rose to move, That this House takes note of developments in the European Union.

My Lords, this is an opportune moment for a debate on future developments in the European Union. Yesterday, we discussed the outcome of last weekend's European Council meeting, and in particular the consequences of the "No" votes in the referenda in France and the Netherlands and the budget ceilings for the European Union for the period 2007–13. We did not have an opportunity to look at the wider context in which we are having that debate, and that is what I hope we will do today.

Let me go back to first principles. There are many things that European nations do best when they work together, which bring added value. That is why Britain joined the European Union in the first place and why we remain a member today. Since its inception, the European Union has removed trade barriers to boost growth and create jobs; improved our environment; raised standards and rights for consumers; fought international crime and illegal immigration; brought peace and stability and given Europe a more powerful voice in the world.

There is no doubt that the European Union has achieved a great deal in its relatively short lifespan. As a pro-European government, we want to see a continuation of those achievements, but we can do that only if economic stability remains at the heart of the European project. On current trends, people in the United States will be almost 50 per cent richer than those in the European Union by 2025. China's industrial production is growing at an amazing 17 per cent per year, and its share of our imports increased tenfold between 1985 and 2003. India is now producing a quarter of a million science and IT graduates every year and is competing with European economies not just at the lower end of the market but in every area, including cutting-edge industries such as software and biotechnology.

The European Union cannot afford to be left behind. We owe it to our citizens and to the future prosperity of our countries. We have to do more to make a reality of the ambitious targets for economic reform, training and employment in the European Union, which were set by its leaders at the Lisbon summit in March 2000. EU regulation needs to be reviewed to ensure that it benefits business, not harms it. We also have to strengthen the EU's ability to act globally against threats to our security, while building on its strength as a force for good in international affairs in areas such as trade and aid. That is why we are so committed to a reform agenda.

In seeking reform, we have to recognise the benefits of the European Union and the importance of the UK's engagement within it. When we have engaged, the United Kingdom has been able to shape the rules that allow British citizens to travel, work and live freely anywhere in Europe and get welfare benefits, healthcare and fair legal protection. We have secured European liberalisation, which has slashed airfares and brought the cost of telephone calls down by half. United Kingdom and other European businesses once had to fill in 60 million customs forms a year simply to trade within Europe, with all the attendant bureaucracy and delay. Today, they can trade directly to the same standards and rules as local firms in a market of more than 450 million consumers. EU police and justice co-operation is helping to bring drug smugglers, people traffickers and fraudsters to book.

Alongside those practical benefits, our position as a leading power in Europe makes the United Kingdom stronger and more influential in the world; we are speaking as part of a community that accounts for a quarter of world wealth and trade and more than half of all development aid. European governments have not necessarily got those positive messages over to our citizens. One issue raised by the "No" votes in France and the Netherlands is whether enlargement commitments to Bulgaria, Romania, Turkey, Croatia and other western Balkans countries should be honoured. Our answer is "Yes". Enlargement benefits everyone—both the countries joining and existing member states. Today, democracy and stability exist across a wider area of Europe than ever before. Everyone benefits from participation in the biggest multinational single market in the world, but we need to work much harder to demonstrate to all EU citizens that enlargement is good for the EU and good for all member states.

Today, the European Union faces a critical period in its evolution. The rejection of the EU constitutional treaty by French and Dutch voters was a big disappointment for everyone who took part in the Convention on the Future of Europe and in the negotiations on the treaty. It was a disappointment too for everyone who believes that reforms to the way in which the EU does its business are needed in the enlarged EU of 25. After an exceptionally difficult European Council meeting last weekend, EU leaders agreed on the need for a period of reflection in which the critical questions as to Europe's future directions are debated.

We have always said that the treaty is a good treaty, both for the Union and for Britain. We argued strongly for key reforms such as the creation of a full-time chair of the European Council and increased rights for national Parliaments to have a say on proposed EU legislation. However, the treaty's decisive rejection by the electorates of two founder member states of the EU has profound implications not only for how the treaty might come into force but for the future development of the European Union. As my right honourable friend the Prime Minister said yesterday, the EU's institutions and policies need to reflect the priorities and concerns of Europe's citizens, and so do the EU's budget and spending.

The European Council failed to reach agreement on the future financial perspective for the period 2007–13, and that issue remains to be resolved. Under the Luxembourg presidency proposals, the United Kingdom was asked to agree to reform of its abatement without any reform to the agricultural policies that made the abatement necessary in the first place. It is simply not acceptable in the 21st century that more than 40 per cent of the EU budget is directed towards agriculture, which represents only 5 per cent of the population and accounts for less that 2 per cent of the EU's output. That is seven times the amount budgeted for science, technology, research and development, skills and education put together. We would be failing in our responsibilities to both the United Kingdom and the wider Union if we allowed such distortions to continue. We need to grasp the nettle of the EU budget now, and ensure that it properly reflects the challenges of an enlarged EU in the 21st century.

Five member states found the deal unacceptable and several others expressed concerns. We believe that there is appetite for change. We fully understand, however, the interests of the 10 new member states in securing a deal. The United Kingdom Government have been a champion of enlargement and that will continue to be the case. We want to ensure that any deal struck meets the needs of those states.

Negotiations over the EU's budget are rarely resolved quickly—nor should they be for such a profound issue. It now falls to the UK presidency, in partnership with all member states and the EU institutions, to begin the process of finding a way forward for the European Union. We are determined that the lessons of the widespread scepticism across the EU about the treaty and the future direction of the Union are learnt. The fundamental lesson is that the EU needs to reconnect with its citizens. It must be relevant to people's lives, and must show that it is relevant. Above all, it must deliver both the prosperity and the social justice that people want.

Notwithstanding the headlines, the European Union is working, and we will take forward the essential EU business which falls to our presidency. The EU must show that it can rise to the challenges of the age and that it can deliver practical benefits to its citizens. Of course the current political situation creates greater uncertainty among member states and the EU institutions over how the EU agenda will be taken forward, and how quickly. We will have to work within that constraint, of course, but we will do so.

We cannot turn around the tide of globalisation or put up barriers against it. Rapid technological change, global capital flows and global sourcing of products and services mean that economies need to be highly competitive in order to thrive. Globalisation provides unrivalled opportunities for high-skill knowledge economies. Europeans should be ideally placed to take advantage of those opportunities. Europe currently has 19 million people unemployed. That is not delivering a "social Europe" for our citizens.

During our presidency, we will make a priority of advancing the economic reform agenda. We will take forward the better regulation initiative, for example, by ensuring that assessments are made of how far new EU legislation will impact on the EU's international economic competitiveness. We will also take forward work on the services directive, which extends the single market in a hugely important part of the modern economy. It also falls to our presidency to consider the post-financial services action plan agenda.

We will make sure that we use our G8 and EU presidencies together to reinforce our priorities on climate change and Africa. We will, for example, co-ordinate EU strategy for the Montreal UN climate change conference, and ensure that the EU increases dialogue with China and India on climate change. We will take forward work on the higher EU aid target at the UN millennium review summit in September. We will also look for better trade terms for African nations from the WTO ministerial conference in Hong Kong in December.

On security for Europe's citizens, we will follow up the commitments in the counter-terrorism action plan and take forward the EU drugs action plan. We want a businesslike, effective and efficient presidency focused on our priorities—economic reform, security, climate change and Africa. However, we are realistic about what the six months of our presidency can do. It can make progress on Europe's shared agenda for change, but we know that we cannot transform those issues overnight.

We have worked closely with the preceding presidency, those who succeed us and the Barroso Commission to ensure continuity in progressing the agenda. At the same time, we are clear on what our presidency is not about. It is not about imposing our agenda on the rest of the EU. The priorities of our presidency are shared priorities. As with all other presidencies, we are expected to be impartial. It is not about getting a deal on each and every issue. It is not realistic to solve every problem in six months. On much of the work programme, we will take forward issues as far and as effectively as we can before handing over to Austria. It is not about ratifying the EU constitutional treaty. Ratification is a matter for each member state, and the European Council has agreed to revisit that in 2006.

The EU of 25 is quite different from the EU of the past. The dynamic is one of liberalisation, not integration. Our job in the presidency is to take forward the agenda that we inherit in a businesslike and effective way. On 30 June, my right honourable friend the Foreign Secretary will set out the detailed presidency agenda as part of his Statement about the White Paper on developments in the EU. My right honourable friend the Prime Minister will also set out the general approach to the current European debate and to the presidency at the European Parliament on Thursday.

It was striking that, in both France and the Netherlands, exit polls showed that a majority of older voters supported the treaty while younger voters were opposed. In the United Kingdom, the situation is reversed, with polls showing that younger people are more favourable towards the European Union. The lesson from those two different patterns of opinion is the same—if the European Union is to remain relevant, it cannot simply rely on the achievements of the past, but must continue to deliver practical benefits for the future. It must show that Europe can deliver results on the issues which most matter to people's lives—jobs, prosperity, security and social justice.

To maintain prosperity and social justice in a more competitive and fast-changing world, the EU must adapt. We need to look at how diverse social models, from Scandinavia and Spain to the United Kingdom, have delivered growth and social justice around Europe, and discuss how we can build on those successes. This European Council marked the start of a debate about the EU's future priorities and direction. That debate is of vital importance to us all—to everyone who lives, works, travels or trades in the European Union. The United Kingdom has a clear interest in shaping that debate and leading reform in Europe. Under this Government, and during our presidency of the EU, we shall play that role to the full.

My Lords, can the noble Baroness say why only half a dozen Members of her party were present to hear her interesting speech?

My Lords, given that we have discussed the European Union over many debates—indeed, we discussed it yesterday on a Statement—perhaps Members of our party considered that they had other priorities today. That is their decision.

Moved, That this House takes note of developments in the European Union.—(Baroness Amos.)

My Lords, I thank the noble Baroness the Lord President for setting out so clearly the wider issues, as she sees them, arising from the present situation in Europe. She has done so from her point of view, which I respect, but I will take a different approach in my intervention.

Not since 1945 has Britain been so favourably placed to influence the future shape of Europe. Like the Lord President, I will not dwell on the rebate row, important though that is—it has, of course, been raised in part as a diversion—and valuable though it has been to this nation from the moment it was so brilliantly secured by my noble friend Lady Thatcher. However, on the present row, during the past weekend the British position appeared to be staggeringly ill prepared and seems to have been inspired more by Lastminute.com rather than by serious policy work, preparation and insights.

Nor am I going to harp on the Anglo-Saxon model, and the European social model, as I believe that the differences of approach are at least somewhat exaggerated by the fevered caricatures beloved of the economists, as the noble Lord, Lord Kerr, who I am afraid is not in his place today, rightly implied yesterday. Anyway, whether we like it or not—and I do not—the concept of the UK as a low-regulation, low-tax, competitive system is rapidly being eroded as we sink daily into a mire of new regulations and higher taxes this side of the Channel as well.

I will not even dwell on the failed constitution, which has so obviously capsized, except to allow myself this expression of some anger: three years, not to mention forests of paper, have been wasted on this flawed project. One wonders now why we should heed the advice of all the commentators—and, indeed, the Prime Minister himself—who until last week were telling us that the constitution was good for Britain and good for Europe, when the whole attempt has obviously done so much harm and has ended up not bringing the Union closer to the people, which was the insight and rightful demand of the Laaken declaration, but has taken it further away from them than ever.

No, my Lords, let us leave the media to have their say on all these issues, as they are certainly doing at the moment. This is not a time for prolonging divisions or trading insults, although some of us have had to bear our share of those—especially a good deal of genial vituperation from the party sitting to my right. I do not want to respond in any way to that. For those of us who genuinely want to see Europe strengthened and effective in this new world, this is not a crisis—not for the people, although it may be for some governments with egg on their faces. It is a colossal opportunity for all of us. It is a time for a new vision and a new and different kind of arrangement, possibly a new treaty, in Europe.

This is the moment when, as never before, we need creative leadership and for setting out why a new direction for the European Union is essential and why it is now possible. Why does it turn out that things we were always breezily told were not on are now on? Outdated EU thinking has been fatally holding back Europe's economic development, while Asia—the Lord President mentioned the rise of India, China and Japan—races ahead, as has the United States. Actually, the US economy remains precariously placed.

We should proceed with reform on the basis of the following points. I want to offer a number of detailed points because this is not a time for generalities but for hard work. I am going to offer 16 points to your Lordships which I hope will do better than President Woodrow Wilson's 14 points, which did not eventually carry the day. Whether these are called, in the new spin of the Government, pro-European reform or whether they are called reform as suggested by more sceptical Europeans, does not matter a hoot because they amount to the same thing. There is not much choice except to go forward on constructive reformist lines.

First, there must, obviously, be a fresh IGC and a new treaty which accommodates enlargement and improves on the Nice Treaty. That was full of faults, as we pointed out at the time. We need a set of rules which genuinely simplifies EU procedures and organisation, as the constitution did not. It should not be called a "constitution"—a name which utterly misleads and confuses and has caused much grief. The need is for new club rules which ease further enlargement—for instance, for Bulgaria and Romania and perhaps other Balkan candidates—and make it possible to embrace dynamic Turkey, instead of freezing out that remarkable nation, as the present mood seems to imply. That would be quite wrong.

Secondly, the new treaty must restore and confirm inter-governmentalism for large areas of Union activity to give member states room to breathe. I refer, for example, to foreign and security policy; judicial trans-national co-operation, which is going ahead satisfactorily without any treaties; social policy, which is far more sensitive and closer to people when conducted nationally instead of in general and stratospheric terms; the bulk of farm support; all fiscal and, for those lucky enough not to be trapped in the euro-zone, monetary issues; and all areas where the EU fails to add real effectiveness and convenience to our life and policies.

As the OECD recently pointed out, the European Union now represents,

"a chronic pattern of divergent activity".

Those who want Europe to stay together will recognise and adjust to that, rather than pretend it does not exist. As former Commissioner Bolkestein urged, the Charter of Fundamental Rights, embedded in the defunct constitution, should be scrapped. He said that it is unnecessary and full of potential friction and vapid rhetoric. It has nothing to do with social dimension or improving the lot of workers throughout Europe.

Thirdly, the Conservative approach will anchor national parliaments at the heart of the EU law-making and decision-making process. The capsized constitution protocol talked of involving national parliaments, but returning the final say-so on the suitability of new powers to the central institutions. That was called the "yellow card". We said from the start that there should have been a red card, as did many others, including leading members of the Labour Party in the other place. If a group of national parliaments objects to new or existing legislation, it should be withdrawn or repealed. That is essential if the EU is to modernise and decentralise.

Fourthly, the EU Commission should lose its absolute monopoly right of initiative for new legislation and share it with member states.

Fifthly, the idea of a five-year Council presidency—two times two and a half years—should be withdrawn and replaced not by six months, which I agree is much too short, but by a one-year rotating presidency, which will give some opportunity to the smaller countries.

Sixthly, speaking of smaller states, especially the new entrants, we should adhere to the principle of a more equal Europe in which smaller nations have more say and gain more respect for their views and gain freedom from bullying by the bigger states. It always used to be Britain's role to protect the smaller states—we were the friend of the smaller nations of Europe; indeed, we helped to found some of them. Frankly, I find it very disappointing—I would even say appalling—that over the weekend the Prime Minister and his advisers were somehow manoeuvred on to the wrong side in this respect and ended up being criticised by those such as Poland who should be our friends.

Seventhly, the concept of a Europe of different directions should be welcomed as a realisation of a flexible Europe in the network age—a genuine partnership of interdependent nations in a community which values differences as strengths and not as weaknesses. The Commission and the European Court of Justice must be encouraged to understand that these are the new imperatives, as opposed to the demands of the old hierarchical and over-centralised system.

Eighthly, the existence of separate groupings in no way validates the concept of a two-speed Europe, which is a nonsense. The implication that there is a single integration goal for the nations of Europe, at which all will eventually arrive, must be, in our view, firmly rejected. Anyway, it is the case that many of Europe's most dynamic economies are on the outer circuit. The core, if it is formed, will be the very slow part indeed of the whole structure.

Ninthly, the powers of the central institutions must be much more clearly circumscribed and the acquis communautaire must be systematically combed through and heavily reduced in line with modern circumstances.

Tenthly, the treaty-embodied laws of the Union will, of course, in many cases, as with all treaty-embodied law, take precedence, but that must be adjudged on a case basis, as hitherto. There will be and should be exceptions, as in the case of the German constitutional law. That is quite different from trying to enshrine the supremacy of Union laws in a higher legal constitution, as the draft constitution tried to do. The ECJ, as I say, must be impartial in those matters.

My eleventh point is that we all know that the common fisheries policy has failed. It should have no place in a new treaty of Europe. As for the common agriculture policy, which the Lord President mentioned, we all agree that it requires further reform. It is quite ironic and odd that M. Chirac has now well and truly reopened the matter by reopening the issue of the rebate. I believe that the Prime Minister, thinking quickly, was right to link it to CAP reform. Yesterday some noble Lords were saying that that would take a long time, but as the noble Baroness, Lady Symons, reminded the House yesterday with her usual acumen, the World Trade Organisation's moment of truth is coming up extremely fast at the end of this year in Hong Kong and urgent decisions will be required before then. This is not a matter on which we can sit around.

My twelfth point is that the reinstatement of national democratic control over an extensive range of competences is necessary to halt competence creep, about which we all know, and to enthrone the principle that democracy occurs in nation states. The European Parliament does a good job scrutinising the Commission, but it cannot connect to the thread of democracy that runs up from the grassroots via national legislatures such as ours. Greater powers for the European Parliament are not the answer to the so-called democratic deficit.

My thirteenth point is that the practice of trans-national co-operation at informal and NGO levels—between the professions—should be vastly encouraged.

My fourteenth point is that defence and foreign affairs co-operation should be defined in practical and organisational terms. There should be room for ad hoc coalitions, pan-European concerted moves in some cases where desirable and task-specific, intensified compatibility of defence equipment, but plenty of space for wider coalitions than the common foreign and security policy can hope to mobilise, especially when managing affairs with the great, but vulnerable, superpower, America, which needs real friends and partners and not querulous rivals.

We should reject absolutely the language and instruments of super-bloc or superpower rivalry as being completely out of touch with the needs of the network world. There is no point in trying to rescue the common foreign and security policy. As Mr Bolkestein also points out in an article in the Herald Tribune, it is an illusion and one that fails notably to protect or to promote our interests. It is certainly a weak and inadequate "partner"—hardly the right word—in the trans-Atlantic relationship.

My fifteenth point is that new forms of regular accountability to national parliaments certainly need to be developed. One idea is that a senior Minister should head UKRep and report back to the Commons and to your Lordships fortnightly.

My sixteenth point is that referendums on future constitutional changes by treaty, as attempted so furtively in the rejected constitution, should be obligatory.

Those are my 16 points. At some stage over the past two years, the Government, which in the beginning never really wanted the constitution—that is what the Prime Minister said—lost touch with the requirements of the situation and ended up with a lot of feeble red lines instead of a coherent strategy. Now they are paying the price. But it is not too late. M. Pompidou once said that Britain's three best qualities were humour, tenacity and realism. Now is the time to mobilise all three in the cause of a better Europe, which we all want to see.

My Lords, before the noble Lord sits down, perhaps I can ask for clarification. I am sure the House will find his 16 points for a new proposed treaty very interesting. I found one aspect of it very interesting. He proposed to give more power back to the smaller states. Does he suggest that one should do away with qualified majority voting? If so, how would 25 or 27 states be able to work?

My Lords, I certainly believe that modification is necessary, but it has to be seen, as the Prime Minister is always reminding us, in a wider context of reform. I want to see more powers repatriated and a less ambitious and more practical European Union which it will be possible to administer, even with 25 states. I understand the problems raised by the noble Lord. They would have to be resolved very carefully. It is a matter of a change of emphasis so that we have a Europe less dominated by the big boys and more balanced in dealing with the fewer matters that I would like to see at the centre anyway.

My Lords, I thank the noble Lord, Lord Howell, for his very kind words about my genial vituperation and assure him that I intend to maintain my geniality in this respect. I agree with many of his 16 points. I hope he will regard it as a compliment when I say that my overall approach to his speech is much the same as my approach to the constitutional treaty. I agree with much of it, although I have substantial hesitations about a number of matters—a bit of a curate's egg.

I welcomed the opening speech of the Leader of the House and its strong emphasis that British foreign policy has to start with European co-operation. A strong place for Britain in Europe is the key to Britain's place in the world. Liberals, as a party and as a matter of philosophy, believe strongly in international co-operation as opposed to nationalist nostalgia or populist defence of sovereignty or subordination to American hegemony.

