and logical sense, is that when we are cutting the EU budget over the next financial programme we should cut waste and cut subsidies that stop commerce, but we should not cut the money that goes to the poorest people in the world.

It is a great pleasure to follow the noble Lord. There has at times been something of a debate about whether the EU or NATO has contributed more to peace and stability in Europe. But, surely, the most welcome accession of Croatia answers that question.

It was a moment of great joy when the Berlin Wall came down. During the preceding decades it was NATO that resisted the threatening assertiveness of the old Soviet bloc. In the end, their economic contradictions became overwhelming. However, there were anxieties about the political course of post-soviet European countries. But the role of the European Community in securing their democratic underpinnings is beyond doubt. With carrot and stick, but with genuinely altruistic intentions, the political, social and economic landscape was transformed in these countries. We ourselves, through the Know How Fund and the Westminster Foundation for Democracy, inter alia, helped in this process. Therefore, the accession of Croatia should be seen in the context of a European enlargement process of dramatic historic importance.

The inevitable crisis that has infected the eurozone, built on a false architecture, means that we all have to examine the perceived certainties that have widely prevailed in Brussels and elsewhere and reorder the structures that were questioned only by a small minority in the past. Indeed, the pillar on which the EU developed was the relationship between France and Germany. Over time relationships can be re-established, but the bilateral fissures between France and Germany that now exist are deep and open, and the anxiety about that is freely reported constantly in the French media. President Hollande promised to counter austerity, but reality dictates great limits to that. When the word “solidarity” was repeated yet again about the European budget, it failed to resonate as before, and with German interests very different about some of France's long-held interests, change is undoubtedly in the air.

That is why the new banking union is important. While there are huge problems within the European economy, it increases the prospects of greater regulatory stability within the eurozone. Very importantly, it establishes the principle that the interests of non-participant countries will be protected, with majority voting now required in the European Banking Authority for both in and out members. It also incorporates a provision that the ECB will not discriminate with financial regulation against a single or group of countries.

The eurozone crisis has brought about a recognition that there have to be even more flexible arrangements to incorporate all 27 member states, and any future newcomers. We already have different arrangements with regard to Schengen, the single currency, and indeed direct relationships between EU member states—for example, our extremely close and valuable military and defence relationship with France.

We have often heard the word “marginalised” in respect of the United Kingdom. Indeed, it has been something of a mantra; a kind of reflex reaction. But we are now seeing a more subtle process at work. We saw it in the banking negotiations and in the budget discussions.

I shall dwell briefly on the lead-up to the banking union agreement. Frankly, for years, proceedings at ECOFIN meetings were not exactly made smoother all the time by a previous attendee. When the financial and banking crisis descended on us and the desire grew for new regulatory structures in Europe, the failure of our own tripartite regulatory system considerably reduced our credibility. Indeed, there was at times an edgy response to our legitimate concerns expressed about the future of the City of London. As we have seen at the budget discussions and latterly the banking union agreement, the word “marginalised” has become misplaced. A huge effort has been successfully undertaken by the Prime Minister and the Chancellor of the Exchequer to explain patiently, courteously and comprehensively our points of view.

It is in that spirit that the balance of competences review is to be applauded. European directives have for far too long been interpreted here in a black and white way, all too often leading to misunderstanding and anger. This is a dispassionate and professional exercise that will give us an insight into the impact of broadly European legislation on our lives, department by department. It is not being done hastily. Again, in fairness, we should applaud all those who initiated this exercise fully and comprehensively engaging with our European partners.

This review will not offer negotiation points. However, it is clear that there is a greater understanding now that those countries not in the core need to be accommodated. It is unhelpful simply to talk of solidarity or pick and mix when the underlying fabric of the EU is under so much economic and social pressure and new structures are clearly evolving. If we have a clearer understanding of the balance of powers between member states and Brussels it becomes much easier to argue the case for EU membership itself.

The jewel in the crown has been indisputably the single market. Of course, there is more to be done. The European economy is in real difficulties. Membership of the euro demands internal devaluations that are causing immense hardship. Whether it will be possible to provide the enormous fiscal transfers to the countries that are now suffering hugely high unemployment and social problems, given the chastened state of all European economies, is frankly debatable. For all of that, it is hugely important that we in Britain are able to offer a home to foreign investors and employers who wish to access the European market. Nothing should be done that could possibly impair that.

I penultimately conclude where I began. I declare an interest as chairman of the British Ukrainian Society. Ukraine has initialled an association and free trade agreement with the EU, but in view of recent prosecutions there, the EU is requiring changes to the criminal code and the judicial system in general if progress is to be made. Russia offers very unhelpfully a customs union and there are great dangers in that. Ukraine has suffered horrifically in its history. The prospect of association, in firmly implanting democratic standards, could assist the country to translate into reality the high ideals of the Orange Revolution. These are very testing times for Ukraine.

Finally, I just say this, because I passionately believe it. At Laeken, the core and fundamental challenge facing the European Union was openly discussed; namely, the sense of disconnect, of the democratic deficit between European institutions and the peoples of Europe. We now see strong support for independence groupings, or at least much greater autonomy in many member countries, because of perceived overcentralised control. Also, many people believe that there has been a conveyor-belt of authority seeping away to Europe. Anti-EU sentiment has risen, and so have extreme political movements not necessarily linked. There is now a sense that the old European model cannot comprehensively accommodate 27 countries and that we in Britain need to try to recalibrate our relationship if it is at all possible to make the European Union survive and prosper. I believe that the seeds of this understanding have now been sown in recent developments in the European Union in a way which was simply not apparent a few months ago.

My Lords, I hope your Lordships will not consider me ungracious if I point out that of the 19 previous speakers, at least 13, and perhaps more, were strong and vociferous supporters of this country joining the euro. We can all now see that it has been the disaster that some of us forecast it would be, yet we have heard not a word of apology or repentance from any of them. I hope that we will do so from the seven noble and europhile Lords who are yet to speak. In the mean time, I will just ask why we should pay heed to their wisdom about the EU’s future when they got its past so wrong.

I think we can take it that there will soon be a referendum in this country to decide whether we wish to stay in or get out of the EU. The Prime Minister apparently wants the choice to be between leaving and staying in a reformed EU, with powers being returned to Westminster from Brussels. But I trust that Monsieur Hollande, the French President, put him right on the possibility of reform last week. As I have said to your Lordships many times over recent years, to change a comma in the treaties of Rome, let alone to retrieve a power, would require unanimity among all its member states—28 of them now—and a new treaty to be ratified in all of them. I fear that that is not going to happen for any worthwhile powers.

I suggest that the referendum, when we come to it, will turn on one word: jobs. I suppose we can assume that the other great fallacy of the EU project—that it has brought peace to Europe and is essential to maintain peace in future—will not feature much. The historian Antony Beevor puts this rather well in an article entitled “Europe’s Long Shadow” in this month’s edition of Prospect, which I recommend to all noble and still europhile Lords. I quote:

“The argument that it was European unification which prevented another war on the continent was always a completely false one … Democracies do not fight each other. The key question is therefore the inverse: will a dramatic increase in the democratic deficit lead to unrest and even conflict as Europe ‘tears itself apart,’ in the controversial phrase of the governor of the Bank of England?”.

