My Lords, I wish to make a personal statement. In a debate on Wednesday, 6th May on euthanasia, I ascribed the authority for a statement I made on a question of the award of costs in the Annie Lindsell case to the President of the Family Division of the High Court. I now understand that I should not have reported the terms of a conversation that I had had with the learned judge. The statement was made without his authority or knowledge. I should therefore like to apologise unreservedly for any embarrassment that I may have caused the President of the Family Division.

asked Her Majesty's Government:

Whether they will press for the attachment of Estonian officials to the European Commission while the Republic of Estonia is conducting negotiations for entry into the European Union.

My Lords, we support arrangements designed to prepare officials from Estonia and other candidate countries for the realities of EU membership. We are determined to be fully involved in the European Commission's proposals for institution building through twinning between government departments in central Europe and those in member states. Attachments to the Commission would fit naturally with this process. But decisions on such attachments would be a matter for the European Commission.

My Lords, I thank the noble Baroness for her most helpful reply. Is she aware of the speech made by the Foreign Secretary of Estonia, Mr. Toomas Hendrik Ilves, on 31st March this year when Estonia started its negotiations for entry into the European Union? In that speech he stated that the attachment of officials to the Union would be most helpful in facilitating the negotiations. Will the noble Baroness press the Commission to ensure that the five plus one nations have exactly the same rights as those enjoyed by Austria, Finland and Sweden when they started negotiations some years back for entry into the European Union?

My Lords, I regret that I was not aware of the specific speech to which the noble Earl refers but I think we can agree with the general terms on which he reports it to have been based. The twinning aims to strengthen the institutions and the administrative capacities of the applicants. The centrepiece of the twinning will be secondments between an applicant and a member state. We and other member states will inform the Commission by the middle of June of the expertise that we can offer and we will then firm up the arrangements with the applicants with the aim of getting the first twinning arrangements into place by October or November this year.

My Lords, if Estonia is admitted in due course, Estonian will be one of the official languages of the European Union. As only 5 million people speak Estonian—the noble Earl will correct me if I am wrong—will there not be a campaign by the Catalans, whose language is spoken by around 6 million people. who will wish the Catalan language to be an official language of the European Union as well? Is there not a danger of an extraordinary proliferation of languages as some of the smaller countries are admitted?

My Lords, the question of official languages will have to be discussed during the course of the negotiations between the applicant counties, member states and the Commission.

My Lords, will the Minister give an assurance that questions of numbers will not dominate her mind in relation to Estonia and the other Baltic states but rather their heroic tradition of suffering and their fidelity through the years to democratic ideals? Can we be assured that the Government will be supporting the application of these states for membership of the Union?

My Lords, the criteria used for all the applicant countries will be the same. Those criteria will have to fulfil the requirements in relation to human rights, in relation to the economic position of the country and in relation to political institutions. The criteria will be the same for all countries. It is not a question of numbers; it is a question of fulfilling the criteria.

My Lords, on that point, Estonia has made major progress towards the integration of Russian minorities into its society. In the light of the Government's policy on human rights, do they support the amendments to Estonia's naturalisation laws'? If so, does the Minister therefore foresee a smoother passage of entry for Estonia into the European Union?

My Lords, I refer to the answer that I just gave on the question of human rights. The criteria applied in respect of human rights will be the same for all countries. As the noble Lord is aware, Estonia, along with Poland, Hungary, the Czech Republic, Slovenia and Cyprus, began accession discussions at the end of March. As far as we can see, the basic criteria are already in place and we are now in negotiations with those countries.

My Lords, is the noble Baroness aware that there are 1.5 million people living in Estonia of whom many speak three or four languages, including English? Is she further aware that our present excellent ambassador to Estonia, Mr. Timothy Craddock, was recently interviewed on Estonian television and spoke fluently in Estonian? Will the noble Baroness offer him her congratulations?

My Lords, not for the first time the noble Earl's intimate knowledge of Estonia considerably outdistances my own. I shall be very pleased to convey his congratulations to the ambassador.

asked Her Majesty's Government:

What action they will propose to the NATO-led Stabilisation Force in order to stop Serbs killing Albanians in the province of Kosovo.

My Lords, no role is envisaged for the Stabilisation Force, the SFOR, in Kosovo. SFOR was established in accordance with the Dayton Agreement for peace in Bosnia and Hercegovina. Its mandate does not cover action in the Federal Republic of Yugoslavia.

My Lords, I thank the noble Baroness for her Answer. Does it not immediately lead to the question as to whether the mandate should be changed to cover, if necessary, action either in Kosovo within Serbia or on the Albanian frontier between Kosovo and Albania? Is not the fact of the matter that the present measures being taken, such as sanctions, show at this stage very little sign whatever of succeeding? Indeed, Commissioner van den Brock, at a conference last week, described the sanctions as little more than an act of helplessness of last peaceful resort? Are we not really in great danger of making the same mistakes as were made in 1991 and 1992? Is not the fact of the matter that as long as Milosevic is president of the Federal Republic of Serbia, the western world can make as many declarations and pass as many sanction rules as it likes, but effectively we are whistling in the wind?

My Lords, I agree that the situation in Kosovo is increasingly dangerous as the noble Lord and indeed I am sure the whole House, will be aware. A pattern of virtually unbroken, low-intensity fighting has now developed in western Kosovo and in border areas. There are growing concentrations of Serb security forces and Yugoslav army units which are very worrying. But NATO has expressed its concern at these recent events and has pledged to continue to monitor the situation very closely. I hope that that reassures the noble Lord that this is not an issue that has been placed to one side, but that it is being monitored and that NATO's concern has been expressed on that point.

My Lords, before anyone at the Ministry of Defence or anyone else takes a decision to commit British soldiers to this part of the world, first, will they make sure that they read a simple history of that area over the centuries which has been pretty bloody? Secondly, will they consult the Germans who became ensnared there between 1941 and 1945, with great casualties, and ask them why they made jolly sure that they did not get involved in that area?

My Lords, I am sure that the utmost care will be taken before there is any question of pledging British troops anywhere. We should note that the recent visit to the region by the Secretary-General underlines the importance that NATO attaches to preventing the escalation of conflict. NATO is currently considering possible further measures to promote stability and security in the region. I am sure that the whole House will be pleased to note that Mr. Milosevic met Mr. Rugova, the leader of the opposition, on 15th May. That was a very welcome first step. The meeting was made possible by sustained pressure from the European Union, the contact group and others in the international community.

My Lords, following the meeting of the Council of Foreign Ministers on 27th April when the decision was taken to bring in sanctions against Serbia and Montenegro, there was reference to additional measures. Can the noble Baroness say what they might be or have they been agreed? May I also ask the Minister about the crisis which has just blown up in part of the Federal Republic of Yugoslavia; namely, the attempt by President Milosevic to appoint Mr. Momir Bulatovic as the new president of the Federal Republic which has been rejected by the Montenegran Parliament and is now leading to a serious political crisis in that part of the former Republic of Yugoslavia. Can the noble Baroness tell us something about that?

My Lords, I cannot give the noble Baroness any further specific information on the last point that she raised. My general point is that there is considerable worry about what appears to be a continuing armed conflict in that part of the world and continuing difficulties caused by the lack of stability. The noble Baroness must be reassured that this matter is being monitored not only by the United Kingdom Government but through the contact group and the EU.

The noble Baroness asked about further measures. These are under consideration at the moment. The question of sanctions has revolved around the freezing of assets in this country and investment in Kosovo. As regards money going into Kosovo, that matter was put on one side for the time being on 16th May, given the meeting that had just taken place between Mr. Milosevic and Mr. Rugova. It was hoped that that meeting would lead to a quieter, more stable position in Kosovo. The other issues will be considered at further meetings within the next couple of weeks or so. I hope that we shall have more information at that stage as regards the first point that the noble Baroness raised.

My Lords, does the Minister agree that it is important that the frontier between Albania and Kosovo is monitored to prevent the infiltration of arms and people from Albania into Kosovo?

Yes, my Lords, I agree that it is enormously important to monitor what is happening at the borders. Five monitors are currently attached to the Federal Republic of Yugoslavia. We are giving as much support as possible to ensure that we are monitoring what is happening on the borders because of the tension that may well escalate if the level of hostility rises in Kosovo. We are well aware of the possibility of a spill-over of the conflict outside Kosovo, to which the noble Earl referred.

My Lords, as normal chaos returns and re-establishes itself in the Balkans after the break-up of Yugoslavia, would the Government consider an arrangement under which NATO, which was set up for a completely different purpose and has a membership which is only partially appropriate to these operations, would make available to the OSCE its own facilities in terms of international co-operation for future military action in that part of the world with the aim of defusing the possible American/Russian and Western European/Russian tensions that will continue to arise as long as this is left to NATO under its own direct command?

My Lords, we have been pursuing the question of Kosovo through a number of different forums. The House will probably be most aware of the contact group through which we are trying to ensure the maximum degree of international agreement, involving both the United States and Russia in our approach to the problems of Kosovo. I believe that in the first instance we should be considering the role of the contact group to see what can be done to de-escalate the difficulties and hostilities in Kosovo rather than leaping down the path of assuming that our only course of action is to bring in full NATO forces. I am not quite sure what the noble Lord was suggesting, but I hope that I have got over to him the point that the Government will want to continue to pursue the option of the contact group.

My Lords, is my noble friend aware of the recent report by the Council of Europe which looked into the question of Kosovo, and particularly its recommendation that any potential long-term settlement of the issue should be within the existing borders of the Federal Republic of Yugoslavia and that there should be no question of Kosovo somehow seceding from those existing borders?

My Lords, I am aware of the report and agree with its major conclusions about Kosovo not seceding. The position of the EU contact group is clear on this point. It supports enhanced status and a greater degree of autonomy for Kosovo within the Federal Republic of Yugoslavia. However, that has to include meaningful self-administration. The status quo is clearly not sustainable.

My Lords, the Minister will know that no one on either side of this House wishes to mitigate the extraordinary difficulty of the circumstances in Kosovo at the moment, but history certainly does repeat itself in the Balkans as elsewhere. Having been to Mostar, Bihac and Sarajevo within the past 11 months and seen the horrific damage done in recent years in those cities and the country around them, may I ask the Minister to bear in mind, and to pass on to her colleagues, the fact that we must try to avoid repeating the mistakes that were made in the early 1990s?

Hear, hear!

My Lords, I could not agree more with the noble Lord. Having heard that acknowledgement of his views from all sides of the House, I am sure that all noble Lords agree with his basic premise. A few moments ago I mentioned the meeting between Mr. Milosevic and Mr. Rugova earlier this month. That meeting was made possible as a result of sustained pressure from the EU and the contact group and others in the international community who are pressing for a dialogue within Kosovo itself. We must look to both sides in the conflict to use the opportunity to establish a political process which we hope will lead to an enhanced status for Kosovo. There is a particular responsibility upon President Milosevic as head of the government to seek that negotiated settlement.

My Lords, given that the Minister has informed the House that there are only five monitors, what information can she give us about the extent and effectiveness of the monitors who were deployed by the European monitoring mission in Kosovo?

My Lords, I would not wish to be misunderstood. Five may not be the total number. I believe that five monitors were looking particularly at the border arrangements. I shall write to the noble Lord on that point because I would not want any imprecision on my part to be misleading. I hope that it is understood that the Government's position is that it is enormously important to monitor what is happening. I believe that that monitoring position changes as the difficulties are perceived to be more or less acute. As I have said, I shall write to the noble Lord on the particular point that he raised about monitoring.

asked Her Majesty's Government:

When work will start on (a) the enriched uranium and (b) the irradiated material sent from Georgia to Dounreay.

My Lords, the 4.1 kg of unirradiated highly enriched uranium will be processed into targets for production of medical isotopes once the Health and Safety Executive and the Scottish Environment Protection Agency have completed a review of the management of safety at Dounreay and are satisfied that processing activities in the fuel cycle area can be carried out safely. The 600 grams of irradiated uranium is now in safe storage at Dounreay. It will not be reprocessed before the HSE is satisfied with the safety of the reprocessing line. The quantities of highly enriched uranium are slightly smaller than announced immediately after the arrival of the material because those figures were for the total Uranium 235 in the consignment.

My Lords, I thank the Minister for that helpful Answer. Can he reassure the House that when it comes to future reprocessing proposals, an environmental impact assessment will be made first in the best interests of health, safety and the environment?

My Lords, safety is absolutely key in these matters. There are requirements in relation to the environment and adherence to the regulatory process. I do not think that a specific environmental impact assessment is required in the circumstances, but I shall look further into the matter and write to the noble Lord.

My Lords, perhaps I may précis the Minister's Answer by saying that the Government do not have a clue about when the material might be reprocessed. Is it not a fact that the irradiated material cannot be reprocessed because Dounreay does not have a certificate allowing it to reprocess, and that the non-irradiated material cannot now be reprocessed because Dounreay's certificates have been withdrawn and the whole fuel cycle area has been shut down? Is it not a fact that without some years passing and many millions of pounds being spent, neither of the materials can be reprocessed? Does not that call into doubt the Prime Minister's assurance that Dounreay was the safest place to take Georgian nuclear material?

My Lords, the noble Lord is uncharacteristically going overboard a little. He knows that I have quite a high regard for his abilities, including now his ability to go overboard. Although I appreciate the noble Lord offering to help by précising my Answer, I thought that I had done that when I approved it.

It will not necessarily take years. As the noble Lord is well aware, this matter is under careful investigation by independent and responsible authorities. I cannot say when the work will be able to go ahead; it will be only when safe to do so and only when the necessary compliance has been given by the organisations concerned. That is the responsible approach. I do not know why the noble Lord draws the conclusion that it will take years. He does not have a vestige of evidence to support that proposition. It will be done as soon as possible, but the most important element is safety. As to the noble Lord's assertion about the Prime Minister, there was no reason to suppose at the material time that there was a problem about safety.

My Lords, I lived in Caithness when the nuclear station was built. Can the Minister inform the House whether there is a cluster of leukaemia cases in that area? Given that this more powerful uranium has been sent there, what is the risk of seepage into the sea and contamination of water and fish?

My Lords, the point that the noble Baroness raises goes very much wider than the Question tabled. I am not aware that there is any danger of leukaemia. However, because this falls outside the scope of the Question I shall look into the matter and write to the noble Baroness.

My Lords, can the Minister assist as to the length of time that the environmental audit may take? The Minister will be aware that similar problems have arisen at Sellafield which is very professionally run and where safety is paramount. Will this environmental audit or checking of both highly irradiated and normally irradiated material be out of the ordinary? Will it take years or can one expect some good news before the millennium?

My Lords, it is not just an environmental audit but an investigation that is being reliably and authoritatively undertaken. The essential requirement is not speed but thoroughness. To return to the conclusion drawn by the noble Lord who spoke from the Front Bench, there is no reason to suppose that this matter will take years. The noble Lord will understand that what is important here is that it should be done thoroughly. I am sure that no one in this House expects anything else.

My Lords, referring to the Minister's earlier response to my noble friend Lord Selkirk, will the normal rules concerning return to sender of irradiated material be enforced in this instance?

My Lords, not in this instance because the amount involved was very small indeed. It would not be appropriate to return it to its source because it has no means of dealing with the matter. It would have been completely irrelevant had we insisted on it in this case.

My Lords, does the noble Lord agree that it is much safer for this material to be kept in this country where it is under control than to leave it in Georgia where it can easily fall into the wrong hands?

My Lords, there is substance in that point. At the heart of the matter is the question of taking action in the context of non-proliferation. I believe that by undertaking this particular contract this country also did the right thing in that respect. I believe that that is a very important point to underline, and I am grateful to the noble Earl.

My Lords, is the Minister aware of the importance to the local economy of Dounreay? Can he assure the House that while this investigation is going on there will be no dismissals or suspension of workers at Dounreay?

My Lords, that is not a matter for the Government. No doubt the authority will note from its diligent reading of Hansard the point made by the noble Lord. As far as I am aware, the local community has not expressed deep concern about the matter. In the past Dounreay has been very diligent in ensuring that the local community is aware of what goes on.

My Lords, I begin by declaring an interest in that the cousin of my wife is dying of cancer having been a nuclear engineer at Dounreay. Can my noble friend inform the House who will pay for the storage and reprocessing of the material from Georgia?

My Lords, that is a matter for the contracting parties. I am sure that all noble Lords are sorry to hear the information that my noble friend has disclosed. I am sure that he does not wish to imply that there is any necessary connection between what goes on at Dounreay and the unfortunate condition that afflicts his relative.

My Lords, the Minister has said that he will write to me on the specific point that I raised. Will the Minister bear in mind that other countries carry out environmental impact assessments to the highest standards before they make key decisions of great importance?

My Lords, in one of my earlier answers I referred to the need for compliance with three essential criteria: safety, environmental requirements and regulatory requirements in another respect. I am grateful to the noble Lord.

My Lords, on behalf of my noble and learned friend the Lord Chancellor I beg to move that the Commons amendments be now considered.

Moved, That the Commons amendments be now considered.—(Lord Hardie.)

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 1. It may be helpful if I speak also to Amendment No. 2 and explain the changes the two amendments jointly make to Clause 1 and how they improve the procedure which the Bill establishes. Both amendments reflect discussion with experienced practitioners. The Bill found favour in your Lordships' House as a practical measure to reduce delay in summary proceedings under Section 12 of the Magistrates' Courts Act 1980, particularly those for the less serious motoring offences.

Clause 1, as sent to the Commons by your Lordships, amended Section 12 of the Magistrates' Courts Act to allow a guilty plea to be given by the defendant in response to a summons served with a statement of facts as at present or a written witness statement conforming to Section 9 of the Criminal Justice Act 1967. Service of the summons with a written statement is the key procedural change. The considerable advantage of that change is that the written statement can be used in two ways. First, it may be used as an account of the facts of the case when the defendant wishes to plead guilty. In those circumstances the witness statement serves the same purpose as the statement of facts does at present and will be read by the court clerk. Secondly, when the defendant does not respond to the summons the evidence in the statement may be used by the prosecutor to prove the case in the absence of the defendant on the first listed hearing thus avoiding the need for an adjournment.

In the first set of circumstances—when a witness statement is used to give an account of the facts following a plea of guilty—the original draft of Clause 1 would require the court clerk to read out the whole statement. Reading a witness statement will take longer than reading a statement of facts because it is a full account of what the witness saw, heard and did and will have been prepared to prove the case. The statement will include detail which is not required for a guilty plea. In a speeding case, for example, the statement will describe the steps taken to check the accuracy of a calibrated speedometer in a police vehicle. That evidence may be required to rebut any challenge that the equipment is faulty, but it is not needed when the defendant has already pleaded guilty.

Clause 1 as originally drafted would undoubtedly reduce the number of adjournments but each guilty plea will take longer than it does presently if the court clerk is required to read each witness statement verbatim. The cumulative effect of reading each statement in full could reduce the time and costs savings created by the new procedures. That would be an undesirable outcome in a Bill designed to save time and reduce delay.

A number of practitioners, including senior magistrates and justices' clerks, drew the Government's attention to the problem of Clause I as first drafted. The Government considered most carefully the points made by practitioners and accepted that in a guilty plea case a full reading of the witness statement was not necessary and could lead to court time being wasted. Requiring the statement to be read in full after a guilty plea would also mean that the court clerk would very likely have to do more than the prosecutor when proving the case. The prosecutor may, where the court so directs, give an oral account of what is said in a witness statement. Provision for the prosecutor to summarise in this way is made in Section 9(6) of the Criminal Justice Act 1967. For those reasons the Government brought forward the amendments which are for consideration today. The practical effect of the two amendments will be to allow the court clerk to give an oral account of, or to summarise, the witness statement when the defendant has pleaded guilty.

Amendment No. 1 stipulates what shall be read by the court clerk in a guilty plea case. This will depend on whether the summons served on the defendant is served with a statement of facts or a witness statement. When the summons is served with a statement of facts the clerk will read that statement of facts to the court. When the summons is served with a witness statement or statements and the court does not otherwise direct, the clerk will read that witness statement or statements to the court. The nature of the direction by the court is the subject of Amendment No. 2.

Amendment No. 2 does two things. First, it provides that when a witness statement has been served with the summons and the court gives the direction mentioned in Amendment No. 1, the court shall cause an account to be given orally before the court by the clerk of the court of so much of any statement as is not read aloud.