We live in Europe—it is part of our unavoidable geography—and we have to start by getting on with our neighbours and ensuring that our neighbourhood is peaceful. That does not mean that we deal simply with Europe. We and our neighbours must be concerned about how we spread the peace, security and democracy that we have, thankfully, achieved over the past 60 years, not only as we have done successfully across eastern Europe, but also, as we hope to do, across south-eastern Europe and further south and further east.

As the noble Baroness, Lady Amos, said, we have shared interests in the international rule of law, in the promotion of human rights, in global, economic and social development, in the prevention of climate change, in environmental sustainability, and in the combating of international crime, terror and the smuggling of drugs and people. None of those things can be done by Britain alone. On all of those issues, our closest partners are across the Channel and some of our most difficult negotiations are across the Atlantic. Therefore, we start by assuming that we have to make the best of European co-operation rather than the worst.

I much regret that our Government and the governments of other western European countries have made so little of the achievement of eastern enlargement so that in both the French and the Dutch referendums resistance to Poles, Czechs, Slovaks and others was part of the "no" campaign. The failure to explain the long-term advantages of eastern enlargement to European publics was one reason for the failure.

Further enlargement is an obligation, first, to the western Balkans and then to Bulgaria and Romania. Then we need to have a very careful debate about how much further we should go and when. In the past five years I have spent some time in Turkey. The Turks themselves are only just beginning to debate the implications of Turkish membership. Turkey's membership will be a very major step for us all. We have committed ourselves, and we should certainly not exclude Turkey, but we need to discuss the long-term implications with our publics, as well as with Turkey.

The noble Lord, Lord Kerr, who is unfortunately not here today, has spoken about the need also to commit ourselves to Ukrainian enlargement. I had lunch the other week with someone who said, "And Russia in time". After all, the population of Russia is shrinking and it will be smaller than the population of Turkey by the time it joins. We must think quite carefully about our neighbourhood and how best to stabilise it, and about the point at which we should offer being good neighbours with close relations with the European Union, rather than extending it further and further east until we reach Vladivostok.

A number of institutional changes were clearly needed to cope with enlargement to a European Union of 25, soon to be 27, and then more. The Laeken declaration of the European Council in December 2001 set some of them out. In particular, it stressed the need to consider what powers should be returned from the European Union to national governments—the principle of subsidiarity; it asked for a short and simple text for the constitutional treaty; and it asked for a much stronger role for national parliaments. I have to say that the constitutional treaty that emerged did not fulfil all those requirements. Perhaps our two representatives on the convention who are going to speak in this debate will explain to us how we got from A, not to B, but to D or E when it came to it.

The treaty was far too long and complex. It has a number of proposals that are necessary and desirable and that will improve the efficiency of the European Union; for example, strengthening capabilities and foreign policy, simplified voting and a smaller and simpler Commission. In passing, I have to say that it is easy to over-emphasise the subtle distinctions of different forms of qualified majority voting. The Council of Ministers does not vote very much, and votes much more often on agricultural issues than on any other single subject. There was confusion over having both a new foreign minister and a president of the council. There was clear resistance to returning any powers to national governments within the convention. The restatement of the acquis, which is the lengthy Part 3 that has led to so much rubbishing of the treaty, was a clear mistake. There was a massive misreading by those within and around the convention of the popular acceptability of what they produced, for which the Commission, the European Parliament and what, for shorthand, I shall call the "francophone élites" must share some of the blame.

I share a good deal of Gisela Stuart's perspectives on the convention. It was captured by what I call the "Old Believers" in the European Union who believe in technocratic imposition from Brussels; that the people in the centre know best; that they are the enlightened fonctionnaires of Europe; that centralisation is the same as integration; and that the social partners—a single European social model—is what one imposes.

The noble Lord, Lord Howell, spoke a great deal about globalisation, and we have to realise that one cannot have globalisation without remote governance. We all share the problem that remote government is very hard to sell to our publics. Look at the United States, where every single presidential candidate runs against Washington because Washington represents remote government imposed upon Idaho, Texas, Arizona or wherever. We face a not dissimilar problem with Brussels. That is a problem that is going to grow under globalisation.

It was a mistake to focus on institutions so much and on strategic priorities so little. So the right course now is to focus on what strategic priorities we need for our enlarged European Union, not on further institutional reshaping, let alone on further institutional grand designs.

As a number of people have said, there are a number of things that can and should be implemented. We should look at our own procedures as a national parliament and our Government should be more willing to discuss their approach to the European Union with their parliamentarians. We should build closer links with British Members of the European Parliament and overcome the last of the old legacy which meant that British Members of the European Parliament saw British Members of the British Parliament as rivals and vice versa. We need to do a lot more on the reform of the Commission, and we need to strengthen the effectiveness of the instruments we have in foreign policy and defence policy.

What should our strategic priorities be? I apologise that I do not have 16, but I have a few. Economic reform is clearly one of them. We have to go back to the Lisbon agenda and seek economic reform within a social market model. I welcome again what the noble Baroness the Leader of the House said on that. We are not attempting to sell the American economic model to our European partners. I slightly regret that the noble Baroness, Lady Amos, suggested in her speech that we are necessarily falling behind American economic growth. A number of good economists have pointed out that social choices are at stake in the different developments of the European and the United States socio-economic models. The surge of American economic growth has a great deal to do with the closing down of city centres and the opening up of shopping malls. That may not necessarily be the way that we want to go.

The Government need to adopt a different rhetoric and tone on the Lisbon agenda, and I am glad to see that the debate on the sort of economic and social changes needed is already beginning to open in France and Germany. French commentators cannot, in most cases, bring themselves to say that there is something to learn from the British model, but they are at least saying that there is something they can learn from the Danish model.

The stabilisation of the wider European region is clearly a major priority for those countries that have joined the European Union in the past two years and for those countries that remain outside it. Part of that stabilisation has to be continuing support for convergence and growth within the new members. We have to hope that rapid growth in Poland and elsewhere will help to lift the rest of the European economy.

We should talk much more about our shared contribution to world order and global governance within NATO, the G8, the United Nations and a range of other global agencies.

Then we should talk about a budget that reflects those priorities, rather than arguing simply about the budget itself. It is clear that in the immediate budget débâcle Britain was hijacked, in effect, by France and Luxembourg. It was an unnecessary row over something that did not have to be settled now. I regret that the Government did not use the phrase that the noble Lord, Lord Radice, told us about some weeks ago, which was that we should trade the British rebate against the French rebate. Those of us who have been around since the Hague summit in 1969, when the young Mr Chirac, then a French Minister, was involved in fixing the French rebate, can remember where that comes from.

We must recognise that so long as President Chirac is there, the appalling personal relations between the French head of state and the British head of government are something we will have to cope with. I regret to say that I think that in the development of that very poor relationship in recent years the fault has been much more on the French side than on the British.

There have been failures of leadership within most member governments. There have clearly been failures within the German and Italian Governments and, as I saw when looking at the end of the Dutch referendum campaign, also within the government of the Netherlands.

But there have also been failures within the British Government, since 1997, as well as since 1987. We have also failed to persuade and to create a consensus around a more constructive agenda. This Government have been dysfunctional in their handling of European issues, as well as in their handling of many other matters. There has been intermittent attention. The level of investment that our Prime Minister has put into building relations with each new American administration has been far higher than has been invested in building and maintaining relations with our French, German and other partners. There have been rapid changes of Ministers for Europe, most of whom have not had significant influence. I think that there have been seven of them, although in the Commons debate last week I noticed that Jimmy Hood said that he was not sure whether there had been eight or nine of them. We certainly hope that Douglas Alexander will be given full support and that he will stay in the post long enough to begin to gain a positive reputation abroad.

The tone and style of British government needs to change. An authoritarian executive used to lecturing the Opposition across the House of Commons tends to lecture its opponents, so to speak, abroad. We lay ourselves thus open to the caricature that we stand for free market Anglo-Saxon capitalism against a mythical single European social model.

I bitterly regret that we have weakened our relations with the Polish Government and that all the reports from Brussels suggest that the foreign press were deeply unsympathetic to the British perspective. That is because the Government have neglected the foreign press over the past eight years instead of cultivating them and helping to persuade them that the British perspective is positive for Europe—arrogance in lecturing continental governments contrasted with timidity in facing the British press.

Perhaps the other dimension of the failure of government policy is that the Government have failed to stand up to the Murdoch press, they have stifled Britain in Europe, they have failed to claim success for some of the great contributions we have made in Europe, including close Franco-British co-operation in defence, and have therefore left themselves in a very weak position. Any effective foreign policy must rest upon public understanding and public support at home.

So we have a hard task ahead and a delicate task during the British presidency. We face the French illusion that you can have political union without a single market and that the British are arguing for a single market without stronger political institutions. We face entrenched suspicion in the continental press as well as by too many of our political partners. But the effort has to be made in Britain's long-term national interests by this Prime Minister, or by his successor.

My Lords, as chairman of your Lordships' European Union Committee, I shall speak mainly, but not exclusively, in that capacity. Where I have some personal observations to make, I shall indicate that I am taking off my chairman's hat. In fact, for a moment, I shall do so right away.

For those of us involved on a day-to-day basis with European Union affairs, one can say that we live in extremely interesting times. I found it quite extraordinary that some government and Commission leaders would have us believe that after two "No" votes it was still business as usual—that things were going to continue as they were. It recalled to my mind one of the less kind remarks that Winston Churchill made about Stanley Baldwin when he said that he was a man who occasionally stumbled on the truth but would immediately pick himself up and hurry on as if nothing had happened.

Yesterday the House—I now put back on my chairman's hat—heard a Statement on the European Council. I was rather amused by the suggestion of the noble Lord, Lord Strathclyde, that the idea of linking the United Kingdom abatement with the reform of the CAP in the Council was not embraced until our commissioner in Brussels telephoned the Prime Minister to suggest it. Perhaps our commissioner in Brussels had read the excellent report of the sub-committee of the noble Lord, Lord Radice—I am delighted to see him in his place—on the Future Financing of the European Union, which was published as long ago as early March. Among its conclusions, it states:

"We also think that, so long as the predominant weight of the CAP in the budget continues, the United Kingdom abatement is justified. Only when the CAP has been further reformed would it be sensible to consider a Generalised Corrective Mechanism.

We believe the Government's insistence on the rebate is entirely legitimate in the context of an inadequately reformed CAP. We urge the Government to persuade other Member States of the logic of this position".

Well, maybe the Prime Minister read that report too. Anyway, that is what we said. I do not think that we were the first ever to say it, but you certainly heard that in this Chamber from the noble Lord, Lord Radice, well before you heard it from Downing Street.

Perhaps I may take off my hat once again. I must do so because I have to assure members of my committee that I am not implicating them in some of my remarks, although I think that on this point they probably would agree with me. I just have not had a chance to check with them. I want to express my profound concern that, among the apparent consequences of the French and Dutch "No" votes and the row over the budget, there is the possibility of a slowing down, if not a total blocking, of the enlargement process. An enormous amount of time and effort has been expended by accession countries to meet the myriad requirements of membership, and they have done it very well. Why should their expectations now be undermined because of some clear failures of leadership among some important existing members of the European Union?

As has already been noted, successive British governments have been enthusiastic champions of enlargement, not least this government. I urge the Government not to let the momentum of enlargement die. Nothing less than the future security of Europe could be at stake. So I was quite comforted by what the Lord President had to say on the matter a little while ago.

Yesterday was quite a European day in your Lordships' House as we also debated, on a Motion of the noble Lord, Lord Wright of Richmond, a key aspect of European Union policy; namely, The Hague programme and other justice and home affairs matters. I want to take the opportunity—I could not yesterday because I was sitting on the Woolsack—to thank the noble Lord, Lord Wright, the noble Baroness, Lady Harris of Richmond, and the noble and learned Lord, Lord Scott of Foscote, all of whom chaired inquiries that formed the basis of the debate and all of whom spoke so eloquently in it.

There is no need for me to reiterate the work that the European Union Select Committee will be undertaking during the presidency since I did that at some length when I spoke during the debate on the humble Address. Suffice it to say that all seven sub-committees, on which more than 70 of your Lordships work so hard, will be engaged throughout the presidency in holding the Government to account on important issues of policy that affect the lives of all citizens.

Since the Lord President referred to deregulation, I should remind your Lordships that our Select Committee is currently engaged in an extensive inquiry into how we can achieve better and less regulation. That report will be published before the Summer Recess.

The presidency places specific obligations on the host Parliament. We will, jointly with the Commons, be hosting the COSAC meeting of the European committees of the national Parliaments, where these committees focus on exchanging best practice on holding governments to account. Secondly, there will be held here, jointly organised by the Lords and the Commons, a series of other subject based inter-parliamentary meetings within the framework agreed by the Conference of Speakers. In your Lordships' House the responsibility for those meetings also falls on our EU committees because of the focus of the events.

With the beginning of the presidency only 10 days away, we, as members of the legislature, must recognise that whatever decisions may be taken about the constitution—or perhaps I may say "treaty" because I share the dislike of the noble Lord, Lord Howell, of the word constitution—the treaty, the budget or any of the other high-profile policy issues confronting the presidency, the ordinary day-to-day scrutiny work of EU business must go on, both here and in the other national parliaments.

That work serves a vital constitutional purpose, being this House's chosen mechanism to substitute for the detailed discussion of EU legislative texts on the Floor of the House. But it is more than just that. This work is also a contribution to the transparency in EU matters that all sides of the House, I am sure, wish to see strengthened.

Our House does not go so far as the Danish Parliament in having a dedicated team of staff to answer questions from the public about the impact of EU legislation on their daily lives. But I suggest that we need some mechanism or process of that sort. We might do well to look at Ireland's permanent National Forum on Europe, which is also admiringly described as a kind of travelling circus that pitches up in cities and towns across Ireland with a cast of MPs, MEPs, EU officials and academics to listen to the public and answer their questions on what EU legislation is all about and what its impact is or is likely to be.

For the moment, however, it is the results of your Lordships' hard work in scrutinising, analysing and reporting on EU legislation, all of which work is freely available to the public on the website, that forms this contribution to transparent debate. Here, I pay tribute to the work done by the noble Lord, Lord Puttnam, and his commissioners, including the noble Lord, Lord Renton of Mount Harry, one of our sub-committee chairs, who have recommended improvements to the website that I know chime very well with initiatives already under way by officials of the House.

What has befallen the treaty has among its direct consequences one of particular importance to our Parliament. I refer to the treaty's proposed mechanism for early warning on subsidiarity. For those unfamiliar with what was proposed, the idea was that if one-third of the chambers of national parliaments objected to a legislative proposal on the grounds of subsidiarity, the Commission or other body initiating the legislation would be obliged to think again.

Our Select Committee thoroughly examined that so-called "yellow card" mechanism and determined that it was an important proposal with much to commend it. We also concluded—I quote from paragraph 25 of the report—that,

"even if the Constitutional Treaty does not enter into force, the provisions relating to national parliaments and to subsidiarity can and should provide a stimulus to greater and more effective scrutiny by all national parliaments in the EU".

The European Council has concluded that a period of reflection is needed. That is eminently sensible. But reflection should not mean inactivity. Treaty or no treaty, national parliaments have a duty continually to strengthen and improve their scrutiny of the European Union and their effectiveness in holding Ministers to account. If proposals in the treaty will assist this, and if their implementation does not require treaty change, we should press on. In my view, the subsidiarity yellow card mechanism falls clearly into that category and national parliaments should continue to work to set the system up. The House might see the practicality of entrusting the operation of the mechanism in this House to the EU Select Committee as a logical extension of its scrutiny work.

I note that the Government have stated that they would welcome national parliaments entering into effective collaboration envisaged by the treaty, whether or not it ever comes into force. Although my committee's report has not received a government response, I hope that the Lord President will today be able to give a steer that such a course would be welcome.

There are some caveats to that. First, without the constitutional treaty, the yellow card provisions cannot be binding on anyone. Yet I believe that it would be clearly in line with the stated determination of the Commission and, in particular, of Commissioner Wallström, who is in charge of relations with national parliaments, to secure greater engagement with the citizens, for such a mechanism to be in place and for the Commission to co-operate fully with it. Should a formal mechanism other than a treaty change be needed, an inter-institutional agreement might do the trick. But the key would be for the Commission to state clearly that if one-third of national parliamentary chambers objected to a legislative proposal on subsidiarity grounds, it would reconsider it and, on the basis of both qualitative and quantitative analysis, give detailed reasons for proceeding with it or not.

Secondly, information will need to be made available to national parliaments. Under the protocol on national parliaments appended to the Treaty of Amsterdam, provision is made for that, and our Government does a very good job in discharging their responsibilities. But the constitutional treaty went further, requiring the Commission also to send its papers direct to national parliaments. However, there is no need for a treaty base to require that. Again, in the spirit of openness and transparency, the Commission could and should just do it.

For all those reasons, in the spirit of what the treaty had to say about enhancing the role of national parliaments, those parliaments should continue the work already begun on strengthening parliamentary scrutiny of the EU and of their governments' roles in making European Union legislation. This House should play a leading role in that.

My Lords, I am very happy to follow the noble Lord, Lord Grenfell—not least because, like him, I now live half the time in this country and half the time in France.

All those of us who truly care about Europe should be immensely grateful and welcome the breath of fresh air and the dose of realism that the rejection of the constitutional treaty by the peoples of France and the Netherlands has brought about. The Government have rightly said that there now needs to be a pause for reflection. I agree, but the pause needs to be prolonged and the reflection profound. Both are equally important.

Noble Lords will be well aware that the rationale of the European project has always been political, rather than economic. There is nothing wrong with that. That is all the more obvious today when the context for economics is so clearly global rather than regional. I agreed with much of the criticism made by the noble Lord, Lord Wallace, of the constitutional treaty, but I was astonished to hear him say that globalisation necessarily implied remote government. That is quite untrue. Globalisation does not mean global government.

After all, we have had globalisation before. We had it in the whole of the industrialised world in roughly the half century between the end of the American Civil War and the beginning of the First World War—just as intense globalisation as we have today. Governments were not conspicuously remote then and they do not need to be today. If they are, that is a problem that needs to be addressed.

My Lords, the noble Lord will remember the case of the Bank of Credit and Commerce International. International regulation goes with globalisation and sometimes gets rather complicated when, as with BCCI, for example, it is not quite clear in what country a private institution is based.

My Lords, I do not want to go into the case of BCCI. I gave evidence to the committee of inquiry into BCCI. Everything I have to say is there. I do not think that that has anything whatever to do with the remoteness of government.

In the spirit of realism that is now abroad and that I hope will remain—it may not—let us clear the minor issues out of the way. First, it is no great crisis that no European budget has been agreed. It does not need to be at this point; one will be agreed in due course, in good time, I have no doubt. I should be very surprised if it were agreed during the forthcoming British presidency; we do not need to expend too much capital trying to secure it within that period when it does not need to be.

For reasons that the noble Lord, Lord Williamson, gave only yesterday, the so-called United Kingdom rebate is essentially a non-issue. If the reason that gave rise to the need for the rebate—the nature of the budget and the common agricultural policy—were to change, the rebate would automatically disappear without any action. It does not need negotiation or any special treaty amendment.

I say just two things about the rebate. First, it is a bit rich to be lectured and told that we should not have a British rebate because there should be a general corrective mechanism. When the government of which I was a member, led by my noble friend Lady Thatcher, who we are all so glad to see in her place today, embarked on a general corrective mechanism we were told by our partners, especially the French and the Germans, "No, there is no way you can have that. The only thing you can have is something special to Britain". That, thanks to the negotiations that were pursued over several years and, at the end of the day, an understanding by our partners that if we did not get satisfaction, we would withhold our contributions, is how the rebate came to be.

However, there is one particular problem that I shall address later and that has been implicit in some remarks hitherto. I refer to the effect of the rebate mechanism on the accession countries of central Europe. Let us get it straight: all eight central European countries that have acceded to the European Union are all, rightly, beneficiaries from the budget. It is true that under the mechanism around 3 per cent of the net benefit—perhaps just under that—that those states get from the European budget disappears. It is only a little but Her Majesty's Government should perhaps try, quite outside the treaties and rebate mechanism, to make good that small amount. It might be a very sensible and correct thing to do.

Perhaps it does not need to be said but the common agricultural policy is an abomination; so, too, is the degree of agricultural protection in Japan and the United States—I have no wish to single out the European Union. It should be a major objective of British policy to work vigorously in so far as it can independently, but however it can within the framework of the World Trade Organisation, to get levels of agricultural protection wound down worldwide. That is very important.

The European Union Committee report, under the chairmanship of the noble Lord, Lord Radice, to which the noble Lord, Lord Grenfell, rightly referred, made the point that until protection is wound down agricultural support ought to be devolved back to the nation states. That should be done on grounds of subsidiarity, equity and commonsense. I am very sorry that Her Majesty's Government have not taken that recommendation on board and run with it. It is clearly the sensible approach, even though it may take a long time, as these things do. In the mean time, so-called reform of the common agricultural policy is neither here nor there. We have had reform after reform proclaimed as great but the problem is pretty well as big today as ever.