I would just repeat that the employment, misery, and civil unrest already sweeping Europe are entirely caused by the project of European integration and its euro. What is the eurocrats’, and our political leaders’, reaction to this obvious fact? Why, more Europe of course. I quote from Mr Beevor again: the eurodreamers,

“should perhaps remember that both in war and in peace, reinforcing failure through obstinacy has always tended to turn a crisis into a catastrophe”.

Have the Government given any thought to the contention that the disasters caused by the euro, with worse to come, can be solved only by getting rid of it? Could not all 17 finance ministers meet and declare the obvious—that the euro has failed—and go back to their national currencies at initial exchange and interest rates, to be agreed in one weekend? Of course it would be messy, but I understand that much of the work has already been done. Changing a currency costs only about 4% of GDP, which may turn out to be a small price to pay against what has already been wasted in keeping the euro going and what may lie in store. I fear that it will not happen, of course, but I thought that I would just ask, if only for the pleasure of saying “I told you so” when the tumbrils come to collect us. I look forward to the Government’s reply.

I go back to trade and jobs, on which the forthcoming referendum will turn. The Government and other europhiles will, no doubt, still intone the falsity that we must stay imprisoned in the EU because 40% of our trade and 3 million jobs depend on or are linked to the single market. I hardly dare repeat it again, but there are 4.5 million jobs in the EU that depend on their trade with us; we are their largest client, so we will be in the driving seat when we have voted to leave. The EU has, or is concluding, free trade agreements with 38 other countries, according to a government Answer to me on 19 November. It is inconceivable that we could not have trading and other arrangements at least as good as those enjoyed by Switzerland.

We have never said that we want to be in the European Economic Area like Norway, a fax democracy obeying the EU rules without taking part in their making. A number of noble Lords have made that point today, but we have never said so. I hope that we do not have to hear the Norwegian comparison again. We could have our own arrangements, and it would not matter that we no longer wasted so much time in Brussels, agreeing all the regulations that are steadily sinking the single market in the great ocean of the new markets of the future.

The US and China, and all the other countries that export to clients in the EU, do not do so either. We do not make the rules for exporting to the United States of America, but it helps to put the steering wheel on the left if you want to sell a car there. So of course we would obey the rules if exporting to the EU, as does everyone else. However, none of our exports to the EU, nor the jobs that deliver them, would be lost if we left the political construct of the treaties of Rome. The truth of this is underlined in Hansard for 14 December, at column 263, in a Written Answer to the noble Lord, Lord Stoddart, from the noble Lord, Lord Green of Hurstpierpoint. This confirms that there really is no difference between a free trade agreement and membership of a single market. I trust that my noble friend will quote the Answer in full when he comes to speak later.

As I have often said before, only 9%, and falling, of our GDP goes in trade with the EU anyway; 11%, and rising, goes to the rest of the world; while 80% stays right here in our domestic economy—yet Brussels diktats smother 100% of our economy. It is madness, really, when you look at it like that.

I hope that the Government are slowly beginning to understand some of these points. The noble Lord, Lord Strathclyde, the Leader of the House, told me on 21 November that,

“the noble Lord may wish to take heart that, despite tough conditions, British exports of goods have increased in the past two years to China by 72%, to India by 94% and to Russia by 109%”.—[Offical Report, 21/11/12; col. 46.]

If that is so, could we not make the conditions less tough by negotiating our own free trade arrangements with those countries? There is also the rest of the Commonwealth, and the whole world outside the sclerotic EU.

So, millions of new jobs indeed depend on the EU—they depend on our leaving it. Anyone who doubts this should read the briefing notes on the website, where it is all set out in succinct form. I ask again whether anyone in the Foreign Office or the Treasury has actually read that store of unanswerable wisdom. What do they think of it, if they have? I look forward to the meeting offered by the noble Baroness, Lady Warsi, in Questions on 26 November, when she offered to give me,

“a briefing on the economic importance of our continued membership of the EU”.—[Official Report, 26/11/12; col. 10.]

I have written to her saying, “Yes please”, and I await the date with fervent anticipation.

When we have voted to leave the EU, by what method will we do so? Will we simply repeal the 1972 Act, which we were always promised, at the time of Maastricht and before, was the way of leaving the EU and retrieving our sovereignty, if that was what we wanted to do? Does that promise still stand or will the Government feel constrained to follow Article 50 of the Lisbon treaty, which sets out an expensive process that can last two years, with Brussels in control of the terms of our departure? I trust that it is still the former: we repeal the 1972 Act and then all its subsequent amendments—the Single European Act, Maastricht, Amsterdam, Nice and Lisbon—fall with it, including Article 50 of the latter. I look forward to the Government’s answer to that one.

The noble Lord gave most impressive figures for the percentage rise in our exports to China but failed to note that we export more to one Land in Germany than to the whole of China, which puts his position in some perspective. It was refreshing to hear a noble Lord who dared to speak his aim—he wants out. He lives in a world not of greys, like most of us, but of black and white.

There are of course other noble Lords who flirt with unobtainable goals as alternatives to the European Union. For example, there is the Commonwealth, as if it could develop into a trading bloc; manifestly it could not. There is the Swiss example, but everyone now accepts that the Swiss arrangement with the European Union was a one-off, not to be repeated. Norway is mentioned as a potential example but its relationship is integration without representation—having to accept, as it invariably does, deals that are negotiated without it being part of that very negotiation. As for repatriation of powers, that is manifestly not on offer, as President Hollande made crystal clear last week.

It is perhaps unusual in a debate of this nature to have lumped together a general debate and two Bills. There is at least one disadvantage of this, in that it prevents a focused debate on an important and distinct issue such as Croatian accession. However, perhaps the link between the general debate and Croatia is that the nexus lies in the very contrast that as Croatia and, indeed, the rest of the western Balkans move towards accession, the UK Government sleepwalk in the opposite direction. Le Monde on 13 July posed the question, “Will Europe soon be without GB?”. The Financial Times, on 19 October, published an article headlined:

“Brexit: Europe loses patience with British exceptionalism”.

The Economist of 8 December had a leader entitled, “Goodbye Europe”. I concede of course that there is a rising tide of nationalist anti-Europe sentiment, particularly in the Conservative Party. Perhaps it is looking over its shoulders at the rise of UKIP. The Prime Minister himself is more sensible. He travels lightly on Europe, as indeed on most other issues, but he cannot ignore party divisions. Even the Sunday Times yesterday, one of the anti-Europe newspapers, had a headline:

“Brussels to spend £16m on PR as junk-status Croatia joins EU”.