The second part of the amendment preserves the provision in the original Bill, that when a written statement is read out, the declaration at the beginning of the statement need not be read out. This is the declaration by the person making the statement to the effect that it is true to the best of his knowledge and belief and that he made the statement knowing that, if it were tendered in evidence, he would be liable to prosecution if he wilfully stated in it anything which he knew to be false or did not believe to be true.

The requirement for the court to give a direction means that the court will control the proceedings and that the clerk may only summarise what is in the statement with the express authority of the court. The Bill as introduced in this House was an eminently practical measure to tackle delay in summary proceedings. The changes made by these amendments reflect the concerns of practitioners. They will further improve the procedure which the Bill establishes and I commend them to your Lordships. I beg to move.

Moved, That the House do agree with the Commons in their Amendment No. 1.—(Lord Hardie.)

My Lords, about 97 per cent. of cases heard in our courts are heard in magistrates' courts. A high percentage of those cases are minor summary cases. Nevertheless, they sometimes suffer a number of adjournments. The Bill seeks to reduce those adjournments, and does so successfully. The amendments tabled by the Commons further enhance the effectiveness of the Bill. They are supported by this side of your Lordships' House.

On Question, Motion agreed to.

My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 2 to which I have already spoken with Amendment No. 1.

Moved, That the House do agree with the Commons in their Amendment No. 2.—(Lord Hardie.)

On Question, Motion agreed to.

My Lords, this Bill represents the first step towards achieving the Government's aim of the introduction of new tax credits—the working families tax credit and the disabled person's tax credit. It provides authority for preparatory expenditure by the Inland Revenue and the Department of Social Security for the introduction of the tax credits.

In his recent Budget, the Chancellor of the Exchequer announced the introduction of the WFTC, a central part of the Government's major programme of tax and benefits reform. It will provide a very real incentive to move from welfare into work by significantly boosting the earnings of low income families with children, and providing extra help with childcare costs. It will build on and replace family credit, and similarly, a new disabled person's tax credit will build on and replace disability working allowance. Both these new tax credits will be introduced in October 1999. They will be assessed and administered by the Inland Revenue, and from April 2000 will be paid in the main by employers through the wage packet.

The WFTC proposal is designed to make work pay for families, by guaranteeing them a minimum income, above and beyond the level of the minimum wage. It aims to demonstrate the rewards of work over welfare by providing a clear link with employment. We hope that it will reduce any stigma associated with claiming in-work support by changing it from a welfare benefit into a tax credit. We believe that this will encourage higher take-up and help encourage people to move off welfare and into work.

The WFTC, when it is introduced, will provide around £5 billion of help to about 1.5 million working families, equivalent to £70 per family per week. That represents approaching £1.5 billion more in-work support than family credit.

The WFTC represents an important step towards greater integration of the tax and benefit systems. In particular, it will reduce the current wasteful overlap between the tax and social security systems whereby almost 500,000 families pay income tax to the Inland Revenue while receiving FC from the DSS.

Although the purpose of the Bill is to allow preparatory work in developing the details of the scheme to go ahead, the basic structure of the tax credits is already clear. It may be helpful if I describe the outline scheme as it stands currently.

In general, families on low incomes where the main earner works more than 16 hours a week will be entitled to a tax credit of £48.80 in respect of the adults (or adult) in the household. They will also be entitled to a tax credit in respect of each child, which will range from £14.85 to £25.40 a week, depending on the age of the child. There will be an additional tax credit of £10.80 where the main earner works for more than 30 hours a week, to encourage people to move from part-time to full-time work.

The cost of childcare can be a major obstacle to work, and the WFTC will include a childcare tax credit. This will be an integral part of the WFTC and will be paid in addition to the basic, child and 30-hour credits to make up the whole WFTC package. The childcare tax credit is designed to make support for childcare through the tax system more generous and more transparent than is currently the case with family credit.

The childcare tax credit will be worth 70 per cent. of eligible childcare costs, subject to an overall limit on those costs of £100 a week for one child and £150 a week for two or more children. As a result of this, the WFTC will provide support for childcare costs up to a maximum of £70 a week for a family with one child, and up to a maximum of £105 a week for a family with two or more children. This will be a significant increase on the maximum support, currently provided by the childcare disregard in family credit and it will, unlike that disregard, be paid to those on very low incomes.

The WFTC will begin to be withdrawn when the family's net income (before adding the WFTC) exceeds £90 a week. But WFTC will be withdrawn more slowly than family credit. After the £90 threshold, for each additional pound of net earnings 55 pence of WFTC will be withdrawn, as compared with 70 pence per pound under the current family credit rules.

The structure of the disabled person's tax credit will be broadly similar, and it will include an adult credit (for single people and those who are married), child credit, and the childcare tax credit to help with childcare costs.

The structure of the new tax credits reflects the priority the Government attach to getting those who are out of work into work—and keeping them in work and on the ladder of opportunity. It unambiguously improves the return to work, and will improve work incentives for families and those with an illness or disability, by making work pay. For example, by targeting the greatest increase in support on those earning between £100 and £300 a week, the WFTC will provide support for the sort of jobs people moving from unemployment and inactivity are most likely to take. The reforms to national insurance paid by employees and employers will reinforce this effect.

The WFTC alone will also ease the poverty trap—another significant discouragement to work—by reducing marginal rates for over half a million families, currently receiving family credit. The reduction is created by the lower withdrawal taper of 55 per cent. compared with 70 per cent. under family credit; the increase in the withdrawal threshold to £90 per week; the increase in child credits; and changes in the interaction with housing benefit which can currently lead to marginal rates of over 100 per cent.

Further details of the new tax credits will be fully developed in the coming months. Both the credits will be administered by the Inland Revenue on their introduction in October 1999, and from April 2000 will be paid in the main by employers through the wage packet. This will help to reinforce the link with work.

It is particularly important to ensure that the system works effectively from the start in view of the significant benefits it will provide for so many people on low incomes. This, and prudent management, means that there must be meticulous preparation. And if it is to be thorough, the preparatory work needs to begin well in advance of the introduction.

There is much to be done to bring about the smooth introduction and operation of the tax credits. The computer systems and processes need to be designed and ready to begin on the date of the introduction of the credits. Other necessary preparatory work includes the training of staff in new procedures and responsibilities, redesign of forms and leaflets, and the provision of information to employers and potential claimants. None of this can be done overnight.

Both the Inland Revenue and the Department of Social Security fully recognise the need to work closely together and to start work straight away to develop the necessary business processes. Indeed, an Inland Revenue project team, working jointly with the Benefits Agency and the Department of Social Security, has been set up to plan the new processes.

However, until the legislation introducing the credits has been sanctioned by Parliament, the costs for these aspects of development work are outside the current accounting remits of both departments. That is why we need the Bill. It will allow the department to expend money in preparing for the introduction of the credits. This authority is essential to enable the development work to begin now, in order to meet the timetable.

In seeking this authority the Government are behaving entirely correctly in bringing the matter to Parliament for approval. This will make sure that there is no doubt about the propriety of spending the necessary money in preparation for the tax credits. This type of legislation is not without precedent. Bills of this kind are more commonly used to facilitate privatisations where, for example, agencies are wound up and, incidentally, need to expend money on winding themselves up. This is normally outside their powers and requires specific legislation for the necessary expenditure to be incurred by them.

It is important also to bear in mind that while this Bill extends the authority to incur expenditure for the Inland Revenue and the Department of Social Security, it does not relax the controls upon them. Both departments will be accountable for this expenditure in the normal way, through their Permanent Secretaries in their role as Chief Accounting Officer. This Bill merely allows the work to go ahead in developing the credits. The substantive legislation will be brought before the House, probably in the next parliamentary session, when this House will have the opportunity to scrutinise the details carefully.

This is an important Bill which will allow necessary work to begin in preparation for the introduction of these credits which are central to the Government's programme of tax and benefit reform, and I therefore commend it to the House. I beg to move.

Moved, That the Bill be now read a second time.—(Lord McIntosh of Haringey.)

My Lords, I am grateful to the Minister for explaining the purposes of this short Bill. I was a little concerned on, I think Tuesday, that the Minister would no longer be answering for the Treasury when I discovered that he was taking through the education Bill. I congratulate the noble Lord on his versatility and brilliance. When he has to be parachuted in to help, I am not sure whether it is a reflection on the versatility and brilliance or a reflection on Ministers. I believe that my noble friend Lady Blatch, considered it a distinct honour that the noble Baroness, Lady Blackstone, had to be reinforced by the strength and ability of the noble Lord, Lord McIntosh. However, I am just relieved that I am not deprived of his excellent explanation of Bills. I fear that he is about to beat my record for the number of Bills taken through in one parliamentary Session; I suppose I can do nothing to stop that.

This is a small Bill, as the noble Lord said. It deals with preparatory expenditure for the new proposals for tax credits. I was a little surprised to hear the Minister say that the main Bill would be introduced probably next Session. I wonder how that squares with introducing the new tax credits by April 1999. I should have thought that the measure had to be introduced next Session. It seems a little odd that some doubt is creeping into the Government's mind. The only reason why Parliament should pass such preparatory legislation is if Parliament is absolutely sure that the main Bill for which the expenditure is designed will be passed.

The proposal for tax credits builds on the success of the family credit scheme. We are not opposed in principle to a shift from the benefit system to a tax credit system. Many of the points the Minister made are absolutely valid. When we were in government, it seemed odd to us as well that some families paid tax on the one hand and received benefits on the other. However, when we considered moving to a system somewhat like that proposed here we discovered that there were major administrative and other difficulties. When we judge the main Bill, and the prospectus set out by the Minister, we shall ask some questions. Is it simple to operate? Is it transparent? Does it impose unnecessary burdens and expense on business? Does it erode the principle of independent taxation? We considered the possibility of this system ourselves, but the complications are considerable.

Currently family credit has a considerable virtue: it is relatively simple to administer. The person goes to the Benefits Agency with which she is probably dealing anyway. Some checks are made; a payment book is brought forward; and, in general, the mother goes to the post office and picks up the family credit. That will be changed. Other players will be introduced. The Inland Revenue will have to come in. I suppose the Minister will say that it replaces the Benefits Agency so it is a one for one. More importantly, the employer will have to become involved in a way that does not happen now. At present the employer does not necessarily know which of his employees is claiming family credit. He does not need to know. In future he will need to know so there will be a relationship between the employee and the revenue, the revenue and the employer, and the employer and employee—perhaps even between the employee and employer so far as concerns tax credit.

Employers will need to know who is entitled to family credit. They may even need to know what an employee's spouse earns, and how many children he has. Employers will need to know this for the very first time. They will obviously know who is so entitled.

I fear that too much bureaucracy may be involved on the part of the employer. There is also the impact on the employer's cash flow. If he is paying out money in tax credit, for how long will he be without that money before he receives it back from the Inland Revenue? It is a difficult question. It could become more difficult. An employer interviews two people for a job. If he discovers that one will be eligible for tax credit and the other will not, will he be more sympathetic to the fellow or lady who does not have a tax credit and therefore will not add to his workload or problems with his cash flow? It is a serious problem that we shall undoubtedly have to consider. It will have to be addressed to an extent in the preliminary work. I understand that much of the expense is in developing the computer system. I strongly suspect that it will be more expensive to develop than the Government think if experience with the Benefits Agency is anything to go by. One needs to know what questions the computer has to answer and ask, as it is engineered. Many of those issues will have to be decided before the main Bill comes before the House. Therefore I imagine that the Government have answers to some of these points.

An important aspect arises in respect of the employer's workload and his discovering details about the employee's personal affairs; for instance, his spouse's income, his children and whether he is eligible for tax credit. When the Social Security Select Committee in the other place took evidence on that the Institute of Directors stated:

"No employer will want to have to collect that information",

that is, information about the earnings of employees' spouses and the number of children they have. It continued:

"Furthermore, many employees will be reluctant to supply such information to their employers. Claimants currently supply that information to the Benefits Agency only on the clear understanding that it will not go any further".

Indeed, security of information is an important aspect of the work of the Benefits, Agency.

I wish to repeat a point that I made previously about transparency of the expenditure. Help given to working families will no longer be shown in the Red Book as an expenditure of the Department of Social Security, but will appear in the figures of the Inland Revenue. It will be tax forgone. That is a difficult issue. A huge error was made in the Government's Red Book because of such difficulties. Four of its tables were wrong; they were tables B5, B8, B9 and B24. Indeed, a parliamentary Answer was needed to a "planted question", as they call it, on 27th March to enable the Financial Secretary to correct the errors in the Red Book.

The errors were significant. The original tables assumed that the value of the income tax credits would be 0.3 per cent. of GDP. The correction was that they would be 0.8 per cent. of GDP. Your Lordships may be forgiven for believing that 0.5 per cent. of GDP does not add up to much. But it adds up to an awful lot; to £15 billion between the start of the scheme and the year 2002-2003. Therefore, it was a significant error.

The shift to being scored as negative taxation and not social security spending is an odd sleight of hand. When I previously challenged the Government the Minister answering pointed to MIRAS as being something similar which they could pray in aid. Whereas MIRAS has never been counted as social security expenditure, family credit has. Therefore, this large item of expenditure will be Tipp-Exed out of the Government's income and expenditure accounts. One will need to burrow deeply into the income figures in order to discover exactly how much tax has been forgone by the family credit.

My final question is equally important in the context of how the computer system is set up. Who collects the money? The Minister said he trusted that by April 2000 in the main the money would be paid via tax credits. Currently, family credit is largely collected by the mother, a little like child benefit. That is the great strength in both family credit and child benefit. If the mother is the only earner in a household of two adults or is a single parent, nothing will change; she will collect the tax credit as she collects the family credit from the post office. Nothing will change. Even if the father is the earner, by and large the mother usually collects the money. However, under the new system the father can collect the money via the tax credit. What puzzles me is: who decides? What is the fallback position? Does the mother decide that she wishes to continue to collect the money as a family credit? Does the father decide that he wishes to collect it as a tax credit? Alternatively, must they have a family meeting to make the decision?

I wish to know who has the veto on the matter because it is important. If there is inertia and no one makes a decision what will the Government do? My wager is that the Government will pay the money as a tax credit. They do not want to pay it as a family credit because they do not want it to appear in the accounts as an expenditure. Therefore, I suspect that in the circumstances I have outlined the father will be given the tax credit.

I and many people are concerned about the pressures which will be brought on the mother to ensure that she gives up her right to collect the money at the post office. Will she and the children see the money if it is paid to the father? When child benefit was introduced, one of the great debates was that it would go to the mother. One of the worrying aspects which stopped us proceeding with this proposal, apart from the bureaucracy, was the question of who is paid. These are difficult social issues, and I wish to warn to Government that in Committee and at later stages we shall wish to explore them. However, it may be too late because the engineering of the computer system will have been designed to deliver the benefit either to the father or to the mother.

I hope that the Minister can give me some reassurance on these issues, in particular the last issue. In many of the families which need such help, the financial relationships between the father and the mother are not—let me put it this way—on a good footing. I can see that money which is currently paid to the mother through the post office will turn up in the husband's wallet and will not see its way to her purse. I do not believe that a transfer from the purse to the wallet will help achieve our purpose of assisting all members of families in work.

My Lords, we on these Benches support the principle behind the substance of the working families tax credit. We have a number of concerns about the Government's approach and I hope that the Minister will deal with some of them today. First, we are surprised that we have an open-ended money Bill to deal with the issue. The Bill makes no suggestion of the cost and we and our colleagues in another place are being asked to give the Government an open cheque. That is not a good general principle.

In another place, we expressed concern about the fact that a supplementary estimate had not been adopted. That seemed to us a more normal way of proceeding. Today the Minister gave us some precedents for money Bills, but I am not sure that the privatisation precedent is relevant to a tax and benefits change. The Minister in another place said that she believed that this was the correct legislative route for the somewhat unusual circumstance whereby two departments were required to work together. We were sorry to hear that the situation is so unusual that we need a special Bill to help them to do so. We wondered mischievously whether there was a certain amount of passing the parcel between the departments in respect of which was to bear the cost. Perhaps a money Bill is seen as a way of dealing with a potential conflict as to which will foot the bill.

We have a further concern relating to the components of the expenditure. The Minister explained what they might be. We hear about computers, training and information. We also hear about staffing costs, but I do not believe that we need a money Bill to set up a working group of Inland Revenue officials to look at a tax change. Tax changes take place all the time and in the Finance Bill following the Budget we see a huge amount of putative work that has had to be done on tax changes.

The one matter which is really likely to cost money is in relation to computers. It is impossible for the Inland Revenue to be spending money at this stage on information because there is nothing about which to inform people. There are no proposals. It is very difficult to see how it can be spending very much on training because there is nothing to train people on. Indeed, even as regards computers, as the noble Lord, Lord Mackay of Ardbrecknish, has just said, you can only do a significant amount of work when you know what is to be the structure of the new benefit.

That brings me to our main concern, which relates to timing and consultation. Both here and in another place much has been made of the need to consult widely on this Bill because it is extremely complicated and affects millions of people. And yet we have heard nothing about the timetable for pre-legislative consultation.

I believe that the Minister said that he expected the Bill to be in the next Session. I assume that the only other alternative is that we shall have the Bill in a fortnight, in a month or before the Summer Recess; but I suspect not. If that is the case and we are talking about a Bill in the next Session, it would be helpful to know what procedure the Inland Revenue now intends to follow in terms of consultation on the structure of the new benefit. When can we expect a consultative document; what form will it take; and will it be issued in plenty of time for all those who have a legitimate interest in the issue to make substantive comments on it before legislation is in such a form that those comments cannot be taken on board? In particular, we express the hope that the document does not emerge in the middle of the summer period with a very short timetable for comments to come in.

While in one sense we are pleased that the Government are getting on with the introduction of this benefit, we are sensible of its extremely complex nature. The noble Lord, Lord Mackay of Ardbrecknish, has spoken at length about a number of the complications. It seems to us that this measure will affect the lives of millions of people in a fundamental way, where even a week's problem in terms of the flow of income to low income earners may have a devastating effect on their family income and their capacity to manage their affairs in a sensible way. Therefore, it is crucially important that from the day this credit is introduced it is fully formed and operating efficiently. We must not find ourselves dealing with a large number of errors. Therefore, the whole question of consultation and timetable becomes crucially important.

On balance, we believe that setting a tight deadline and October next year is an extremely tight deadline for a change of this magnitude—is good because if a longer deadline is set it may take longer to achieve it. However, I should welcome any assurance which the Minister can give about an orderly timetable for consultation, legislation and implementation between now and next October. We should welcome also the assurance that the Minister is confident that the Inland Revenue has the measure of that change and will be able to introduce it in an orderly way which will be crucially important if this much-needed change is to take place successfully.

My Lords, perhaps I may make two points. It is clear from the speeches to which your Lordships have listened that the main Bill next Session is likely to be extremely complicated. Both for that reason and from past experience, it is extremely unlikely to be easily comprehended. The noble Lord, Lord Mackay, used the current fashionable phrase "transparency". It is not likely to be very transparent.

There is an unofficial body which has been generally acclaimed and has had official support both from the previous government and from the present Government concerned with the rewriting and clarification of the fiscal law generally. Arising out of what has been said, and particularly after the last speech that was addressed to your Lordships, I suggest that before we have the main Bill, it should be processed through the Fiscal Law Reform Committee.

That was a committee under the sponsorship of the noble and learned Lord, Lord Howe of Aberavon, and it will be easily identified. It would certainly be helpful if the Bill could be vetted and drafted under the aegis of that committee rather than having an extremely complicated and untransparent Act which subsequently had to go to the committee.

The other point is very short arising from Clause 1(4)(b) which states:

"for the reference to money provided by Parliament there shall be substituted a reference to money appropriated by Measure of the Northern Ireland Assembly".

That relates to the Northern Irish impact of the Bill. Is that a reference, as the Bill stands, to the present set-up or does it refer to what we hope will be the outcome of the referendum tomorrow?