I also urge the Government during their presidency to drop the idea of making promotion of the so-called Lisbon reform agenda a main thrust. I believe that it is a profound mistake, not because I am against economic reform of the liberal-market kind; indeed, as someone who served in a government, led by the noble Baroness, Lady Thatcher, that engaged in the most thoroughgoing economic reform process of this kind that any European government has undertaken, it would be strange if I were opposed to it. The problem is not that it is not important, but the folly of pursuing it on the European level is that the overriding measures that need to be taken are the responsibility of member states not Europe. To promote economic reform in the name of Europe does not increase public acceptance of those reforms in Europe; it merely shifts odium for some of the uncomfortable things that must be done on to the idea of Europe. That is exactly what happened in France; it is very foolish. This must be dropped.

There are slightly different models of economic policy in different countries. If the French wish to accept the price of higher unemployment and the slightly lower rate of economic growth to pursue the more paternalistic and bureaucratic way in which they like to run things, with which they feel comfortable and are happy, they should be allowed to do so. We should not preach at them and lecture them; they are entitled to do that, it is their choice. Different countries should be allowed to pursue their own policies; I state emphatically that it should not be a European initiative and policy—it is counterproductive.

What is Europe really all about? Originally, it was about preserving the peace in Europe, essentially by placing Germany within a wider European structure so that there was no longer any danger from that quarter. Without being complacent, we can say that that objective has been achieved. Since then, there has been a new challenge, referred to already in this debate: assisting the countries of central and eastern Europe in their emancipation from the tyranny and burden of the Russian communist empire, and assisting them to make the transition to freedom and capitalism by again placing them in this European structure. That has been embarked on and I congratulate all those who have achieved what has been done so far. But it is far from complete; much more must be done. That should be the overriding priority of British policy, in this presidency and beyond. Facing up to that challenge and successfully dealing with it does not require any further deepening of the European Union or any further integration. Indeed, many of those countries are frightened of just that prospect. So it is high time that the federalist dream was explicitly abandoned—I stress the word "explicitly".

The message of the referenda, which was certainly apparent to me in France, was that one of the things that the ordinary people of Europe want most is a period of stability. They have had enough of change after change being imposed on them. No sooner is the ink dry on one treaty than another pops up. President Chirac did his best to get a "Yes" vote by undertaking on television not to resign if there were a "No" vote; nevertheless, he was unsuccessful. We must accept that, even after he has gone, there will always be tension between this country and France. For France, certainly the French elite, the overriding purpose of the European Union is to challenge what they see and fear as the political, economic, military and cultural hegemony of the United States, and they believe sincerely that that can be achieved only under French leadership. We do not share that perspective, and that is that. That difference will always be there; it cannot be papered over and we must live with it.

I believe that a prolonged period of stability can be achieved. The irony is that only when that period of stability has been achieved, and it is accepted that this is the destination of the journey that we embarked upon all those years back, can we sensibly contemplate a genuine European constitution—not the phoney so-called constitution that we were offered—in which each member state's responsibilities are clearly delineated and it is accepted that they will remain indefinitely the responsibilities of European Union member states. Such a constitution could help to provide for the peoples of Europe the sense of stability in a turbulent world that they so clearly need.

My Lords, the noble Lord, Lord Lawson, made a speech of great importance. It was perceptive and possessed considerable profundity. I do not agree with his final conclusions, for reasons that I shall give at the end of my short remarks, but he asked the important question that has been raised by the events of the past two weeks in the European Union—what is the purpose of Europe now in these early years of the 21st century?

The noble Lord, Lord Lawson, was right to say that the origins of the European Union lay in the immediate aftermath of the Second World War. I became a passionate pro-European out of the fact that my father was in the First World War and I went off to the Second World War. The duty of Europe was to find a way of avoiding the ultimate catastrophe of a third great European world war. One of the achievements of the European Community, although it was not alone in contributing to it, was to deal with that problem and to create a European union with the reconciliation of Germany and France at its heart. It made great European wars inconceivable.

Now, of course, the younger generation—my grandson's generation—love listening to the stories of the Second World War, but for them it does not have any resonance in terms of the present purposes of being part of the European Community. It is against that background, which the noble Lord, Lord Lawson, sketched out vividly, that we must look at the events of the past week or so and at the European Union summit that has just ended. It was, no doubt, a dismal and rancorous affair, but it would be wrong to treat it too tragically. In my own modest time as a Commissioner, I lived through several summits which seemed just as bad as the one that has just taken place. Then came the dawn, and the Union had to carry on and search for sensible compromises.

As the Lord President said, the Government face for the next few months the heavy and critical responsibility of chairing the European Council, at the same time as being the chairman of the G8, and have a priceless opportunity to contribute to that search for a way forward out of recent events in the European Union. For the Prime Minister, with his considerable skills, it is the chance to move on from Iraq and to seek to restore Britain's role at the heart of policy-making in the European Union, as he has frequently told us. There is no doubt that the present crisis in Europe is one of more than usual gravity.

That is not due to the row between Britain and France over the CAP. I agree with other noble Lords about that. That row is old hat in the European Union—we have been that way many times, and I agree with the noble Lord, Lord Lawson, that the CAP remains a major distortion within the economic affairs of the European Union. But it is important to see it in perspective and those troubles between Britain and France are not at the heart of the problems that face us. The grave problems are the much more important implications of the results of the referendums in France and the Netherlands over the proposed constitutional treaty.

It was a profound mistake ever to dignify with the title of a "constitution" this series of treaty amendments—that is what we are dealing with—designed to make a union of 25 and more members operate more effectively. This grandiose piece of hype by the political élites of Europe has revealed the unacceptable gap that has been allowed to grow between the government of Europe in its various institutional forms and the citizen of Europe. Finding constructive ways to fill that gap is the difficult challenge for the self-imposed period of reflection on Europe's institutions that lies ahead.

Again, I agree with the noble Lord, Lord Lawson, that that period of reflection should probably be prolonged—and I hope that it will be profound, because that is at the heart of the problem that faces us. It especially involves looking for ways to enhance the role both of national parliaments and the European Parliament in European legislation. As my noble friend Lord Wallace said, it is appalling that the national parliaments and the European Parliament should have had such bad relations. In the days after I returned from Brussels, I argued that it would be far better if the European Parliament were to build on the basis of containing within its ranks members of national parliaments who carried real influence back in their national parliaments. But now that is all water under the bridge.

Now there is a real challenge to enhance the role of national parliaments. Again, I listened with interest to the remarks of the noble Lord, Lord Grenfell, about the work of the European Union Select Committee on which I was glad to be one of his humble rank and file for a year or two. That work may well provide the type of model for ways forward to improve the relationship between the citizen and, through the national parliaments, the link with the various institutions of the European Community, which must closely involve new forms of partnership and the workings of the European Parliament.

There is also a need to deal with the Byzantine lack of transparency of the proceedings of the Council of Ministers. That is an old issue which has now become urgent and I can see no reason why the important meetings of the Council of Ministers, which is the ultimate legislative body of the European Union, should not be open to the public, instead of having to depend, at the end of the day, upon these bizarre midnight national briefings which help greatly to divide the nations of Europe, rather than to unite them.

With the abandonment of the ratification of the treaty, there is room for making steady progress, with incremental changes in the mean time. I am an old Fabian who believes that there is much room for the Fabian approach to European Union reform. The leader of my party, Charles Kennedy, stated the other day:

"There is much of the necessary reform agenda that can be achieved within the existing treaties".

We should explore that most vigorously. However, time will be required for that. Perhaps, we need to wait for a fresh generation of western European leaders, some of whom are already waiting in the wings, and to hope that they will produce the fresh vision that an enlarged European Union badly needs. Here I return to the purpose of having a European Union and here I differ from the conclusions reached by the noble Lord, Lord Lawson. I believe that the European Union has deep and irreversible roots and that the practical issue for us all is whether we can make its workings more effective or less effective.

Within that, the real challenge for the United Kingdom is whether Britain is to play a central role in seeking to make the European Union a more effective institution in the service of the peoples of Europe and in the creation of economic prosperity, and a political influence for peace, or whether we will take the route that I think was charted out in a very detailed way by the noble Lord, Lord Howell. President Wilson managed it with 14 points. I think that he needed a few more than that for his grand design. But I think that the noble Lord charted a de facto withdrawal by the United Kingdom from an effective role within the European Union. Britain can be a major partner in a Europe that plays a distinctive role in world affairs, which is much preferable for us than a lesser role of going our own way in the shadow of the United States.

My Lords, this is turning out to be quite a serious debate, which is appropriate at this time in the history of the European Union. I appreciate very much the style and substance of the Prime Minister's position in the recent summit conference. I also appreciated the preview of the UK presidency that the noble Baroness the Lord President gave us, both in what it included and what it did not include. Perhaps both elements are equally important.

Is the European Union in a crisis? During my time in Brussels, along with the noble Lord, Lord Thomson—indeed, even earlier than that—when we had the first such crisis I said to a very old European hand even at that time, "What a crisis". He said to me, "You should be pleased that the European Community is still capable of producing a crisis. It would be much worse if nobody cared what we were doing". Perhaps few people care. Perhaps it is a crisis for a small political class much more than for the citizens of Europe.

That is the case despite the fact that the European Union now sees five of its major projects in jeopardy. First, there is the constitutional treaty. I have great respect for those of your Lordships who did a great deal of work on the treaty, but, from the beginning, I thought that it was unnecessary and that it was the wrong treaty at the wrong time. I am afraid that I have to say to the noble Lord, Lord Howell, "Please, no intergovernmental conference; please, no new treaty for the time being. Let the pause be long".

Secondly, there is the financial plan for 2007–13. The British position is entirely appropriate. I suspect that the link with the agricultural policy, which is totally plausible and with which I agree, will mean that there is not likely to be a solution during the British presidency. That does not matter. It will probably happen in the early weeks of the Austrian presidency. It will not be a great event when it happens. It will be one of those fudges that are, perhaps, even necessary for agreements among 25 countries.

There are three other issues that are rather more serious. On enlargement, I wholly agree with the noble Lord, Lord Grenfell. Perhaps the most unfortunate consequence of the interpretation of the referenda in France and Netherlands is that that interpretation has turned governments, political parties and possibly a good part of the population in continental Europe against further enlargement soon. I suspect that it will fortunately be inevitable now to take in Romania and Bulgaria. If it was not inevitable, there would certainly be forces to try to delay the accession. I also suspect—it is a dramatic failure of Europe—that negotiations with Turkey will be conducted in a spirit that, for some negotiators on the European side, is not intended to lead to the conclusion that Turkey should be a member, which it should be. I also suspect that the European Union will find it difficult to complete its task in the Balkans without holding out at least the possibility for the "not yet" states of the Balkans to be taken into the European family by membership of the European Union. Among my five crises, that is one of the three that are more serious.

The next crisis has not been mentioned yet. I was surprised that it was not mentioned, not even by the Prime Minister at the recent summit. What happened to the stability pact? We have an interesting phenomenon in euro-land. Many people expected—I am one of them—that the introduction of the euro would mean for those who took part in it almost of necessity greater co-ordination of economic policy. So far it has not. On the contrary, some members of the euro-zone have gone their own way, and major members of the euro-zone have in the process come to violate and then almost explicitly violate the stability pact that they concluded as a loose and basic framework for the co-ordination of economic policies.

That does not augur well for the prospects of economic development in member states of the European Union. It certainly does not augur well for what happens to the Lisbon agenda, which is the fifth point that we have to consider when deciding whether there is a crisis. On Lisbon, I entirely agree with the noble Lord, Lord Lawson. It is interesting that when Jacques Delors proposed the single market he had the good fortune to have sitting next to him in the Commission the noble Lord, Lord Cockfield, who translated the plan of the single market into—I have forgotten—270-plus regulations, directives, et cetera and thereby gave the communities a specific, clear task for what they could do.

With regard to Lisbon, not only is there no noble Lord, Lord Cockfield, in the Commission, there could not be. It is not possible to translate the Lisbon agenda into a programme for common European action. I agree with the noble Lord, Lord Lawson, that the Lisbon agenda is not a European agenda at all. It is something that we want to see happen in Europe but which cannot be brought about by decisions of the institutions of the European Union. As regards the views of member states individually, I see no prospect of rapid progress along the Lisbon road in most major continental countries, although I also agree with the noble Lord, Lord Lawson, that countries are free to choose in some important respects. Why should one prescribe its choices to the others, if the choices that are made do not impinge on the room for manoeuvre that others have?

On the Continent, the picture that I have sketched is interpreted these days as a clash of two visions of Europe. That is interesting. Fundamentally, I agree, but not for the reasons that are usually given. One of the interpretations of the two visions of Europe is, of course, the famous—or infamous—so-called conflict between the Anglo-Saxon model and the social Europe. Much has been said about it. In his brief comment yesterday, the noble Lord, Lord Kerr, made the key point.

I have seen some as yet unpublished research conducted in Berlin that shows clearly that the differences between European countries on social policies are vast. They are so big that they far exceed the difference between what you might call a median European position and the US position. There is no European social model. Therefore, the alleged conflict is non-existent.

Those on the Continent who like to contrast what they call a mere free trade zone with political union are barking up the wrong tree. For one thing, they do not understand that even a free trade zone is an important agreement, as one can see in the case of NAFTA. It even involves certain legally binding arrangements, certainly for mediation and the conciliation of disputes. That is not the problem. There are two views of Europe. To put them in fairly stark terms, I describe them as follows. There are those for whom the unity of Europe is almost a purpose in itself. It is a purpose that they pursue because they want to see Europe, as President Chirac would say, as one pole in a multipolar world. Others might emphasise even more strongly the difference with the United States of America. It is a curious notion in which unity and power are the key concepts. It is a notion that leads to a Europe that looks for protection, looks inward and has a strange world view that one can detect, unfortunately, in a number of specific European policies.

The other view is of a Europe that is open to the world. I rather like the attempt of my good friend Timothy Garton Ash to use the words "free world" rather than "western" to describe what we are aiming at—the real objectives that some of us would like to see realised. That world requires that a union such as the European Union pursues, above all, the goals of openness and liberty—openness to the outside, liberty in its internal structures—as a step in the direction of a world in which we live by rules that provide liberty for the largest number of people everywhere. It is those two views of Europe that, at the moment, come out into the open.

I cannot disagree with the Foreign Secretary, who said that it was the contrast between the past and the future. I would like to think that one can describe it in those terms. It is therefore one of the main functions of this great country, which has such an important tradition in this respect, to push in detail as well as in attitude for openness and liberty, rather than for unity as an objective in itself, let alone for unity to create a pole—a power—in a world in which I, for one, do not particularly want to live.

My Lords, it is a great responsibility to take part in this debate following immediately on from the speeches to which we have just been listening. It is a remarkable contrast between the voices outside this House, as they reacted to the events of the collapse of the summit meeting—stridently and rancorously, as the noble Lord, Lord Thomson of Monifieth, said—and the extraordinary bond of harmony and sanity that has characterised all the speeches in this debate.

The collapse of the summit meeting provoked many people who were disposed to draw the worst conclusions about the European Union, particularly those who have never liked it, to proclaim not only the death of the constitution but also the death of the union. It is quite clear from the tone of the speeches made so far today on all sides that so far as we are concerned, that is not the case.

I had the privilege—if that is what one says—of spending some time last September in what we would call the intensive care unit of a French hospital. I was rather entranced to discover that the French for intensive care unit is Département de Réanimation. If the European Union has been, or is, in an intensive care unit, it is also clearly in a Département de Réanimation.

The thinking that has characterised all these speeches accepts as the premise that the European Union is there for keeps and something to which we belong, not just because it is our neighbourhood but because it has so many other positive outcomes for us. The irony is that all this momentary confusion springs from the rejection by the people of two founder members of a text that was intended, although certainly not designed, to make the Union more acceptable, more attractive, more intelligible. It resulted in a document which I dare say a number of us were preparing to have to defend in a referendum, if such had taken place, but about which we may now speak with rather more candour. It was in truth a parody of the worst faults of l'acquis communautaire at its worst. It was a parody on such a scale that l'esprit communautaire—the spirit that draws us together, the aspiration that we have—was being submerged to the point of becoming almost invisible.

I had some sympathy—indeed, precise agreement—with Gisela Stuart when she said that whenever the word "Giscard" appeared in a message, the spell check on her PC immediately said "Discard". But if the treaty of the constitution is to be dealt with in that way, the agenda to which the constitution-mongers were addressing themselves, remains. It is now the task of our government—our Prime Minister and our Foreign Secretary; I emphasise both components of the government and, indeed, the whole government—to address the agenda which the constitution was trying to tackle. On what basis? There are two objectives: to restore, or try to restore, the mutual confidence which has characterised the Union at its best and which has taken us through some very difficult confrontations; and to set about implementing the decisions that have already been taken but not put into effect.

I agree with the noble Lord, Lord Dahrendorf, and others that the Lisbon agenda is not an agenda for the Union. Nor, in a curious way, is the Stability and Growth Pact an agenda for the Union, because it simply spells out the implications of economic sanity, which the markets will in the end enforce come what may.

The third item which has to be a part of that agenda was identified also by my noble friend Lord Lawson. It is a great pleasure to be sitting alongside my old confrère in this debate on this topic. He emphasised the need for stability. The need for stability should be more recognised in this country. We have far too much uprooting of institutions and change for the sake of change at a pace with which people cannot keep up, but stability is certainly an objective now for the European Union.

The task facing Her Majesty's Government in their presidency should be seen not as a business of winning an international battle, but of helping to put back into working order a unique multinational coalition. Success for the European Union—I think this is common ground between all of us—remains a crucially important British interest.

It could be seen more clearly if there was a proper understanding, as others have explained, of Britain's so-called rebate. The British rebate is not a privilege which can be taken or bargained away; it was always, and remains, an agreed and enduring means of correcting an earlier injustice—the misshapen original system that was a result of our non-membership. It is part of a deal between, and in the interests of, all the member states which, as others have pointed out, was achieved under the leadership of my noble friend Lady Thatcher, who is sitting beside me.

The contemporary history of the achievement of that settlement is worth considering a little more closely. First, it happened only after five years. So the idea that we are going to be assured of a settlement of the budgetary problems during the British presidency, as the noble Lord, Lord Dahrendorf, pointed out, should not be taken very seriously.

The details which in the end laid the foundations for the conclusion were actually hammered out during the French presidency in two successive weekend meetings at Chevening between Roland Dumas, the French foreign Minister and me; and between Guy Legras, from the French side, and the noble Lord, Lord Hannay of Chiswick, from our side. It was that work offstage by foreign Ministers and advisers which, if I may put it like this, put flesh on the bones which characterised my noble friend's powerful presentation of our case time and time again.

The noble Lord, Lord Williamson, described yesterday the excitement when the agreement was reached. Characteristically, perhaps I may add this detail. My noble friend Lady Thatcher, the noble Lord, Lord Williamson, Sir Michael Butler and I went into a little room containing four gold chairs off the main palace in Fontainebleau. President Mitterrand placed before us the approach that we were hoping for; that is, a 65 per cent settlement of the problem. We looked, we thought and we talked. It was my noble friend Lady Thatcher who said that that was not good enough and that it had to be 66 per cent. President Mitterrand said that if that was what we wanted, we would have to go to the Council to get it. I dare say that the rest of us were a shade less confident than my noble friend at that time, but into the chamber we went and we got 66 per cent. During the following decade, that was worth £120 million to the British Exchequer. So it was quite a remarkable achievement.

The point is that the rebate was achieved within the framework of Anglo-French partnership within the broader framework of the European Union for the sake of the Union. When my noble friend came to present the results of that summit to the House of Commons a couple of days later on 27 June 1984, she said:

"I pay tribute to President Mitterrand and Chancellor Kohl for their help in getting this arrangement through the European Council".—[Hansard, Commons, 27/6/84; col. 1000.]

I hope she will forgive me if I go on, because she had also said:

"We should not have got this agreement unless it had been known that we were very pro-European and that Britain makes considerable contributions to the life of the Community and believes that it is right to be in the Community".—[Hansard, Commons, 27/6/84; col. 998.]

Our views have parted in some respects on that matter since then, but the essential features—

Noble Lords:

Oh!

My Lords, I expected that reaction. I hope that I may still say that the broad agreement within this Chamber that we should be maintaining a position within the European Union and addressing the important agenda items that have been set out is one on which we have to concentrate. That view can be very well distilled out of the contributions that have been made in this debate.