We have been members of the club now for 40 years and, as the noble Lord, Lord Jopling, said extremely wisely from his experience, if you are members of a club you do not insult it if you wish to obtain concessions and work within the sentiment of that club. Rather than making the most of our membership and criticising from the inside where justified, as often it is, we alienate friends and allies by giving the impression of wanting to be on the sidelines and to be given a special status. Such a negative attitude surely cannot be in our national interest.

The Government, to the acclaim of the anti-European press, trumpeted their decision to opt out of the pre-Lisbon police and judicial co-operation measures—the so-called Protocol 36—without mentioning the benefits we receive, for example, from the European arrest warrant and assuming that we can opt in later if we want. However, the precedent is otherwise: in three cases, the UK tried to opt back into the Schengen opt-out but in all three cases we were refused permission on our pick-and-choose policy. As another example, over the past three years, able British graduates have clearly been deterred from putting their names forward for the administrative grade in the grand cours of the Commission. I readily concede there are other factors but we provide 12.42% of the EU population but only 2.03% of the valid applications for the administrative grade, because of the climate that has been created and because, in part, able graduates in the UK must ask whether they will have a long-term career within the EU.

Of course, I accept that we should press strongly for change from the inside. A good example of this is the other Bill before us, the European Union (Approvals) Bill. Surely the European Agency for Fundamental Rights is largely a duplication of the human rights work of the Council of Europe. I only wish that, at the time when the agency was conceived and came into being in 2007, a British Government had robustly said, “Look, there is no need for this agency, it is part of Commission empire-building, it is going to cost a lot of money”. Indeed, the money spent on the agency is 20% of the whole of the money spent on the Council of Europe, which is the major human rights agency in this field. Like it or not, it is there, but it duplicates the work. If one looks, for example, at the themes mentioned in the European Union (Approvals) Bill—such as the Roma, racism and xenophobia—these are all key themes of the Council of Europe. We just refused, or were not strong enough, to point out that the emperor had no clothes in 2007.

The proposed accession of Croatia on 1 July next year tells one something about Croatia itself but also tells one something about the enlargement process. I personally have no doubt about the European credentials of Croatia. I remember spending one morning in Zagreb Cathedral observing how each of the stages of European cathedral-building were paralleled in the cathedral in Zagreb. The café society in Zagreb could be transplanted easily to any of the major cities of Europe. Of course there are concerns over practical issues, such as the International Criminal Court, although Croatia has now satisfied that. It has progressed well on judicial delays, as it should. On border controls, there will be a new report in March but much is being done to overcome problems. So far as migration is concerned, we have the transitional arrangements. There is no doubt about the concessions that Croatia has made, particularly in sensitive areas such as shipbuilding.

As the Minister said in opening, we have learnt many of the lessons from recent accessions such as the problem of countries having border disputes with neighbours. Slovenia drove a hard bargain over Croatia’s accession regarding Piran. On the question of backsliding, the Minister set out the new procedures, safeguard clauses and one or two other such arrangements. The big picture, of course, is that we, as Europeans, need a stable western Balkans. It is in all our interests. All those countries are relatively small. They are manageable and should be managed. I recall being in the office of George Papandreou when he was Greek Foreign Minister, pointing on a large map on the wall at the western Balkans and saying, “These are the last pieces of the jigsaw”—manageable and should be managed. So let us look forward to a time when Serbia, geographically and historically necessary for stability, and the other countries of the western Balkans play their full part in our new Europe when they are firmly anchored in the European Union.

My Lords, 2012 has not been a good year for the European Union and it has not been a good year either for Britain in Europe. To deny either of those two pretty evident propositions is to delude oneself and to make the search for remedies even more difficult than it already is. The members of the eurozone have remained locked in an existential crisis from which they have yet to find a safe way forward. Even if they have made some progress and have managed to avoid some of the traps into which they might have fallen—most obviously the contagion that would almost certainly have followed a Greek exit from the euro—this crisis has diverted the energy and the attention of leaders away from a whole range of other challenges, such as completing the single market, continuing to give a firm lead on climate change and facing up to the difficult foreign policy choices in places such as Syria and over Palestine, for example. At the same time, Britain has slipped into its own, quite separate, existential crisis over its membership.

The coincidence of these two existential crises is in itself a negative factor, characterised by a sharp reduction in the sense of mutual solidarity that is needed if neither is to end in disaster. Even when a piece of good news comes along—such as the award to the European Union of the Nobel Peace Prize in recognition of its major contribution to peace and prosperity in the period after the Second World War, by anchoring the former dictatorships in southern Europe and the countries of central and eastern Europe, liberated from Soviet domination, to democracy and market economies, and by stabilising the Balkans after the tragic experiences of the 1990s—that good news is rapidly discounted or, in this country, derided by those whose narrative it simply does not fit. The Prime Minister’s absence from the Nobel awards ceremony in Oslo left me feeling ashamed. How petty we have become.

What are the main choices for this country and the European Union for the period ahead? I suggest three main lines of policy. First, we should continue to be supportive of the eurozone countries as they struggle to shape a more integrated economic policy structure within which to secure the future of the euro. Their success is as much in our interest as it is in theirs. Anyone who believes that the single market could survive unscathed a break-up of the eurozone is not awfully good at risk assessment. So we should eschew any further completely unnecessary and counterproductive confrontations, such as occurred over the fiscal union treaty last December.

We should work constructively and pragmatically to develop a system of variable geometry, a concept that has worked well in the EU since the end of the 1980s. We should look at the euro, look at Schengen and look at the way in which we handle justice and home affairs legislation to encompass also now the relationship between the euro ins and outs in the fields to be covered by the new eurozone steps towards economic integration, while safeguarding the integrity of the single market for all 27—soon to be 28—member states. Both these objectives seem to me to have been advanced modestly by last week’s European Council decisions on the first steps towards a eurozone banking union. This means rejecting the siren voices of those advocating a two-speed, two-tier European Union, which I believe is neither negotiable, sustainable nor in Britain’s interest. It means ceasing to chase the will-o’-the-wisp of repatriation.

Secondly, we should work flexibly and in partnership with the other EU member states that favour a rigorous approach to EU spending to secure agreement on a multi-annual financial framework for the seven years ahead when the European Council next meets, in February, to discuss this. That group of countries has already achieved considerable success in shrinking the excessive spending bids of the Commission and the European Parliament. There could and should be more progress in that direction before a deal is struck. However, we need to avoid snatching defeat from the jaws of victory by pushing the EU back into relying solely on annual budgets, which would likely be higher and less sensibly distributed than the multi-annual framework. This will require the Government to be bold enough to ignore the quixotic and opportunistic urgings of the House of Commons a couple of months ago at an earlier stage in the negotiating process.

Thirdly, we urgently need to develop a positive agenda for ourselves and for the European Union that reaches beyond the traditional fixed points of Britain’s EU positions on completion of the single priorities, completion of the single market and further enlargement, valid though those priorities remain and welcome though the recent agreement on the European patent is—a clear case, by the way, of more Europe being good for Britain and good for the EU. Should we not be working with the new French Government to respond to the pressure being put on our defence budgets by the policies of austerity? Should we not give a lead, as only our two countries can in this sector, to a more effective European defence and security policy that reflects the realities of the US Administration’s pivot towards Asia and its insistence that Europe needs to do more in its own back yard? I draw some encouragement from the wording of the European Council’s conclusions, which seem to provide a perfect framework within which we could give a lead, with the French, in the year leading up to the discussion that is to take place in December 2013.