My Lords, I am grateful to all noble Lords who have taken part in this short Second Reading debate. I am particularly grateful to the noble Lord, Lord Mackay, and the noble Lord, Lord Newby, for their support in principle both for the proposals and for the Bill. My gratitude is even greater to the noble Lord, Lord Mackay of Ardbrecknish, because he carried the twin burdens of representing both the Treasury and the Department of Social Security in this House for a very long time. Therefore, he understands the issues concerned with this legislation and the forthcoming legislation more clearly, I suspect, than anybody else in the House.

However, he should know by now that we do not stand up in this House or anywhere else and give commitments as to what will appear in the Queen's Speech. He knows perfectly well that the words "probably next Session" is the standard precaution which we take in those circumstances.

The noble Lord referred to the burdens on business which may flow from this change to tax credits. Of course, such burdens are very much in the mind of Government. I reassure him about the amount of work that employers will have to do. Instructions to employers will come from the Inland Revenue only in the form of an amount which must be paid to a given employee in the given payment period, whether it is a weekly or monthly payment. There will be no calculation for the employer to make and, more important, there will be no way in which the employer can find out how the calculation was arrived at.

In other words, the employer will not know whether there is a spouse or a partner because those credits apply to unmarried as well as married couples. There is no need for the employer to know anything about the employee's personal affairs; for example, the number of children or any of the other elements in the calculation. The employer will merely be told that he must pay so much per week to that employee.

I hope that that in turn addresses some of the problems which the noble Lord anticipates as regards intrusion into the employee's affairs by the employer. For example, there is no reason at all why an employer interviewing two people should know, before deciding which person to employ, whether or not a person is receiving the working family's tax credit. Of course, the instruction to pay is exactly comparable to the instruction to pay in the case of MIRAS, although I hesitate to say that because it would, perhaps, raise more complications than those raised by the noble Lord and, indeed, more than we need to raise. But, certainly, PAYE and national insurance contributions are instructions to employers to pay and it is no different in that respect.

The noble Lord asked me about the reimbursement of employers. Where the amount paid out in working families tax credit or disabled persons tax credit is less than the amount which the employer receives as a result of withholding tax under the PAYE system, the two will be netted off against each other. I acknowledge that that will make a difference in the employer's cashflow. But, historically, since the introduction of PAYE, the employer has always had a timing benefit from withholding tax before he has to pay that tax withheld on a monthly basis. I do not know whether the noble Lord has ever been an employer, but I was one for 30 years. I found that the withholding of PAYE and national insurance contributions enormously easier to organise than I did my VAT returns, with which I always had huge difficulties.

The noble Lord rightly said that a very significant part of the expenditure under this Bill will be in computer systems. But the computer systems will not be starting from scratch. The reason for our needing this power for the Inland Revenue and the Department of Social Security is that we are building on the department's computer system and it is best that it should be involved in that process rather than trying to start entirely from scratch.

The noble Lord made a point about the transparency of expenditure and the fact that tax forgone can be presented—as, indeed, I believe it is in the United States—as not being part of public expenditure on social security. I believe that the Americans also count it as being a tax cut, which we are certainly not attempting to do. Whatever government do for internal purposes is a matter of presentation and is relatively neutral. However, I can assure the noble Lord that, so far as concerns the national accounts, the Office for National Statistics would not stand for any nonsense even if the Government were to propose it, and will be presenting these tax credits as they are, correctly in the national accounts.

The noble Lord made perfectly responsible and worthwhile points about the purse-to-wallet transfer and the danger of the husband taking the money for childcare and child benefit for that part of working families tax credit where the expenditure really ought to go, as it has in the past, to the mother. Where there is a husband working and a wife who is not working, there is no presumption, despite the noble Lord's wager, that the money will go as a tax credit to the working partner rather than as a direct benefit to the non-working partner. That matter will be resolved by agreement between the two partners. If there is disagreement between them, the presumption will not be that it goes to the working partner, whether male or female, but that it will go to the partner who has the most responsibility for looking after the child.

I hope that that will alleviate some of the concerns expressed by the noble Lord and those which were correctly expressed by those interested in family welfare when the proposals of the previous government were put forward. We are not trying to pull a fast one, if I may put it that way, and there is no sleight of hand here either in the national accounts or in the actual mode of payment where there is one working partner and one non-working partner.

The noble Lord's final point was that it will be too late to do anything about it when we actually come to the main Bill. I do not believe that that is the case. We need this paving Bill—and this takes in the point made by the noble Lord, Lord Newby—because the work being done is outside the current accounting remit of both the Inland Revenue and the Department of Social Security. That is why it cannot be done as a statutory instrument. Similarly, because it is being done outside that accounting remit, the existing procedures for paying family credit and disability working allowance will continue, as they have to continue until any changeover takes place. If by any chance the main legislation were not possible, then nothing would have been lost other than the expenditure provided for under this Bill.

I turn now to the remarks made by the noble Lord, Lord Newby. This is not open-ended expenditure; this is expenditure for which both the Inland Revenue and the Department of Social Security will be responsible. Their accounting officer and their Permanent Secretaries will be responsible to Parliament in exactly the same way as for other expenditure. The fact that we cannot say at present what the exact quantum is does not mean that there is no responsibility in that respect.

As my honourable friend the Economic Secretary said in another place, we should have the power to enable departments to work together. It is not that it is unusual; indeed, that is not the reason for having a paving Bill. The reason is the accounting remit. The noble Lord is quite right to say that, in designing the computer systems, we need to have an understanding of the structure which those computer systems are designed to implement. That is why I took care in my opening remarks to set out the fact that we do know the structure and we know a lot of the amounts which we are going to propose in legislation as a result of the Budget. Therefore, the noble Lord can be reassured that the instructions to those who are preparing the computer systems will be clear and that they will be prepared in time.

The noble Lord also referred to the timing of consultation because, as he rightly said, there is a tight time-scale involved. We have already begun consultation. We have consulted representatives of employer groups, payroll organisations, practitioners and business. Indeed, we announced all of this in the pre-budget report in November of last year, which is further evidence of the transparency of our legislation and of our implementation of changes to our tax and welfare system. I hope that that, in turn, reassures the noble Lord, Lord Newby, about the nature of the preparations that we are making for what he rightly described as this much-needed change.

The noble and learned Lord, Lord Simon of Glaisdale, anticipated that this would be a very complicated Bill. I shall not say that he is wrong. The noble and learned Lord made suggestions about the way in which this Bill might be scrutinised in terms of the committee chaired by the noble and learned Lord, Lord Howe of Aberavon. We are grateful to him for his comments and we shall certainly consider the suggestions that he made.

The Bill provides for a Northern Ireland assembly, although that provision will not be necessary during a period of direct rule. When this legislation is actually brought into force and implemented, we hope that we will have a Northern Ireland assembly and that we will, therefore, need the provisions in the Bill which have been made in anticipation.

I hope that I have responded to all of the questions that have been raised by noble Lords.

On Question, Bill read a second time; Committee negatived.

Then, Standing Order No. 44 having been dispensed with (pursuant to Resolution of 18th May), Bill read a third time, and passed.

moved Amendment No. 1:

After Clause 1, insert the following new clause—

REPORT ON SUBSIDIARITY PROVISIONS

(". No later than one year after the passing of this Act, and at annual intervals thereafter, a Minister of the Crown shall lay before both Houses of Parliament a report containing details of the application in the United Kingdom and in the European Union of the Protocol to the Treaty establishing the European Community on the application of the principles of subsidiarity and proportionality.").

The noble Lord said: My Lords, when we debated the deceptive subject of subsidiarity in Committee, I tried to show that it is one of the fundamental frauds of the Euroland adventure—one of the fundamental frauds brought about by the Treaty of Rome. That debate took place on 28th April at cols. 170 to 191 of the Official Report. We have inevitably touched on it at other stages of our debates, because subsidiarity lies close to the heart of the disagreement between those of us who see the Treaty of Rome as well intentioned but potentially disastrous for the whole of Europe, and those of your Lordships who see it as a glorious enterprise which will bring everlasting peace and prosperity to our much loved continent.

Your Lordships will recall that subsidiarity was introduced into the treaty largely at the instigation of the then Conservative government in the Maastricht amendments of 1993—it was then Article 3b. We were assured that it would be our shield and defence against further erosion of our sovereignty. I have no doubt that most of the civil servants and Ministers who gave that assurance were in good faith, but not perhaps quite all of them. The trouble was that one did not have to be a great constitutional lawyer to see that the wording of the new clause was Delphic to say the least, and open to exactly the opposite interpretation, confirming the Community as all powerful in the areas covered by the treaty. The result was that all the main political parties in this country were keen to extol the clause's virtues because they all took the position that they did not want to see the United Kingdom absorbed into a European superstate. The governments of most of the other signatories at Maastricht, on the other hand—who, alas, are determined to create that superstate—were free to interpret the clause as conducive to that,

"ever closer union of the peoples of Europe"

which is required by the Treaty of Rome in Article A.

If there ever was any doubt about the meaning of the original subsidiarity clause at Maastricht—some of us did not think that there was—that doubt has been clearly removed at Amsterdam by the protocol which is the object of this amendment. I refer to Protocol 30. Any Delphic ambiguity has been firmly decided in favour of the interpretation put upon the clause by the majority of European nations who wish to create the very superstate which both the Conservative and Labour Parties say they wish to avoid. The Liberal Social Democrats will forgive me if, as usual, I have not quite grasped where they stand on this one, but I am sure that is my fault.

That is why this amendment is so important. It will not of itself do anything to stop the Euroland juggernaut from lumbering down its fateful path, but it will at least allow the British Parliament once a year to consider that progress in detail. I can but hope that the British people will thus become more aware of the true nature of the juggernaut, and that perhaps they may come to see that they should stand aside and let it continue without us.

I should of course justify the interpretation I have put on this matter. I am afraid there is no other way of doing it than to quote once again the relevant parts of the original Maastricht subsidiarity clause, and then from the new Amsterdam protocol, which clarifies it.

It is at this point that I urge noble Lords in the Chamber, and any noble Lord who might have struggled thus far in his reading of Hansard, not to switch off. The word "subsidiarity" itself is one of those Eurospeak words which alone is capable of switching most normal people off the entire debate about Euroland. But the devil is in the detail. When we cannot be bothered to examine the detail, the bureaucracy advances effortlessly against our democracy. So here goes, again, Article 3b of the Maastricht Treaty:

"In areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be … achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community".

The only way to understand the intended meaning of this clause is to concentrate fiercely on the first 10 words, and then to indulge in only a few seconds of lateral thinking. Those 10 words are,

"In areas which do not fall within its exclusive competence".

Perhaps it helps to paraphrase the clause into more normal language. It would read something like this,

"In areas which the Community does not want to control the nation states can do their own thing".

The point to grasp and never relinquish about this clause is that it is the Community which decides the areas which fall under its own control, not an individual state such as the United Kingdom. It is the Community which decides whether some proposed action is justified by its pan-European or international nature. That is why in our debates in 1993 some of us said that the clause did not afford the protection for which the Conservative government hoped. Indeed the Labour opposition agreed. And so it has proved. My right honourable friend Mr. John Major, then Prime Minister, surely was in good faith when he hoped that some 25 per cent. of existing Euroland legislation would have been repealed under this new clause, but not one single item has been so repealed. We are told that the clause has prevented the Community from producing perhaps a dozen or so regulations which would otherwise have been enacted to our detriment, but we are not given examples. Anyway, the point is that the Community could have gone ahead with those regulations if it had wanted to, because in all those areas of our national life where we have not retained the veto, the Community alone decides when it takes control.

It has to be said again that we have abandoned the veto in huge areas of our national life which are therefore now controlled by the Community. They include all of our commerce and industry, our environment, the workings of the common agricultural and fisheries policies and many other areas, including "European culture", which we now see flooding into our schools and universities as flagrant pro-Euroland propaganda.

So we now come to this new protocol agreed at Amsterdam, all of which underlines and confirms the interpretation I have given of the original clause. Paragraphs 2 and 3 of the protocol are perhaps the most important. I apologise to your Lordships for the Eurospeak. Paragraph (2) states,

"The application of the principles of subsidiarity and proportionality shall respect the general provisions and objectives of the Treaty, particularly as regards the maintaining in full of the acquis communautaire and the institutional balance; it shall not affect the principles developed by the Court of Justice regarding the relationship between national and Community law, and it should take into account Article 6(4) of the Treaty on European Union, according to which 'the Union shall provide itself with the means necessary to attain its objectives and carry through its policies"'.

So that paragraph in the new protocol confirms that subsidiarity can do nothing to withstand the other provisions of the treaty. It is powerless to diminish the acquis communautaire which, as your Lordships will recall, is the law which decrees that once the Community has acquired a power, it never gives it up. Then paragraph 2 goes further, and ordains that whatever subsidiarity may mean, it is subservient to Article 6(4) of the Treaty on European Union, the catch-all article which gives the Community the power to do what it wants to achieve its aims.

Paragraph 3 then rubs all this in by starting as follows:

"The principle of subsidiarity does not call into question the powers conferred on the European Community by the Treaty, as interpreted by the Court of Justice",

which I would have thought was the final coup de grâce.

I shall not weary your Lordships with the other paragraphs of the protocol. There is nothing in them which goes against what I am saying; in fact, they all confirm the dismal picture. The Community is left in charge of all the decision-making and all the bogus half-protections which are sewn into this protocol.

So I fear I must take issue with the noble Lord, Lord Whitty, when he said in Committee:

"the changes between Maastricht and Amsterdam do not weaken the position. … We have not gone backwards".—[Official Report, 28/4/98; col. 185.]

The only way in which the noble Lord could be correct is if one accepts that the original Clause 3b was so weak as to be entirely useless, as many of us said it was. But if one held out any hopes for the original clause, this protocol must dash them completely.

We have indeed gone backwards, and the Community has gone forwards, as it always does. So I very much hope that your Lordships will support this amendment, which will afford Parliament the chance of monitoring the progress of this sorry tale in the years to come. It will thus give the British people an opportunity to discover the nature of the enterprise to which their political leaders have so foolishly committed them. And, when they come to understand it, their wish to leave it will become irresistible. I beg to move.

My Lords, I deeply regret my inability to explain the position of the Liberal Democrat Benches to the noble Lord. It is not for lack of trying; however, I must apologise for what is obviously a muddled presentation. I shall continue to try to persuade the noble Lord. I shall therefore take the opportunity in a few moments to explain exactly where we stand in relation to this amendment.

Among the Prime Ministers with whom we have been blessed in recent years, there was a very great difference between the characteristics of the noble Baroness, Lady Thatcher of Finchley, and her successor, Mr. John Major. The noble Baroness, Lady Thatcher, often declared victory while the war was still raging. Mr. John Major frequently failed to declare a victory when he had actually achieved one. The issue of subsidiarity is a perfect example. There is almost no area in which the Community and the Commission have moved further to meet the precise objections raised on subsidiarity by the honourable gentleman as Prime Minister when he represented this country at Maastricht. I must therefore tell the House that I find this amendment extraordinarily strange, perhaps even perverse. Let me give noble Lords a few published facts—and I shall stick entirely to published facts—which I believe indicate how misconceived the amendment is.

The noble Lord, Lord Pearson of Rannoch, referred to some of the sections of the protocol attached to the Amsterdam Treaty—and it is the Amsterdam Treaty that we are discussing today, not the Maastricht Treaty. The Amsterdam Treaty in fact moved on from the Maastricht Treaty, not least in the area of subsidiarity. Perhaps I may quote one or two of the statements in that protocol.

Paragraph (5) states:

"For Community action to be justified, both aspects of the subsidiarity principle shall be met: the objectives of the proposed action cannot be sufficiently achieved by Member States' action in the framework of their national constitutional system and can therefore be better achieved by action on the part of the Community".

Again, paragraph (1) states:

"In exercising the powers conferred on it, each institution shall ensure that the principle of subsidiarity is complied with".

The noble Lord, Lord Pearson of Rannoch, and those who think as he does, will doubtless say that those are merely words, and that they are meaningless. They are not meaningless. They have indeed already been given a very clear meaning. Let me adduce a few examples.

First and foremost, in the case of all new legislation reasons must now be given as to why that legislation is being put forward. Those reasons must indicate why the legislation is necessary to meet Community objectives, and must place that necessity clearly within the terms of the treaties—all of which have gone through ratification procedures either according to the parliamentary structures that we favour in this country, or in some cases, including in this country, through a referendum. In other words, at each stage of these treaties, the views of the people have been taken on them. The treaties must therefore be borne in mind all the time, and legislation that is not within that test will fall.

Next, the test must include that objectives cannot be met by member states' national action. If they can be met by national action, then the legislation does not pass the test of subsidiarity. The Commission has clearly indicated that it now strongly favours directives over regulations, because directives allow each member state to choose its own means of accomplishing the objectives that have been agreed at the Council of Ministers or the European Council. So directives are becoming the chosen method of legislating within the Community, instead of more heavy-handed regulation, whereby the Commission itself is directly responsible for the outcome.

Next, the Commission has accepted the requirement for wide consultation. It now issues many more Green Papers than White Papers on matters of significance—as many as 13 last year. I would dare to say that it is increasingly becoming a Commission which tries very hard indeed to consult widely before bringing forward any serious legislation. I can speak about this matter at first hand, having on a number of occasions been directly involved in consultation with non-governmental organisations, in particular the platform of European non-governmental organisations on a scale which is in this country virtually unprecedented. The same is true of consultation with the so-called social partners, the trade unions and the employers.

Another fact makes the amendment, to use an old-fashioned term, otiose, or to put it more crudely, straightforwardly perverse. The Commission has now in every single year since 1994 produced a report, which is available in the Library for anybody who cares to read it, giving, unlike the claim by the noble Lord, Lord Pearson of Rannoch, precise details of legislation that has been withdrawn, legislation that is going ahead, and the reasons for it.

Perhaps I may give the House a few important figures. In 1990, 61 proposals for legislation were put forward by the Commission. In 1995, a year after Maastricht was fully ratified, 25 proposals were put forward. In 1997, seven were put forward, of which only three fell outside the exclusive competence of the Community. So only three raised the issue of subsidiarity in any form. A fall in the number from 61 in 1990 to three in 1997 is, I suggest, a very substantial achievement. I am surprised that those who are critical in this debate do not take credit for that achievement.

I have a slight argument with the Minister, the noble Baroness, Lady Symons. In answer to a Written Answer on 26th March 1998 raised by the noble Lord, Lord Pearson of Rannoch, she stated:

"Each year the Commission withdraws a number of proposals. There is no specific list of those withdrawn on grounds of subsidiarity".—[0fficial Report, 26/3/98; col. WA 255.]

There is at least a list. In 1995, 61 such proposals were withdrawn; in 1996, 48 such proposals were withdrawn; in 1997, the latest year, 30 such proposals were withdrawn. I imagine the reason that the noble Baroness did not give the exact details was that some were withdrawn on grounds of proportionality, some on grounds of subsidiarity, and some on both grounds. But the figure is far higher than that mentioned by the noble Lord, Lord Pearson of Rannoch, and far more examples were clearly stated.

If any noble Lords wish to see them, I have before me the three reports for 1995, 1996 and 1997, giving full details of proposals withdrawn and proposals that remained after subsidiarity tests had been met. Nobody could sensibly call for yet another report when this report is readily available, and when UK representatives sit on the committee responsible for it. This is an area in which there has been a profound impact by the United Kingdom on the behaviour and practices of the Commission, which I believe to be wholly good. Noble Lords on the Liberal Democrat Benches deeply believe in subsidiarity and consider that it should be made to work. The noble Lord, Lord Pearson of Rannoch, may be unaware that the Liberal Democrats have fought for devolution of power from Europe to the member states and from member states to the regions for many years: but I am only too happy to enlighten the noble Lord.

This is an area in which there have been huge advances. We have the right to take some credit. The previous government have the right to take some credit and it is sad that they are not willing to do so for reasons caught up with a dogmatic desire to present Europe as she is not rather than as she is and is becoming.

There remains a problem area. It lies, as much as anywhere, with member states. According to reports on subsidiarity, 25 per cent. of existing agreed, ratified and approved legislation has not yet been implemented. That is a serious difficulty for law-abiding member states. It is high time that countries implemented the legislation, greatly cut down as it is. I say with a note of mild irony that in 1997 no less than 670 technical regulations were put forward by member states, many of them almost certainly unnecessary, while there were three items of legislation proposed by the Commission. Perhaps we should look elsewhere for the areas about which we should complain, take some credit for what has happened and indicate that the amendment is neither necessary nor borne out on the basis of the facts I have presented to the House.