Britain certainly need not be adopting a feeble, negative, red-line approach to this issue. Provided others will do the same—and that must clearly involve effective reform and curtailment of the CAP within the confines of an overall smaller budget—we should be ready to play our full part in promoting the success of an enlarged European Union, not by enlarging its power, but by making it less pervasive, less dominant, and more accountable to the peoples and parliament alike. As others have said, there should be more open law-making and transparency in the Council. The European Union should be more ready to listen to, and be bound by, the representations of parliaments of the member states. As my noble friend Lord Howell acknowledged, it needs a longer-serving presidency, simply for managerial purposes and so that it might work effectively.

Where I dissent from the noble Lord, Lord Dahrendorf, and my noble friend Lord Howell is in believing that real benefits can and should flow from the establishment, if possible, of a common European position on as many aspects of foreign policy as can be achieved. After all, we get enormous benefit from having an integrated trade policy in a world where the World Trade Organisation requires organisations to represent all the countries in one way or another. We are able to do that because we have a working partnership with our European partners.

I do not proclaim the need for a common foreign and security policy as a means for challenging, above all, the United States. I do not subscribe to the narrow view which is attributed to President Chirac in that respect. But I should have thought that nobody, least of all the United States, could wish to see the emergence of a world in which the only accompaniment of the United States' input to foreign policy came from China, Russia and India. There is a need, for the sake of the world's talents—for those of the United States as well as our own—for the countries of Europe, with our common cultural background and our common political aspirations, to make an input into that debate for all our sakes. I do not think in terms of a mechanical arrangement, with a single, authoritarian European foreign Minister. It is not an area in which the treaty proposed majority voting, binding us to objectives that we do not want, but an area where we should work as hard as we can to achieve an integrated and effective contribution to foreign policy. That is the agenda which the British presidency must carry forward, not theatrically, but practically.

I shall remind the House of the words of the predecessor of the noble Lord, Lord Williamson. What a great achievement it was, incidentally, for us to secure a British successor to the first Secretary-General of the Commission, Emile Noel. He lived up to our expectations dramatically. We are delighted to hear his testimony here along with those of so many others. Emile Noel said that our task should be not posturing, but problem-solving. That is the way in which we should be attacking the issue. Perhaps I may be even more Europhile in my closing sentence. As Jean Monnet would have wished, we should be displaying a preference for,

"doing something rather than being somebody".

My Lords, there is a certain irony in the fact that I am making my first speech from the Back Benches for over four years in this debate. A few weeks ago, I mentioned to some Members of this House that one advantage of no longer being Chief Whip was that I would have a good deal more time to play an active part in the referendum campaign. That now seems a pleasure forgone, at least for a while.

The speeches in this debate, particularly the last four, of the noble Lord Lawson, my noble friend Lord Thomson of Monifieth, the noble Lord, Lord Dahrendorf, and the noble and learned Lord, Lord Howe, will be extremely difficult to follow. They have set a very high standard in speaking about the issues that we face together today. Having been rather depressed by some of the events of the past few weeks, I am certainly being reanimated by the speeches that we have heard so far—and I shall want to follow some of their points.

There is no doubt that the results of the French and particularly the Dutch referendums, and the revelations in recent weeks, especially at last week's European Council, of the wide differences in approaches to the European Union of different member states have certainly had a salutary effect on those such as myself who have spent a good deal of their political and professional life advocating that Britain should play the fullest part in the progressive development of the European Union. But today I should like to draw some preliminary conclusions from these recent developments and make one suggestion of a possible response to them.

We have seen two or possibly three disconnects or gaps in European approaches to the Union in the past few weeks. My noble friend Lord Thomson of Monifieth has already referred to one of them. The first, and the one about which most comment has been made, is the gap between the political class or elite and the population on European issues. That gap was most apparent in the Netherlands, where virtually all the political parties and virtually all the media favoured the constitutional treaty, while it was rejected by the public by a significant margin—significantly larger than that by which it was rejected in France.

There has been a good deal of analysis of the reasons for that, but I shall refer to two things that certainly played a part in the Netherlands, which while not directly related to the detail of the constitutional treaty would exist in other member states too. One reason is the habit of political leaders in almost all European Union countries, irrespective of their own underlying commitment to the European Union, to tend to criticise the detailed workings of the Union and not infrequently to use it as a scapegoat when things go wrong. When things go right, it is thanks to the national government, but when things go wrong it is because of "them" in Brussels. That tendency inevitably has a cumulative negative effect on the public in all our countries. Why should they agree to more powers being transferred to a body which their political leaders seem so ready to criticise?

More important, in the Netherlands, has been the failure to explain the reasons for and the success of the enlargement of the European Union to the eight post-Communist states that joined last year. Reference has been made to that already. Among the political élites in all member states, almost irrespective of their attitude to the European Union, there was an enthusiasm for enlargement; it was seen as something that we ought to do. In the same way that earlier enlargements helped to guarantee democratic societies in Greece, Spain and Portugal, so this enlargement has ensured that the adoption of the European Union acquis has provided a framework for the operation of a modern market economy in the new member states. But the case for that was taken for granted by the political élites and was never properly explained to our electorates in the existing member states. In the French debate before the referendum, the "Polish plumber" became a particular bogeyman, as an example of the dire results of enlargement.

In the Netherlands, the widening of the European Union to unfamiliar countries, which the people did not really know, led the electorate to resist a treaty that might involve a further move to political union. It was one thing to contemplate a political union with western European countries that you knew pretty well. It was something rather different to do it with people whose capitals you could not really remember—and even to other countries that might be more difficult to cope with and whose membership appeared to be coming fairly soon. In this case, widening clearly made deepening more difficult than had been expected. One of the serious casualties of the referendum, to which I hope that I have a chance to return, is the question of further enlargement.

The second disconnect, which was revealed very clearly at last week's European Council, was that between the political élites in the different member states, with regard to their concept of Europe. That has both a static and a dynamic dimension. There have always been differences of view both within and between member states about the ultimate objectives of the Union—but beyond these institutional debates there are also conceptual differences about what Europe is for, which became clear at last week's European Council. What is the scope of the Union? Those points have already been referred to by the noble Lord, Lord Lawson, and my noble friend Lord Thomson of Monifieth.

I remember at the time of the debates on the Maastricht Treaty, before it came into effect, saying that until then it had been possible for the Germans to see the European Union as just another layer of federalism, for the French to see it as the république Franc"aise à l'échelle européenne—the French republic on a European scale—and for the British to see it as a free trade area with the minimum of trimmings. I argued at the time of Maastricht that it would be impossible to maintain those differing concepts once you had a treaty of the European Union. I was wrong—they have been maintained to a significant extent, and the discussions of last week reinforced that.

That has happened as a result of two factors. The first factor is my third gap—that is, the gap between those working in Brussels, who without resolving the conceptual problems to which I referred are able to work closely together on the day-by-day practical problems. There has developed a serious gap, or disconnect, between them and the national political élites. That becomes even more serious because of the second factor, which is the absence of any common European media or any common European debate about what Europe is for. The absence results in jargon about a common European political culture.

We do not have a debate about the purposes or the scope of Europe, as distinct from the institutional details of the constitutional treaties or the specificities of particular pieces of legislation. Now there are widespread calls for such a debate—and it would be useful to ask how it should be organised. Some forums seem to exclude themselves. The European Council is not appropriate for a prolonged consideration, although the results of such a debate would, I hope, facilitate its future work. Nor, with great respect to my noble friend Lord Maclennan or the noble Lord, Lord Tomlinson, do I feel that the reawakening of the convention would be seen by many as the right way to progress such a debate. In theory, the European Parliament ought to be able to do it, but I suggest that there is such a gap between it and the debates in most member states that it would not be right.

In these circumstances, and in spite of the disconnection between national political élites and their electorates, I turn to the possibility of national parliaments initiating such debates. It would be necessary to work that idea out in detail—but I have already mentioned it to the noble Lord, Lord Grenfell, in asking him whether his European Union Committee could explore in the first instance the feasibility and practicality of national parliaments playing a part in such a task. His reference this afternoon to Ireland in that respect shows one interesting way in which that is already being done in one member state. Perhaps COSAC, at its meetings, could consider whether that is something that could be generalised at a European level.

In the few remaining minutes, I turn to what I believe may be the most serious casualty of the events of the past month. I refer to the continuing process of enlargement, especially its impact on the Balkans. Although the presidency conclusions of last week, if you read the small print, are encouraging in reaffirming the commitment to the western Balkans' future lying in the European Union, the comments in member states following the referendums have been much less encouraging. I was at a meeting a couple of months ago in Thessaloniki with parliamentarians from a number of the west Balkan countries—all those that would eventually hope to become members. There was no doubt that they saw European Union membership as a key part in resolving the remaining problems of their region.

Two years ago in Thessaloniki, the European Council gave a very clear call in committing the Union to providing a future for the people of Macedonia, Bosnia and Herzegovina, Albania, and Serbia and Montenegro, together with Kosovo, to come within the European Union. The processes of reform, reconciliation and reintegration within and between those countries have a much better chance of going forward if they can be seen as having a European vocation. We still have Armed Forces in Bosnia and in Kosovo. An exit strategy for them would be much more difficult if the prospect of membership were to disappear.

Security, democracy and prosperity—the three key purposes and successes of the Union among its existing members—will continue to be at risk in the west Balkans if the goal of membership is removed. The cost to the rest of Europe of continuing conflict on its periphery would be high. I hope, therefore, that the Government—and I was encouraged by the remarks of the Lord President in her speech this afternoon—will be able to play a key part in ensuring that that commitment to enlargement to include eventually the western Balkans is not merely maintained but proclaimed.

My Lords, it is amazing but perhaps inevitable that over the past couple of weeks there have been acres of newsprint and hours of radio and television discussion about our European Union. It is the kind of coverage for which we have all been asking. But it has been limited to that very narrow area of the draft constitution, the European Union budget and the CAP reform. And even on that they could not get it right, because the argument was not about the European Union budget but about the financial perspectives for the years 2007 to 2013. So the experts did not get any of that major agenda correct.

In all this there has been no real mention of so many of the issues that are mentioned in the document on current developments in the European Union. We can go through them all. We have a little mention of the Lisbon agenda, but nothing about regulatory reform, nothing about the services directive or the seventh research and development framework programme—and so one could go on right through the agenda. However, it is not that which I want to talk about. I want to talk about the Fontainebleau agreement, and I want to put a rather different gloss on it. I hope that the noble and learned Lord, Lord Howe, does not quite disappear, because I am going to put a slightly different gloss on the Fontainebleau agreement from that which he so glowingly put before us.

The Fontainebleau agreement—almost 21 years ago to the day—also was born out of crisis, out of a failed European summit in Brussels. And so those attending the summit had to go through the agony of a summit all over again within two months. The United Kingdom was led by that great trio whom we saw today on the Front Bench below the gangway—the noble and learned Lord, Lord Howe, the noble Lord, Lord Lawson, and, the captain of the team, the noble Baroness, Lady Thatcher. They turned up in Fontainebleau, and the first thing that the noble Baroness had to do—as it was almost a prerequisite of being able to do anything else—was to sign the statement that she wanted on budget discipline. It said:

"The European Council considers it essential that the rigorous rules which at present govern budgetary policy in each Member State also apply to the budget of the Communities".

I looked through the following decade or decade and a half to see what the impact of that budget discipline was, but it was precious little.

The mythology of Fontainebleau is even further from the truth than just the failure to get a system of budgetary discipline. In order to get an agreement on the corrective mechanism based on a United Kingdom abatement of the succeeding payments to the budget, the noble Baroness, Lady Thatcher, and her team had simultaneously to agree to an increase in the own resources of the European Union, from a budget based on 1 per cent of VAT to one based on 1.4 per cent of VAT. A 40 per cent hike in the budget had to be agreed to as the price for getting an agreement on budgetary discipline.

If there is anything more absurd than that it is hard to realise what it is. That was recognised by Members of your Lordships' House who were in another place at the time that the noble Baroness, Lady Thatcher, made her statement. I looked with great interest at the debate and found that the noble Lord, Lord Higgins, in his former manifestation as the right honourable Member for Worthing, asked the noble Baroness a question. He asked:

"As this is clearly not a permanent settlement"— that is, the British rebate—

"should we not refuse to approve an increase in own resources until after the common agricultural policy is reformed and agricultural expenditure reduced?".—[Hansard, Commons, 27/6/84; col. 995.]

I have to say that the noble Baroness's reply to what was a very pertinent question was rather opaque. I found the reply less illuminating than the question.

Then, my noble friend Lord Sheldon, in his former manifestation as the right honourable Member for Ashton-under-Lyne, was perhaps even a little bit more brutal about the Fontainebleau agreement. He asked:

"Is the Prime Minister aware that even more important than the exact fraction of the loaf with which she returned from Fontainebleau is the need that she faced to withhold her consent, at an historic moment, to an increase in own resources? Why did she not make use of that once-for-all opportunity?".

The reply to that was a little clearer. The then Prime Minister, the noble Baroness, Lady Thatcher, said:

"If we had not made use of it, we would not have obtained the agreement for a refund and we would have been left without any right to a refund whatever".—[Hansard, Commons, 27/6/84; col. 997.]

That is an amazing statement.

I want to debunk the mythology of Fontainebleau. What the noble Baroness said at that time was really saying that she knowingly agreed to a 40 per cent increase in the European budget in order to get a refund, at a time when her great achievement was that she had got an agreement to budgetary discipline. That is the budgetary discipline of Bedlam and it has had very serious and ongoing consequences.

It actually got worse than that. We gave our European partners in the Fontainebleau agreement a whole series of other expectations. If you go through the detail, you will see at paragraph 1.1.6(i) that we agreed to a "convergence of economic policies". Paragraph 1.1.6(iv) shows that we agreed to the,

"protection and promotion of employment, which is a crucial factor in Community social policy".

It went on to suggest that the European Council,

"expects the Council of Ministers to specify without delay the other areas in which Community initiatives are called for".

It even went on to mention words like "harmonisation" in the context of taxation policy.

In doing those things, we created expectations of our European partners about what Britain was going to do in this Europe with a 1.4 per cent VAT ceiling, and we consistently reneged on everything. Far from working out the inequity of the budget—on the expenditure side of the budget, which is what the language of it was all about—we found Chancellor of the Exchequer after Chancellor of the Exchequer refusing to have expenditure programmes in the United Kingdom because they realised how much of their rebate they would lose if they actually did get the expenditure on the United Kingdom.

That went on and on. Something that was co-financed 50 per cent/50 per cent meant that we paid two-thirds of our own 50 per cent. So we were paying 83 pence in the pound for co-financed European policies. It was an inbuilt structural recipe for disaster. It has meant that we in the United Kingdom have a very clear idea about what we are against in Europe but we have precious little idea about what we are for.

We know that we are against the common agricultural policy. We even know a few of the reasons why we are against it: it benefits inefficient farmers rather than efficient ones; it adds to structural surpluses; it prevents modernisation of the industry and does significant damage to the very policies that we are pursuing in Africa and the developing world. We know the reasons why we are against it but have we really yet developed a clear idea of what we want to replace it? A few ideas have been floated today. Should we renationalise the CAP? Should we partly renationalise it? Should we cut down the level of expenditure and say, "If you want more than that, you do it at a national level"? What is our policy? We are clearer about what we are against than what we are for.

I believe that the great challenge now is to stop the mythology of the Fontainebleau agreement and to stop the idea that that is an automatic corrective mechanism which will ultimately work its way out. The noble Lord, Lord Higgins, in his former incarnation as Terry Higgins the Member for Worthing, was absolutely right to ask the question that he did. The noble Lord, Lord Sheldon, in his former incarnation as the Member for Ashton-under-Lyne, was absolutely right to pose the question that he did to the noble Baroness. We must now get out of the negative mentality in relation to Europe, develop an agenda comprising that which we want, and partly an agenda that we need, and then start to pursue that. I suggest that many of the matters which we have not considered over the past few weeks should be on that agenda.

There is the whole question of what should happen to the research and development framework programme. Are we in favour of it or are we against it? I personally am in favour of it. It is our job to influence and shape it. That policy brings us benefit, brings benefit as regards regeneration of our industrial base and can create a dynamic inside Europe which adds to our competitiveness. However, what we must all do is not go back to the past, recognise that we have a new agenda, work on that agenda and follow it enthusiastically from the pro-European perspective that many people have demonstrated in this debate, but show our friends and colleagues in Europe what we are for rather than going there with our well rehearsed litany of what we are against.

My Lords, before the noble Lord sits down, I wondered whether he would make any reference to his intervention during discussion on a Starred Question on rainforests on 15 June.

My Lords, I believe that the noble Lord, Lord Pearson, knows my view on that matter. I did not intend to make any statement on that. For the sake of those noble Lords who were not in the House during that discussion, I asked with reference to the noble Lord, Lord Pearson,

"Is it not the case that concerning the development of forestry in this country, we should all be following the lead of the noble Lord, Lord Pearson of Rannoch, who recently received £96,000 from the European Union for doing exactly that"?—[Hansard, 15/6/05; col. 1197.]

I was praising the noble Lord, not criticising him. I hope that his shoulders are big enough occasionally to accept words of praise from a pro-European.

My Lords, I do not want to detain your Lordships but the intervention of the noble Lord, Lord Tomlinson, last week was a clear repetition of a very prominent and damaging hatchet job on me by the Guardian newspaper on 30 May which implied wrongly that I had benefited from EU money. I managed to get the Guardian to print a letter of correction on 3 June and merely mention these items so that any of your Lordships who may be interested—I appreciate that there may not be many—can read them. At least I have set the record straight in your Lordships' House, even if the noble Lord opposite is not interested in doing so.

My Lords, I am sorry that my noble friend felt it necessary to intervene at that stage. It would have been much better if the noble Lord, Lord Tomlinson, had made an apology at an earlier stage. However, I shall not rake over those matters now. People can read the article and hear what my noble friend has to say.

It is always a pleasure to follow the noble Lord, Lord Tomlinson, as I like his robust style, which I, being of a more reserved disposition, cannot possibly hope to emulate. However, I shall not follow his argument today because there are some points that I want to make which have not been covered in the debate so far.

The results of the referenda in France and the Netherlands are not making life easy for the Government, but they have certainly opened up immense opportunities. First, we ought to be absolutely clear about why we are where we are. For a decade and a half, the European train has rushed forward at breakneck speed. Those in charge have made little effort to take ordinary people along with them. Indeed, I believe that elaborate steps have been taken in most countries to conceal from the people where the train has been going. To speed the train along, the Commission has been prepared to use every possible device at its disposal, sometimes, for instance using powers given it for one purpose for an entirely different one.

Those of us who were in the House of Commons in the 1980s are often challenged about the Single European Act. My view is that it has been extensively misused. Many of us were na-ve enough to believe that it would be used to reduce barriers to competition. I acknowledge that it did some of that but, on the pretext of providing a level playing field, the Commission has also used it to produce a veritable blizzard of so-called harmonisation measures, many of them comprising the worst kind of bureaucratic meddling.

Only last week, I had a reminder of the absurdity of some of those measures when I received a letter—I am sure that every other noble Lord did—about the EU Food Supplements Directive. I am sure that people throughout the Continent have all kinds of bright ideas on how their quality of life might be improved, but I am equally sure that few put the need to harmonise the market in food supplements at the top of that list. It really is a load of nonsense.

The Commission has not been averse to a bit of sharp practice now and again. For a start, it has used treaty articles designed to create a single market to advance entirely different aims. My right honourable friend David Heathcoat-Amory has put in a great deal of work on that and has pointed out that Article 95 of the treaty, which allows the harmonisation of laws and regulations to establish the internal market, has been used to promote directives on money laundering, art market levies, summer time arrangements, metrication, combating terrorism, anti-personnel landmines, civil protection and balance of payments support.

Then there is Article 308, the flexibility clause that allows the Community to take new powers to achieve a treaty objective. That is supposed to be used and used only in the course of the operation of the Common Market. In fact, it has been used for purposes entirely unconnected with the Common Market, for example, to set up new executive agencies and to grant loans to non-EU countries.

What on earth is the point, incidentally, except as an exercise in empire-building, of the EU's involvement in overseas aid? What is gained by countries handing over the bulk of their foreign aid for the EU to launder and then, having taken a cut, dispense on their behalf? What about the so-called social dimension mentioned by the noble Lord, Lord Lea of Crondall, yesterday? The point surely is not whether workers should have decent holidays but whether, given our history of effective collective bargaining, there is the slightest need to have holidays and working hours laid down in Brussels. Clearly, there is not.

While the Commission has brought forward a torrent of rules and regulations interfering—in the words of my noble friend Lord Hurd of Westwell—in every nook and cranny of national life, step by step, treaty by treaty, the peoples of Europe have been losing the right to govern themselves. That is the history of the past decade and a half. The Maastricht Treaty, which was hailed for enshrining the principle of subsidiarity and as a measure that would limit unnecessary legislation, did nothing to stem the flow, or blizzard, of rules and regulations. A massive extension of majority voting meant a massive transfer of power from the people of Britain to the people of Brussels.