Should we not, too, be working with our fellow EU partners in the G8 and in the G20 to ensure that Europe’s shared objectives of freer and fairer world trade and of more effective policies to combat climate change are properly reflected in the outcomes of the two summit meetings to be held in 2013? If Europe cannot get its act together, we can be sure that those two gatherings will be dominated by the relationship between the US and Russia and the US and China respectively. The Europeans, ourselves included, will be sidelined and marginalised. Both the World Trade Organisation talks and the UN-led negotiations on climate change desperately need new momentum from outside their overlarge and unwieldy negotiating processes. There is an opportunity to provide that and to check the tendency to turn away from international co-operation, which could be so damaging for middle-ranking powers with global interests such as ourselves.

None of these three lines of policy will be easy to achieve, nor will they be supported by the noisy band of Europhobic activists both outside and inside the Government’s own ranks, whose sole objective and priority is to propel the United Kingdom towards an early exit from the European Union; nor will they be achieved if the leadership of all three main parties, which continue to support Britain’s membership, do not put a lot more effort than they have in recent years into setting out, in compelling and persuasive terms, why it is in Britain’s interest to remain an active participant in EU policy formulation, and one with plenty of positive and appealing ideas. In the past four weeks there have been the first tentative signs of a response to that imperative. The speeches of the leader of the Opposition and of its own chair at the CBI conference and the speech of the Foreign Secretary in Berlin were such straws in the wind. However, much more will need to be done if the tide of Euroscepticism by default and by meretricious assertion is to be stemmed and reversed.

I shall conclude with a few words about the two European Bills to which we are being asked to give a Second Reading today. The Bill to enable the UK to ratify Croatia’s accession should be strongly supported. It represents another building block in the EU’s response to the sanguinary break-up of the former Yugoslavia, which is still work in progress with a long way to go. The aspirations of Montenegro, Macedonia, Serbia, Kosovo and Bosnia and Herzegovina must not be overlooked. Much has changed in Croatia for the better since it first applied. I was able to see some of that when I visited Zagreb in May to celebrate the 20th anniversary of Croatia’s joining the UN. The EU institutions and the people of Croatia will need to be vigilant to ensure that the ground gained in the approach to membership does not slip away after it is achieved, but there is no reason to hesitate now.

The second Bill, which enshrines the political deal to set aside the original intention of the Lisbon treaty to limit the continuing expansion of the European Commission and to ensure that the system of appointing one Commissioner for each member state remains in force, I support, too, but, I fear, only while holding my nose. The Commission is already too numerous and is unable to give all its members worthwhile jobs, a problem that will only get worse with enlargement, which I happen to support very strongly. While I accept the present provision as necessary, it is a necessary evil. This area will need to be revisited in the years ahead.

I am sure that 2013 will be another turbulent and difficult year for the EU, but it could also be the year in which a turning point is reached in those two existential crises that I have identified. I hope that all those who support an EU with Britain as a full and active member of it will join forces to make it so.

My Lords, I for one was very glad that my noble friend mentioned so firmly the Nobel Peace Prize at the beginning of the debate. I know that there has been controversy about this, but as one who was beginning to reach political consciousness and going through my formative years politically at the end of the Second World War and that post-war period, I remember it all very clearly.

Our sense of history becomes rather short. The European Coal and Steel Community was the beginning of it all. The great statesmen who were involved in this were not just interested in economic arrangements; they were seeing economic relations as the means by which one builds stability and peace in Europe—the two went absolutely hand in hand from the beginning. We should not be so reticent these days as to fail to mention and reassert the interrelationship between the economics and the politics, and how the economics are there to support the reality of a stable, peaceful Europe.

The noble Lords, Lords Maclennan and Lord Taverne, got it right when they reminded us that it would be much better to put our energies into explaining to the British people, in our schools and through informal public education, the benefits of the Community rather than just always putting across a picture of how we are defending ourselves against all sorts of pernicious and sinister forces that are trying to defeat us, which is nonsense, of course. Though we may think that we understand it or begin to understand the single market, we need to explain to the people of Britain why it is so important, not least in terms of inward investment to this country and of meeting the challenges of south-east Asia, China and Brazil.

But there is much more to the Community than just this, and noble Lords have referred to it. There is the reality of the new multinational businesses and of international crime. How are we helped in coping with the power and influence of multinational business or dealing with international crime if we try to do it all on an individual-state basis? It will not work; we have to co-operate. That is why the police are so adamant that we should be very careful about pulling out of any of the relationships that they have painstakingly built to help them to do their job effectively. Of course, this applies in the sphere of terrorism as well, as it does in that of global warming, because pollution and the consequences of global warming know no national frontiers and we are foolish if we think that we can build up effective arrangements for coping with it on a national basis alone.

We ought also perhaps to put a bit more time into talking about social legislation in Europe. We ought at least to examine whether there is some interrelationship between German economic success and the social provisions that prevail in its industrial relations and industrial law. Why do we have this knee-jerk, prejudiced reaction against it? Perhaps there is a relationship between enlightened approaches in these spheres and effective economic performance. I happen to believe that there is, but let us be open-minded about it and examine it rather than react to it.

I believe—here, I want refer to the very effective speech by the noble Lord, Lord Tugendhat, with all his experience as a Commissioner—that in the eurozone, if we have it, economic integration, as the events of the past few years have made clear, is going to be indispensable. But one cannot encourage simply economic integration; social policy has to be integrated. If there is not a matching social policy for the member countries of the eurozone, I see disaster and acute political instability ahead. One has to think of the consequences of what is being done economically and how one handles it in countries such as Greece, for example, or Spain.

There is one other issue that I should like to mention, because we ought to take it into account more often. One of the difficulties that we face in Britain is the remoteness of Brussels—an apparent elitism and even arrogance in the style of Brussels. This is partly a consequence of technocracy and technocratic organisation, which can too easily start generating its own momentum and leave a gigantic gap between it and the people who are closely involved in society as a whole. We need to look at that issue, because I personally believe that there is a cultural issue there which needs to be addressed.

Whether we like it or not, Britain is part of the world. It is intimately involved in and interconnected with the world; there is no way in which we can go our own way in isolation. Indeed, isolationism in political talk in our country serves the people, our children and our grandchildren no good whatever. We are part of the global international realities and our energies need to go into ensuring that we are working with the international community to do the right things for people as a whole, including the people of Britain—our own people. It is not us against the others; it is us working together with the world in getting it right for everybody, including the British people. If we do not take that approach, we shall certainly be in trouble.