My Lords, I am glad that the noble Baroness paid tribute to what Mr. John Major and Mr. Douglas Hurd achieved in Maastricht by negotiating some important amendments to what had been proposed before the deliberations began. Perhaps the most important change was the introduction of the subsidiarity rule, Article 3b, to which reference has been made. I believe that my noble friend Lord Pearson of Rannoch is right to suggest that the outcome of the application of that rule should be reported to both Houses of Parliament from time to time. I was very surprised that the noble Baroness described the suggestion of reporting to both Houses of Parliament as "perverse". That is not correct.

My Lords, I thank the noble Lord for giving way. I must make it plain that I regard the amendment as perverse. I indicated that the report was already available to both Houses of Parliament. That is why I said I thought the amendment perverse.

My Lords, with great respect to the noble Baroness, I suggest that the amendment is not perverse. Although reports are made, and can be obtained from the cellar below the Printed Paper Office, they are not reports to the Houses of Parliament; they are reports issued within the European Community for use by the Council of Ministers, and so on. That is not the same as reporting them to Members of both Houses of Parliament, which is what my noble friend Lord Pearson of Rannoch has so wisely and convincingly proposed.

One could make a long speech about this matter; I have been into it in some detail over the years. However, I shall add little to what my noble friend said. Great hopes were raised when the subsidiarity rule was introduced. But, alas, on 27th October 1992 officials of the Commission issued a paper 22 pages long which sought to explain how the principle of subsidiary should be applied. The confusion created by that paper was appalling. In the European Court of Justice the then British learned judge, Lord Muir MacKenzie, described it as "gobbledegook".

There have been great difficulties, confusion and sometimes opposition to the application of the excellent principle of subsidiarity. Until it is presented to us in a form which will give effect to what is proposed in the amendment, our Parliament will not be conscious of what has gone on.

I agree with the noble Baroness, Lady Williams, that the results have up to a point been encouraging. But they need to be more so. I do not want to go into detail on the disadvantageous process of harmonisation, but that is where the problem lies. It was all right for the original six countries which signed the Treaty of Rome. The word then used was "assimilation". When we entered, we insisted that that should be modified to "harmonisation". When we entered that was just about feasible; but, with 15 countries and 11 different languages and the prospect of a further seven countries and another half dozen languages, harmonisation is not only impossible but nonsensical. Senior lawyers of the Commission have done their best, but it is now impossible to achieve. If we lose sight of subsidiarity, which is a modification of harmonisation, we shall add to the confusion.

My noble friend has done a great service. I hope that the Government have taken it on board and will give a sympathetic answer.

My Lords, I entirely agree with the noble Lord, Lord Renton, that the situation in 1992 was very confused as far as subsidiarity was concerned. But the outstanding characteristic of this protocol is that it is set out in much plainer language. That is its real quality. I therefore find it rather strange that we should be spilling belated tears over what happened in 1992 when we now have a protocol which very adequately clarifies the situation with regard to subsidiarity and in fact largely improves it.

I draw attention, as I have done in previous debates, to the fact that the protocol provides stronger guarantees than anything a Conservative government were able to achieve. We must remember that when the Conservative Government negotiated the Maastricht Treaty, they had negotiated fully on the issue of commitment to the full maintenance of the acquis communautaire. It is a little late now to say that all that was a great mistake.

I stress once again what I consider to be the key issue in the new protocol, which is paragraph 4. That paragraph states:

"For any proposed Community legislation, the reasons on which it is based shall be stated with a view to justifying its compliance with the principles of subsidiarity and proportionality; the reasons for concluding that a Community objective can he better achieved by the Community must be substantiated by qualitative or, wherever possible, quantitative indicators".

That is a major step forward. I am very surprised that the noble Lord, Lord Pearson of Rannoch, seems to regard it as being of no importance at all. To me it is the key to the improvement of the subsidiarity regulations. It will give us a great deal of comfort when we have to consider the situation in the future. I entirely agree that we should have reports on what has been achieved and on what is happening under the subsidiarity rule. They are available. I do not mind going down into the cellar of the Printed Paper Office, if necessary. It is also open to any noble Lord to ask an Unstarred Question, a Starred Question, to call for a debate or anything else. If they feel that these are issues that need to come before the House, it is well within the powers of any Member of this House to bring them forward.

My Lords, I regretted slightly the tone of the remarks of the noble Lord, Lord Grenfell. It is a little unfair to suggest that, merely because my noble friend Lord Pearson and I are Conservatives, we are in some way to blame for the Maastricht Treaty. His memory must be a little short to believe that. Had we been listened to, rather than others in our party, there would have been no such treaty.

My Lords, I am grateful to the noble Lord for giving way. I do not blame the noble Lord for the Maastricht Treaty; I congratulate his government on having signed up to some sensible provisions.

My Lords, the noble Lord makes matters worse by attempting to be funny. He should understand that in both parties there are those of us who disagreed with the Maastricht Treaty and those who took it through. Some of us at that time voted against it. I suspect that there are now a good many who did not but wish they had.

I was fascinated to hear the noble Baroness, Lady Williams, say that we had moved on from Maastricht, not least in subsidiarity. Moved on we certainly have. The noble Baroness displayed enormous enthusiasm for, and is obviously overwhelmed by, the idea that reasons must be given for the legislation that is proposed. I am old fashioned enough to think that that has always been a good idea. They may be perverse reasons, to use the noble Baroness's own words. They may be reasons with which one does not agree. But to suggest that we have made a step forward because reasons must now be given for legislation suggests that the noble Baroness is too easily satisfied on this front.

The noble Baroness reminded us that the principle of subsidiarity is that in future the rules, regulations and legislation should only come from Brussels in the event that the objectives cannot be accomplished by our own country. She was extremely keen on that. We were told how the Liberal Democrats had fought for the devolution of power. Did they fight for the devolution of power? They fought to ensure that only matters which could not be dealt with in our own country, which we were not competent to deal with ourselves, should go to Brussels. It is only a matter of a week or so ago that the noble Baroness was expressing her delight that in this treaty there are provisions for Europe to take over such matters as legislation on sex discrimination and discrimination on grounds of race or religion.

As I look around Europe and consider the record of most of our friends and partners on the Continent, I doubt whether their record on discrimination, on grounds of religion or of race, is such that we should regard ourselves as incompetent to manage these matters and that they should be handed over to those who know more about them. They may have more experience of them, but whether or not they would deal with them more competently is another matter. Indeed, why are we no longer competent to deal with these matters? Are they not ideal matters, not for subsidiarity, but matters which should be ruled out entirely of any mention in these treaties? After all, what is the doctrine of subsidiarity? When one comes down to it, it is the doctrine which is used in the Army: that the decisions best taken by the generals should be taken by the generals and they authorise down the ranks the colonels, the majors and even the lance corporals to take the action which is appropriate to them. It is not a system of democracy; it is a system of autocracy which is implied by the whole concept of subsidiarity. The mind set assumes that all power should be in Brussels or in the general headquarters of the Army and that such power as is necessary to make the thing work is passed down the line.

It is extraordinary that the noble Baroness should look at it in that way. However, she may be helped out of the hole which she dug for herself and her opposition to this amendment by the noble Lord, Lord Whitty, when he replies to the debate. I am sure that he has a list which he will give to us of all those matters which, since the Treaty of Maastricht was enacted, have been handed back to the nation states. I am sure that there must be dozens of matters which, until the day of Maastricht and subsidiarity, were handled by Brussels, where Brussels had the powers and where those powers have now been renounced. I look forward to him giving us that list.

Indeed, I look forward to hearing from the noble Lord, Lord Whitty, what more is to come back to us. After all, there should be some trade-offs as we hand over foreign and defence policy progressively to Brussels? What will we get back? What powers will come back to us? What powers have already been given back to us since Maastricht? It is in the light of that reply that noble Lords might judge the amendment.

My Lords, the Maastricht Treaty was sold to the people of the United Kingdom and the people in the rest of the EEC, as it was then known, on the understanding that new, intrusive laws, regulations and directives and an extension of qualified majority voting would be counter-balanced by the introduction of the principle of subsidiarity. That promise must have been critical in tipping the scales of public acceptability, not least in France and Denmark.

Although nebulous and ambiguous in many respects, and although philosophically dubious, as the noble Lord, Lord Tebbit, pointed out, subsidiarity seemed to represent an advance of sorts. One remembers how exultant the last government were after the Edinburgh Summit, as the noble Lord, Lord Pearson of Rannoch, reminded us. But what a damp squib that turned out to be. How little of substance has been repatriated to the people. Indeed, if the people of France and Denmark had realised that they had been sold subsidiarity on a false prospectus, would they have voted respectively for the Maastricht Treaty on the narrowest of margins? Almost certainly not.

A Danish MEP has discovered that legally binding EU diktats—regulations and directives—have soared from 680 in 1973 to 14,071 in 1996, the last year for which statistics are available. Moreover, such diktats increased during the period of subsidiarity from 8,507 to the aforesaid 14,071. That is an increase of 65.4 per cent. in less than four years.

The noble Baroness, Lady Williams of Crosby, says that subsidiarity has meant that many draft directives have been withdrawn. Thank goodness for that! The position would have been even worse otherwise. I calculate that these directives and regulations have increased by 13.5 per cent. per annum compound before subsidiarity was introduced and by just over 18 per cent. per annum since.

Apologists for this state of affairs will argue that changed circumstances necessitate new or changed laws and regulations. But even if one were to accept that argument, what about old and arguably redundant laws, directives and regulations which conflict with subsidiarity? Can one round up all those escaped horses and herd them back into the stable, the doors of which were left open for 20 years or more? The answer of course is no. The villain of the piece, as the noble Lord, Lord Pearson, reminded us, is the acquis communautaire, the ground conquered—or, less emotively, occupied—over the years by the EEC, the EC or the EU, in its various manifestations.

Until the Amsterdam Treaty it was still not 100 per cent. certain how rigid and immovable the acquis was. There was still some hope that the occasional loophole could be found. But, unhappily, this treaty now declares the acquis to be totally sacrosanct. Such a proposal demonstrates, like nothing else does, the immense gulf between the Community élite and the people of the EU. Of the hundreds of millions of voters in the Community, one can confidently predict that at least 95 per cent., were the question put to them, would see no reason for the acquis to be set in tablets of stone. One can also confidently predict that if the question were put to them 80 per cent. or more of voters across the Community could visualise at least one area where they would dearly like to see the occupied ground re-conquered by their own country for the benefit of themselves and their fellow countrymen, and quite possibly others as well.

By supporting this amendment one can strike a blow, albeit in a small way, not merely for ourselves but for the great mass of ordinary people, as distinct from elitist zealots, right across Europe.

My Lords, I wonder at the modesty of this new clause. The noble Lord, Lord Pearson, is asking that a Minister of the Crown shall lay before both Houses of Parliament a report containing details of the application in the United Kingdom and in the European Union of the protocol to the treaty establishing the European Community on the application of the principles of subsidiarity and proportionality. All he is doing is asking that Parliament should have laid on the table before it what is happening under subsidiarity and be able, if it so wishes, to discuss what is happening to its own powers. Subsidiarity means that our Parliament and our Government are subsidiary to the institutions of the European Union. The noble Lord, Lord Pearson, apparently is an ogre because he wishes Parliament to be informed of how subsidiarity is going and how Parliament's powers are being undermined.

I think it is altogether a good thing that this amendment, modest though it is, should have been moved. It will give the House the opportunity to decide whether it wants to know what is happening to its powers, to the powers of the House of Commons and to the powers of the Government as more powers are transferred in this and other treaties to the institutions of Europe. The noble Baroness, Lady Williams, criticised the Conservatives, and presumably Mr. Major in particular, because they did not take credit for subsidiarity. I seem to remember that Mr. Major came back saying that on this particular issue and on others he had won "Game, set and match". I know that he is a cricket enthusiast and not a tennis enthusiast. But I really do believe that he should have understood what "Game, set and match" means. It means that he won everything; but, as we have found, he did not win very much at all.

In 1997 there was a net increase of 721 in Community instruments. So there has not been much subsidiarity there. Every instrument that the Community passes is an instrument which Parliament here does not have to pass. We really have to wonder where it will all stop and how Parliament will be able to decide just what it is here for. After all, who decides whether a matter is within Community competence or whether it is a subsidiarity matter? It is not Parliament which decides; it is not this House or the House of Commons which will decide whether or not the matter is subsidiary. It will be the Commission and, in the last analysis, the European Court of Justice. So Parliament will have nothing to say, except in so far as it will be allowed to say it, although do very little about it, if this amendment is passed. It is a modest amendment to which we should really all agree.

The noble Lord, Lord Hurd, when he was Foreign Secretary, said that he was fed up with the European Community getting in to the nooks and crannies of our affairs. What is certain is that since he made that statement, which is a very good one, the European Union has intervened in even more nooks and even more crannies of our national life. There is the question of duty free goods. That will be decided not by Britain but by the European Union. These people are supposed to be concerned about building the people's Europe, about which the noble Baroness, Lady Williams, is to have a conference on 6th and 7th, or 7th and 8th, of next month. But far from listening to what the people are saying about duty free goods, an issue which will affect tens of thousands of British jobs, they have ignored public opinion, they have ignored the newspapers, they have ignored the trade unions and they have even ignored the British Government. They have said that they are not even prepared to reconsider the matter. Some subsidiarity there! I urge noble Lords to think very deeply on this matter. I feel sure that if they do think deeply on it they will come to the conclusion that this is the least they can do to ensure that Parliament knows what is happening. I support the amendment.

My Lords, there is a large gulf between those of us who believe that one should mistrust other governments on principle as setting out in combinations to do down the interests of the British people and those who see international co-operation as in the British interest. It is of course the case that we have given up some of our sovereignty to a number of international organisations. The noble Lord, Lord Tebbit, referred to losing British sovereignty over defence. We have been a member of NATO which has steadily grown more integrated over the past 50 years. To that extent we have shared our sovereignty although perhaps we have given it up to the Americans rather more than to others. That is part of the process of international co-operation.

My Lords, NATO is a group of countries freely discussing together, each taking their national interests into account, and very often reaching a common decision by consensus. What we are concerned about now is not that, but a group of unelected, unappointed officials, one might say—I am speaking about the Commission as distinct from the Council—who make the decision first whether or not subsidiarity should be required and whether or not proportionality is appropriate. As has been said before, this is coming from the top down and it is not a free discussion between equals coming to a decision, which is the situation in NATO. That is a very different situation.

My Lords, the noble Baroness and I clearly differ in our understanding of the decision-making procedures in NATO and the European Union. The annual report on subsidiarity and proportionality to which my noble friend Lady Williams referred, comes from the Council Secretariat and not from the Commission. That secretariat operates for the Council of Ministers which consists of elected ministers of national governments. It is they who take the decisions that the Commission proposes.

The largest area in which business has grown in the past five years in the European Union—I have this from people in the Council Secretariat who service committees—has had very little to do with the Commission. It has been under the third pillar and it has been to do with police, asylum, etc. The British Government, under our previous Home Secretary, Mr. Michael Howard, were very actively concerned with pushing forward closer co-operation in that area. That has nothing to do with the Commission grabbing powers; it has to do with responding to international developments. I recall Michael Howard saying to a Committee of this House some months ago that he regarded that as part of his normal business as Home Secretary.

When one talks about subsidiarity and proportionality we are concerned with the question of what should best be done at which level. I and many of my colleagues—

My Lords, the noble Lord should not be allowed to get away once again with this piece of absolute nonsense of comparing NATO and the European Union. Can NATO legislate over the head of this Parliament? Does NATO have a supreme court? Does NATO even interfere in whether one should compensate, and in what sort of manner, and provide legislation over sexual discrimination in the Armed Forces of NATO? No, no, no and no in every respect. They are totally and completely different even to the extent that NATO has a provision within it for the renunciation of the treaty, and the Treaty of Rome has no such provision.

My Lords, I recognise the noble Lord's quotation from the noble Baroness, Lady Thatcher. May I remind him that NATO has a common budget and command structure. There is also a common services budget to which all of us make our own proportionate contributions. As regards subsidiarity and proportionality, we have a problem throughout the European Union.

My Lords—

My Lords, I have given way a great deal—

My Lords, I am most obliged to the noble Lord for giving way. Does he agree that the great difference between the European Union, as it involves sovereignty, and NATO is that votes are taken by consensus and not by a qualified majority? That is the difference.

My Lords, I entirely agree with that. I am conscious of the fact that at one point last year the majority of NATO members were in favour of enlargement to include Romania and Slovenia. The United States was against that and a decision was taken as the United States wished. If that is a definition of consensus, which we all have to accept, in effect that is how NATO operates. Let us not be too silly in how we define these things.

In terms of subsidiarity and proportionality, I strongly support what my noble friend Lady Williams has said. We have gained a great deal. Of course, we are in a political process in which each government and each national public wants to tell people in other countries what to do, but not to be told what to do within their own. We have pressure groups in this country who are anxious that the European Union should take steps to ban bull fighting, but not to interfere with the right to hunt foxes. It is a normal process in which we all have to play our part.

I strongly support the proposals which this Government should be pressing further, to reform the Commission and to cut down the number of different Directorates-General. I believe that there are still too many things which come out of the directorates with numbers above 20 which push forward their proposals. But the majority of proposals which come from the Commission have been started by one government or more which wanted to push something on to the European Union agenda. It is not the case that Britain is against all the other 14 governments. Other governments are also concerned about subsidiarity. My wife and I wrote a paper for the Dutch Government two years ago on the principle of subsidiarity and how to apply it. I have also been involved in a Finnish study on how we implement the principles of subsidiarity.

Perhaps I may remind the noble Lord, Lord Tebbit, that my party wishes to see the principles of subsidiarity and proportionality applied within the United Kingdom as well as at a European level. We see this new Government setting out rather hesitantly and being unsure how they wish to apply the principles of subsidiarity and proportionality to Scotland and Wales let alone restoring power to local government. This clause is not necessary. We have made quite good progress, but it is a political process which we need to continue.

My Lords, I listened with care to the noble Baroness, Lady Park of Monmouth, making the case about NATO. I have heard it many times before. I understand very well that that is the way things work in normal times. But it is of the essence of decisions about peace or war that they may sometimes fall to be made in what are not normal times. In fact, warnings of possible nuclear attack, hypothetically, and possibly not only hypothetically, might fall to be made within as little as four minutes. The amount of consultation that one can do within that space of time is necessarily limited.

I concede to the noble Lord, Lord Tebbit, that NATO is not about to require us to have gay soldiers. But much as I understand that the noble Lord, Lord Tebbit, minds the prospect of gay soldiers, even he might possibly mind total annihilation just that little bit more. The power of war and peace is the most supreme mark of sovereignty and is even above the power to make law. Necessarily, where there are nuclear weapons, in an emergency that cannot be a matter for consultation between all the governments concerned in an alliance. That is why I believe my noble friend Lord Wallace of Saltaire has been making a very valid point.

My Lords, we stray, but I shall not stray very far. The noble Earl knows perfectly well that the nuclear weapons of the United Kingdom remain subject to the requirement of the dual trigger. What he forgets is that day after day after day, the liberty of the people of these islands is being eroded through the European Community. It was not NATO, which is responsible for our defence, which required this House—without option—to enact an amendment to the Sexual Offences (Amendment) Act 1976. That is the extent of the subsidiarity argument. It is subsidiarity that we are arguing about today.

My Lords, I shall resist the Liberal Democrat temptation to be drawn into the all too clear debate of the distinction between NATO and the European Community. I wish to focus very briefly on the subject of subsidiarity and how far we got with it in Committee. Key points on the subject were left unanswered at that stage. It will be helpful to the House if they can be clarified this afternoon. It is already beginning to feel like this evening! In so doing, I shall attempt to persuade the noble Baroness, Lady Williams, that neither this amendment nor my position is strange or perverse. I hope that I succeed.

In Committee, we had a long and interesting debate about the way in which European law is made, touching on the whole complex question of European Union law-making and who is ultimately responsible for it, as well as on the qualified success of the principle of subsidiarity in general and, more specifically, on the effect that the new protocol on the applications of the principles of subsidiarity and proportionality contained in the Amsterdam Treaty will have on that success.