Some, such as my noble friend Lord Hurd, described Maastricht at the time as marking the high tide of federalism; but of course it was not. Amsterdam followed, and another 20 areas of self-government were surrendered. Then came Nice, with an extension of majority voting to a further 40 areas. Finally, when the Government signed up to this ill fated constitution, they signified their willingness to surrender the veto in another 63 areas, covering such key matters as criminal law and justice. Why on earth the Government chose to pretend that the constitution, which thenceforth would be the source of authority of the EU and would be open to interpretation by the European Court in entirely unpredictable ways, was a mere tidying-up exercise is beyond my comprehension, but it should make one a little wary as to what the Government might be up to now.

The real risk is not so much that the constitution will be implemented by the back door; it is that the Commission and others will just go on behaving as if nothing whatever has happened. We are told—these matters were raised by my noble friend during his excellent contribution on the Statement the other day—that the Fundamental Rights Agency is being set up in Vienna, even though without the constitution it has no legal status. We are told that John Bruton is in Washington acting as if he were the EU ambassador; and that Mr Solana is comporting himself as though already he was the European Minister for Foreign Affairs. The Government have the power to just say "No" to that sort of nonsense, and we are entitled to an assurance that they will.

I am sorry that the noble Baroness the Leader of the House is not in her place. She completely missed the point of the question that was put to her by the noble Lord, Lord Pearson of Rannoch, at the time of the Statement. Without the constitution in force, the EU has no legal authority whatever during a period of reflection to do any of those things. It is the Government's job to see that the EU does not act without proper legal authority. Again, I am sorry that the Leader is not here, and I hope that my remarks are passed on to her, because we are all entitled to a categorical assurance that the Government will have none of that nonsense. They must say that there is no question of anyone acting as if the constitution is in force, because they would be acting without any legal authority.

I have another concern that the Government will pick out of the constitution superficially attractive bits and promote them on the assumption that no one could possibly object because they are really awfully good things. Might I therefore also have an assurance that the paltry provision giving one third of national Parliaments the right to require the Commission to review a proposal and then carry on as if nothing has happened will not be picked out and presented as a great reform? Here, I disagree with the noble Lord, Lord Grenfell. We need real, not fake, proposals to enhance the role of national Parliaments.

The British Government have been saved from disastrous error by the rejection of the constitution in France and the Netherlands. In all their proper concerns about the budget, I hope that the Government will not fail to advocate fundamental reform—reform that, in the words of my noble friend Lord Biffen, will reduce the ambitions of the EU and restore the primacy of national governments and Parliaments. They might usefully start by urging that the Commission be stripped of the right to initiate legislation. That really would be a blow for democracy.

My Lords, here we are again. I, too, am sad that the noble Lord, Lord Tomlinson, has not seen fit to apologise to my noble friend Lord Pearson. If that is the way—

My Lords, will the noble Lord give way? He has named me. I have a simple question—what am I supposed to apologise for? Read the words that I uttered, and before the noble Lord enters into the debate, if he is going to chastise me, he should tell me what for.

My Lords, the noble Lord said that he was praising my noble friend Lord Pearson. If he would have allowed me to finish, I was going to say that if that is the tone in which he praises my noble friend, I would hate to be the subject of his tongue.

I hesitate to disagree with the noble and learned Lord, Lord Howe, who is not in his place, about the difference between this House and the world outside in that it is not reflecting the voters' wishes—at least until the noble Lord, Lord Waddington, spoke. His speech was excellent, and I am afraid that I shall be repeating some of his points.

The constitution—a tidying-up exercise according to our Government; a major crisis; extremely damaging; irreparable damage; will plunge the EU into chaos if you vote "No"; according to other European leaders. It is all very confusing but typical of the obfuscation that has surrounded the discussion. Incidentally, no mention is made of reform of our Parliament, bearing in mind that 70 per cent of our laws emanate from Brussels. We must face the realities of the situation. Brussels is in chaos. If I had a company whose accounts had not been fully approved for 10 years, I would probably be in jail by now. What happens in Brussels? The whistle-blower gets sacked. The Parliament is so indecisive that it cannot decide whether to meet in Brussels or Strasbourg, at huge expense and inefficiency. Our new EC Commissioner, Mr Mandelson, is now giving the UK Government public advice on how to deal with EU problems—a somewhat inappropriate position to be in. Since the Government do not appear to know what to do, perhaps that is no bad thing.

One minute we are told that there will be a vote on the constitution as a tidying-up exercise, which is a funny thing to be voting on. Then we are not having a vote. Why not? Surely the British people have a right to express their opinion—it might help the Government to form theirs. The excuse for losing the referendum in France is that it was a vote against President Chirac and not to do with the EU at all. The vote was "Yes" or "No" to the constitution. We can analyse why voters voted in a particular way, but the fact is that they voted "No". Why did the Labour Party win the last election here—because voters voted "Yes" for Labour, or because they voted against the Opposition? The fact is that Labour won the election with a large majority. Are we going to have another vote on that because they won when only a quarter of the UK population supported them?

As a percentage of GDP, the Brussels budget is small. Our benefit fraud is probably more than that percentage, but that does not excuse the lack of accountability or massive overemphasis on agricultural support. As has been stated several times in the debate, agriculture is less than 5 per cent of GDP, but the agricultural support is more than 40 per cent. It is all very well to complain about that now; it should, of course, have been dealt with years ago by successive governments.

I hope that we are now seeing the decline of ever-closer union. The countries involved are simply too different. The leaders of Europe may well ignore the death of the constitution and try to install parts of it without a formal treaty. I hope that the noble Baroness will be able to reassure us that that will not occur in the UK, although present actions are not encouraging; I shall not repeat the items mentioned by the noble Lord, Lord Pearson, the other day. However, on 17 June, the Luxembourg presidency stated:

"This treaty is the best one, which means its renegotiation cannot even be envisaged".

The federalists have, until now, had their way. I cannot say that they have won the argument for me, because their main argument seems to be vision and inevitability. If you actually want an argument, they cite peace in Europe—have they never heard of NATO?—or the nonsensical statement that 3 million jobs will be lost if we leave the EU. That number of jobs may be dependent on the EU, but that is an extrapolation of many factors and it will not cease if we leave. We will still trade with the EU—look at Switzerland or China—and the EU will still trade with us.

According to the European Central Bank, the UK is the EU's largest single customer, taking 25 per cent of all EU exports. The next largest is the USA with 17 per cent. We are also the EU's largest outside suppliers, supplying 17 per cent of European imports. Moreover, the EU is in trade surplus with the UK, as is well known. Despite not being an EU country or having a free trade agreement with the EU, the USA exports almost as much to the EU as the UK, despite the fact that the UK enjoys the benefit—if such it is—of the EU customs union single market. Even the Europhiles would be most unlikely to mess around with their largest customer.

The Euro-sceptics or xenophobes—Conservative Central Office denounced UKIP as gadflies, but perhaps "gladflies" would be more appropriate now—have a case, and are prepared to back it up with rather more than a vague comment about nationhood. I shall not bore the House by giving many reasons, but let me repeat one. Why should we become fully integrated into an EU with a rapidly ageing and declining population? For example, 50 per cent of the German federal budget will be spent on old age pensioners if nothing is changed by 2050. Do we really want to be held back by that?

Now we have the admission that several countries cooked the books to join Europe and are still doing so. The Prime Minister of Portugal said in April that it was time to tell the truth about Portugal's public finances, and that:

"Our deficit is well above 5 per cent of output and close to 6 per cent".

That is twice the declared figure. Germany, France, Italy, Holland and Greece all flout the stability pact. Greece has confessed to cooking the books by 2 per cent every year from 1997 onwards. Silvio Berlusconi has stated that he is,

"tired of the endless bureaucracy in Brussels".

What future for the euro now? How can you expect the new accession countries that want to join the EU to meet the budget criteria when existing members cheat? If new members do not meet the criteria, will they be refused entry? Can the Government be serious in ever contemplating getting more involved in such a society? Let us look at manufacturing. By most estimates, EU trade barriers against non-EU imports cost us 3 per cent of GDP, against 1 per cent of GDP for CAP. Why not leave the EU and scrap the EU trade barriers? While in the EU, we have no control of them. It is a debate worth having. The EU has 90,000 pages of rules and regulations. How on earth can anyone absorb that lot? When we implement them we in the UK add even more, as we know.

Where do we go from here? The German Foreign Minister has said that the "No" votes are not an end, just an interruption. I think that Luxembourg and possibly Poland will still hold referendums. It has even been suggested that France and Holland should rerun theirs. However, some European leaders have shown their intention to press ahead with the constitution by stealth. No wonder that we do not trust our politicians. We should refuse to discuss rebates or budget contributions until the EU accounts are signed off—think of a plc trying to raise money without a clean report from the accountants. Then we should initiate a full review of the present budget, and of what it is used for and why.

At least Downing Street agrees with me on something. A source suggests in reply to rumours that Britain in Europe, as opposed to the "No" campaign, is considering winding up. It states:

"Britain in Europe had an inflated idea about its own importance".

The EU should be a free trade area in goods, services and capital. It should not seek to harmonise taxes, social policy, working hours, retirement ages and many other things. It should not protect its domestic industries. The best way for the EU to foster growth is to do less, not more. Abolishing CAP should be a start, as it keeps the exports of developing countries out of the EU while encouraging fraud. The World Bank estimates the cost of CAP to the developing world at $20 billion a year. Why not deal with third world debt that way rather than cancelling it? Feed the poor, scrap the CAP.

If the EU is prepared to reform and not merely to talk about reforming, the UK should consider remaining of it rather than in it, otherwise the disadvantages of regulation, tariffs and fraud should encourage us to seek a different association. That may ultimately mean leaving the EU, but let us see whether meaningful reform is possible first. The "No" vote is a wake-up call in no uncertain manner. Let us hope that our leaders can benefit from it.

My Lords, this has been a debate characterised by the diversity of the contributions, and the seriousness of reflection on the events of the past month by a number of former Ministers and those who have held high authority in the Commission in Brussels. It has been the kind of debate that it would have been good to have replicated across the European Union prior to the holding of the referendums, and even in this country. It was a matter of some regret that, perhaps by an informal understanding between the parties, there was no such debate in our country on the eve of the general election.

Even at this time of deep reflection about the European Union's future, it cannot be forgotten that it has been an unprecedented success for its members. Anyone with a sense of history must marvel at the achievement of such a long period of stability, peace and prosperity as western Europe has enjoyed for the past 50 years. The EU has seen its members decouple themselves from their imperial past, transform peasant economies into sophisticated skills-based industrial societies and put down strong-growing democratic roots. The great majority of its citizens now enjoy standards of living and social protection which two generations ago were experienced by the privileged few.

Even at this moment of self-doubt, the European Union remains a powerfully attractive magnet to its near neighbours. They, like the states of eastern Europe which have recently joined the Union, are not attracted only by hope of access to its prosperity and the security of the Union's commitment to freedom, justice and democracy. They aspire to belong to a diverse Union without imperial ambitions; a Union which, when acting as one, can safeguard the interests of its members in the global councils; a Union whose actions in common can overcome the ineffectiveness of national policies pursued without "concertation" or in isolation and alone.

I have to say in response to the noble Lord, Lord Dahrendorf, whose speech I found one of the most thoughtful in the debate, that I do not see the two Europes which he describes as being entirely in opposition to each other: the Europe in which freedoms and liberties are being pursued and the Europe in which a capacity to be effective is being pursued at the same time.

The economic success no doubt encouraged the members of the Union to look to it to promote other objectives held in common. The treaties of Maastricht and Amsterdam recognised that when the Union speaks with a single voice and acts together it can be a powerful force for good. But to the noble Lord, Lord Waddington, who queried the sense of there being a policy on development aid within the EU, I commend the report of Sub-Committee C of this House in which the work done by the European Union to give a greater bang for the buck has been described and taken forward. It seems to me to produce economies which are entirely to the benefit of the recipient countries.

The treaties of Maastricht and Amsterdam laid down those goals and the support for democracy in the Ukraine and the dialogue with Iran over its nuclear capability are recent examples of this impulse. The good sense of the Union tackling together the relief of world poverty, the problems of climate change and environmental pollution, terrorism and cross-border crime seems to me to be manifest. The development of a defence capability to promote peacekeeping and to safeguard fundamental human rights, as in Macedonia, is a small but important step to sustain the international rule of law.

It is particularly important to remember that in the aftermath of the rejection of the constitutional treaty—and I do not doubt that that is what has happened—the evidence of opinion polls across Europe shows consistent and strong popular support for the Union's engagements in these tasks which it has set itself. The "No" vote was not a vote against Europe; it was a vote for a different Europe. The steps which are taken to redirect the Union must not turn Europe away from its goals. The mistake would be to confuse rejection of the means of European integration with the purposes of the Union.

As my noble friend Lord Thomson of Monifieth said, the word "crisis" is often overused in the context of the EU. The policy of the empty chair, the veto of Britain's membership, will be recalled as crises overcome. But it would be complacent to doubt the need for bold, new directions if the Union is to re-establish itself with its citizens as aptly designed for these new purposes.

Some frank admissions would help to clear the ground. First, the provisions of the constitutional treaty were indeed worthwhile but would not have sufficiently reformed the Union's processes to diminish public criticisms to insignificance. The convention, of which I was proud to be a member and naturally disappointed with the outcome, went as far as its government members would allow, but it did not go far enough. There was no capture, as was earlier suggested in this House, by Euro-fanatics of the convention. It was, to some extent, an attempt to read the minds of the government representatives that characterised the work done by the convention's members. That may have led it to do not too much but too little.

By way of example, and with no personal animus, I recall the adamant opposition of the noble Baroness, Lady Scotland, to extending the rules of locus standi before the European Court of Justice to allow European citizens to seek remedies for harm suffered. Too often in the work of the convention such conservatism lay behind the proclaimed intention of all the governments to enable the Union to "reconnect with its citizens". I do not belittle what was agreed. Much of it should be carried forward, particularly, as the noble Lord, Lord Kerr of Kinlochard, suggested in his maiden speech, the requirement of greater transparency in the proceedings of the Council. But a new agreement is required.

For a long time, the project of unification has been justified by its results: peace and prosperity. Today, the gulf between particular policy goals and their delivery is too wide to legitimise the processes of decision-making after the fact. The failures of intergovernmentalism lead to bad-tempered frustration at government level. But with the public, the sense is of a juggernaut which has stalled.

Take, for example, the issue of managed migration, a subject of particular sensitivity in the Netherlands where two nasty political assassinations were experienced which cast a blight over the ideals of that country. Despite the agreement at Tampere in 1999 setting out the Union's priorities, five years later the Commission felt obliged to report:

"The constraints of the decision-making process of the current institutional context preclude the effective, rapid and transparent attainment of certain political commitments. Moreover, the right of initiation shared with the Member States sometimes had the effect that the national concerns were given priority over the Tampere priorities".

Now, as a follow-up, we have The Hague five-year programme to continue the work. The Dutch have every reason to complain, as good Europeans, that 10 years is rather a long time to deal with an issue of such pressing and immediately felt importance. To take a more straightforward example, although everyone argues that better police co-operation is needed—there is some manifestations of it—for two years the appointment of a new chief for Europol was held up by intergovernmental wrangling. Turning to the much discussed Lisbon agenda mentioned by a number of speakers today, high-flown commitments were made in 2000. But as the much admired Dutchman, Wim Kok, reported four years later:

"Lisbon is about everything, and thus about nothing".

It is scarcely surprising that the Services Directive, of high importance, is mired in national disagreements which the Commission lacks the democratic authority to cut through.

I put it to noble Lords that to failures of output must be added growing dissatisfaction with the legitimacy of the inputs. Here to some extent I agree with the noble Lord, Lord Waddington, whose position on Europe could scarcely be further removed from my own. The public may be ready to acknowledge, as it should, that the creation of a single European market requires not only deregulation of economies in the member states but also their reregulation at European level since localised national policy actions would distort the efficient functioning of competition. But how is that exercise properly accountable? When agreements emerge in Brussels from the obscure intergovernmental "comitology", the public are less ready to accept that these agreements have to be imposed by executive fiat on their national parliaments. People are not wrong to worry that democracy in Europe is losing its way. They know that they may overturn their governments, but they are less clear that they can by their votes change policies subscribed to by their governments in this European context.

Euro-sceptics, of course, wish to return to the good old days—as they see them—when the nation state seemed to be in control of its destiny and accountable to its citizens. But that view underrates the impact of globalisation on our country and our vulnerability if we stand alone. Moreover, such a course would most likely lead to the unravelling of the existing Union's achievements, which are too often taken for granted and assumed to be unshakeable.

The Euro-sceptic case is essentially defeatist in denying the possibility of European democracy, much as it was denied by the ancien régimes for the nation states in Europe's Age of Enlightenment. To those who argue that there is no demos that feels a European identity, I would reply that democracy is about expressing, debating and ultimately making choices that serve citizens' interests. It was the Dutch and French judgment of where those interests lay that was being expressed in the referendum "No" votes, not an assertion of national identity on the part of two founder members of the European Community.

Therefore, at this point, I would cautiously advance the view that there is in a Union of 25 democracies no simple alternative to embracing democracy as the way ahead which will satisfy the Union's citizens. In particular, it must be very strongly doubted—notwithstanding the eloquence of the Leader of the House—that an Anglo-Saxon initiative leading to the announcement of a new policy consensus by the Council would do the trick. In their own ways, all member countries are seeking,

"a synthesis of the dynamics of liberalism with the stability and welfare of social democracy".

But Europe's citizens want to know how: how can we hold those who make the choices for us accountable for those decisions? Twenty-five national parliaments holding 25 national governments to account may be better than nothing. I yield to none in my admiration for the work done by the committee chaired by the noble Lord, Lord Grenfell, which I have just had the privilege of joining. Surely he would be the first to agree that it is not viewed as a model, and one that would lead to great efficiency if spread across the European Union. It is not likely to be effective in producing agreed policy outcomes for Europe.

To the question of how one would go about extending democracy, I must reply cautiously. John Bruton, the former Taoiseach of the Republic of Ireland—earlier referred to with disfavour—proposed to the convention that the president of the European Commission should be chosen by Union-wide direct election. For most member countries, a parliamentary route to the top executive offices would seem more familiar and better adapted to the development of accountability. It would, moreover, build on the existing authority of the European Parliament to dismiss the Commission.

At this stage, however, the initiative must lie with the Council, which would be wise to take its time. After all, the political Union is its creature, with its tasks well defined in the Single European Act, and in the Maastricht and Amsterdam treaties. It needs to understand, however, what it means by the "democratic deficit", which was acknowledged at Laeken. It needs to be concerned that although the members were elected, and may be rejected by its citizenry, with consequent impact upon the direction of public policy at national level, no such democratic provision is made for Europe's citizens.

I recall Jean Monnet's famous dictum, "We are not here to create coalitions of governments, we unite peoples". Coalitions of 25 national governments, even when led by as adroit a ringmaster as our Prime Minister, will continue to see their broad aims frustrated by disagreements over ways and means. They must now recognise that Europe does not belong to governments; it belongs to its citizens.

My Lords, I remind noble Lords about the reference in the Companion to 15 minutes maximum for speeches.

My Lords, this is a historic debate. All the tremendous speeches that we have heard have reflected the significant changes and new reality in Europe. This is an important time to have such a serious exchange.

I am someone who believes that the referendum results and the Council meeting that followed them mark a defining moment in the history of Europe. I welcome what I see as a long-needed breakdown in the fac"ade—it was a fac"ade—of a one-size-fits-all European model. After years of what has effectively been polite obfuscation, the reality has finally broken through that Europe does not have a single voice.

Jean-Claude Juncker made the point that to many of the continentals it looked as though we were dealing with a confrontation between two different philosophies on the European project, or as he put it, a clash between two different views of Europe. As the noble Lord, Lord Dahrendorf, explained, there are more than two models of Europe. That is the point: we are dealing with multiple views of the way in which Europe and European nations want to organise their affairs. We have to deal with that diversity, rather than the one-size-fits-all Europe.

At the extremes, those different views range from the pursuit of economic protection, the high-cost, high-regulated, high-social-cost markets versus the UK model of recognising that we need to compete in global markets with open competitive economies. On another dimension there are the extremes of those who believe in full political integration versus those who seek a Europe of nation states. There is a contrast between those who seek to build Europe into a rival world power bloc versus those who see our future as being part of a strong Atlantic alliance.

The constitution was the high watermark of the attempt to paper over those cracks and to force us further down the road towards political integration. While we were assured in the UK, as others have said, that the constitution was simply a tidying-up exercise, the continental leaders have been more forthright in bemoaning the fact that the loss of the constitution in their view represents a severe setback to their objective of political integration.