The language that has surrounded the whole, great opt-out saga that we are just about to enter is the language of doing it exactly the wrong way. To think that we can make everybody suspicious within Europe, and everybody increasingly resentful of us as an irritant within Europe, and then cherry pick the bits that we want to go back into, expecting them automatically to say, “Yes, okay, we’ll have the Brits back for that”, is very naive. We have to provide and build a context in which we can be there, benefiting our own people and bringing our influence to bear in the interests of our own people, because we are working for the European and the international community as a whole.

Twenty years ago this December, the late Cyrus Vance and I were deep in the mire and tragedy of the Balkans. Therefore it is with great pleasure that I welcome Croatia into the European Union—we hope this summer. I strongly support the legislation that makes this possible. About the only positive thing one could say then was that eventually it would be settled through the aspiration to membership of the European Community, as it then was. I also hope and pray that it will not be beyond a decade before we see Bosnia-Herzegovina, Serbia, Macedonia—or FYROM—Montenegro, Kosovo and possibly Albania all coming in together. Personally, I think it would be much better if we now saw that as a concept, because each country can hugely help each other over this difficult transition, which if we are honest is not going too well in many of those countries.

I do not need to say much about the vision of how one can restructure Europe. I totally agree with two speeches in particular—first, that of the noble Lord, Lord Howell, and then that of the former Commissioner, the noble Lord, Lord Tugendhat. I am certainly against this “shopping list” and the use of “repatriation” as a word. I am also against the belief that we can dictate. Our passage through this difficult transition will be done only if we have a positive message, if we look for solutions that suit not only us but other countries, and if we negotiate. I very much hope that the coalition, right from its very top, stops telling us what it is going to do when the next election comes and just gets on with telling us what compromises have now been reached inside the coalition. I do not look forward to the long-championed speech by the Prime Minister. Of course, he has to keep his party together and make a commitment to a referendum at some later date, as he has done. However, what is essential at the moment is to look at the negotiating strategy of the British Government and people and not just from the Conservative, Liberal Democrat or Labour Party view.

The fact is, we would never have been in the European Union, the European Community or even in the Common Market had it not been that this was wisely and widely judged as a broad-based issue of British interest and we came together. Grievous mistakes have been made. The whole eurozone was a palpably and fatally flawed combination, and for far too long those of us who said so in this country were despised and not given platforms. Equally, it has to be said, so was the ever-greater integration that went on unchallenged and often championed by Britain for nearly 10 to 15 years. That, too, was a mistake and we have to learn from those mistakes. I agree that we are not in a strong negotiating position. It is weak and the noble Lord, Lord Kerr—famous for being a Cassandra on these issues—was right to say what he did. He warned that strong forces are working towards a financial market union. My argument to him is that this is simply unacceptable and we have to make it unacceptable in a positive way.

The way ahead seems pretty clear. The European Union is a constant negotiation, hour by hour, day by day, week by week, month by month. It is not often realised in Europe what a good negotiating position Britain is in. Many people decry the Bill on referendums introduced by the coalition Government. I believed it was a sensible Bill and it has already shown itself to be one. The country can agree within the treaties to substantial integration for the eurozone if that is what these countries want. This does not challenge us in the terms of that legislation. There is no requirement for a referendum. Under the clause which talks about whether or not a power goes from this House of Parliament to the Commission, there has to be a referendum, but a power purely going to other eurozone countries does not require a referendum. This is not understood in Europe and it gives us a powerful hand. It is why it was such a tragedy that the Prime Minister embarked on his course of isolation this time last year. Thankfully, that course has been abandoned. The way that the leader of the Opposition spoke to the CBI about how many of these issues can be negotiated is also a positive feature.

However, the idea of waiting until 2015 is quite ludicrous. It is perfectly obvious that once the German election is over, whoever wins—and there is not much difference between the parties—the German people will say to the poorer and weaker eurozone countries, “We will fund you through possibly four or five years of great difficulty”. It will be an extremely generous decision, almost a Marshall Plan-like concept, but they will not do it, or be given a mandate to do it, unless the countries given financial help are ready to adopt what many people will call and see as German financial disciplines. That is their quid pro quo. If they do it, the Government are right to encourage that process and we must let it be done by amending the treaties and without referendums. This reform will come in dribs and drabs, but at that moment we must say to them that we have demands and one is to say, “At all costs we intend to stay in the single market and we need your help to do so”. That is essential.

I simply do not accept that a community that started with six members, went through being the Common Market, the European Community and the European Union and made the mistakes that it has in the eurozone is now entitled to say to the British, “You have to be out of the single market because we wish to dictate it in a eurozone direction”. I do not think it will. There are strong legitimate reasons why we cannot join that degree of eurozone political integration, which was never envisaged during the 1975 referendum in this country. In fact, it was specifically excluded by both of the key campaigners in the yes vote, the late Lord Jenkins and the late Edward Heath. We need to get our democratic responsibilities in line. I think we will end up with a referendum. I hope and pray that it is not a straight in/out referendum on the existing EU, because I think the people of this country will vote to go out. Therefore, I want it to be a much more restructured Europe when that referendum takes place and I am confident that we can restructure it in ways which are sensible for all the members of the European Union.

One of the things which I wish to see in future is us taking positive measures, for example, taking Turkey into the European Union. We have left this issue alone for far too long, but it is now a possibility. Turkey does not want to join the eurozone. There could be a European Union that has two segments—eurozone and full integration, and single market and full co-operation. I do not ask for it to be diluted, but for qualified majority voting and a single negotiator, the essence of the success of the single market. That can be achieved for all of Europe and one that includes Turkey.

My Lords, it is a great pleasure to follow the noble Lord, Lord Owen, with many of whose remarks I agreed—which, I suspect, may be more than will be said by the noble Lord, Lord Davies of Stamford, when he follows my remarks.

This is a bit like one of those interminable European summits where everything has been said, but not everybody has said it, so we carry on. So much has happened and yet so little has changed since we last debated these issues. We are still where we are, with the future of Europe nailed firmly to a snowflake. We were warned just last week by Monsieur Hollande that there is no possibility of change—that repatriation of powers simply is not going to happen and commitments are for life. I am not sure what experience he has as a relationship counsellor, but I think that there may be a better way.

I spoke recently to a Foreign Minister of an eastern European country. I was trying to explain to him that many British people feel disaffected because they have never been asked directly if we were willing to give up sovereignty. I must have lost my presence of mind, because I quoted Ted Heath. He said at the time that we joined the Common Market:

“There are some in this country who fear that in going into Europe, we shall in some way sacrifice independence and sovereignty. These fears”,

he added,

“I need hardly say are completely unjustified”.

That is what I tried to explain to my eastern European colleague: that far too many people in Britain feel disengaged from the European Union and misled about it. His response was that we were clearly stupid—yes, stupid. “Of course it involves giving up sovereignty”, he said. “All you had to do was look at what was going on in Europe and you would have known”. I dare say that he was right. I suspect that he found it easier than we British would to belong to a club where all his membership fees were being paid by others. However, he was entirely wrong to say that there was simply no alternative, because to say that is to deny history, democracy and close our eyes to what is happening. The Prime Minister is of course right to seek a new settlement and to search for a new way.