Perhaps I may take this opportunity to reiterate the Opposition's support for the principle of subsidiarity. Decentralised decision-making is at the very core of what we believe is the best vision for Europe—a vision of a partnership of nation states in a competitive, decentralised and efficient Europe.

From these Benches, we welcomed the commitment of the noble Lord, Lord Whitty, to the concept of devolved law-making in the Union and to ensuring that it works effectively, as well as his confident assertion that this protocol will help the law-making to work better. I thank the noble Lord for acknowledging the importance of the principle and for the recognition that it was the previous administration's initiative which led to proposals being brought forward to entrench subsidiarity further into European decision-making, and his acknowledgment that before Maastricht there was no general presumption in favour of action at national level contained in any of the treaties.

The recognition of the need to reinforce this presumption established at Maastricht led to the decision to include in the Amsterdam Treaty elements of the detailed rules for the application of subsidiarity, which had been agreed at the 1992 Edinburgh European Council.

From these Benches, we also echo the need for further clarity on how subsidiarity should be applied, as pointed out by my noble friend Lord Renton. That seems to be the key issue today because clarity has not yet emerged on this question. In this context, I raised in Committee some issues about the unsatisfactory nature of the wording of the new protocol, in particular paragraph 2, and I expressed fears that despite the new protocol's length, far from strengthening this important principle to ensure that the European Union makes laws only when individual member states are not better placed to do so, it will, in fact, weaken it.

I welcomed the noble Lord's assurance that the application of the principle of subsidiarity has not taken a backward step, thanks to the complex Protocol 7, but I still have important questions about the assertion that subsidiarity has become a more effective safeguard as a result of the Government's negotiations at Amsterdam.

I compared the effect of the general principles of subsidiarity and proportionality, as set out in Article 3b of the Maastricht Treaty, which was the first step towards establishing the principle, which the Amsterdam Treaty was then intended to reinforce, with the potential effect of paragraph 2 of Protocol 7. That paragraph makes the concept of subsidiarity subject to the acquis communautaire, the European Court of Justice and Article F(4)—those very principles, pillars and institutions that created the supranational activity in the first place. The noble Lord, Lord Grenfell, believes that the protocol simplifies and clarifies the position. It does not do that for me and I am glad that we have this opportunity for the Minister to respond on this point.

Far from clarifying and tightening the application of subsidiarity, I believe that this key paragraph, paragraph 2, could ensure that the sum effect of the protocol is that the principle of subsidiarity will mean what the Council, Commission and Court of Justice intend it to mean at any one time. Therefore, the concept of subsidiarity will be held hostage to the way in which the institutions—the ECJ in particular—choose to interpret the confused and contradictory provisions of the protocol. It is that specific point which brings me to the Dispatch Box this afternoon in order to seek clarification from the Minister.

I take on board the important points that have been made in this debate about the role of the former Prime Minister, John Major, in pursuing the important issue of subsidiarity. I hope that the questions that I have posed do not in any way undermine the respect that I have for his important work on that issue. Indeed, that is why I sought reassurance that the Government would ensure that paragraph 2 does not prove to be a fertile ground for the centralising tendencies of the European Court of Justice, which will be able to interpret the protocol according to its vision of, and attitude towards, European Union development. If not, the Government will run the risk of giving free rein to dominance by the institutions of the European Union, which will serve to confuse and undermine the principle.

The noble Lord responded to the legal points that I raised in Committee, but I should like some further clarification. The noble Lord said that, as regards subsidiarity, "ultimately" there must be a role for the Court of Justice, but that it would be a "longstop" role. The noble Lord further expressed his confidence that the European Court of Justice would implement the protocol effectively in line with the general view across the European Union that the principle of subsidiarity has to be enforced, and that, "in the last resort" the ECJ will be better able to ensure that the subsidiarity principle is properly applied on the firm legal basis of the explicit protocol written into the treaty. Perhaps today the noble Lord will elaborate a little on that point and reassure the House that that "longstop" role will not lead to the Court of Justice effectively becoming the arbiter of what is, or is not, subsidiarity and proportionality.

I conclude by saying that we welcome the Government's recognition of this very important principle. From these Benches, we shall strongly support them in the efforts they make to find new ways to ensure that the definition of "subsidiarity", which the previous government pioneered, is effectively followed by the institutions of the Community. This amendment, formally requiring such a report to Parliament, would be a beneficial step towards that objective, adding significantly both to the body of knowledge available to both Houses and to keeping Ministers of the day on their toes and yet more accountable to this Parliament.

My Lords, I agree with many noble Lords that subsidiarity is a vital issue, but this amendment is both unnecessary in terms of achieving the modest aims which my noble friend Lord Stoddart ascribed to it, and flawed for reasons that I shall explain in a moment.

First, I must stray a little into philosophy. I suppose that I should have cottoned on at an earlier stage, but it seems that some noble Lords are under a serious misapprehension about what "subsidiarity" actually means in terms of both a general concept and what was written into the Maastricht Treaty and built into this treaty after the Edinburgh agreement.

The original concept of subsidiarity was evolved within the Catholic Church rather than in the political or legalistic arena. Whatever one's confessional allegiances, I suppose that that could be slightly alarming because the Catholic Church is a slightly centralised operation. However, in relation to the Army, to which the noble Lord, Lord Tebbit, referred, and in relation to a unitary national state, the concept of "subsidiarity" is different from when it applies to the European Union—

My Lords, the noble Lord is, of course, absolutely right in saying that the concept of subsidiarity originated in the Holy Roman Catholic Church, but I am sure that the noble Lord will go on to agree with me that there is a greater degree of subsidiarity in the Roman Catholic Church today than in the Treaty of Rome.

My Lords, I am not going to be drawn into that one. I am saying that the Catholic Church and a unitary national state are different organisations from the European Union and that subsidiarity therefore applies differently because in those organisations power rests at the centre, at the top—that is, in the Pope or in the parliament of the national state. Almost the opposite is true in the European Union in the sense that the EU is not based on a unitary constitution; it is based on a treaty.

Therefore, the treaty defines where sovereignty lies in the sense that the powers given to European institutions are spelled out in that treaty. All other powers are presumed to rest with the member states. As the noble Lord, Lord Moynihan, implied, for the first time that presumption was written in clearly to the treaty itself thanks to the negotiating position of the previous government. That presumption was always there but it is not there in relation to a national state. Sovereignty rests with this Parliament and sovereignty is devolved from this Parliament to a Scottish parliament or local government. That is an entirely different concept. If I were to pursue the earlier request of the noble Lord, Lord Tebbit, and spell out precisely what issues applied at each level, I should be falling into a trap which he otherwise asks us to avoid; namely, to specify a federal constitution of the European Union. I had thought that the noble Lords, Lord Pearson and Lord Tebbit, wished to avoid that.

The concept of subsidiarity in the treaties is not a definition of different levels of competence in that sense but a test that is applied to areas of competence which are shared between the member states and the institutions of the European Union, as my noble friend Lord Grenfell indicated. I understand that the noble Lord, Lord Pearson, and other noble Lords are worried that we are pooling more and more sovereignty through these treaties. The noble Lord, Lord Tebbit, is perhaps in a slightly weaker position in that he was, after all, a member of a Cabinet which probably pooled more sovereignty than any of its successors. Nevertheless, I understand that argument. But the presumption is that, where not specified in the treaty, the member states shall have competence and where there are shared competencies the test of subsidiarity as expressed in Article 3b of the treaty applies. Therefore, subsidiarity as in the treaties is not, as suggested by the noble Lord, Lord Pearson, and others, about the repatriation of powers. They may wish that to be so but it is not and never was. It is concerned with how powers should be exercised in those areas where competence is shared between the Community and member states. I believe that it is important to be clear about the matter from the outset. I had the impression that the approach of the noble Lord, Lord Pearson, started from an entirely different point.

I turn now to the wording of the amendment. The amendment would require a report on what effectively are two alleged aspects of the new subsidiarity protocol: its application in the European Union and its application in the United Kingdom. I should like to address each in turn. I deal first with a report on the application of the protocol in the European Union. This amendment is unnecessary. As stated by the noble Baroness, Lady Williams, the noble Lord, Lord Wallace, and others, the Commission already reports to the Council on the application of the principles of subsidiarity, together with the principles of proportionality, simplification and consolidation of European law in its annual Better Law Making report. This is routinely provided for scrutiny in the parliament of each member state. In our Parliament it is provided under cover of a clear explanatory memorandum on the subject by the Government. It is considered by the scrutiny committees of this House and another place.

My Lords, I thank the noble Lord for giving way. My noble friend is really arguing that it is not necessary. I could see his arguing that case effectively in relation to reporting to the European Union. But the Commission is itself mandated under Clause 9 of the protocol to make an annual report, clearly because that is of great importance not only to the European Council but to the Council of the Regions and the Economic and Social Council. After all, it deals with one of the most sensitive issues of all: the distribution of powers between this country and the European institutions. If it is considered important for that purpose, how on earth can a Minister of the Crown say that it is not equally important to have an instruction laid down in the Bill itself to report to the United Kingdom Parliament in Westminster?

My Lords, first I welcome back to this debate the noble Lord, Lord Shore of Stepney. The exchanges during the latter stages missed his sharpness of intervention. No doubt this will be the first of many such interventions today. However, I disagree with the noble Lord. I do not say that the report and its consideration by Parliament is unimportant but it does not have to be specified either in a treaty of the European Union or a Bill that ratifies a treaty of the European Union in this Parliament. The provision is already there. Not only does the report of the Commission have to be given to the institutions of the Union; it must be provided to national governments. Under our procedure that report goes from national government to both Houses of Parliament. Therefore, it is up to the Houses of Parliament to consider the report through their scrutiny committees. If required, both the scrutiny committee of this House and noble Lords can request a debate on the report. We do not need to provide for separate annual reports by the United Kingdom Government because that is provided on the basis of the Commission report in an explanatory memorandum to the scrutiny committees. I do not believe that it is necessary to specify in legislation that that is required. Noble Lords from all parties could ensure that such a debate took place. The provision for the report is already there and is prescribed under parliamentary procedures.

As to the Commission report, as my noble friend Lord Grenfell indicated, for the first time it spells out clearly that the provision of that report will be a formal and binding obligation on the Commission, as is said in paragraph 9 of the protocol. In those circumstances, I believe that a report separate from the parliamentary procedure that already exists will not add to the process.

I am not sure it was intended by the drafters of this amendment, but as written the second part of it, which is flawed in terms of this Bill, appears to relate to a report on subsidiarity within the United Kingdom. Important though that issue is, I cannot see how that is relevant to a debate on the Amsterdam protocol. The protocol is not concerned with the allocation of responsibilities within member states. Both the Labour Party and the Liberal Democrat Party, unlike the Official Opposition, have taken a strong, coherent and consistent line on subsidiarity in its general sense in the context of the programme of devolution for Scotland, Wales, local government and the English regions, including Greater London. We have a pretty active devolution programme. Subsidiarity is being pursued by this Government. However, that is not a matter for this Bill nor for a European treaty.

I turn to the detail of some of the speeches. It is clear that some noble Lords, like the noble Lord, Lord Pearson of Rannoch, oppose the Maastricht provisions on subsidiarity as inadequate, misplaced or misapplied in the first instance and therefore have taken a consistent approach throughout. Other noble Lords are perhaps more disappointed as to how the Maastricht and Edinburgh principles have since been applied. I understand the consistent principle that the noble Lord, Lord Pearson, has pursued. But I do not see consistency in the approach adopted by the Front Bench of the Official Opposition. As many noble Lords have indicated, it was the previous administration who signed up to many of the words repeated and elaborated upon in the protocol. The previous government were exultant in their achievements at Edinburgh and Maastricht in this respect. I do not believe that the previous government regarded the achievements on subsidiarity as inadequate; nor did they pursue a campaign for the repatriation of powers. Occasionally, they resisted the extension of powers but they did not call for their repatriation. Therefore, I do not believe that it is credible now for the Official Opposition to oppose the improved form of subsidiarity found in the protocol.

As the noble Baroness, Lady Williams of Crosby, said, there has been substantial progress in the application of subsidiarity since Maastricht. It is difficult precisely to quantify it. To some extent, as I think I said at an earlier stage, it is a dog that does not bark. If the Commission is observing subsidiarity, it does not come forward with proposals. Nevertheless as the noble Baroness said—I think that we are working to roughly the same figures—over the past three years 140 potential proposals by the Commission have been withdrawn, largely on the basis of subsidiarity. Part of that process has resulted in a reduction in the amount of primary legislation from 61 new Acts in 1990 to seven last year.

The noble Lord, Lord Monson, referred to regulations. Clearly regulations will continue to be promulgated under existing legislation, the vast majority of which was promulgated under legislation facilitated by the Single European Act, when the noble Lord, Lord Tebbit, was a member of the Cabinet. The adoption of the principles of subsidiarity at Maastricht has partly reduced dramatically the amount of primary legislation

It is a developing process. I accept that it is of course about changing the culture within the Commission. That has not changed completely, as I am sure my noble friend Lord Bruce will remind us from time to time during the rest of the debate. It is also to some extent about changing the culture of the Council. The terms of Maastricht have worked, and this protocol will strengthen and clarify that process. It will strengthen the principle of subsidiarity by incorporating in a legally binding document many of the guidelines agreed at the Edinburgh Council in 1992.

The noble Lord, Lord Moynihan, raised the role of the ECJ. The reference to the ECJ in paragraph 2 of the protocol concerns the supremacy of Community law. Clearly in most cases subsidiarity will have been taken into account, if not by the Commission in bringing forward proposals, then by the member states in considering them in the Council. That is why I referred to the ECJ as essentially a long stop. It can arbitrate on the application of the procedures set out in the protocol as it can on all other items of the treaty, but, essentially, the political application of subsidiarity rests with the Commission and member states in the Council. As with all other disputes under the treaty, there is a long-stop provision for the ECJ.

My Lords, I thank the noble Lord for giving way. I should say by the way that even in the Catholic Church there is another doctrine, which is the forgiveness of sins if one is truly repentant. While he is entitled to point to me as a sinner, I hope that he will understand that I have truly repented. The point I wanted to make to him was about the court. Surely the danger here is that if the Council of Ministers or the Commission should come to a conclusion that they wanted to increase the extent of subsidiarity, that decision could, itself, be challenged in the court. It would then fall to the court to say whether or not that had gone too far.

My Lords, first, we would all welcome the noble Lord's confession of repentance, even if his sin was not perhaps one that I would normally acknowledge. Nevertheless, such humility is welcome in this House. With regard to the scenario which I think the noble Lord spelt out, if the Council of Ministers, or the Commission for that matter, decided that subsidiarity should apply to a greater degree than had previously been presumed, that is a matter for the Council of Ministers. It is not a matter for the court. At the end of the day, the Council of Ministers has to decide whether to accept or modify the Commission's proposals for any form of legislation. It is only the other way around—where the Commission or the Council has failed to observe subsidiarity—that the court could consider a challenge.

My Lords, I am grateful to the noble Lord, because this is a matter as regards which I am genuinely uncertain, and I suspect from his hesitancy that he may not be certain. So I shall give him a moment to continue thinking. It is clear that if, in a vote in the Council of Ministers, a decision were reached by QMV, one of the nation states which was dissatisfied with that and thought that the principle of subsidiarity had not been applied, could challenge that in the court. That, as I understand it, is certain. But let us suppose that one of the nation states thought that the principle had been pushed too far, could that nation state challenge in the court, and would not the court have power to rule on that?

I hope that the noble Lord has received a message which will enable him to give me a clear reply. He should not take too much notice of the fact that the noble Lord, Lord McIntosh, is there, because he told me the other day that Ministers should not answer questions with the words "Yes" or "No", even when it is possible to do so, because the words "Yes" or "No" might be misleading. I am surprised at the noble Lord. I thought that lawyers had great skill in court in forcing people to answer "Yes" or "No" to the questions which were put to them.

I am not a lawyer!

My Lords, I really do apologise to the noble Lord for that.

My Lords, before the Minister replies, might I make a comment on paragraph—

My Lords, no. There has been an intervention. There cannot be an intervention on an intervention, particularly on Third Reading.

My Lords, I am not a lawyer either, the noble Lord will be relieved to know. The advice that I have received telegraphically from my noble friend indicates that I was correct in my assumption: at the end of the day, if the Council of Ministers has gone through correct procedures, and proposed something, and extends subsidiarity as a result of that, it is not challengeable in the court on grounds of breach of the subsidiarity principle. If it fails to observe the subsidiarity principle, it can be challenged.

We need to make progress, so I shall wind up. Those who see this protocol as a weakening of the principle of subsidiarity tend to quote the words from Article 2 relating to the acquis communautaire. That mistake was made also in the other place the other day by the honourable friend of the noble Lord on the Front Bench. In fact, the wording of the acquis communautaire is virtually the same as that agreed at Maastricht and in the Edinburgh Agreement. We have not gone backwards; we have gone forwards both in clarity and extent to the commitment to subsidiarity. That should be recognised in this House.

Subsidiarity may not have worked perfectly, but we are improving the way in which it works. This protocol will allow the institutions of the Union to improve still further. That is something that this House should welcome. We shall have an opportunity to debate subsidiarity and other aspects of changing Community law on many occasions in the future, without the amendment. The second part of the amendment in relation to the UK is probably irrelevant to this legislation. The part relating to the EC report applies already within our existing parliamentary procedures. Therefore I ask the noble Lord, Lord Pearson of Rannoch, to withdraw the amendment on the grounds that it is unnecessary and that we have made progress on the subsidiarity concept.

My Lords, I am most grateful to all noble Lords who have spoken, especially those who have supported the amendment. I think that it would be in order to try to hit finally on the head some of the points advanced by those who oppose the amendment. I shall start with the noble Baroness, Lady Williams of Crosby. She singled out paragraphs 1 and 5 of the protocol—in that she was joined by the noble Lord, Lord Grenfell, who singled out paragraph 4 of the protocol—to show that the subsidiarity clause and the protocol now attached to it were moving in the direction of the protection of national sovereignty. I do not want to repeat the clauses again. Noble Lords did so. Any noble Lord can read those clauses, and has to ask himself one question: yes, but who decides the issue? Who is the final arbiter? It is the Community. It is no help for the noble Lord, Lord Whitty, to say, "Ah, but we have the Luxembourg Court of Justice as a long stop". I have not seen the Luxembourg Court of Justice save a single leg bye in the whole of its existence. I do not think that those of us who are worried about the relentless progress of the European Union towards the superstate at the expense of national sovereignty can accept any of the clauses in this protocol.

The noble Baroness, Lady Williams, went further. She said that if national legislation can provide for it, it will. The evidence is that it will not. I thought that the noble Baroness went far even for her when she said that the Commission was now being a good boy and indulging in consultation all over the place. If that is so, perhaps I may ask your Lordships to read the first Starred Question on Monday of this week. The Government Front Bench were forced to admit that the Commission is refusing even to produce a cost-benefit analysis on its intended destruction of the London art market. If the Commission is to be welcomed, like my noble friend Lord Tebbit, into the Kingdom of Heaven as a sinner that repenteth, why are we troubled with a potential directive on buses? The Community wishes to take away from us the good old double-decker and the British mini-buses. They are under definite threat from Brussels at present. Why does it want to destroy our system of take-overs which makes the City world famous? I could go through a long list of British interests which are being interfered with. They are not just nooks and crannies; I refer to major industries.

The noble Baroness sought to advance some statistics to demonstrate that the Commission is being a good boy and is not increasing the large numbers of statistics. I was grateful to the noble Lords, Lord Monson and Lord Stoddart, who knocked that argument firmly on the head, indicating that the numbers of the most anti-democratic element of the Commission's activities, the regulations, are increasing strongly.

The noble Lord, Lord Wallace of Saltaire, could not resist advancing the old chestnut: a comparison with our membership of NATO, saying that we lost our sovereignty to NATO. Those who advance that old chestnut never answer the question. If we have decided to share our sovereignty with NATO, for very good reasons, we are at least free to leave it whenever we wish. I do not think that question was answered. The Minister did not cover it. There is an exit clause in our arrangements with NATO. There is no exit in the juggernaut of the European Treaty of Rome. Perhaps I may remind noble Lords that it is NATO which has kept the peace in Europe since the last war. Any pretence that the European Union has had anything to do with that is entirely fallacious.