It is not surprising that political integration has been their goal because many have seen it as the essential glue to hold together a fortress Europe vision, with a single currency, protected high-cost markets and a rival power bloc. However, the truth is that that model of an integrated Europe, however necessary it might have been to protect the vision that they had, was destined to fail sooner or later. The truth is that the economic diversity within Europe is too great for a single economic policy or a single currency. The political and cultural differences in Europe are too great to be contained within one democracy.

I say to the noble Lord, Lord Maclennan, that I believe democracy is a national event. One cannot have a democracy without a nation and Europe is not a nation. Therefore, a European democracy is a contradiction in terms. The risk is that the political elites in Europe were creating a forced vision, a forced union that was building intentions that sooner or later would explode. I for one am grateful that that has broken down sooner rather than later. I believe that the pain and cost of it breaking down further along the road would have been even greater.

The reality is that the true underlying diversity of Europe has been exposed, and the cracks are too big, I hope, and too visible to paper over again. So rather than attempting to restore a flawed status quo, we now have the opportunity to create a new and more realistic model for Europe that truly recognises and rejoices in Europe's diversity and takes away the strains and tensions of trying to force a one-size-fits-all model on the different nations.

The model that I advocate at this point, a Europe of diversity, is an à la carte Europe that recognises that different nations want different relationships and have different objectives. In my view, the UK wants the benefits of a European common market and the opportunity to co-operate with other European nations on important regional issues, whether they be crime, environment, transport or, in some areas, defence. What it does not want is to be part of an integrated political union, or of a protected, high-cost social market, or to have a common currency.

However, it is unrealistic to believe that we can sell this UK vision of Europe to the French public, or, indeed, to many other publics in Europe. We have just seen that the French public are already concerned about too much competition and too much Anglo-Saxon Atlantic influence. The notion that we can take this opportunity to convince all other European countries that they should tread our route is nonsense, nor is it appropriate that we should try to do so. Instead, we can recognise that we have different endpoints and objectives.

Within an à la carte Europe, if a core group of countries—potentially the euro-zone group or a sub-set of it—wants to pursue the route to political integration, accompanied by a high-cost social market, we should let them do so, but without imposing their costs and their policies on us. We may think that they are wrong in economic terms, but we should recognise that they come with different histories, different experiences during the war and different experiences of democracy or lack of it over past centuries, so they have different perspectives on the benefits and the costs of moving into a politically integrated Europe. We also need to recognise that if they do want to perpetuate the euro-zone and it is to survive as a single currency with a single economic policy, they have to move towards political union because, so far as I am aware, no single currency zone has ever existed for long without political union.

If we allow a core group to integrate, I believe that they would welcome the opportunity to pursue their vision unencumbered by the difficulty of embracing more than 25 countries in the same tight political union. That is the reality that the French and other electorates woke up to in their referendum campaigns. The truth is that a one-size-fits-all version of Europe is no longer credible and it is no longer sensible to pretend that it is desirable or essential.

An à la carte approach to Europe would resolve those tensions. The UK and other countries that want to join us—I suspect it would be a large group of the accession countries and maybe the Scandinavians—would continue to be part of a common market. That would be our raison d'être but I use the phrase "common market" rather than "single market" because, as the noble Lord, Lord Waddington, said, we want something that is much less regulated and interventionist than the single market has become. We would seek intergovernmental co-operation and funding of programmes that we find of benefit on specific agreed policy areas. Individual countries would have the opportunity to opt in or out of them as they thought fit, in the way that the UK began to develop in the previous decade.

A major benefit of this à la carte Europe is that it would make it much easier to pursue the expansion that we all desire and to welcome new members into a liberal capitalist democratic club. Those members would be much easier to accommodate in an à la carte Europe than they would in a politically integrated Europe. As the noble Lord, Lord Lawson, said, that should be a priority that overrides many other concerns.

To bring about an à la carte Europe will require significant institutional changes. That is also an opportunity. It is an opportunity to break some of the deadlocks and to cut back some of the bureaucracy that has arisen in the way the current European institutions have evolved. For a start, in an à la carte Europe where each country could pursue its own objectives there would be no single budget. There would be budgets for the common market, for the core group that wanted to pursue political integration—but for them and their programmes alone—and for individual programmes that countries could sign up to. The common agricultural policy, if we have failed to get it fully repatriated by that stage, could be a programme that countries could sign up to, or not, according to their preferences. There is no need to have a common approach across the whole of Europe.

Neither would there be a single legal acquis. The European Court of Justice could continue to move towards being, effectively, the supreme court for a core group moving towards political integration, taking the European acquis with it. There would be a much more limited role for a European treaty court to adjudicate on common market rules and intergovernmental treaties. Under that system there would no longer be a presumption that there was a body of EU law superior, in general, to national laws and constitutions in those countries that were not part of the core integrated group.

Similarly, there would no longer be a single commission. There would be a commission that was effectively the executive of the integrating core group and there would be a wider, looser commission that administered the other programmes and the common market aspects of the wider European Union as a whole.

It would also, and not before time, bring into question the role of the European Parliament and whether a European Union administering a common market and a number of intergovernmental programmes needs a European Parliament. I think that the European Parliament was brought into being to be part of the institutional and government structure of an integrated political union. It should remain that for those countries that want to be part of the core political union, but it would raise the question of a whether a European Parliament has a valid role in a Europe made of individual national democracies.

There are a number of important institutional issues that the Government, and other European governments, could usefully address in building a new model of an à la carte Europe. Until recently, with the blind adherence to an ever-closer union, such radical changes would have been unthinkable. Today the question is why not go down the à la carte route? It is clear that that is closer to what the peoples of Europe want. It would give the core group that wants to integrate politically what it wants, if it continues to wish to go in that direction. It would give us, and many other members of Europe, including new accession countries, what we want.

Let me briefly deal with the idea that the UK would be at a disadvantage if we went down this route. First, for the reasons that the noble Lord, Lord Stevens, laid out, there is no reason for the UK to be disadvantaged. The other countries are more dependent on trade with us than the other way round. They would continue to value us. Secondly, we are in the strongest negotiating position we have ever been in to put our version of Europe on the table and to have the others agree to it because they need our agreement to build the kind of Europe they want using European institutions and acquis.

I believe that the time is right to be bold, to seize this moment and to build Europe around an à la carte model. I earnestly urge the Government and this House to consider this approach.

My Lords, it is always argued that the European Union brings peace, friendship, harmony and co-operation in Europe. However, recent events, especially the recent summit, show a completely different picture—a quarrelsome, petty-minded, self-interested, divided Europe, uncertain about its future but still determined to press on with its drive for greater integration and a centralised superstate.

That is the warped vision of the political and bureaucratic elites about whom we have heard from unusual quarters this afternoon. It is their vision, but it has been shown not to be the view of the people of Europe, when they have been given the opportunity to have a say. There might have been all sorts of reasons—we have heard some of them in the debate today—why individuals voted "no" to the constitution in the French and Dutch referendums, but they voted decisively against the constitution. Let us have no doubt about that. The collective voice decided that the constitutional treaty was not the way forward and must be set aside in favour of a different approach.

Many speakers, including the noble Lord, Lord Blackwell, who has just spoken, believe that that is so and that that is what the French and the Dutch people intended. As the Foreign Secretary said on the "Today" programme on Saturday, when referring to the referendums in France and the Netherlands,

"You cannot tell the citizens that they were in error. You have to listen to their voices. It is called democracy".

So why will we not accept it? Why is it that the noble Baroness the Lord President—even yesterday, I think—made some excuses for why they voted "No"?

The Foreign Secretary understands that when the people say "no" they mean "no" and that that is called democracy. That sensible view is not shared by others. Giscard d'Estaing framed the constitution. His reaction to the vote was:

"It was a mistake to send out the constitution to every French voter. It is not possible for anyone to understand the full text".

He drafted it, so he should know; but what an insult to the intelligence of the French people and how out of touch with reality is the man. Is he not aware, after such a long period in politics and government, that a constitution to govern the people must be couched in terms that they can understand? If they have a constitution that they cannot understand, how on earth can they agree to be governed by it? The treaty should be in simple terms, not dressed up in high-flown rhetoric, designed to obscure and deceive, as is the one rejected by the French and Dutch people. I am so glad that they did that.

Before the French referendum, I saw the noble Lord, Lord Pearson, and I bet him £5 that the French would say "yes". I have never been so pleased to lose a bet, and I have paid him his £5. I do not know what he has done with it, but I hope he put it to good use.

My Lords, the document in question is with the framers as we speak.

My Lords, I thank the noble Lord for his intervention.

Giscard, of course, piled arrogance on arrogance by implying that the French people would have to vote again. Last week, Mr Juncker, who is the president of the European Council—at least, he is until the end of this month—said:

"I really believe that neither the French nor the Dutch rejected the constitutional treaty".

Mr Juncker said that after the French had voted 55 per cent against it and the Dutch had voted 62 per cent against it. What sort of people are they? The mind boggles at such arrogance.

Pro-Europeans are always going on about the peoples of Europe, but when the people speak and the message is not to the liking of the governing elite they become hysterical, telling the people that they are wrong and very naughty. Either they want them to vote again or they ignore the people's voice and make moves to circumvent their will by deceit and stealth. Such are the crooked autocrats that this country is associated with and governed by. Unfortunately, that anti-democratic blight infects our politics and government in the United Kingdom.

We must have an assurance today that none of the new items in the constitutional treaty will be brought in by the back door. If that is attempted, there will be an explosion of anger that will damage our political life, as it would circumvent the wish of the British people to have their say on the future of the European Union and break the Government's promise that there would be a referendum before the constitution was ratified and implemented.

The Prime Minister and the Foreign Secretary have said that there must be a fundamental review of the future direction of the European Union. Such a review is long overdue, and some of us have been calling for it for a long time. The European Union has been travelling in the wrong direction for far too long, and the train that we have always been told Britain was missing has now run into the buffers of the people's will. That train was taking us to a destination that Her Majesty's Government have always denied, but continental leaders like Chirac and Schroeder know that the ultimate destination was always meant to be a centralised European superstate—a country called Europe.

That is not the destination desired by the British people, who, in recent opinion polls, say that they simply want a free rade area and voluntary co-operation among nations on matters of concern to them all. Recent statements from senior European leaders are in direct contradiction to that view. I shall quote what a couple have said. Hans Martin Bury is the German Minister for Europe. In an article in Die Welt on 25 February, he said:

"The constitution is the birth certificate of the United States of Europe".

Miguel Angel Moratinos, the Spanish Foreign Minister, said:

"Accepting the EU constitution means the surrender of member states' sovereignty".

He added:

"We are witnessing the last remnants of national sovereignty".

There can be no doubt about what those words mean; they mean the death of the nation state and the construction of a single European state.

Do Her Majesty's Government agree with those sentiments? If they do not, why do they not flatly repudiate them? They have not done so thus far. Perhaps the noble Baroness—our Leader—will repudiate them this afternoon. Then we will know where the Government stand. I trust that the fundamental review to be undertaken will be wide-ranging and will embrace all the organisations and individuals who want to join the debate, not simply Europhiles.

It simply cannot be left to Blair. We have had too much of Blair this, Blair that and Blair everything. The Cabinet must assert itself and insist on being involved and giving collective advice to the people and the House of Commons, which, together with your Lordships' House, must be fully involved in the review.

I also sincerely hope that the Government will be prepared to listen to people and organisations hitherto—I add that—described as Euro-sceptic, who have so often been proved correct in their assessment of the European Union, its policies and its rampant ambition. That includes their warnings about the euro, a policy that has turned sour, so that Italy is now contemplating leaving. In Germany, in a recent phone-in of 360,000 people, 92 per cent wanted to return to the mark.

If the Government do not embrace all views, they will waste a great opportunity and fail the people of this country. I hope that the Government—and, indeed, the official Opposition—will discard the absurd notion that there is no alternative for Britain but to remain in the European Union, come what may. There are alternatives, sound alternatives that would benefit the United Kingdom economically, politically and socially and return the governance of our country to where it properly belongs: here in Britain, here in Parliament, by people who are elected by the people and who can be dismissed by them if they do not live up to expectations.

The Campaign for an Independent Britain, of which I am chairman, has just published a new book entitled Britain and the European Union: Alternative Futures, written by three distinguished Bradford University economists and sociologists, which sets out some alternatives to the EU for Britain. I shall be happy to send a complimentary copy of the book to any Member of the House if they would like one. They simply have to let me know.

It gives me no pleasure to see the European Union in such turmoil. That is bound to injure the interests of the nations of Europe. The project of greater and faster integration was always bound to fail. Let us make a new start and build a co-operative Europe based on the consent and support of all the people of Europe.

My Lords, it is a pleasure to follow the noble Lord, Lord Stoddart of Swindon, who has been a voice of reason on Europe's ills for so long. It is also a pleasure to take part in this important debate. I am especially proud that the majority of the contributions today have come from these Benches—I think that the noble Lord, Lord Stoddart, is spiritually on these Benches for this purpose. By comparison, there has been a great dearth of speakers behind the noble Baroness, Lady Amos, and I fear that she must have felt somewhat lonely—

My Lords, I assure the noble Baroness that I do not feel at all lonely, because the debate is entirely as I expected it to be.

I am glad to hear that, my Lords.

My European credentials are weak compared with the vast majority of the speakers that we have heard today, so I shall concentrate on some territory that is slightly closer to my natural home: economics and finance. However, before that, I should like to reflect on the constitution, which is now in a state of limbo—it is in neither the land of the living nor of the dead. I do not regard it as satisfactory that in 2006 the constitution might be revived. That reminds me of cryonics, which is where foolish people have their bodies deep frozen in the hope that some new process or remedy will be found to give them new life in the future. What they do not realise is that even if that time ever arrives, the world itself will have moved on and they will be ill equipped for the future.

As we know, the constitution has been rejected by the French and the Dutch, and if people in many other countries were given the opportunity to have their say all the evidence is that they would reject it too. Noble Lords will be in no doubt about the result of a referendum in this country, had we been allowed to have one. So what sense is there is in preserving a constitution for possible future revival? It is clear that the constitution is not right for now and there is no reason to believe that lapse of time will make it any more fit for purpose.

Over the weekend, I was struck by several references to Europe's citizens. The press release from Mr Juncker on Friday stated:

"Europe must pay more attention to what its citizens are saying".

Europe is not a nation. It does not have citizens. The constitution perpetuated the myth of European citizenship, but citizenship is allegiance to and protection by a country. UK citizens do not owe allegiance to Europe. If anything, they look to their own country for protection against interference by the EU.

I tell the noble Lord, Lord Maclennan of Rogart, that there is no European demos. I agree with my noble friend Lord Blackwell, who said that European democracy is a contradiction in terms. Those who use "European citizens" language betray their federalist aspirations. It has become clear that the vision of Europe as a nation state, which lay behind much of the constitution, is not shared by the people in Europe. Some member states and some members of the Commission are said to be plotting to implement as much of the constitution as possible by the back door, but the clear message is that there is no mandate for that.

So, as many people have said today, what we need is a complete rethink on Europe. We should rethink whether the direction of ever-closer union is any form of viable guiding principle for the way forward. There is another way, which is based on returning powers to member states and an EU that interferes less in the internal workings of member states. It is still based on a European Union, but a very different one from that laid out in the failed constitution. My noble friend Lord Howell gave us a good start with his 14-point action plan to plot a way forward to a new form of Europe.

Turning to economic matters, I say nothing about the budget and the rebate because, thus far, the Government's position has been admirable and I support it. However, I should like to say something about the euro. I praise the Government for their strength to date in keeping us out, although I regret that joining when the time is right is still their official position.

It is clear that the euro is unpopular with people in many of the countries on which it has been imposed. The noble Lord, Lord Stoddart, referred to that. There are stresses and strains within the euro-zone that may result in its breaking down. That is openly discussed not just in Italy and Germany but even in the French press.

I am ambivalent about the failure of the euro and it is not clear what the economic outcome would be if it did fail. Certainly there would be a period of confusion as some or all countries returned to their own currencies and monetary policies. That may well affect global growth in the short term, though given the sclerotic nature of the euro-zone economy as a whole, we should be wary of overstating this case. My cautious instincts say that Britain would be better served if the euro-zone struggled on and avoided the trauma of multiple divorce, but another part of me sees the euro project as a microcosm of all that is wrong at the heart of Europe. One size does not fit all in Europe and there is no point, over the long term, in pretending that it does.

The failure of the euro could underline what we need to do in the wider issues of Europe; namely, to look again at the underlying principles and create a new way forward based on recognising differences rather than trying to eliminate all natural variation. I bear no ill will to those countries currently imprisoned by economic and monetary union, but I can see positive advantages arising from their liberation.

The constitution as drafted would give the EU competence to co-ordinate the economic policies of member states. No one knew exactly what that meant, which was a worry in itself, but a reasonable interpretation would have been more European interference in the economic policies rather than less. Indeed, Nicolas Sarkozy declared that it was an,

"embryo of European economic government".

I shall touch on just two aspects of that: regulation and tax.

Noble Lords will know that one of the biggest gripes of British business is that it is overly regulated. That is now not even disputed by the Government, as the Chancellor's recent conversion to the deregulatory cause shows. Over one-half of the UK's regulatory burden affecting business originates in Brussels, and that is the Chancellor's own calculation. What British business needs is less legislation in Brussels leading to less regulation from Europe. That is not better regulation, but positively less regulation. In itself that would not cure the regulatory disease affecting British business, but it could have a big impact. So we need to see a European Union that does less. The trajectory in the constitution was for Brussels to do more, and that is why the chief executives of most of the major companies in this country do not support it.

The constitution sought also to preserve the status quo in relation to taxation and, in particular, the national veto over direct tax matters. This was one of the Government's famous "red line" issues. But as the Government know, that red line was a complete illusion. For the past decade the European Court of Justice, under the guise of protecting fundamental freedoms—in particular the freedom of establishment—has been striking down national taxation legislation that it does not like. For many years the Commission has had direct tax harmonisation as one of its goals. By and large we had successfully fought it off, but now we have all but lost the battle.

In April the Advocate General gave his opinion on the Marks & Spencer group relief case. Most informed commentators expect that the Government will lose. By all accounts the Treasury will do so as well because for some time it has been holding discussions with tax experts in Britain. Now it has extended those discussions to officials in other countries about the way forward in the wake of such a decision. What is at stake is not the £30 million or so that Marks & Spencer hopes to gain, but as much as £20 billion lost tax revenue. Most UK companies have already lodged their tax repayment claims, as it is right for them to do. This individual case may well benefit much of British industry in the short term, but it does not benefit the country overall. It gives me little pleasure to think that the Chancellor will have an even bigger black hole to deal with because the real downside is that Britain's control over one of the key levers of our competitiveness will be largely dead.

Many countries in the EU see the internal market as one in which competitiveness between nations can be controlled or eliminated. Quite rightly that has not been our view. We want to be an economy of choice for inward investment through our own competitive advantage and taxation is a key element of that. Several of the accession countries are in that game too, for example through flat taxes, recently the subject of a debate secured by my noble friend Lord Patten. We need to change direction on taxation and reclaim national autonomy.

I hope that the Government will use their presidency to reverse the position on the constitution reached at last week's summit. They should take the opportunity to declare the constitution well and truly dead. Instead, I hope that they will promote a new vision of Europe as a community of nation states co-operating when they wish to in an open and flexible way. Nation states need to reassert control over their own economic destiny and be accountable to their own citizens for their success or failure in so doing.

If the Government allow the constitution to stay in the deep freeze, a later presidency is very likely to declare that it has found a new elixir which will breathe life into it. I hope that the Government will agree that a proper funeral service with the permanence of cremation should be arranged in the next six months. If we can put that behind us, we could then start to move forward towards a fundamental redefinition of our relationship with our European neighbours.

My Lords, a number of notable speeches have been made in this debate. I was interested in the 14 points made by the noble Lord, Lord Howell, but for me the highlight was the brilliant and stimulating speech of the noble Lord, Lord Lawson. Those of us who have not shared the dream of a single European state were naturally cheered by the "No" votes in France and the Netherlands. These were obviously a major setback to the inexorable drive towards an integrated Europe. That project is now in deep trouble. I was going to say that it has "hit the buffers", but the noble Lord, Lord Stoddart, has gazumped me on that simile. Nevertheless, it would be rash to assume that an ever-closer union is dead. Even now the bureaucrats in Brussels are apparently pushing ahead with integrationist steps, provided for in a treaty which is supposed to be dead, or at any rate suspended. New buildings are going up in Brussels as if nothing had happened. Those who put them up are a little like those who continued to build monasteries during the reign of Henry VIII.