When Brussels came forward with an inflation-busting budget, the Prime Minister had a duty to object. How can we turn to our sick, our disabled, our elderly, our unemployed and say, “We hear your pain, we understand your needs, but it is more important to feed the European system”? It is a system that has two Parliaments, three Presidents and hundreds of officials who earn more than our Prime Minister; whose budget is so inept and corrupt that, for the 18th year, the European Court of Auditors has refused to sanction it. Why cannot the EU clean up its act? Why do fishermen still pour fish back into the sea? Why are farmers paid for not producing food? Why are officials paid more, more and more?

The whole mess is dressed up as nothing more than the growing pains of a great ideal. Brussels is growing fat on a diet of those excuses. There is growing dissatisfaction—long-term dissatisfaction—with that great ideal. There was a time when 62% came out to vote throughout Europe in European elections. On the previous occasion, in 2009, it was down to 43%. Most people simply could not be bothered, no matter how much money Brussels poured into information campaigns about its great ideal.

I do not want to bandy statistics around, because statistics are too often used in these debates as doctors use anaesthetic, but in the past five years, there is an extraordinary fact which I find rather compelling. Almost every elected Government who have come up for re-election in the European Union have been thrown out—in France, Italy, Greece, Spain, Portugal, Ireland and, of course, this country. The people have demanded that Europe’s elected Governments take responsibility. That is entirely right and proper. What about Europe’s unelected Government in Brussels? Perhaps the Minister can tell us whether a single member of that Government has been fired, forced to take a pay cut or to accept any measure of responsibility for what has been going on. They keep promising change. They say, “Yes, it will be different soon”, but their solemn undertakings are a bit like a Picasso; they seem to change every time you look at them.

David Cameron is right, spectacularly right, to say that this must stop. He is right to say that there must be a referendum, that people must be put back in control of this process and that there must be a rebalancing of rights. The possibilities for a different direction brilliantly expounded by my noble friend Lord Howell of Guildford and followed up by the noble Lord, Lord Tugendhat, deserve great consideration.

However, there comes a point when every great ideal has to face the test of reality: not academic records, not aspirations, not truisms but reality. If we may, let us spend a moment reflecting on the reality that is Greece. People seem to be running away from discussing Greece, but that is the reality of part of that great ideal: where sick people need to fill deep pockets with cash to guarantee hospital treatment; where children faint in classrooms because of a lack of nourishment; where elderly women queue for food at soup kitchens in two overcoats to protect them against the cold. There is now no hope. The suicide rate was once the lowest in Europe, but has now doubled, in a country where the Orthodox Church refuses funeral rights to those who take their own lives. We are watching a country die of despair.

Ah, but the Greeks brought it on themselves did they not? Well, no, they did not—not ordinary Greeks. Those who are suffering most are not the powerful, the rich or the elite who made those decisions. You know that they will always find ways to protect themselves. Those who are suffering are the poorest, the powerless, the old, the young and the sick—those who should be given special consideration and care. That is the reality of the European Union today, and unless David Cameron and others can persuade them that there is a better, more flexible and more democratic way, then I fear that the reality could be even worse tomorrow.

My Lords, this is not the first occasion when I have had the pleasure of following the noble Lord, Lord Dobbs, in a European debate. As he rightly anticipated, I did not agree with him this time any more than I have done on previous occasions, though he said his piece with his usual charm.

It has been a stimulating and worthwhile debate, but it is essential that we have another debate when the Prime Minister has made his long-awaited speech. Can I urge the Government that when that happens we have the whole day for the debate, and that the Government do not reduce the time by introducing Statements or debates on matters that, however fascinating they may be to some people, do not have quite the same potential historical significance as this one.

I may be a bit old-fashioned but I still have the idea that a debate should try to make progress, so I want to take advantage of being put rather low in the batting order this afternoon, not to make a prepared speech but to comment on some of the remarks that have already been made, particularly those that appear to be most memorable.

I am delighted to see the noble Lord, Lord Taverne, come in at this very moment, because the first speech that I want to refer to is his. He made a masterly analysis of the justice and home affairs issue. He demonstrated clearly and conclusively that there are no pragmatics about the Government’s attitude to this; the national interest is completely irrelevant. The Government are simply playing politics with the national interest. A bone—a very important bone, sadly—is being thrown to the Eurosceptics for purely party political reasons. This is a disgraceful state of affairs.

I also to pay tribute to my noble friend Lord Monks, who made an excellent speech about the Social Chapter, based on a unique degree of experience in these matters. I would like to add something about that issue. I am not known to be timid about attacking the modern Tory party or for being particularly indulgent to it. However, I wonder whether even the modern Tory party would seriously go about repealing the limited government measures that have gone through under the Social Chapter, to which my noble friend referred: the parental leave directive, part-time or agency workers’ directive and the four weeks’ paid leave directive. The one thing that Mr Cameron cares about is votes, and I do not think that he would get any if he legislated along those lines. No doubt the Institute of Directors, some right-wing think tanks and a lot of Eurosceptics would be delirious with pleasure; but I do not think that that would help him at the next election. So I anticipate that the Tory party is much more likely to say, “We want to pull out of the Social Chapter for ideological reasons, but we won’t actually repeal the measures that have gone through”.

If you think about it, though, that is the worst of all possible worlds. If we are going to have these measures—which are costly, of course, but essential in a humane society, to which we all want to be committed, and which are supported by all reasonable employers—it must be in our interests to ensure that they are part of the Social Chapter, and that there is no one else within the single market who can conduct their business without these kind of costs. Otherwise we would be damaging our own competitiveness within the single market, which would be a self-destructive thing to do. The Government pretend to care about the national interest, but an important aspect of the issue has not been taken into account at all.

Now I turn to the Government and to the noble Baroness, Lady Warsi. In a most excellent speech, my noble friend, Lord Liddle, quoted the Prime Minister as saying that, for him, Europe and referenda went together. I cannot think of another sentence that a Prime Minister could have pronounced which more obviously, immediately and dramatically would create uncertainty about our position and future in the European Union. Yet we had the noble Baroness, Lady Warsi—and, before her earlier today, the noble Lord the Leader of the House—saying, “Oh no, there’s no uncertainty at all; the Government are quite committed to our membership of the European Union and we haven’t created any uncertainty”. That is really quite a fatuous remark. The Government have gratuitously created a lot of uncertainty; as the noble Lord, Lord Pearson, said, a large number of people in this country believe that we are set on a course that will lead us to leaving the European Union in the next Parliament. Not only a lot of people in this country believe that and work on that basis, but a lot of our partners, sadly, believe that and will be working on that basis, which will mean a reduction in our bargaining power with them on many issues. Worst of all, many investors believe that, are working on that basis and therefore will not invest in this country. Whether they are British-domiciled or foreign-domiciled, they will invest somewhere else in the single market if they want their operation to be certain to continue to be in the single market and in a country that has a full weight in the decision-making process of that market so it can protect their interest.