The noble Lord, Lord Whitty, took us into philosophy, and, not being either a lawyer or a philosopher, I lost him. However, he said that the European Union is based not on the concept of a unitary state, but on the treaty. I agree with him. But it is the treaty, without the exit, which contains this provision for qualified majority voting where, as I mentioned in my previous remarks, we have already ceded vast areas of our national sovereignty. The Amsterdam Treaty devours another 34 areas of it.

The noble Lord also said that the Conservative Government have never pretended that the subsidiarity clause was about a repatriation of powers. We did hope that to be so in good faith. My right honourable friend Mr. John Major thought we could repatriate 25 per cent. of all legislation. Indeed, the Conservative Government's attitude to growing flexibility arrangements was designed to effect repatriation in due course.

Finally, the noble Lord, Lord Whitty, was boxed into the well known position of saying that the amendment is not necessary. We all know that to mean that we have won the arguments but the Government would rather that we did not press the amendment. He referred to the subsidiarity clause as a dog which does not bark. I believe that it is time we discovered whether the dog will ever acquire the art of barking. In order to do so, I beg leave to test the opinion of the House.

moved Amendment No. 2:

After Clause 1, insert the following new clause—

SEAT OF THE EUROPEAN PARLIAMENT

(". This Act shall not enter into force until a Minister of the Crown has laid before both Houses of Parliament a report on the financial implications for the United Kingdom of paragraph (a) of the Protocol on the location of the seats of the institutions and of certain bodies and departments of the European Communities and of Europol annexed to the Treaty signed at Amsterdam on 2nd October 1997 amending the Treaty on European Union, the Treaties establishing the European Communities and certain related Acts.").

The noble Lord said: My Lords, Amendment No. 2 deals with the location of the various institutions of the Community. It may be for the convenience of your Lordships to say that I shall refer to pages 88 and 225 of Command Paper 3780 which reproduces the Treaty of Maastricht.

The protocol which is set out at page 225 is quite remarkable in itself because it completely negates another clause which remains still intact within the treaty and is still part of the treaty itself. Perhaps I may read that to your Lordships so that noble Lords can follow the precise way in which this matter has been dealt with. Article 289 of the amended treaty, which is Article 216 of the original treaty, states:

"The seat of the institutions of the Community shall be determined by common accord of the Governments of the Member States".

That remains a part of the treaty itself. It is still a valid and clear clause within the treaty.

In the course of the determination of the final text of the Treaty of Amsterdam, there were several IGCs. There were even final deliberations on the day on which the treaty was signed. Oddly enough, even though those deliberations at the IGCs produced a number of deletions of clauses from the original treaty as amended by Maastricht and a large number of amendments to the various clauses in the Treaty of Rome as amended by Maastricht, nowhere in the protocols, apart from this particular one, did their appear a complete negation of a clause.

Obviously, in this case—and the Government will have a very good opportunity to reply—almost up to the time of the signing of the treaty, there was agreement as to its text. And then suddenly, out of the blue, appears a protocol which is not in the normal function of a protocol explaining various aspects of clauses in the treaty but a protocol in complete negation of one of the clauses which remained intact.

I ask the Government whether there is any explanation for that. There is one version, the truth of which I am not aware; that is, that it probably was not in the original text at all but when the final documents emerged for the signature of the various participants, this one mysteriously appeared.

That is not unusual in European agreements. I can testify to that from my own personal experience. I have participated in a number of conferences in the European Parliament itself in which certain agreements were arrived at and everyone understood exactly what they were. And yet, when the presidential version of what occurred appeared the next day, a number of new clauses and amendments appeared in it that nobody seemed to remember having agreed to.

We all know how those conferences work. I have been to scores of them. To begin with, there is laid on the desk of all the delegates, whether governmental or otherwise, the final communiqué which they have not yet considered. The conference goes on and parts of the final communiqué get shipped away and eventually they make up their minds as to exactly what they want to agree to.

But there have been many cases when the presidential or the chairman's version of what occurred the previous day appears to differ markedly from the memory of those who participated in the discussions and even those who took notes upon it. Therefore, the first question I must ask the Government—and I am sure they will answer me in all honesty—is whether anything appeared following the agreement of the Amsterdam Treaty proper that either added to or subtracted from their recollections or notes of what actually occurred.

This is a direct challenge by me to the authenticity of the documents because—and noble Lords must believe me when I say this—the number of times when documents have been altered is no one's business. Indeed, I shall name the country. France, in particular, when it is in the chair, is prone to produce somewhat different versions of what has actually been agreed. I defy challenge in that respect. I say that because, in my own particular case, I can in fact still produce such documents.

If that has occurred, it is something which ought not to be countenanced. The original clause, which is still there, reads as follows:

"The site of the institutions of the Community shall be determined by common accord of the governments of the Member States".

As it stands, without the protocol, it means that the existing sites cannot be altered unless there is unanimous consent to the alteration. In short, there is quite adequate security as long as the existing members are in complete accord. There is no reason why, even if one dissents, the sites of the various institutions can be altered. The question arises as to why they should want it explicitly in the treaty? Is it because they are afraid that, with the enlarged Community, certain member states might urge—and urge successfully—the abandonment of the unanimously agreed accord on the sites? What are they afraid of as regards the position already stated in the treaty?

It is common knowledge that there is tremendous waste as regards having different sites which, in many cases, result in a duplication of functions. According to the accord and the arrangements proposed in the protocol, France will have its Parliament—12 plenaries—fixed in Strasbourg. Luxembourg will house the General Secretariat of the European Parliament. I emphasise the fact that it will be Luxembourg, not Strasbourg or Brussels. Indeed, Luxembourg will also house three of the 12 meetings a year of the Council of Ministers when they take place in April, June and October. Those Ministers will meet there three times; they are currently based in Brussels.

The Commission itself will have a permanent office in Brussels. In fact, Brussels will hold additional parliamentary plenaries as regards the Committees of the European Parliament, the Council of Ministers, the Commission, the Economic and Social Committee and the Committee of the Regions. Germany's interest in the matter will be confined to the European Monetary Institute, and Holland will have the European Police Office (Europol). The remaining 10 states will have nothing in them of any note.

I am not complaining about this in any way; indeed, it is no part of my case today that the UK should have any institutions in it at all. I am not complaining of unfairness. There is a very good reason of course, because in about 10 years' time the United Kingdom will be the only extant parliamentary democracy in Europe and will, I hope—if it follows my advice and those who think like me—remain well out of this new wretched superstate which will reproduce the superstate envisaged by the German General Staff in 1942. I do not plead that we should have more, but I am saying—and the amendment states— that the cost of all this is terrific and is unnecessary.

The General Secretariat of the Parliament has to move to Strasbourg and to Brussels as well as being in Luxembourg. Every week there is a caravanserai of lorries conveying documents from one part of France to Luxembourg or to Brussels at enormous extra cost. Why on earth is that allowed to continue? Everyone admits that such arrangements are ridiculous and that there should not be this travelling circus going all over the place with masses of lorries conveying documents from one site to the other. There is, of course, a considerable extra cost. It is my wish and that of my colleagues that this matter of cost should be considered by another place.

The other place is naturally interested in all waste. Your Lordships will recall that the other place had an investigation carried out—the Benefits Integrity Project—into disability payments as the other place thought there was large-scale fraud in that area. It thought that out of a cost of £11.5 million, it would probably be able to recover, on average, £7 to £8 million a year. Of course that is completely erroneous as that represents only 70 cases of selected fraud out of the 55,000 that have so far been assessed. Nevertheless the zeal was there to pursue this sum of £7 million or £8 million per annum which the House of Commons thought was being fraudulently spent.

The extra cost to the European Community funds, of which we bear 14 per cent. of its expenditure—a sum which is vastly in excess of the sums allegedly to be recovered from social security fraud—is a significant sum. It can be anything between £20 million and £30 million per annum by every estimate that has been so far made as to the ridiculous extra costs that arise from the various locations, and the movements between them, of these principal European institutions.

It is my hope that another place may be able, and think it desirable, to investigate this further. The way of ensuring that is to make sure that this amendment is carried because then the other place will have to consider the matter because, believe me, it has not considered it for over three years. The other place is the guardian of our financial resources. Therefore it ought to be afforded the opportunity to consider the matter. The existing case for trying to gloss over this is thin indeed. We have a unique instance of where a protocol is used to override and completely to negate an article that still remains in the Bill. That is quite insufferable. I ask the House to support the amendment. I beg to move.

My Lords, having listened with great interest to the noble Lord, Lord Bruce, I am not absolutely sure that he is not finding himself on something of a procrustean bed. Knowing his views on the legitimacy and appropriateness of the European Parliament in the European political system, there is probably something to be said for having the European Parliament meeting once a month in Strasbourg, since that undoubtedly interferes with the efficiency and smooth operation of the organisation. Indeed, from that perspective, there is a case for saying that it should never be allowed to meet in the same place more than once, thereby further eroding participation in the business of the Community.

I wish to make it clear, as a former Member of the European Parliament for five years, that I love Strasbourg. It is a marvellous city and a place where I dearly love to be. That said, the peripatetic nature of the parliament between those two great cities, Brussels and Strasbourg, does not contribute to the smooth-running operation of the Community. It would be in the interests of the communities and the peoples of Europe for the parliament to be permanently situated in Brussels, adjacent to the Commission—not merely because of the proximity to the other parts of the European system but at least as much because there communications with the rest of Europe are so much better than they were in Strasbourg. It is an obvious point, and I shall not elaborate further.

What has been rather disappointing is the attitude of the French. I can understand their Gallic pride in having one of the seats of the European Parliament in Strasbourg, which is a remarkable place. Nevertheless, I have always understood that what stood in the way of rationalising those rather eccentric arrangements described by the noble Lord was the unwillingness of the French to contemplate any change in the existing state of affairs.

It is my understanding—noble Lords will forgive me if I have misunderstood—that about a couple of weeks ago at the summit to launch EMU there was a great deal of negotiation about the identity of the person who will be president of the European Central Bank. If my memory is correct, the dispute was basically as to whether it should be a particular Dutchman or a particular Frenchman. There was a long drawn-out negotiation.

Bearing in mind that it was clear that the French were extremely anxious for their candidate to secure the post—a great deal of negotiation and horse trading went on—it seems to me that that would have provided the most wonderful opportunity to throw this particular issue into the negotiations. It is my understanding that the Government's view about the location of the European Parliament is much along the same lines as mine. Against that background, did the Government introduce this point into the negotiations that took place. And if not, why not?

My Lords, I wish to speak briefly in support of my noble friend Lord Bruce of Donington, who so ably moved the amendment. I can tell the noble Lord, Lord Inglewood, that I am well-known for disliking the European Parliament, and I voted against its establishment. However, my concern is with British taxpayers' money and, for that matter, taxpayers' money throughout the European Union. There is no doubt that the peripatetic nature of the European Parliament causes huge logistic and administrative difficulties, and those impose far higher costs on taxpayers. That cannot be right.

There is a new parliament building in Brussels which is not fully and economically used because it is not the permanent seat of the parliament. That has been built at a cost of £670 million, of which British taxpayers have had to find some £120 million. So no wonder I am concerned about the way in which the parliament is, as I have to grant, forced to arrange its business and its meetings.

It really is time that this matter was confronted and put right. It does not matter how offended the French may be as a result. Britain is often accused of being the odd man out in Europe. But it is the French, with their intolerable arrogance—or inferiority complex; I do not know which—who so often cause the problems, as we saw in the world trade talks and more recently over the appointment of the first president of the European Central Bank. French tantrums not only cause difficulties but bring about decisions which are harmful to the European Union. Noble Lords may think that I am in favour of that, and in normal circumstances I am; but this involves taxpayers' money and therefore I am not in favour.

I believe that the problem of the siting of the European Parliament is one of the long-term problems that the French have caused. It is time that they were brought to book. There is no reason why everyone should keep giving in to the French. France is not the largest country in population or economic terms. Indeed, its population is no greater than our own. Certainly its world importance is no greater than ours or that of Germany, and its achievements are not equal to those of other European countries, including our own, over a long period of time.

I believe that the time has come for the French to be confronted with firmness and vigour. We should therefore agree to this amendment so that the House of Commons, which has not dealt with this matter properly, as my noble friend pointed out, can have another look at it and see whether there is some way in which the Commons, and indeed the Government, can revisit the issue, put some pressure on the French and achieve agreement on a proper meeting place for the European Parliament, thus saving the taxpayers a great deal of money.

My Lords, I was keen to have this opportunity to return to an area of grave concern, which was not sufficiently addressed by the Government in Committee; namely, the reasons for the enshrinement in treaty form of the dual location of the European Parliament.

Up until now, decisions about the seat of each institution have been made by the Council or European Council. For example, the current pattern of sittings of the European Parliament as between Strasbourg and Brussels was determined by the European Council in Edinburgh in December 1992. However, the new protocol legally binds the current dual sitting arrangements.

I appreciated the sincerity of the noble Lord, Lord Whitty, who accepted that the dual location of the European Parliament was an unnecessary cost for the taxpayer, which he described as "irksome". His explanation for the inclusion of Protocol 12 to the treaty, which specifies the locations of the various European institutions, was that the status quo predates UK accession; that the provision is consistent with the existing agreement on dual sites reached at Edinburgh in 1992; and that in October 1997 the ECJ ruled that the European Parliament was legally obliged to hold 12 plenary sessions a year in Strasbourg, thanks to a legal provision after the protocol agreed at Edinburgh and signed by the previous government. In short, the Government do not like it, but their hands were bound and there was nothing they could do, because agreement on a single European site requires unanimity.

However, the Government have yet to explain why, in the course of their negotiations, they not only failed to press the case for a single European site but also brought back a treaty which enshrined the dual location of the European Parliament in treaty form for the very first time, something that the noble Lord, Lord Whitty, has admitted that the Government do not support.

Let me outline exactly what this will mean for the European Parliament and for British and European taxpayers. The Parliament will continue to be divided between Brussels, Luxembourg and Strasbourg, considerably adding to the expense of maintaining and administering the parliament. It will be based in Strasbourg for all monthly sessions and will be in Brussels for extra sessions, while committees of the parliament will also be based in Brussels and its General Secretariat will continue to be based in Luxembourg.

Clearly there are strong arguments, not least financial ones, for all the parliamentary sessions, the committees and the secretariat to be based, if not under the same roof, then at least in the same city; if not in the same city, then surely in the same country.

In this House your Lordships have heard that the European Parliament itself estimated that the additional costs involved in its being located in Luxembourg, Strasbourg and Brussels add approximately 15 per cent. to the parliament's overall budget. The cost of investments in immovable property, rental of buildings and associated costs for the European Parliament's Strasbourg site has been estimated at a total cost of about £17 million, while the costs of fitting out premises and other expenditures on buildings in Brussels and Strasbourg in 1996 and 1997 have been estimated at around £14 million. Those are just the costs associated with the buildings, without taking into account the additional travel costs, hotel costs and daily allowances.

An article in the Sunday Express last year probed into this matter. It found that,

"Euro MPs are spending almost £4 million on showers for their offices in the new Brussels parliament".

And on 12th February this year the final part of the multi-million pound parliament building in Brussels was inaugurated, aptly nicknamed Caprice des Dieux. That is the part which houses the offices of the MEPs, each of which is indeed equipped with a £6,000 shower room.

Of course, governments are to blame for this ridiculous situation. Ten years ago the Belgian Government secretly started the new parliament building in Brussels, claiming it was to be an international conference centre. The French Government have subsequently trounced the Belgian Government. In Strasbourg, MEPs are soon to leave the building they have shared with the Council of Europe for a new palace which, when completed later this year, will be of a similar size and price to the one in Brussels.

The MEP for Essex North and Suffolk South—Anne McIntosh—rightly criticised such lavish spending. She was quoted in the article as saying,

"The problem is that there's a contest going on between Strasbourg and Brussels over where MEPs meet. Each is wooing MEPs by offering better facilities".

Anne McIntosh is now the MEP for the Vale of York. But it is a contest fuelled by national rivalry and funded by taxpayers' money. The Amsterdam Treaty actually makes provision for this ludicrously inefficient and expensive contest to continue. How did that get into the treaty text? Let me quote from The Times of 26th June last year. It said,

"In the most glaring sleight-of-hand, President Chirac managed to introduce a treaty guarantee keeping Strasbourg as the seat of the Parliament, although officials at the summit do not recall the issue being discussed. 'Chirac must have mumbled something and no one objected, so that was taken as assent', a senior Belgian official said".

Where were the Prime Minister and the Foreign Secretary when that happened? Did they stand up against the conceits of individual governments for the interests of British and European taxpayers? Apparently not. Were they even there? We do not know. How can the parliament and the institutions of the European Union expect to be taken seriously when they demonstrate such extravagance and blind stupidity in this case?

Can the Minister say what steps, if any, were taken to attempt to prevent this expensive and absurd state of affairs at Amsterdam? I know that my comments in Committee had a lot of support and understanding from the Liberal Democrat Benches—I hope that that continues today after what I have said. These arguments are so compelling that even the Minister would be lauded by all right-minded noble Lords for entering the Lobby with us on this issue on the grounds of her wisdom and perception and our clearly argued case.

It is in that spirit that I strongly support the amendment standing in the name of the noble Lord, Lord Bruce of Donington. Here is the first chance that the Government Benches have to demonstrate that they are not New Labour Lobby fodder committed to excessive public expenditure, but are ready to accept a well argued case and ready to reject unnecessary costs for the taxpayer which they themselves describe as "irksome".

My Lords, my noble friend Lord Bruce of Donington may be right that another place has not debated this matter for three years. I have not checked Hansard, but it feels as though this place has debated it several times within the past few days.

I am tempted to cut my remarks to say that there is great consensus in this House; we all think that this position is nonsense. But there was nothing we could do about it before the treaty and nothing we can do about it after. However, I will be slightly more elaborate.

First, I take up the questions raised at the beginning of my noble friend's remarks both about the process of the protocol arising in the negotiations and the apparent contradiction as he sees it. He is quite right to suggest that the protocol was included in the text of the treaty at a late stage of the negotiations and at the behest of President Chirac. But he is quite wrong to suggest that it appeared after the negotiations had finished or that the British Government had not seen it. The text of the protocol was seen, despite what an unknown Belgian official may say, and was agreed clearly at the Amsterdam Summit. But its incorporation into the treaty in no sense altered the pre-existing legally-binding position.

As far as concerns the contradiction between Clause 289 and the protocol, in their effects they are not contradictory. Both before and after Amsterdam any change in the seat of the parliament would require unanimity. A common accord means unanimity of all states. Therefore, there is not operationally a contradiction.

When we discussed this matter in Committee speakers on all sides expressed their frustration. Former and existing MEPs frequently expressed that frustration. We have total sympathy with that frustration regarding the inconvenience and cost that is incurred. However, the amendment before us would serve no useful purpose. Paragraph (a) of the protocol has no additional financial implications for the United Kingdom or any other member state over what happens at the moment, and the costs pointed to by the noble Lord, Lord Moynihan, which I have not had the opportunity to verify, if correct, existed before the treaty. The legal position and the financial implications of that position have not changed. In other words, the protocol did nothing to change the present position. The EP site is not new.

My Lords, on a point of information, when those major costs are decided, is there any procedure by which the member states are consulted in an annual budget and told what is the intention; or is the decision taken without consultation?

My Lords, the principle of building new parliament sites has to go to the Council of Ministers, and did go to the Council of Ministers during the regime of the previous administration. The precise cost in terms of out turn has probably never been effectively reported. I suspect that that point may be mentioned by my noble friend Lord Bruce in the next debate. Nevertheless, the principle would have been considered by the member states.

The legal force of the present situation does not depend on the Amsterdam Treaty. It was, as noble Lords have implied, established by the agreement at Edinburgh in the European Council in 1992. As a result of that agreement the European Court of Justice decision of 1997, which was inevitable, was that the European Parliament is legally obliged to hold 12 sessions a year at Strasbourg. That ruling did not require changes to the Amsterdam Treaty. It was based on the pre-existing legal position.