Why did the constitution come to grief? Surely the main reason is that those who devised it showed a complete disregard for the views of the people of Europe. Giscard and his acolytes transformed what was supposed to be an adjustment to the EU machinery to accommodate new members into a blueprint for another giant step towards a single European state. Gisela Stuart and David Heathcoat-Amory, who were there, described the process vividly in the booklets they have written. Charles I said on the scaffold:

"For the people . . . their liberty and freedom consists in having the government of those laws, by which their life and their goods may be most their own; 'tis not for having a share in government . . . that is nothing pertaining to 'em".

Giscard and those in Brussels who run the EU share the king's view entirely. With luck, they may escape the same fate.

I believe that the Prime Minister was right to say in his Statement yesterday that the crisis is about the failure of Europe's leaders to reach agreement with the people of Europe about the issues that concern them. But Mr Blair is one of those leaders who signed the treaty. Evidently he had not read the Economist, which long ago said that the constitution should be put in the bin.

The Commission, the continental heads of government and their advisers, the European Court of Justice and the whole apparatus of the EU's directing élite have always thought: "We know best and the ordinary man or woman in the street cannot understand these mysteries". They should now realise that ordinary people do understand. Whatever you may say about the French, they are not stupid—and they do not like what they are being presented with.

But we in this country are in no position to throw stones at the high and mighty in Brussels and in continental governments. Our political leaders are just as much to blame. Who can forget the way the then Conservative government forced through the Maastricht Treaty and, on 14 July 1993, bussed in scores of backwoodsmen to ensure the defeat of an amendment—moved from their own Benches by Lord Blake—which called for a referendum on that treaty. When it was debated, I said:

"The people have every right to be consulted before their system of government is fundamentally changed . . . What we desperately need is for the Government and the political class as a whole to regain the confidence of the people".—[Hansard, 14/7/93; col. 306.]

The Conservatives won the vote but lost the confidence of the people. No wonder the present Government have been reluctant to put the issues of the euro and the constitution to the country, knowing what the probable results would be.

Political leaders in all three parties have continued to claim that the aim of the EU is not to create a European superstate when it is obvious to everyone that that is precisely what the machine in Brussels is seeking to do.

I am afraid that in this House we have been no better. In 2003, 50 Peers—a number with real distinction in politics, in business and in other fields, including the noble Baroness, Lady Thatcher, who was in her place earlier—found that there had been no authoritative and impartial report on what detachment from the European Union, in whole or in part, would mean for the United Kingdom. They argued that such a report was overdue and ought to be produced by a Select Committee of this House.

But the establishment in this House—the Liaison Committee, on which the leading figures in the House sit—rejected this reasonable proposal on very largely spurious grounds and the Chairman of Committees ensured that when the matter was debated we were well and truly stitched up. The establishment did not want such questions seriously examined or the public enlightened. Its attitude was the same as that of the leaders the Prime Minister has now denounced.

What should we do now? I think the Government are right to seize the opportunity of their forthcoming presidency to work for real reform of the EU, political as well as economic, difficult though that will certainly be. We need the building of new methods of co-operation, an end to "ever closer union", an end to the mass of maddening, detailed regulations—and of the scores of officials who devise them—an end to fraud and unsatisfactory accounts, and the return of control of agriculture and fisheries to nation states—in fact, a root and branch reform. If with the support of new members and others we can achieve this, or make a real start in that direction, it will be a great achievement.

If we cannot, then it is no use our simply wringing our hands. We should move firmly to an associate status which, as some recent studies have shown, could give us the benefits of continued trade and sensible co-operation without the excessive costs and burdens of full membership. It would also be stimulating and, indeed, exciting to be once more untrammelled and to a large extent on our own.

My Lords, participation in a debate on Europe seems to require an extensive knowledge and intellect that, regrettably, seems to escape some of us. It is always a daunting exercise.

It is sad to see Europe in a state of ideological chaos. After all, the European Economic Community, as it then was, was the brainchild of politicians after World War II trying to stop the endless wars that had engulfed the continent for the previous 500 years. I was not wildly in favour of the European Economic Community when it first started, but when I had the privilege of being a junior Minister, of going to Brussels in the early 1970s and of seeing all the countries sitting around a table, talking and arguing—even castigating the United Kingdom for raising the price of milk by one shilling a gallon without telling them—I thought it was wonderful. It was talk, not war. That must be encouraged, for that can only be good. My noble friend Lord Lawson said that that part of it had all worked, and so we have to move on.

Events have turned me—as they have, I fear, a number of other people—against the Europe ideal. While so many people saw the value of trade and equal conditions among states as being wholly beneficial, the European Union took on a momentum all of its own and took off in directions both unseen and unexpected. Now we are talking about a European Union with a continuing president; a permanent foreign secretary; a European army; a national flag and even a European national anthem; and endless diktats designed to ensure uniformity within the states, which guarantee collective antagonism. All that—not the diktats but the rest—might have been a twinkle in the eye of European leaders a few decades ago, but it never featured in the aspirations of those who were happy to go along with uniformity of trade.

I agree with my noble friend Lord Waddington that it is not surprising that people are now jumping off the vehicle and are saying, "This bus is out of control. It is going faster and faster. We do not know where it is going—the driver does not seem to know where he is going either—and we do not think we want to go wherever it is that we are going". I regret to say that it is the leaders of the Community, mostly on the continent of Europe, over the past 10 to 15 years who are responsible for that. The blame rests with them entirely. They have gone too fast. They have not carried their people with them. Rather than filling people with excitement, their wild aspirations have filled them with fear. Where are we going? If we get there, what next? That is why the exasperation expressed to me by a lawyer some years ago is rapidly turning into reality; that it will all end in tears.

The European Community started off with six countries; it then went to nine, then 12, then 15 and now 25. Where do we go after that? Is the pot full or is there no limit to membership? What happens when everyone has joined? Presumably we begin to break it all up. There seems to be no long-term goal to be achieved but merely a desire to be on a moving and unstable belt.

We do not want to be ruled by Brussels. It is one thing to harmonise for the common good; it is another thing to be dictated too constantly and on every subject. Why should one not be able to buy what are called food supplements—pills that people have taken for years—simply because Brussels has wiped them off the list on the altar of uniformity or harmonisation? As someone has said already, we can ask any banker about the diktats affecting his industry coming from Brussels and how a simple two pages that the customer can understand becomes eight pages of incomprehensible verbiage.

Farmers used to farm as individuals with the support of government. Now it is the Government who farm and farmers get paid if they do what the Government want. Plant more hedges, and you get more brownie points. The more brownie points you get, the more you get paid. That is alien to the life of British people, whose individuality has made the country and the countryside what it is.

There were 3,000 million people in the world in 1960. In 2025—which is only 20 years on—there will be 12,000 million people in the world. The world population will have multiplied fourfold in the lifetime of some people alive today. That is an alarming prospect. All those people will need to be housed and accommodated in cities, with schools, factories and roads, and they will have to be fed. But politics is short-term: we do not want food now, we want wildlife, and we want farmers to become industrial gardeners. It is no wonder that people who live in the countryside are appalled and distraught.

The noble Baroness the Lord President was right to remind us that the common agricultural policy consumed half of the budget of the European Union. That is a colossal sum. Why is it that no one in or out of agriculture feels the benefit? It is always said that you cannot have a successful European Union without a common agricultural policy. I have never understood why. We do not seem to have a very successful European Union with a common agricultural policy, so why not try one without it? If that kind of money is being spent, as it is, farmers in Germany, France, Italy and the United Kingdom ought to feel the benefit. So ought the citizens. But no one seems to.

There seems to be little that is common about the common agricultural policy anyhow. When the price of milk in England was 13 pence a litre, in the Netherlands, I think, it was about 25 pence. What is common about that? The countryside is disfigured with set-aside—we all understand why—but one never seems to see set-aside in France. There is nothing common about that. The common agricultural policy was supposed to produce uniformity of conditions and prices. It has not.

I was so glad that my noble friend Lord Lawson said, as did the noble Lord, Lord Moran, that the right to sustain the agricultures of the Community ought to be returned to the countries of the Community. They are right, and I agree. Can Europe not manage without a system that seems to infuriate everyone? Can no one find an alternative, or is it that they can find an alternative but think that they will not get a majority of their fellows in Europe to agree to it?

Now, the Government have introduced the single payment system, which is so unbelievably complicated that no one understands it. About two weeks ago, the noble Lord, Lord Bach, said with some pride that the Government had produced 32 road shows and 1,200 videos in order to show farmers how to complete their forms. What kind of stupid system have the Government produced that requires 32 road shows and 1,200 videos to show farmers how to fill out their forms? Even then, they do not understand it. That is bureaucracy gone made, and the European Union has created it, even though I am told—horror of all horrors—that it resulted from a British initiative and that it was the British who conjured up the idea. It is no wonder that people want to jump ship with that kind of stuff going on.

I am glad to see that the Prime Minister is standing up robustly to President Chirac and is refusing to be told that there is only one European solution and that he has to sign up to it. The Prime Minister is right on that, and he is right not to surrender the British rebate. He is also right not to have a referendum. He is lucky too: he has been let off the hook. Had there been a referendum, the constitution and the Prime Minister would have been roundly rejected, but as the constitution has to be accepted by all countries and as two have already rejected it, it is virtually dead. Continuing with referenda would be pointless, as total agreement is now impossible.

Despite the fact that two months ago the Prime Minister said that, if elected, the Government would hold a referendum and would campaign vigorously for a "Yes" vote, they have decided to do a volte-face, which is perfectly understandable. However, they have broken two of their election manifesto commitments within eight weeks of being elected, which is not bad going.

Who would have known in a referendum what it was for which they were voting? A constitution of 511 pages is grotesque and incomprehensible. If you have not read it, how can you cast an opinion on it? If you have read it, you cannot understand it. How can you say in all honesty that that is what you want? What way is that to run a vital part of our future history? In some countries, the constitution is not even written in their own language. How on earth do they know what is going on? The 10 commandments had at least the advantage of being short, succinct and understandable; the constitution as a document is impossible. As long as Brussels and the leaders of the Community continue to be bureaucratic, verbose and incomprehensible and to use funny language, so long will people dislike them and distrust them. The leaders have only themselves to blame for that.

The United Kingdom ought to be, and is, part of Europe. We want to trade freely and fairly, but we do not wish, nor do we need, to be part of a United States of Europe. We have our own sovereignty, which we continue to use for the benefit of ourselves and for the benefit of the Community. We do not have to surrender it for the doubtful benefit of Europe and to the unquestionable disadvantage of ourselves. I just hope that the Prime Minister and the Government will take advantage of this hiatus to realign the direction of Europe and to realign the direction of the United Kingdom.

My Lords, I know that it is not the done thing to giggle at a funeral, but you would have to have a heart of stone not to laugh at the efforts of the Eurocrats who tell us that the constitution is not dead but just resting, or, as my noble friend Lady Noakes said, is in some sort of cryogenic deep-frozen suspension waiting to spring into life at an appropriate moment.

Equally laughable are the attempts of the Eurocrats to inform us that the "No" vote was really a "Yes" vote and that the electorate did not understand the question. But were those not the same Eurocrats who told us that a "No" vote in the constitutional referendum would be a "No" to the whole of Europe? I think that that is what some of them said. Was it not an EU commissioner who told us that a "No" vote would mean a return to the gas chambers? Yes, it was: I am afraid that that is right.

Do they still believe that? Apparently, they do. I have bad news for the noble Lord, Lord Waddington. Even today in the Telegraph, Mr Michel, an EU development commissioner—I do not know what development commissioners develop; perhaps photographs—and a former Belgian Foreign Minister, in an interview on Belgian radio, said:

"The British Prime Minister has the upper hand, but to run a good presidency, it's necessary that everyone helps . . . We'll help him, but on condition that it's all heading in the direction of more Europe, and the direction of deeper [integration]".

That is still the mindset. It is almost incredible. What sort of planet do they live on?

As the noble Lord, Lord Stoddart of Swindon, reminded us, the various Euro-transports we were told we should not miss at our peril—planes, trains and boats—have all crashed, pranged and sunk. They still believe we should go on the same journey to God knows where. We do not know.

The only thing about which I can agree with the noble Lord, Lord Maclennan, is that there is a chance to do something different. However, I part radically from his solution. If we are to seize this chance, we must not think of trying to repair the discredited Euro-model that is sitting smoking in the ditch but find a different way of getting to where the people of this country want to go.

Before Mrs Thatcher—the noble Baroness, Lady Thatcher—came into power in 1979, it was the accepted wisdom on all sides that exchange controls were the norm. They were here to stay. When her government proposed to remove exchange controls, they were told, particularly by the orthodox leftist economists, that all sorts of plagues would rain down on us—frogs would appear, locusts would eat our corn, MEPs would stop fiddling their expenses. We were told that all sorts of weird and wonderful things would happen. In the event, we became freer and richer.

As with exchange controls, so with the EU. Again, it seems to be accepted government orthodoxy that our membership of the EU is in some way a good thing and we have to go along with whatever it brings. Why? My noble friend Lord Stevens said that this is a debate worth having, and indeed it is. Why do we have to go along with it? Why is it a good thing to give away £12 billion of British taxpayers' money to the European Union every single year? That is £35 million a day—£3 million or £4 million has been given away just while we have been having this debate. No one has ever told me why that is a good thing. Perhaps someone will.

Why did we ever agree to allow the European Commission to have the sole prerogative of framing EU laws, which now cover more than 60 per cent of all our legislation? Why are we so spineless about that? Why do we let these unelected political retreads tell us how to hold a ladder, what we should do with our land, how many fish we can catch, how many hours we can work? How did we ever agree to make it a crime to sell vegetables, fruit and meat in pounds? It is astonishing. But I remind your Lordships that it was not the people of this country who agreed to that. They were never asked. They have been let down by their political leaders and their inability to tell the truth about where the European project has been leading and how much power we have been giving away.

The people of France and Holland have, mercifully, blown a giant raspberry at the whole European project. The Government must now be open and tell the people of this country what membership of the EU is costing them financially and in terms of financial sovereignty. In financial terms, I repeat that we hand over £12 billion a year to the EU. The British Chambers of Commerce calculated that more than 80 per cent of the regulatory costs on British business are imposed by Brussels. The noble Baroness, Lady Noakes, gave a slightly different figure, which I think referred to the amount of legislation. According to the British Chambers of Commerce, 80 per cent of the total cost of regulation comes from Brussels, whose regulatory grasp is quite astonishing. The noble Lord, Lord Waddington, mentioned some of the areas, and I can add to them. Working time, water quality, food labelling, fire precautions, car tax, parental leave, animal by-products and employment relations are just a few of the areas which are covered by the regulatory animal in Brussels.

The Dutch Government have recently estimated in an official study that the total cost of EU regulations in Holland was 2 per cent of GDP. That is presumably one of the reasons why the Dutch blew their raspberry. If we assume a similar figure for the UK—and I see no reason why we should not; we are both highly developed countries with an industrial base and advanced economies—the cost of EU regulations would be £20 billion a year. That is absolutely outrageous.

This is madness, yet the EU's cheerleaders are still pretending that EU membership is in our national interest. The truth is the very reverse. Our membership of the EU is costing us billions every year and making us ever less competitive in the global economy. The EU is failing; as the Lord President was kind enough to remind us in her opening remarks, it has 19 million people unemployed. It has low growth and a decreasing share of world markets. We have to do things differently.

If the EU is to continue at all—and I think I am supported in this by the noble Lord, Lord Waddington, and my noble friend Lord Blackwell—it should be more of an intergovernmental organisation, whereby sovereign governments, with the agreement and authority of their people, could co-operate on a range of policies agreed between themselves. I do not believe that we would need the European Commission at all, unless it was a very slimmed down version called something like the secretariat, to oversee the implementation of intergovernmental regulations. The European Parliament would, of course, be redundant and would be abolished. All the Euro-paraphernalia, such as flags and anthem, and all the supranational trappings and accretions of power that the European Union has gathered to itself in the acquis should go. The Government and the Prime Minister really ought to welcome this sort of reform and they should fight for it. Many speakers today have said this and I support them.

There should be no more agonised EU summits. How wonderful that would be after the ghastly summit that we have just experienced. There would be no more humiliating horse-trading. Mr Blair would be spared the agony of being polite to Monsieur Chirac and trying to remember the name of the Luxembourg Prime Minister, only to find that he was talking to the Lithuanian cultural attaché.

Above all—this is an extremely important point—Westminster would regain respect through more inter-governmentalism. I am sorry to say that, in parliamentary terms, we have become political eunuchs. Parliament is largely nothing more than a rubber stamp for European directives and regulations. We cannot change them. If we do, we risk fines in the European Court of Justice. It is time that we became, once again, a representative body that is accountable to its electors. As a by-product of being a sovereign parliament, we might even see an increased interest in politics and the political process.

If we do not get that sort of reform, the Prime Minister should simply pick up his telephone, having enabled his Crazy Frog dial tone, and call Monsieur Chirac to say, "I'm sorry, we're leaving, and our £12 billion cheque is leaving with us".

We were told that our abolishing exchange controls would be unthinkable, but, as a result, we became freer and richer. If we were to leave the EU, we would also become freer and richer. The noble Lord, Lord Maclennan, said that Euro-sceptic arguments were largely defeatist. If it is defeatist to be freer and richer, I am a defeatist. We are better off out.

My Lords, about 10 days ago, I was standing in a queue outside your Lordships' House waiting for a taxi when I found myself next to one of the distinguished ex-Commissioners who are Members of this House. Inevitably, I asked his view of the current developments in the European Union. He replied, "The thing you must remember is that you only get real progress in Europe when you have a crisis". So I very much agree with my noble friend Lord Howell that we must see this crisis as an opportunity.

If there is an opportunity, you must first grab it and then you must exploit it to your advantage. At this point in the game, nobody can say whether what has happened is a good or a bad thing. It is simply too early.

The crisis that we are in is slightly unusual, because the money is not going to run out and the system of governance in the European Union is not going to collapse. We are faced rather with a crisis of confidence and a crisis over direction and what might happen next.

In short, in an era when, to an unhealthy extent, political business seems to be dominated by party managers, we have come to a moment of real politics, because nobody knows with any certainty what is going to happen next. I find that rather refreshing.

Where one has a crisis, it is important to try to dig down to find what the underlying cause of the problem might be. In my experience, the European Union is not unpopular per se. People quite like a lot of the ideas that lie underneath it, and they like a lot of the benefits that people have derived from it. The unpopular element is the way in which it works and some of the rather too many, to put it mildly, foolish things that it manages to do. It is not of course the only level of government that does things that are foolish. Folly can be found everywhere where you have human beings.

No doubt a lot of this criticism is unfair, and I dare say that most of it is the function of what you might describe as the tabloid school of journalism, which, either deliberately or inadvertently, simply fails to understand what is going on or takes things out of context. It is not a matter of whinging. The truth of the matter is that that is the position.

This in turn has become the focus of somewhat wider discontent. Wherever one looks around Europe, one is seeing governments being criticised by the electorate. Last year, I was told, for example, about the Spanish general election. It was not the Madrid bomb that led to the departure of the Aznar administration, but the war and a general boredom with that long serving administration.

An interesting instance in this country was the referendum in the north-east last year on regional assemblies. I come from the north-west, I am interested in regional government and am a great believer in increased localism, but I thought that what was being proposed was simply wrong for England.

I heard from my contacts in the Labour Party, in April, that in every likelihood the referendum would be lost. But what was interesting was the scale of that defeat; it was completely unanticipated—a peasants' revolt, to use that word in a technical sense. Of course, this year we have seen the collapse of the German SPD vote in the North Rhine and Westphalia, we have seen what has happened to M. Chirac in France, and we have seen the resurgence of Fortuynism in Holland.

Against such a background, Europe can hardly be said to have helped itself. We have seen excessive and intrusive legislation, transposition is double-banked and gold-plated, the system of legislation is itself arcane and unsympathetic to the elector, and the system of accountancy and financial control is inadequate and not perceived to be up to speed. But, perhaps most importantly of all, you can have a real go at the European aspect of politics, and you do not bring the whole body politic down on your head.

Clearly the constitutional treaty as drafted is dead. But it is both fortuitous and interesting that that has happened at precisely the moment when we have political gridlock over the structure of the European budget, both in the short term, in terms of next year's budget, and in the medium term, in the context of the financial perspective. The latter in particular is fundamentally and intimately linked with the common agricultural policy, which in turn is intimately connected to the debate about the very nature of the European Union itself.

I say that because something that we do not fully appreciate in this country is how for many member states, especially the early members of the Union, the CAP is not merely a policy about agriculture—it is a kind of sacrament that helps to define the very essence of the European Union. In some ways it is rather like the theological debates of the 16th and 17th centuries over consubstantiation and transubstantiation; it was not merely about the chemical composition of bread and wine. The debate itself was about something quite different. For many that is equally true of the debate about the common agricultural policy: it is not merely about farming.