I turn to the noble Lord, Lord Pearson of Rannoch. I do not want him to think that this is a personal attack. In fact, I have a high personal regard for him; I admire his courage and persistence in continuing to voice views that I think are completely misconceived but he does so very lucidly. Since he has set out so lucidly today what is the standard narrative of Eurosceptics, both in UKIP and the Tory party, I hope that he will not mind if I make him the object of my final remarks.

The problem that all Eurosceptics, whether UKIP or Tory, have in this country is that you just cannot make a credible economic case for leaving the European Union. There is no way that anyone can argue—I have not seen anyone even pretend to do so—that the mere fact of leaving the European Union will add one job to our national economy or one basis point to our GDP. Of course it will not; the argument is entirely the other way. The argument is about how many jobs it will destroy and how many basis points, or, indeed, percentage points of GDP, it will remove and over how long. That is how the argument is conducted—on whether it is hundreds of thousands of jobs we will lose, or millions. Generally, people recognise that if we were left with no access to the single market altogether, it would be more in the millions than in the hundreds of thousands.

Faced with that fact, what do you do if you are a Eurosceptic? I am afraid that you go in for some pretty evasive and disingenuous arguments, which we hear the whole time, and I am sorry to have to say to the noble Lord that we heard them from him this evening. We hear people say in the same speech, “We can negotiate continuing access to the single market”, and, almost in the same breath or sentence, that what is all wrong with this thing is the regulatory burden that we face, which is why we must leave the European Union. Yet if you continue to have access to the single market you continue to have the same regulatory framework, to which you are committed. That is the case with Switzerland and Norway, and it would be the case under all circumstances if we negotiated continuing access to the single market.

The difference, and it is a very important one, is that you are no longer part of the decision-making structure. You have no influence on the evolution of that regulatory regime, on the new regulations or on changes to them. You have no opportunity to propose a reduction of regulations, if you think that is the right thing to do. You are out of the dialogue—

I do not want to speak for too long. I am afraid I cannot give way because we have had imposed on us an unofficial time limitation, because the Government have preferred to do other things.

I am afraid I must insist. I am very sorry. I would love to give way to the noble Lord. I believe in debate in that sense, but we cannot do it consistent with having a time limit imposed on us.

My Lords, if I may read from the Companion:

“A member of the House who is speaking may be interrupted with a brief question for clarification … Lengthy or frequent interventions should not be made, even with the consent of the member speaking”.

That suggests that we should allow the noble Lord to finish his speech.

I am grateful. The noble Lord, Lord Pearson, made another classic error in his speech; it was about our bargaining power. He said that a certain amount of our trade—50%, or whatever it is—is with the rest of the EU but that nevertheless we buy more from them than they buy from us, and that therefore we have greater bargaining power. I am afraid that that is a logical fallacy. Bargaining power depends not upon the size of the stake but upon the importance to each party respectively of doing the deal. I hope that the noble Lord recognises this because he would be in terrible trouble in any negotiation he is involved in if he does not.

In other words, what is important is how important the particular deal under negotiation is in relation to the total of a party’s interest. As the noble Lord recognises, we have 50% of our trade with the rest of the EU. That is pretty much a life-or-death stake to have but from the point of view of the rest of the EU, which has 17% of its trade with the United Kingdom, it is much less of a life-or-death stake—so we have much less bargaining power, as they have much less need to do a deal than we have. On that basis, one can be a great deal less sanguine about any such negotiation that might take place than Eurosceptics are inclined to reassure the British public that we might be.

Before the noble Lord sits down, will he therefore tell us how every other country in the world manages to trade perfectly satisfactorily with the single market without having its ridiculous rules?

We have much greater penetration into the single market than other industrialised countries such as the United States or Japan, and we have that by virtue of being part of the single market. A great many businesses have been set up in this country, both by British-domiciled investors and by foreign investors—including, importantly, by Japanese and American investors—in order to have access to the single market. That is where we have gained enormously; we are part of the market itself. That is a priceless advantage and I think that the noble Lord implicitly accepted it when earlier on, slightly in contradiction to the question he has just asked me, he recognised that we must negotiate some continuing access to the single market or we shall face the most appalling economic losses.

My Lords, I prepared a very interesting and rather long speech for today’s debate but I decided to tear it up while reading the Times this morning on the train here. In it was a reference to an article in Saturday’s Times that was written by Matthew Parris, and which I was pointed to, about,

“the spittle-flecked obsessive reactionaries of UKIP”,

so I looked that article up. I got it out of the Library and I have it here. Its title is:

“Stamp on the grasshoppers of the Rabid Right”,

and is subtitled,

“These spittle-flecked, obsessive reactionaries belong in UKIP. Don’t let them shelter under the Conservative fern”.

I thought that it was the New Zealanders who had the fern and that the Conservatives had an oak tree, but let that rest.

The detail of this article gives offence to me and many of my friends. Matthew Parris says, talking about Conservative MPs, that,

“the local MP has spent a career repelling from party membership anyone under 70 who isn’t a spittle-flecked, obsessively anti-European, immigrant-hating social and cultural reactionary”.

That really is not terribly helpful, nor is the Prime Minister’s refusal to retract his insult that UKIP is largely composed of fruitcakes, cranks and closet racists.

In the Times today I saw the results of a ComRes poll over the weekend conducted for the Independent on Sunday and the Sunday Mirror. It showed that 14% of voters would vote for UKIP and only 9% for the Liberal Democrats; 28% would vote for the Conservatives, by the way, so we are catching them up.

A lot of Conservative MPs want to leave the EU, many more want to renegotiate their positions within the EU and at least three members of the current Cabinet have said they would be happy to leave the EU. All opinion polls in the past two years have found that about 50% of the people in this country would be happy to leave the EU. I know that polls vary and will change from month to month and year to year but, nonetheless, they are definitely straws in the wind.

Are all these people who are polled, the MPs and the members of the Cabinet, all spittle-flecked, immigrant-hating, fruitcakes and racists? Of course they are not. Of course we are not. We want to get our country back. I do not think that is a crime and I do not think we should be treated in this extraordinary way by the leader of the Conservative Party or by a time-worn columnist on the Times.

I do not agree with anything that the Europhiles have said. They have been wrong all along and I think where they are trying to lead us now is very dangerous but I do not insult them—I do not have to, because I just look at the facts. I was grateful to the noble Lord, Lord Dobbs, for mentioning Greece, which has been, as he said, singularly absent in our debates this evening. The Europhiles have skated over the results of what the euro has caused in Europe.

In Greece there is now a bitter hatred of the troika and the misery, poverty and unemployment that it has caused; the noble Lord, Lord Dobbs, is absolutely right about that. The programme of forced austerity has brought misery to Greece, as the noble Lord said very clearly. The German Chancellor is routinely caricatured cruelly in full Nazi regalia. In Greece, unemployment is 26%; youth unemployment is a shocking 55%. The Greeks are run by the troika now; they have no fiscal independence at all.