I am not going to be tempted by the noble Lord, Lord Inglewood, into discussing the negotiating position during the EMU weekend. Nor am I going to be tempted by my noble friend Lord Stoddart into a generalised attack on our French colleagues on the eve of the World Cup. The fact is that the only way to change the present situation would be by unanimous agreement among the member states. There is no more prospect of getting the French to agree than there was in 1992.

I find the position of the Front Bench opposite rather hard to follow. When in government they were instrumental in brokering the Edinburgh Agreement and regarded it as a negotiating triumph. Now, in opposition, they seem to find it intolerable. The best way to change this position—the only way to change this position—is by introducing majority voting for the site of institutions. But the party opposite is clearly opposed to such extensions.

My Lords, the noble Lord is not quite right. That is not the only way in which to address this matter. The other way is to leave the treaty.

My Lords, we discussed that at earlier stages. It is clear that this Government do not wish to withdraw from the European Union. That was endorsed by the people at the last general election. It was a clear manifesto commitment that we should be positive in the European Union and that we should be a constructive member of it. That option is not available to this Government although, as stated on many occasions, any future Parliament has that option available to it, but I hope it never takes it. These are the facts of the case. A split site for the European Parliament is unsatisfactory; we all agree on that. We would all like to change it. The Treaty of Amsterdam does not change that problem and it is not the cause. It does not have any additional financial effects compared with the current situation. Therefore, this amendment will not have any real affect and I ask my noble friend to withdraw it.

My Lords, I am rather disappointed with my noble friend's reply to my argument. If the protocol to which I referred made no difference whatever to the pre-existing position, why embark on it at all? Why not leave the treaty as it is? That would achieve exactly the same purpose. The protocol is there for a specific reason. Essentially, it is there to protect the interests of both France and Belgium. They are quite welcome to it. I am not arguing that the seat of the Community should be changed in any way.

All I am saying—and I invite another place to say so—is that the existing arrangements, particularly as regards the European Parliament, are a shocking waste of money and ought not to be tolerated. The noble Lord may say that another place has a full opportunity to examine these matters. Normally, that depends on the usual channels, as the noble Lord knows quite well. In this particular case, that is singularly inexplicable. The other place declined the opportunity to debate last year's European budget at all. It put it through at 10.15 in the evening without even bothering to examine it. When considering questions of economies, if your Lordships pass this amendment it would have the effect of ensuring that the other place pays attention to this particular expenditure. I invite the House to support the amendment.

moved Amendment No. 3:

After Clause 1, insert the following new clause—

COMMUNITY FINANCES AND FRAUD: REPORT

(". This Act shall not come into force until—

(a) a Minister of the Crown has laid before both Houses of Parliament a report setting out the implications of the Treaty signed at Amsterdam on 2nd October 1997 amending the Treaty on European Union, the Treaties establishing the European Communities and certain related Acts for the sound management of Community finances and the prevention of fraud in relation to Community expenditure; and

(b) the report has been approved by resolution of each House.").

The noble Lord said: My Lords, your Lordships will recall that, specifically in response to a general public demand for far greater oversight of the financial transactions of the European Community, the previous government succeeded in obtaining an amendment under Maastricht on the part to be played by the Court of Auditors. I draw your Lordships' attention to the institutional arrangements affecting the Court of Auditors. A measure was introduced to require the court to issue a certificate to the Community and to parliament requiring a specific assurance as to the regularity of the accounts and so on. I referred to this in some detail in Committee. I shall not pursue that particular aspect further, save to say that for the past three successive years since Maastricht the Court of Auditors has declined to provide both to the Council and to parliament a certificate certifying the legality, propriety and accuracy or otherwise of the accounts presented to it.

The introduction of this new clause to the Treaty of Maastricht was claimed as a very considerable victory by the then government. On Mr. Major's return to this country he claimed substantial credit for it and thought that it marked a considerable step forward in securing the proper control of European Union finances and the manner in which they were dealt with. He was particularly concerned, as I am sure are all your Lordships, with the continued fraud and irregularity occurring among not only some member states but within the Commission itself.

It occurs to me that perhaps your Lordships are unaware of the extent to which this has occurred. Therefore, I should like to draw your Lordships' attention to a report made by the Committee on Budgetary Control of the European Parliament to the parliament itself and to all others concerned. It has not attracted much attention in the press. I shall therefore read to your Lordships its findings. They are not just the findings of the British representatives on the Budgetary Control Committee. One must make a special mention of the work done by Mr. Tomlinson who has taken a prominent part in the work of that committee. It presented a report to the European Parliament this year, which then adopted its own resolution, based upon the report it received.

In order that your Lordships may get some idea of the enormity of these matters, it will be appreciated that for the year ended 1996 our own Comptroller and Auditor-General was involved in the examination of the same matters as were examined by the Court of Auditors itself. It came to the conclusion that fraud throughout the Community was running at anything between £3 billion and £5 billion per annum. That is not an insignificant sum. It is a sum of which British taxpayers bear some 40 per cent. I must again express my disappointment that that matter, which could have been discussed in the other place, was never discussed by the full House.

I shall read some of the findings. I give a health warning here. Some of what I read may be found objectionable by noble Lords who have a sense of fairness and propriety in these matters. The report states:

"Ever since worries were first expressed in 1989 concerning possible internal fraud and corruption in its tourism unit, the European Commission has withheld relevant information from Parliament, and judging by its reports, from the Court of Auditors, provided information only after unjustified delays and, at times, provided misleading information".

That is a serious allegation on its own which requires an answer. So far none has been provided. The second finding was:

"The Commission was slow to take a disciplinary action against any of the staff concerned, and has still taken none against the hierarchical superiors responsible for management. Internal investigations were conducted by bodies answering to the Commission administration. The Commission never of its own accord informed the relevant judicial authorities of its suspicions concerning possible criminal activities by its own staff and in some cases delayed the progress of criminal investigations by refusing to comply with requests for the waiver of official immunity … Practices, rules and procedures covering the management of direct expenditure. especially relating to calls for tender, are lax, inadequate and, in any case, poorly applied. Administrative practices which were known to be unsatisfactory and irregular were tolerated for a prolonged period by the Commission managers at all levels until they became public knowledge".

Finally—I shall not weary your Lordships with anything other than this—it states:

"The accountability of the Commission to both political and judicial authorities is neither guaranteed nor enforceable. Parliament's power of discharge is subverted by its inability to obtain the information it requires, while the principle of official immunity can be used to frustrate inquiries by judicial authorities. In these circumstances, the credibility of European institutions is seriously undermined and public confidence in them cannot be restored unless accountability is made to function in practice ".

I could read further sections of the report, including the parliament's response and recommendations on the basis of the report from the Committee on Budgetary Control, from which I have given extracts.

I have studied this subject for well over a quarter of a century. I am certain that the time has come for governments to do something about the Commission in regard to financial irregularities and the systems which permit large scale fraud to take place. As I said, I understood that the new certification by the Court of Auditors would yield a result. Each year for three years the Court of Auditors has declined to give that certification. The reaction of the Council of Ministers, which includes whatever number of our own Ministers it may be, has been, "Well, it is gradually improving. Let it ride".

If the new powers mean something, the refusal to certify can be taken a stage further as meaning that something needs to be done. Let us imagine the case of a large, or even a small, public company in this country whose auditors declined to give it clearance. If it were publicly quoted, and shares were sent to zero, it would be swiftly taken off the quotation list. All kinds of dire consequences would follow. Yet we seem to be powerless.

Let us assume that the Government sought to enforce the new clause affecting the powers of the Court of Auditors. It could decline to discharge the Commission from its responsibilities. But nowhere is it spelt out what would happen if it refused to discharge. The implication underlying it is that a refusal to discharge would be so grave that the Commission itself would resign. Nowhere throughout the Act, or any of its protocols, explanations or legislation, is there set out in respect of the billions spent what would happen in the event of the Commission being refused a discharge. The answer so far is—it is quite right—that there being no legal provision, it is ignored. At heads of government, heads of state. European Council, Council of Ministers level or whatever level it may be, one way of getting to the heart of Europe is to have sufficient guts to raise this matter rather than lying down supinely under the regime which we know is incapable of administering its financial affairs with what we in this country would call reasonable and due propriety. I beg to move.

My Lords, I wish briefly to take the opportunity to return to a specific point that I raised in Committee on the issue of fraud. We all agree on the seriousness of fraud in the Community, particularly in the light of the report, mentioned by the noble Lord, on the 1996 accounts prepared by the European Court of Auditors. We all agree that it revealed unacceptable levels of fraud in the Community.

In the report, fraud was included in the £3 billion figure relating to the spread which the noble Lord raised during his speech. Even that bottom level figure of £3 billion represents 5.4 per cent. of the European budget. It is only fair that the issue is clarified by the Minister. I understand that the figure includes both fraud and errors in implementation, many of which reflect genuine differences of opinion between the European Court of Auditors and the Commission about the interpretation of the rules on eligibility. If that is not the case, I should be grateful if the Minister would respond accordingly.

Because of the state, position and importance of fraud, it has perhaps become the front line in the arguments for and against the extension of QMV. At this stage in the proceedings, it would be wrong to rehearse those arguments again, but I wish to return to one important point. I ask the Minister specifically about the requirement in amended Article 209a, paragraph 2, which is Article 2, paragraph 52, of the Amsterdam Treaty. It states that:

"Member states shall take the same measures to counter fraud affecting the financial interests of the Community as they take to counter fraud affecting their own financial interests".

I wish to know what effect the noble Lord believes the requirement would have in the fight against fraud. He told me that the significance was obvious if we believed, as we do, that in this country our public accounts are conducted effectively.

Clearly, then, we should try to bring the Community accounts up to the same standard. He added that he hoped that this applied to all other member countries, but it is certainly a valuable criterion for the United Kingdom. I could not agree more with those comments, but I asked the question for another reason. In another place, the Foreign Secretary said that one of the reasons why the Government agreed to the extension of QMV was because,

"we could not get agreement on applying the British standard [on fraud] in other countries".

He went on to make the same point as the noble Lord when he said,

"However, the treaty says that every country has to apply to European spending the same standards and tests that it applies to its domestic spending. We must apply the system we use for our national budget to European spending in Britain. The same steps must be taken in every other European state".—[Official Report, Commons, 12/11/97; col. 917.]

It is the first sentence which concerns me most—

"we could not get agreement on applying the British standards [on fraud] in other countries"—

in the context of amended Article 209a, paragraph 2.

Accordingly, is the noble Lord satisfied with the standards and tests which other countries apply to their domestic spending? Are they as rigorous as those which we use in this country? If not, what efforts will the Government make to introduce changes in line with those standards which we have in this country, which include the Comptroller and Auditor General and the Public Accounts Committee, to ensure that each member state has proper arrangements for dealing with fraud at a national level in order to make paragraph 2 of amended Article 209a more reassuring? Surely the priority must be to get all member states to adopt proper anti-fraud measures.

It is with a heavy heart and a foreboding of repetition that I reflect that yet again in the Government's negotiations, as happened whenever they had to choose between either standing up for British interests with the risk of being isolated in Europe or submitting to the consensus of our European partners and sacrificing our national interests in the name of co-operation and unanimous agreement, that they chose the latter path. Whenever the Government advanced an idea they believed to be in Britain's interest it was retracted as soon as they failed to achieve instant agreement. Where was the courage of the Government's convictions on measures to counteract fraud? The Foreign Secretary had made it clear where they were when he said,

"we could not get agreement on applying the British standard [on fraud] in other countries".

However, on a final note I thank the noble Lord for expressing his belief that the serious issue of fraud should be a priority during our presidency. I thank him also for outlining so clearly the progress being made under the presidency and the other changes made by the Amsterdam Treaty to reduce fraud and to improve financial management, including strengthening the role of the European Court of Auditors in detecting fraud and mismanagement. I must ask him what progress he feels has been made.

From these Benches, we support the useful role of the Court of Auditors. We welcome also the Government's commitment to taking forward existing anti-fraud initiatives. But I look forward to a specific clarification of the points that I have made.

My Lords, I follow what the noble Lord, Lord Moynihan, said. I very much welcome this debate and should like to congratulate the noble Lord, Lord Bruce of Donington, who continually and quite rightly refers to the importance of democracy in carrying out what seems to me one of the most important functions of democracy which is to supervise continually the administration of the taxpayers' money. Therefore, on these Benches, we welcome the strongest possible measures which can be taken against fraud in the European Union and the member states.

No one can say that the European Union has been profligate in its budget which remains at 1.27 per cent. of GNP. Moreover, there has been very little attempt to try to inflate it. However, I draw attention also to the regulation which was agreed on 11th November 1996 when it was agreed between the member states that there should be spot checks and unannounced inspections in the whole area of possible misuse of Union funds.

I agree with what the noble Lord, Lord Moynihan, said in a reasonable discussion on that matter. It is of crucial importance that the European Parliament should work with the national parliaments to reduce the possibility of fraud not least because, as was pointed out in our own 13th report back in 1992, fraud is not so much a problem for the Commission as for the member states dealing with the money provided by the Commission. That means that it is only through co-operation between those which are the parliamentary scrutiny bodies within the national parliament and the European Parliament and Commission that one is likely to deal with that extremely difficult problem.

Secondly, there is continual pressure for closer co-operation arising from Europol and others to deal with the issues of fraud within the geographical area of the Union. In that respect, it is worth echoing what my noble friend Lord Wallace of Saltaire said about the number of proposals brought forward under the intergovernmental pillar in the area of trying to deal with financial fraud and other issues where, if anything, there is a demand for more joint action and not less.

I wholly share the view that we must pursue this matter as vigorously as possible. Indeed, I have been instrumental in sending a good many documents about TACIS and PHARE to our own sub-committee under the chairmanship of the noble Baroness, Lady Hilton of Eggardon, because I have had reason to be concerned that some money may have been misused. It is important that such an inquiry is supported in every possible way by everybody, whatever may be their view in general of the value or otherwise of the European Union.

I do not support the amendment. It would put off sine die any movement forward of this treaty. The phrasing of the amendment implies that one must wait until the treaty had been in operation and a report would then have to be made. A resolution would then be necessary and only if that were carried could one move ahead on Amsterdam. I do not believe that is the right way forward and I shall not support the amendment. However, in bringing this matter to the attention of the House, the noble Lord, Lord Bruce of Donington, is to be much commended and I hope that all Members of this House will make as one of their first priorities the attempt to root out fraud whether at member state or at European Union level.

My Lords, I strongly support the amendment moved by the noble Lord, Lord Bruce of Donington, who has brought this matter to the attention of the House.

I wish to make two points. It seems to me to be vital that our Government and other governments should be seen to act on the reports of the Court of Auditors, particularly in view of the forthcoming enlargement. There are a number of new countries about to join. It seems to me essential that they should join an institution where They see that there is serious application of the law and serious accountability.

It could be very difficult for those countries. They are making the transition from a command economy to a free economy. On the way, there are liable to be quite a few pirates around who will be using their money. It is vital that they should understand that the issue is taken seriously and that accountability matters. Article 216 says:

"If any Member of the Commission no longer fulfils the conditions required for the performance of his duties or if he has been guilty of serious misconduct, the Court of Justice may, on application by the Council or the Commission. compulsorily retire him".

I have to tell the Minister that I should like to see a few compulsory retirements.

I add my congratulations to those already expressed to the noble Lord, Lord Bruce of Donington, for the manner in which he introduced the amendment. I congratulate him also on his long struggles as regards issues of fraud. It would be a little unfair if we were to give the impression that this problem has arisen only since May 1st last year. We know that it has a much longer record.

It now falls to the present Administration to see whether they can be more successful than their predecessors in battling against fraud. I wish the Government well. It will be a most difficult task. I return to the view that I expressed in this House a few years ago; namely, that while such large sums of money are being moved across borders in this way for certain purposes in the European Community, it is unlikely that we will ever get fully on top of the issue of fraud.

I have some sympathy, for example, with the French or Greek farmer who thinks that it is a bit of a nonsense that he should have to grow his tobacco crop in order to harvest it and then send it off to be destroyed so that he can receive his subsidy. It would seem to any logical person that the process could be short-circuited and that such a farmer could save everyone the trouble by relaxing indoors, with his feet up and still receive his subsidy. No doubt a good many of those farmers do exactly that, as we know happens in Italy with the olive scandal.

I was surprised that the noble Baroness, Lady Williams, did not make more of the matter when we discussed subsidiarity earlier. It seems to me that this is a perfect example of subsidiarity. Every country is told that it should deal with fraud involving European Community funds in the way that it safeguards the funds entrusted to it by its own taxpayers. I am sure that the Italians would find that to be quite nice. Indeed, as we know, standards vary across Europe. Surely, the safeguarding of taxpayers funds is not a matter which should have subsidiarity applied to it in this manner. There should be a single standard right across the Community, at any rate in this respect. It should he the highest standard in the Community. I venture to suggest that that means our own standard or that of countries such as Germany.

I should like to ask the Minister who is to reply two questions to sum up the matter. They are fairly simple questions but they may not be so easy to answer. First, would such a state of affairs as has been uncovered by the Court of Auditors be tolerated in a department of state in our Government here? That is pretty easy to answer: it most certainly would not. If such a state of affairs were uncovered in this country, it would not be a matter of people being compulsorily retired; indeed, it would be a matter of people being prosecuted and sent to gaol. Any Ministers or senior civil servants involved would be treated most severely. Of that I am absolutely certain.

The second question is a little more difficult. What can we do about it? I say "we" because it would be unfair merely to ask what the Government are going to do about it. If the Government are going to do anything about it they will require the strongest support from all of us across parties in this House. I hope that when the Government take action and build upon anything which they may have been able to achieve during our presidency they will be strongly supported from all sides.

My Lords, I join the tribute that has been paid to my noble friend Lord Bruce of Donington for his stalwart work over more than 25 years in uncovering and publicising the level of fraud which exists in the European Community. The work that he does is, I fear, done by far too few people in this country and probably in other member states too.

In my reply I wish to comment first on the quantum of fraud in the European Community, and respond to the noble Lord, Lord Moynihan, on that subject; and then to comment on what the Amsterdam Treaty does in that respect and again respond to the noble Lord, Lord Moynihan, on that point. I then wish to comment on what we are doing about this during the UK presidency.

The noble Lord, Lord Moynihan, and my noble friend Lord Bruce are entirely right to draw attention to the National Audit Office analysis of the European Court of Auditor's report on 1996 accounts which reveals an unacceptable level of inaccuracies. The figure is £3 billion or 5.4 per cent. of the budget—and not between £3 billion and £5 billion—but that figure includes not only fraud but also errors in implementation, many of which relate to genuine differences of opinion between the European Court of Auditors and the Commission about interpretation of the rules on eligibility. Neither is this figure an estimate of wastage as it includes technical infringements, for example about the timing of payments. Nevertheless the level of errors, and the fraud contained within that, are clearly a cause for serious concern. When the report was published last November the Government made it clear that much work remains to be done before Community finances are as well managed as our national Budget. This has been a priority for our presidency. I say to the noble Lord, Lord Tebbit, that we do not believe that the level of control and enforcement is comparable to that which exists within the British Government.

What did the Amsterdam Treaty achieve in this regard? The changes were relatively modest but nevertheless they are worth putting on record. First, the treaty "beefed up" the role of the European Court of Auditors to give it recourse to the European Court of Justice to protect its right to audit Community funds. This means that if the Court of Auditors is blocked by another institution from properly carrying out its duties, it can take that institution to the Court of Justice. The Court of Auditor's right to audit those in receipt of Community expenditure right down the line to end users is clearly set out. This may have been ambiguous in the past. The Court of Auditor's right to audit Community funds managed by the European Investment Bank is also protected, even if the agreement under which the audit is carried out breaks down. As a result of these changes the Court of Auditors is now doing useful work and member states and the Commission are taking its reports more seriously. Increases in the European Court of Auditors' powers in the Amsterdam Treaty should ensure that this continues.

The second main change is in the Community's ability to take action against fraud. Under the revised Article 209a referred to by the noble Lord, Lord Moynihan, a specific legal base is created for adopting measures against fraud. Previously those had to be adopted under the cover-all provisions of Article 235, which requires unanimity and causes delay and less efficient legislation. In future, measures will be adopted by majority voting, which allows quicker action. The use of qualified majority voting should not be seen as a threat. On the contrary, it is a tool to be used, and in this case it will be possible to take decisions unencumbered by the threat of veto from an offending member state.

The noble Lord, Lord Moynihan, asked me questions about the control that is exercised by member states. As I said to the noble Lord, Lord Tebbit, although we are not privy to the way in which they run their public sector, there clearly will be significant differences between the member states. However, the point is that now, with qualified majority voting, there is a power to take action even if an offending member state is not in agreement with that action.

The third major change is the requirement placed on member states to co-operate with the Commission to ensure sound financial management of Community funds.

I turn now to what is being done by the UK presidency in the fight against fraud, and for better financial management during our presidency. As recently as Tuesday of this week, May 19th, ECOFIN considered a report on the follow-up to the Court of Auditors' report on the 1996 accounts. That is the first time the Council has discussed member states' replies to criticism by the European Court of Auditors. The debate highlighted key financial management issues such as the need to set clear aims for expenditure and to evaluate results against those aims. That should help to ensure that weaknesses highlighted in the Court of Auditors' report are addressed.

ECOFIN also noted progress on the SEM (sound and efficient management) 2000 initiative, which is improving financial management, and discussed the Commission's annual report on the fight against fraud. I have no doubt that in due course the results of the ECOFIN debate will be made available to noble Lords.

We have made good progress on agreeing amendments to the financial regulation which sets out detailed rules for drawing up, implementing and auditing the EU budget to improve financial management. We are working to pass on good practice in financial management to central European candidates for admission to the European Union so that they can develop effective financial systems before they join the EU. That is relevant to the point made by the noble Baroness, Lady Park. They have all been invited to a financial control conference in London in June.

We are following up last year's report of the European Parliament on transit fraud. Progress has been made on legislation to improve the workings of the transit system and on preparation of the new computerised transit system. We are pursuing work on criminal fraud in the Justice and Home Affairs Council as part of the recent action plan on organised crime. The European Council at Cardiff will receive a progress report.

Although we cannot accept this amendment, because it would cause unacceptable delay and would prevent ratification if the necessary resolution were not passed in either House, nevertheless I know that the Government will recognise the unanimity of view and the determination to counter fraud which has been expressed by noble Lords in the course of this debate. On the basis that that message will now be passed back to government, I invite my noble friend to withdraw his amendment.

I am grateful to the noble Lord for his reply. The whole trouble is that the old Article 209 to which he refers makes no mention at all of any duty put specifically upon the Commission. Reference to the Commission is avoided absolutely in any part of that article. The duties are laid on the member states, and responsibilities are laid upon the Council. But there is no part of the treaty as quoted to me which presently enables the Community to deal with matters where irregularity and fraud are connived at either by the Commission itself or by parts of the Commission. There is at the moment nothing in the treaty that enables the Community to deal with its own Commission. In framing its proposals for the new clauses, the Commission has undoubtedly succeeded in avoiding any responsibility being laid upon itself. It is vital that that should be possible.

I do not for a moment question the zeal with which my own Government are proceeding in the matter, or the zeal of the previous government, perhaps subject to one reservation. When a member of your Lordships European Communities Select Committee, I had the opportunity to question a former Chancellor of the Exchequer as to why no effective action was being taken on this matter. I gathered from his reply that the question was rather pushed to one side as being something that was examined but upon which no definite action was required. That can be verified from the answers he gave to my questions in the evidence published by the Select Committee.

All I ask is that action should be taken at governmental level to prevent and extinguish the evil of bad faith, of lying and of cheating within the organisation. That evil must be tackled, and I sincerely hope that the Government will tackle it.

I am reassured to learn of some of the latest steps being undertaken. As one who was partly responsible for drawing up the financial regulations, as a member of the budget committee of the European Parliament, together with the noble Lord, Lord Shaw of Northstead, I should be interested to receive particulars as to the progress that has been made in trying to amend the financial regulations. That would save much time and enable further, more fruitful inquiries to be made.

In view of the fact that the other place has not arranged for itself an opportunity even to discuss these matters in Parliament, I shall press the amendment standing in my name, which will compel consideration to be given to some of the arguments that have been presented today. I look forward to unanimous support, including that of the Government, for the amendment.

moved Amendment No. 4:

After Clause 1, insert the following new clause—

REPORT ON PROGRESS TOWARDS ENLARGEMENT

(" . No later than one year after the passing of this Act, and at annual intervals thereafter, a Minister of the Crown shall lay before both Houses of Parliament a report assessing the progress of institutional reform of the European Union in preparation for enlargement.").

The noble Baroness said: My Lords, the European Union is in danger of living in the past, rather than embracing the challenges and opportunities of the future. In order to do so, it has to become more outward looking and dynamic on a number of fronts, in particular on enlargement. So, shortly after the G8 summit, I feel I must mention the launch of the Transatlantic Economic Partnership to promote further trade liberalisation between the European Union and the United States. I applaud this initiative, which owes much to Sir Leon Brittan's ground-breaking proposals for a new transatlantic market place, on which I spoke at Report stage. I would also like to pay tribute to Sir Leon who has done so much to shift the European Union away from protectionism and towards a more open liberal trade policy. I urge the Government to pursue with vigour the new initiative.

As Fortress Europe is unsuited to an increasingly global economy, so is an exclusively Western European club unsuited to the post-cold war world. The European Union has clearly acknowledged this. Indeed, there is a widespread agreement that enlargement is not only our "historic" duty, but in the words of William Hague,

"as much a question of hard-headed interest as of Western altruism".

Eastern enlargement is very different from the previous ones, not just in terms of dimensions, but in its significance. The European Union that is emerging now, with the EMU grouping at its core, is very different from the EU of the 1970s and 1980s. Adding a large group of former communist countries to the European Union is very different from adding yet another medium-sized peripheral Western European country within the same geo-political parameters. I accept that it is a complex operation, but I feel that the European Union has not lived up to the rhetoric of enlargement. In so many fields I detect reluctance and delays in acting upon the words repeatedly uttered.

The Government appear satisfied with the pace at which the European Union is progressing towards enlargement. We are not. I accept that much depends on the rhythm of adaptation of the applicant countries, but the European Union is by no means ready for it. I feel very strongly, however, that the Union is not making adequate progress in reforming its policies, and in particular its institutions, in preparing for enlargement.

It is important that enlargement should take place at a faster pace, in order not to create new divisions across our continent that the fall of the Berlin Wall gave the opportunity to overcome. In particular the risk of further delays to institutional reform may well be used by other member states to block enlargement.

These are the main reasons why I am moving this amendment yet again today. It is designed to keep tabs on the pace of institutional reform. Furthermore, I believe that we have to return to this matter because of the Government's attitude. I was disturbed by the Minister's response in Committee and on Report to both my noble friend Lord Moynihan and myself. The Minister suggested that the institutional reform, as it concerns,

"the leftovers of Amsterdam … can be achieved relatively easily …"

through,

"a relatively simple IGC process".

The Minister went on to say,

"We believe that it can take place well before any accession of a new member state. There is talk of it happening during the German or Finnish presidency next year. Perhaps that is true; perhaps it will take a little longer, but it will take place before there is any accession of a new member state".

We were also castigated at Report stage for wanting to slow down the pace of enlargement. The Minister appears to suggest that the EU is set on a path and it is trundlingly slowly, but surely, to its predestined destination. Therefore, the Minister counsels not to do anything because it will only slow down the process along that path.

I was astonished by the attitude betrayed by the Minister's words. It is the attitude of a disengaged bystander, surely not of political leadership. The Minister appears to acquiesce in the plodding incremental approach to reform set by the Commission. Yet this approach is clearly inadequate. Institutional reform has been dodged again and again.

I do know how complicated it is. I remember very well the final session in Strasbourg as an MEP in 1994. The main debate at the time concerned the enlargement towards Austria, Sweden and Finland. It was probably one of the most interesting and exciting debates we had in the Foreign Affairs Committee and it went on late into the night. I am afraid that we failed and voted for enlargement alone rather than grasping the nettle of the necessary institutional changes. It was a great shame and it will be an even greater shame now.

The Minister's words also betray the lack of appreciation of the range and highly controversial nature of the issues involved. He appears to ignore a vast agenda ranging from the reform of the presidency of the Council of Ministers to the reduction of the number of official languages which was not touched on at Amsterdam. He calls a "leftover" achieving a fairer distribution of power between member states' governments. In a Europe of nation states, I believe it is the main course!

Finally, by refusing repeatedly to be drawn on the substance of institutional reform, the Government appear to be singularly unfocused on, and lacking full-fledged proposals for, it. Why let the French do the running on the proposal to set up a wise men's group on the future of Europe linked to enlargement? Why not work for an IGC on institutional reform for early next year?

As Lional Barber recently wrote in the Financial Times:

"Britain has little to lose and everything to gain by a bolder stance on institutional reform".

We must press ahead. We must work for a European Union to tear itself fully away from the old, small protective and corporatist club it was during the Cold War years. It must not join Rimbaud in saying,

"je regrette I Europe aux anciens parapets!"

I beg to move.

My Lords, I warmly support this amendment. Indeed, I think that it is perhaps the most important amendment that we have had before us during the whole of our discussions on the Bill. I say that because—I am sure that many noble Lords would agree—although the great majority of British people are not Euro-sceptics, they do not want a close-knit federal Europe. Like most people, I keenly support the concept of a grand alliance of independent nations, co-operating with each other economically, but with the minimum pooling of sovereignty.

The larger the alliance becomes, the less feasible it is to create a European superstate. As I have said several times during these proceedings, we already have a Union of 15 nations, with 11 different languages and a number of different types of constitution. We know that seven more nations would like to join. That means another half-dozen more languages. In those circumstances, having the wrong treaty, as it largely is, basically unamended but modified under the Maastricht provisions and to some extent implemented under the Amsterdam provisions, is not feasible for an enlarged Europe. It is not feasible even for a European Union of this size, but it would be utterly unsuitable for a Union containing yet more nations.

It is right that the Government should be asked to report to Parliament from time to time on the efforts which they may be making to attempt to achieve the right situation for an enlarged Europe. Indeed, what should be achieved? One could go into this in great depth, but I shall be as brief as possible. Two main steps must be taken. The first is to get away from the concept of a federal superstate. The second is ancillary to the first: let us finish once and for all the ridiculous concept of harmonisation. It is not working now, even as a fudge and even on the basis of ridiculous compromises. It would work still less effectively with seven more nations in the Union. I hope that the Government will reply sympathetically to this important amendment.

My Lords, I wonder if I may raise perhaps a slight note of controversy by wondering whether European enlargement is, in fact, a good thing—not only politically, but economically.

I should like to draw the Minister's attention to a recent publication from the Centre for Research into Post-Communist Economies called European Union Enlargement: the coming home or a poisoned chalice. It is written by the Economics Editor of the Sunday Telegraph, Mr. Bill Jamieson, in conjunction with the well known expert on Eastern Europe and European matters generally, Dr. Helen Szamuely. It is a new analysis of the proposed enlargement of the European Union. The authors use economic data and political facts which expose many of the problems inherent in the proposed process. They examine the effects that enlargement will have on the European Union itself and on the applicant countries. They come to the conclusion that those effects are likely to be very serious for the existing members of the EU and devastating for the newly liberated countries of eastern Europe. They show that western Europe's obsession with the European Union and EMU, and with the unchallenged assumption that the only way forward for the countries of eastern and central Europe is to join the ever more closely integrated Europe, have made it impossible for the West to give the post-Communist countries the help that they need.

The study goes on to look at the poor economic performance of the European Union and concludes that it is far from the right economic model for the Eastern European countries to emulate. Many of them are doing rather better than us at the moment. It sees enlargement as a political construct whose influence is likely to set back post-communist economic and political development.

I shall not deal any further with the book. This matter has come to my attention only in the past few days. The work contains some very frightening analyses and statistics about the whole process. I should like to commend it at least to someone of significance in the Minister's department. I shall give the noble Baroness her complimentary copy after the debate.

My Lords, I note the paradox that just as 11 countries are doing their best to join the European Union a number of Members of this House would like us to leave it. That is a major change in the whole structure of European integration and leads to the transformation of Europe and its institutions.

I do not believe that this amendment is necessary. The Council and Commission are already committed to annual reports on the progress of enlargement, not simply institutional reform but policy reform. Noble Lords may be amused to know that at a conference of national scrutiny committees of the European Union two days ago the noble Lord, Lord Barnett, made a speech in which he argued that policy reform was at least as important as institutional reform in preparing for enlargement. A French conservative parliamentarian attacked him vigorously and accused him of being a Eurosceptic and said that institutional reform was all that was necessary to prepare for enlargement. We need to address this question but we do not require a national report. We must ensure that this House is given as much opportunity as possible to discuss the long-term questions.

We are also in the process of enlarging NATO. The two institutions go together. I regret that this House has not yet spent enough time discussing the enlargement of NATO, which is a rather faster process at the moment and is also likely to lead to another 10 or 12 states joining NATO within the next 10 years. We must discuss how those two processes of transforming Europe should be fitted together.

Having said that, I ask the Minister who is to reply to assure us that the House will be given every opportunity to discuss these questions in detail as we proceed, recognising that we are transforming NATO and that widening the European Union transforms it. But it certainly does not let us off the hook of strengthening the institutions, as suggested in the rather odd speech made the day before yesterday by Mr. William Hague, the Leader of the Opposition. He said:

"Deepening the Union is not just a distraction from widening. It is the opposite".

The idea that to enlarge the European Union is to reduce what one needs to do seems to me to be very odd.

Having said that, we shall not vote for this amendment if it is pressed to a Division. However, we believe that this matter is very important. We want the Government to involve the country as far as possible—so far they have not managed to do that—in discussing the whole question of how to take the Poles, the Romanians and others into a larger institutionalised democratic Europe.

My Lords, for once I find myself in agreement with the noble Lord who has just spoken. Like him, I believe that if we are to consider the enlargement of NATO and the enlargement of the Union as accepted fact it must be very carefully thought out and co-ordinated. I said as much earlier at Committee Stage. I support the amendment, however. We are not discussing these matters because we wish to leave the Union but because we wish it to be the kind of Union that works, which has honest standards and does not waste money; and the kind of Union that accepts that it is a group of countries working together, not a supranational organisation.

There is a great difference. We are doing our best to ensure that this institution works as it should, and works well. I strongly support the amendment because it was a great pity that, with the very many other things that had to be dealt with at the Amsterdam Conference—I freely recognise that that was so—the implicit decision in the reflection group and in the earlier discussions, that there would be early discussion of the institutional framework that will be necessary, has not yet been addressed.

My Lords, the noble Baroness, Lady Rawlings, ranged widely when introducing the amendment. I am glad, in one sense, that she did. I am glad that she made it clear that the Opposition, as distinct from the noble Lord, Lord Pearson of Rannoch, are solidly in favour of enlargement. We on these Benches and, I think, the Liberal Democrat Benches, clearly want enlargement. We also want the budgetary and institutional changes necessary for enlargement.

At earlier stages of the Bill parts of what the noble Baroness and her colleagues were pursuing on enlargement would make enlargement conditional. I am glad that she has made it clear that that is not their intention. However, there was a hint in what she said that could slow down enlargement, in the sense that if all the institutional changes to which she referred—some of the genies coming out of the bottle again—which were discussed before Amsterdam, had to be discussed before we moved to the accession of new member states, enlargement would be delayed. That is why I said at an earlier stage that we should concentrate, in terms of institutional change, on those areas which were explicitly left over from Amsterdam.

The noble Baroness ranged so widely that she managed to refer to a speech from the leader of the Conservative Party, which had otherwise sunk like a stone. The noble Lord, Lord Wallace of Saltaire, also gave it new life. It is a speech which the Daily Telegraph this morning said was a speech without an audience, and which the former deputy leader of the Conservative Party said was in danger of losing an important part of the Conservative Party—the centre ground, which I had always assumed included the noble Baroness and the noble Lord, Lord Moynihan. I would be deeply disappointed if either of them left the Conservative Front Bench because of their commitment to deepening the institutions in the way the noble Baroness had described.

We made progress on institutional issues at Amsterdam. We did not, however, go as far as we wished. I record how far we did get. Article 1 of the protocol states that when the next enlargement of the Union takes place the Commission will comprise one national of each member state provided—only provided—that the weighting of votes in the Council has been modified to increase the relative clout of the large member states. That is a major advance for Britain.

We made it clear also that the enlargement process would require changes not just in those institutional issues but in the budgetary problems which are now being faced up to by the Council. We are not committed to a wholesale overhaul of the treaties further down the line, only to a limited IGC which will complete the process, and to budgetary reform which will allow enlargement to take place.

The text of the amendment is more modest than the text of the noble Baroness's speech, in that it requires a new form of reporting of institutional changes. The noble Lord, Lord Wallace, referred to the institutional reports produced within the European institutions themselves. I assure the House that the scrutiny process on preparing for enlargement—the institutional dimension and others—will be subject to full scrutiny in this House and in another place. We have, as my noble friend Lady Symons outlined in detail at the beginning of this stage of the process, the normal scrutiny process: the six monthly White Paper on developments in the European Union; regular debates in this House and in another place; consideration of a memorandum from the Foreign Secretary, and oral evidence to the Foreign Affairs Committee in another place before each European Council which considers those constitutional issues. After each European Council a report is made to each House, a Foreign Office Minister gives oral evidence about the meeting to the committee of the noble Lord, Lord Tordoff, and we report regularly to the House on the agenda for the Council of Ministers. Therefore the approach to institutional change will be covered by existing procedures, as the noble Lord, Lord Wallace, indicated.

Once we get into the IGC and changes are agreed and put in treaty form, we shall be back here considering the new treaty on the same basis whereby extensive consideration has been given to this Bill. Whether or not the dramatis personae will be the same, I am sure we all look forward to repeating that process at that stage and completing the institutional changes which were not quite completed at Amsterdam.

The House therefore has substantial opportunity for considering institutional changes and the progress up to that point made in the Council of Ministers and elsewhere in the approach to the limited IGC to which I referred. The Government therefore consider that we have not only made preparations at Amsterdam and since for resolving the outstanding institutional issues on which enlargement depends. We have also made provision for reporting them to this House, and for the House to be able to debate fully those changes. The Government therefore believe that the amendment is unnecessary and I ask the noble Baroness to withdraw it.

My Lords, before the Minister sits down, it is important that he gives some idea of what the Government understand to be institutional changes. He used the phrase time and again, but it is very vague. Can the noble Lord say whether it involves reducing the concept of the superstate, the federal state, and getting away with harmonisation? Those are the two main factors.

My Lords, as I think intended by the noble Lord, the answer is no because the proposal for a superstate is not on the agenda either in the Treaty of Amsterdam or in those areas which still need addressing. We are therefore not moving down the road of the superstate. We have made that clear. I believe that the Official Opposition and the Liberal Democrats have also made that clear. We are united in this House that we are not moving to a superstate. Therefore the issue does not arise.

On harmonisation, clearly the protocol and subsidiarity to which we referred will limit the degree to which harmonisation will apply in certain fields. However, we are not intending to roll back the harmonisation which has successfully occurred under the aegis of the single market. Indeed, in many respects the single market is the major achievement of the European Union and it would be wrong for us to promise roll-back of harmonisation in that respect.

My Lords, does the noble Lord realise that the federal provisions in the Treaty of Rome—they are still there even though the treaty has been amended—involve the creation of a superstate? That is what a federal constitution is.

My Lords, no, I do not accept that. I do not accept that it is a constitution for a state. It is a treaty between sovereign member states who agree that on a growing area of items they will pool their sovereignty. We are not talking about the constitution for a superstate. We are not even talking about a federal state in the way that the noble Lord implies.

My Lords, when does one stop the ever deepening process? The Treaty of Rome states that there will be ever deepening of the state in Europe. When do we stop that ever deepening process and start the federal process?

My Lords, the past few interventions indicate a reversion to what should have been covered within the Second Reding debate. Whether or not we get deeper depends on a unanimous decision in the Council of Ministers for a change in the treaty. The British Government and the British Parliament therefore have an absolute veto over any deepening. That will remain the position under this treaty and any subsequent treaties.