The noble Lord, Lord Owen—he is not in his place to answer the question I want to ask him—said that the Germans will pay for the Greeks and for the “Club Med” in future as long as they obey the German-imposed rules. What happens if they cannot hack it, or if they are unable or unwilling to do so? What happens if the disaster scenario occurs that the noble Lord, Lord Dobbs, mentioned at the end of his speech?

We have a bit of an answer from, I think, someone in the German Ministry of Finance—it may have been Herr Schäuble—who promised that they will have,

“more intense, compulsory employment of external technical assistance”.

What does that mean? Does it mean the European Gendarmerie Force? No, I think it just means that when the EU says “Jump!”, the Greeks can only say, “How high?”. I think that that is what is called pooling sovereignty in the EU.

The same thing is happening in Spain, of course. The EU’s vanity political project, the euro, is causing unemployment, unrest, riots and even talk of secession in Catalonia and Andalucía. Your Lordships want to know what the unemployment rate in Spain is. I will tell you: it is 26%, according to Eurostat. Youth unemployment is 49%. In Italy, Beppe Grillo’s out-of-euro party is making enormous inroads. The much derided Berlusconi, when he announced his possible candidacy—he was probably teasing the Italians a little—got it right when he said,

“I can’t allow my country to plunge into an endless recessionary spiral”.

I would have thought that was a pretty good electoral programme on which to run in Italy.

In France, we could soon hear the time-honoured cry: “Aux barricades!” when President Hollande comes up against what he believes is a world without bond markets, globalisation and the internet. When that collides with reality, where is he going to be then? France’s exports are already crashing. Unemployment is rising. The reality is that the EU is impaled on a Morton’s fork of its own making. On the one hand, there is permanent stagnation while the euro staggers along on the German support system; on the other, there is a deep economic depression as the eurozone breaks up. Those are the only two alternatives in front of us at the moment.

The ice is cracking under the European Union, however unpalatable that may be to the Europhiles in and outside this House. We do not know who is going to make it to the shore and who is going to fall in. However, what has happened is not the Eurosceptics’ fault. It is entirely down to the arrogance, conceit and distaste for democracy of the EU elite. As my noble friend Lord Pearson has asked, when are they going to apologise?

My Lords, I am pleased to follow the noble Lord. I certainly share many of the concerns that he has voiced.

I was anxious to take part in this debate because I am becoming increasingly concerned, both about the fabric of our society and our ability as a nation to govern ourselves. One of the main responsibilities of any generation is to protect and preserve what is good in its society and hand it on to the next generation. We, my generation, are failing to do this on a massive scale. One of the principal reasons for this is that, as a country, we are no longer in control of our own affairs or our own destiny. While the European Union is not solely responsible for this, it is certainly playing a major role in all that is happening, and it is time to take stock.

The European experiment—for that is what it has been, although it has lasted quite a long time now—in its original form was never going to work. So many different nations with their different histories, cultures, ambitions and climates were never going to happily and peacefully co-exist in one, all-encompassing framework. So it has proved. The EEC became the EC and then the EU, changing and modifying its framework as the experiment progressed. More countries were added, now an unwieldy 27 with more to come. Problems and tensions of many kinds, not least financial, have grown. Sticking plaster has been put on sticking plaster. Grudging agreements have alternated with threats and, occasionally, genuine use of vetoes. No one is being clear or honest about the ultimate goal. All we are sure of as a nation is that we do not want to lose any more power to Brussels and we do not want to be further embroiled in the experiment, wherever it may be leading. That is right but it is essentially negative, and we are constantly being accused of being negative.

The time has come fundamentally to change our attitude and produce a clear and positive plan for the kind of Europe that we would like to see, together with our place in it. The whole purpose of experiments is to learn—we have learnt from this one—to draw sensible conclusions and plan future programmes. A blueprint that suits our country is not purely selfish, although of course our first duty is to our own country and its people. A sensible working framework would benefit the whole of Europe. Perhaps I may say how much I agreed with the wise, yet exciting, speech of the noble Lord, Lord Howell of Guildford. I am glad he is not in his place now in case I embarrass him. I risk embarrassing him further when he reads this. Anyone seeking inspiration about our role in the world need refer only to the speech of the noble Lord, Lord Howell, in the foreign affairs debate on 6 September. It was comprehensive, all-encompassing and very, very positive.

In European terms, we are in a mess; a mess predicted by so many people from the beginning. We are faced either with grudgingly giving way bit by bit more and more control over our own affairs or eventually an acrimonious split with unforeseen consequences leading to hasty reorganisations fraught with danger. It is a pressure cooker with a temperature constantly rising and we as a country are leaving ourselves entirely dependent on events.

Let us discard some labels. Let us discard “in” or “out” and “Eurosceptic” or “Europhile”. This is really no time for allowing entrenched views to stifle open debate. We should start as a matter of the greatest urgency a brand new debate on a new framework for Europe and our place in it. When finished and finalised it can be put to the British people if need be in a referendum. That eventually will be essential. The longer we leave it, the more difficult and dangerous the situation becomes. On this issue we must take the lead. I believe there is no time to lose.

My Lords, we read that the Prime Minister is thinking about making a speech about Europe but cannot decide what to say, so I have written him a draft and I can give the House advance hearing of it today. It is as follows.

“I was eight years old when Harold Wilson called the referendum in 1975 and advocated a yes vote. I was able to knock on doors to urge a yes vote on the basis of the 1971 White Paper visualising ever closer union. That, of course, was under Ted Heath’s Government. In doing this in 1975, I gave my support to our recently elected and most distinguished leader, Margaret Thatcher, following in the trailblazing footsteps of Ted Heath.

“Friends, we are often accused of being dishonest about the European project, so let me be brutally frank or else we will all have a nervous breakdown”—I think that the absence of Members on the Conservative Benches this evening probably suggests that most of them have had a nervous breakdown already. “The noble Baroness, Lady Thatcher, never claimed that the British people were misled in 1975”. Well, she could not, having been leader of the yes campaign for the Conservative Party in 1975 on the basis of that White Paper and the Act of 1973.

“I say all that because nothing is gained”—and this is David Cameron speaking, just to remind people who have just walked in—“by playing around with the word ‘sovereignty’. It is bandied around as if it has a unique and unambiguous meaning. We are members of NATO, are we not?” Can I ask UKIP Members whether they are happy that we are members of NATO?

NATO has majority voting in its own way. What about the UN? Is there any comment from UKIP about that?

Would the noble Lord please not go on asking questions to which he does not want answers because they are too uncomfortable for him? We are happy to be in the United Nations because we could withdraw—

This is a Second Reading debate. Given the lateness of the hour, we should really have one speech after the other rather than general exchanges. Perhaps the noble Lord who is speaking could bear that in mind.

I merely wish to correct the noble Lord. He pointed to me when he referred to UKIP. I am not a member of UKIP; I am Independent Labour.