In the context of the CAP, it is important to distinguish between the policy mechanisms inherent in it and the means whereby it is financed. While Commissioner Fischler has brought forward the mid-term review—and a lot of the policies are fundamentally different, albeit still in many ways less than ideal—the basis of the financing of the CAP remains unchanged. Rightly and fairly, it has been described as the French rebate. Of course, given a name like that, it is inevitably the French who are the winners. They have almost become hereditary beneficiaries of a European agricultural policy. It is slightly like inheriting an hereditary peerage, which for some, such as Enoch Powell, was in itself a kind of sacrament. As a previous speaker said, however, the world moves on.

Some may say that this is not an appropriate way in which to look at it, but from a United Kingdom perspective, if you try to trace our national contributions to the European Union budget, you see how year on year we are making a material contribution to French domestic agricultural spending. If we were not used to that situation, and that money was being distributed in the same way to the French health or education system, we would think it completely absurd and would not think twice about saying that it was unacceptable. After all, is there a fundamentally sound rationale for doing it? Increasingly, I and many other people are coming to the conclusion that the answer is "No".

Interestingly, too, however, and speaking as a farmer, we have seen a common agricultural policy which has not done the British farming community many favours over the years. Would that the benefit of the substantial sums of money that had been spent had accrued to commensurate financial benefit to farmers. It has not; but we have seen some important changes from Commissioner Fischler driven forward, and we shall probably have—inevitably in the context of WTO negotiations—to see further changes. But we are shifting away from policy which is based on supporting production to one that is based on the land.

It is worth pausing for a moment to say to ourselves that if—which in all our cases is completely unlikely—we were to be the French Minister of Agriculture, how would we look at this change? Comparing the French to the English countryside, the two countries have roughly the same population and France is four times as big. If you are going to have a system of agricultural support that is based on the amount of land affected, you can see why it is not a prospect that the French Minister of Agriculture is likely to look at with a great deal of equanimity. I think it is important that we have that in our minds when we are trying to think about the problem and to see a way forward.

In many people's thinking on the Continent, second only to the CAP at the sacramental heart of Europe is the so-called social or Rhineland model of the economy, which is contrasted with the Anglo-Saxon one. Like many other speakers, I do not like that distinction because I believe that it is a flawed one. I much prefer to look at it from my own perspective as a one-nation Conservative.

It seems to me axiomatic that our system of economic governance in this country should not be designed solely to enable those who are good at it to make the maximum amount of money in the shortest possible time. There are a whole range of other priorities in a plural society. Nevertheless, I think that it is better for someone to be working in a system that perhaps does not have the highest level of social protection where they actually have a job, and were they to be unfortunate enough to lose the job there is a realistic prospect of getting another, as opposed to the predicament in which many on the Continent seem to be finding themselves, where they are living in a system of very high social protection but where they do not have work and there is not much likelihood of finding any.

It is equally true that we are now in a single globalised world. If we are uncompetitive in that globalised world, it will be an absolutely guaranteed means of rendering the European Union economically destitute, which in turn will drive us all towards our economic nemesis. It is for that reason that I repeat what I said before. I think that the incoming Labour Government, in 1997, made a great mistake in signing up to the Social Chapter. It is not because I am against having decent terms and conditions, but because it locked them into a system which in many ways has tied them down to inappropriate mechanisms.

I should like to think from my experience talking to colleagues, particularly German Christian Democrat colleagues in the European Parliament, that the need for a realistic economic basis of the market within Europe is gaining wider currency.

Since the constitution is dead there is not much point in going over it. At the end, the people of Europe were given a Hobson's choice, and it has been left. It is as simple as that. But the important question that we all have to address, and many others have done, is where do we go from here?

I believe it is very important not to lay out a detailed blueprint for where we should propose to move, for the very simple reason that if the European Union is to remain together—and I believe that it is to all our advantages that it should do so—progress will depend on agreement, and laying out entrenched positions at an early stage is an absolutely guaranteed way of not achieving agreement. Rather, I think that one should identify some core principles which should be the guidelines of our future progress.

I think that the traditional United Kingdom middle-of-the-road view of Europe provides a very good starting place. We do not want a superstate. What we are seeing from the development of the European Union is something sui generis. It is a new way for old countries to work together in an evolving and new kind of world. We want a decentralised Europe which has its political and legal authority derived from the member states of which it is part. We want a Europe that is not harmonised but rather is integrated on the basis of minimum harmonisation and maximum mutual recognition. I think that we ought to give great credit to my noble friend Lord Cockfield for the way in which he developed the concept of mutual recognition in the work that he did on the single market programme.

We want a Europe that is financially small and operated according to systems of proven probity. We want the kind of Europe that operates according to the principle of subsidiarity, and when it is deemed appropriate to act, it then responds in a manner that honours the principle of proportionality. We want a Europe that is democratic rather than technocratic. We want a Europe that is subject to the rule of law, not only in the High Court in London but also in the County Court in Penrith where I live and in their opposite numbers in France, Spain, Greece, the Baltic States and so on, right across Europe. We want a Europe that is subject to proper political and financial accountability and control which in turn involves a substantial element of transparency. We want a market-oriented Europe. We all have to work in a global marketplace. The only way we in the European Union can compete in the global marketplace is if we have a properly functioning domestic market, which in that case means the internal market.

Finally, I make a plea to keep it simple. Perhaps the most obvious criticism of the constitution was simply its scale, its complication and its incomprehensibility. It was complicated not only for the people you would expect to find it complicated, but even people who had to work with it on a daily basis found it complicated. That is a very severe indictment regardless of any other consideration.

If we can win over people's hearts and minds to these ideas—I think that many in Europe agree with us, many are wondering about the matter but there are still many more who need to be convinced of it—we will then win the argument. I do not think that that will happen over night but I believe that it will happen over time. We must recognise that and recognise that this is a long game. There is not a quick fix here. However, this perspective has one great advantage; that is, the intellectual wind is blowing in our direction.

The Prime Minister who, if he adopts the kind of agenda that I have described, will certainly have my support, is on the verge of a great struggle. Like the Duke of Wellington at the Duchess of Richmond's ball, he will know that the morrow will bring either a great victory or a great defeat.

If he gets it right—and I think he can—then great success not only for us in this country but for people all across Europe is there to be won. But let us remember that in order to consolidate success we must also be magnanimous. The way of securing the long-term success of this crisis is to make sure that it receives the long-term acceptance of both the member states and the peoples right across Europe.

My Lords, since we have touched this afternoon upon the niceties of our behaviour in your Lordships' House, I should perhaps start by apologising for wearing a scarf rather than a tie. The reason is medical, in that I have a swollen disk at the top of my spine, which thoughtfully touches a nerve from time to time and prefers not to be constrained. It is also, apparently, the cause of an irritating rash. So I trust your Lordships will forgive me. In all the circumstances of this debate I will try not to speak, at least metaphorically, with a swollen head, a stiff neck, too rashly or touching too many Europhile nerves.

I start by taking up where the noble Baroness the Leader of the House left off yesterday (at col. 1455 of the Official Report) when she concluded her Statement on the recent European Council. I may be presumptuous but I thought that she threw me a rather withering and accusatory glance when she said that the Government would now pursue an agenda for reform in Europe, but that they would do so from a "pro-European standpoint". That is where I thought the flash crossed the room.

The implication seemed to be, yet again, that we Euro-sceptics are not pro-European; indeed, that we are anti-European. I have wearied your Lordships often on the ambiguity now contained in the word "Europe" and I will not repeat it all again now. I merely repeat that we Euro-sceptics love what we regard as the true Europe of independent democracies. In this we regard ourselves as the true Europeans. What we object to is the project of European Union, which is now in a state of some confusion. It is not just that we think the UK should never have joined the project of European Union and that we should now leave it. We think that the whole project, however honourable and well intentioned its conception, can now clearly be seen as a mistake, and that it should be abandoned. I know this may be an almost impossible concept for many of your Lordships to take seriously, especially for those noble Lords who have spent so much of their lives in building the project physically and in backing it politically, of whom there are many.

At this crossroad in the project's journey it is perhaps worth recalling why it set off in the first place, what was the basic idea which inspired it, what was the honourable idea that Euro-sceptics believe has now come so badly unstuck. That idea behind the project of European integration was that nation states were responsible for the carnage of two world wars. They must therefore be emasculated and diluted into a new form of supra-national government run by a Commission of wise and honest technocrats; hence the European Commission's sole right to initiate legislation. The nation states, with their ill-informed and unreliable democracies, were always seen as the enemy of the project's fulfilment. They therefore had to be slowly and stealthily drawn into the project, and it was important that their people—their voters—did not come to know what was really going on. I know that I have mentioned the genesis of the project before, but I urge noble Lords to think about it again now and to ask themselves whether it makes sense any more in the modern world.

I submit that if there was a common thread running through the French and Dutch "No" votes, it was a growing distrust of remote government and officialdom, for which the European project must bear most of the responsibility. After all, 80 per cent of all our new laws are now made in Brussels, behind closed doors, for which national parliamentarians—whom the people actually elect and dismiss—have become rubber stamps. The fact that the French voted against the constitution for different reasons from the Dutch, and indeed for precisely the opposite reasons to those that would have inspired this country to vote against it had we been given the chance, does not prove, as Mr Barroso and others have claimed, that what the people are asking for is more of the project of what he calls "Europe", but quite the opposite.

For one reason or another, the project is in trouble. I fear the Eurocrats are going to say that it must be kept going because it promotes peace, which claim is rooted in the original big idea, but which, as I have pointed out before, simply does not wash. NATO kept the peace in Europe since 1945, and the angry exchanges that we have just seen at the recent summit show that the project, being a top-down amalgamation of different peoples put together without their informed consent, is a recipe for long-term conflict rather than harmony. The leaders could no longer ignore the contrasting needs of their very different peoples, and so they had to squabble, and the dream wobbled.

So we Euro-sceptics believe that the whole project should be abandoned in the interests of the real Europe and its diverse peoples. But of course, there are far too many vested interests in Brussels, Luxembourg, Strasbourg and in Europhile political careers across the Continent to allow even for an open and honest debate about that course, let alone its planned and peaceful conclusion. I fear that the road ahead therefore looks rough. Not only do we have the internal political strains that we have just observed, but we have the slow-burning fuse of the ill-fated single currency. With no common language, with limited mobility of labour, with the straitjacket of its single interest rate, and above all with its lack of a federal budget that could be operated only by the federal megastate, which was always the currency's aim but which is now off the agenda, all those inherent design faults are now coming home to roost. German officials are talking secretly about the euro's eventual failure, and the Italians are doing so publicly. The vultures in the currency markets are on their way down. So it looks as though the euro may fail sooner than some of us thought, and let us pray that its end is not too uncomfortable when it comes.

It seems that the project of European Union will stagger on, given the vested interests that support it, until it too runs off the road. Surely this is a moment when our political leaders in this country should pause, and consider whether the United Kingdom should continue to be part of it. I know that this question will fall as a forlorn cry in the ears of the Government and of the Liberal Democrats, both of whom are too lost in their dream about the project to see it for what it is. But surely if the votes in France and Holland show the Conservative Party anything, even that party should now see that it can afford to stiffen its policy toward the EU sufficiently to render the UK Independence Party redundant. Alas, I see no sign of that. Following the advice of the noble Lord, Lord Saatchi, yesterday, I have looked into their eyes, but I have found them blank. Nevertheless, I feel bound to make the point yet again, and I shall go on doing so until the Conservative Party finally gets the point and leads the country out of the grip of the corrupt and ruinous octopus in Brussels.

I end by asking the Government three questions; two of which I have asked before, alas without getting any sort of satisfactory answer, and one that is new. We must find something new to say about this depressing subject. First; an old question. To see whether there is any value in the suggestion that the UK should now disengage amicably from the project of European integration, will the Government commission an independent cost-benefit analysis of our membership of the European Union? I asked that question in debates in your Lordships' House on 27 June 2003 and 11 February 2004 without getting any sort of answer on why such an analysis should not be carried out. All we are told is that the benefits of our membership are so wonderful and obvious that there is no point in finding out the truth. My noble friend Lord Moran mentioned another attempt to get a cost benefit analysis done by a Select Committee of this House, in which he unfortunately failed.

In that respect, I ask whether the Government are aware of a new independent study entitled Should Britain Leave the EU? An Economic Analysis of a Troubled Relationship. It is by Professor Patrick Minford and colleagues.

Ha!

My Lords, Europhile noble Lords continue to use the policy of ridicule; I am attempting to use the policy of reason. I merely ask whether the Government are aware of the publication, which came to much the same conclusion as the analysis in A Cost too Far? by Ian Milne of Global Britain, published by Civitas last June. Both those analyses find that the current cost to the UK of EU membership is around 4 per cent of UK GDP, or £40 billion per annum. They also agree that future additional net costs of our EU membership, due to measures already in the EU pipeline, will bring us to double-figure percentages of GDP—10 per cent and above.

However ridiculous the noble Lord, Lord Tomlinson, and others find the studies, have the Government read them? What do they think about them? Do they dismiss them? Why? Have the Government studied a report written in April 2004 by the Federal Reserve Bank of New York, which may not give rise to the same ridicule from the noble Lord and his friends? It is entitled Benefits and Spillovers of Greater Competition in Europe: A Macroeconomic Assessment. It concluded that,

"increasing competition in the euro area to US levels could boost output by 12.4 per cent in the euro area, as both investment and hours worked rise".

Will the Government go on ignoring such findings? Have they read them, in which case what do they think of them?

Will the Government also undertake to read the new study mentioned today by my noble friend Lord Stoddart of Swindon? Will they tell us whether they agree with it? If not, why not? Surely the Government can see that leaving the political constraints of the European Union and continuing our free trade with the single market would create millions of jobs. Do they deny that? If so, what reasons do they give for doing so?

I asked my second question yesterday at the end of the Statement and could not understand the reply of the noble Baroness the Leader of the House—and nor could my noble friend Lord Waddington, judging from what he said today. I also tabled it as a Written Question on 13 June and await a reply. The question is simple. Will the Government tell us what is happening to all the EU initiatives which rely on the proposed but now defunct constitution as their legal basis? Are they still alive? Are we still paying for them?

I listed some of the initiatives yesterday. They appear to include the EU's space programme, which costs £7 billion annually; the fundamental rights agency being set up in Vienna to enforce the charter of fundamental rights; the EU's string of embassies and ambassadors in growing numbers overseas; the ECJ's ruling last Friday that the Community now has power to dictate on the judicial procedures to be followed by all 25 member states; and—I forgot one yesterday, so I shall mention it now as it seems important—apparently there are already EU troops in the Congo, serving under the EU flag, which would of course have become a proper flag only if the constitution had been ratified. In the mean time, as the Government have confirmed in Written Answers, the EU flag is flown as mere advertising, requiring local authority licence in this country to be flown, for instance.

Is any of that the case? If so, do the Government intend during their forthcoming presidency that those and other initiatives should be abandoned, or will they blithely continue under our presidency as though the constitution had sanctioned them? I ask the noble Baroness the Leader of the House for a clear answer to that today. Are these things alive or are they dead?

Finally, my new question. The noble Baroness the Leader of the House, the noble Lord, Lord Howell of Guildford, and others seem to think that Turkey may enter the European Union and that that would be a good thing. Have the Government noticed that M. Chirac changed the French constitution on 28 February this year to guarantee the French people a referendum on eventual Turkish membership? Apparently, this new provision does not bite on Bulgaria, Romania and Croatia, whose entry negotiations were already in the pipeline, but it does bite on Turkish membership.

The relevant article in the revised French constitution is No. 88/5 and this is what it says:

"Any Bill authorising the ratification of a Treaty concerning the accession of a state to the EU or to the European Communities shall be submitted to a referendum of the French people by the President of the French Republic".

In his final televised appeal to the French just before their referendum, beseeching them to vote "Yes", M. Chirac reminded viewers that they now had the right to veto Turkey's membership in future. So I would not have thought that Turkey's membership is much of a starter, unless the unanimity rule for treaty change is going to be dropped. I should be most grateful if the Government would comment on that and, indeed, attempt some sort of reply to my other two questions.

My Lords, I often wonder why, when times are hard, we use French words: bizarre, grotesque or, like my noble friend Lord Ferrers, volte-face. It is almost as though we do not have an English word to describe the strange situation that we are now in. I will try to take your Lordships back a little and then to look forward into the future.

It saddens me that we seem to have forgotten that Winston Churchill effectively created the EU. I want to put on my glasses and as some form of ancient returning officer make some announcements. I go back to the 21 October 1971 and the Motion before the Lords and Commons:

"That this House approves Her Majesty's Government's decision of principle to join the European Communities on the basis of arrangements which have been negotiated".

That was after nearly 10 years of negotiation and discussion. The most loyal subject we have in this House at the moment is the noble Lord, Lord Stoddart, who openly admitted that since 1962 he has totally opposed what was proposed.

At that time, there was a certain schizophrenia in the political world. In the House of Commons, after some 200 speeches and 600 votes, 356 Members said "yes"—that is 59.3 per cent—204 said "no"—40.7 per cent—with a majority of 112. In your Lordships' House—partly dismissed in the other place as backwoodsmen, although the Prime Minister at the time said that we were frontwoodsmen—451 Members—88.6 per cent—said "yes" and 58 said "no"—11.4 per cent—out of a total of 509, a majority of 397. In the combined Houses—we are all parliamentarians—out of a total of 1,109, 807 said "yes".

It was the speeches made on those days that I rather enjoyed. I have many of them here now, and I have read them all again. I wondered why we had changelings or turncoats entering the political arena. I take one quote from the speech of Sir Alec Douglas-Home at the beginning of the debate:

"In this House and out of it, there is widespread recognition that we have reached the time of decision and that the proper place for that decision is Parliament".—[Hansard, Commons, 21/10/71; col. 912.]

Mr Stanley Orme, Salford West, intervened:

"No. Ask the people".

I always thought that you asked the people through Parliament, but he was the first to initiate the process of referendum.

Mr James Callaghan of Cardiff South East said:

"Tonight is no more than the first skirmish in the struggle, in the course of which we shall, I hope, by debate and discussion between ourselves, establish what is Britain's correct relationship with Europe and what is our role in the world ahead".—[Hansard, Commons, 28/10/71; col. 2202.]

It seems no different today. The problem is that we do not know where we have been, we do not know where we are going, and we do not know where we want to go. All we know is that we are trying to be pro-British, and we are not sure whom we should be anti.

What saddens me is that in 1971 most who voted "no" were members of the Labour Party. Mr Orme said, "When we get in, we are going to ask the people; we shall have a referendum". A referendum was held on 5 June 1975 with the question, "Do you think the United Kingdom should stay in the European Community?", and, in case people did not know what that was, in brackets were the words "Common Market".

At that time the total electorate was 40 million, of whom 29 million voted. The turnout was 64.5 per cent, compared with 59.4 per cent in the 2001 election and 61.5 per cent in the last election. The percentage that said "yes" was 64.5 per cent, and 66 out of 68 counties had a "yes" majority. The only two that said "no" were Shetland and the Western Isles. By any measure, those statistics show that we were committed and that people wanted to join the Common Market. What went wrong? What has happened?

I shall jump forward to my own experience. I have worked for most of my life in or with the countries of the European Union, often in the third world, and I have some knowledge and understanding. The noble Lord, Lord Lawson, and other noble Lords have properties in France, and I have already explained, with pride, that I am a paysan. I call myself a peasant, but paysan means countryman. In producing wine, I benefit from the CAP. More interestingly, I believe that the CAP is a good idea but carried out in the wrong way. I say that because if one looks at the European Union as it is today, one is struck by the differences rather than by the similarities.

The UK is an urban country; 90 per cent of our people live in urban areas. The only country with more urban living is Malta. In Australia and New Zealand, of course, most people live in urban areas. However, the peoples of other countries on the continent of Europe live mainly in rural areas. My noble friend Lord Inglewood pointed out the sizes, but in most of those countries—except Holland, which is mostly urban—a third of the people live in rural communities. Unlike our rural communities, theirs are alive throughout the week because of subsidy. That subsidy was established some time ago and is wrong. If anything, it should be a domestic subsidy from the French Government. If the French Government tried to get out of it, there would almost be a revolution. I can promise noble Lords that even my tractor would probably block the road.

I like it when I am in France because I have friends. I was asked to have a specialist adviser there on referendum night, and one of my Foreign Office friends came down. We watched English, French and Italian television. In the mean time, we had discussions with the paysan brigade and the other local communities—some of them in Le Pen country—about what one should do. They said that we should vote against all governments because they have got it wrong and there should be a "non" vote. I went round and told everyone to vote "non". It was "non" to Chirac.

The postman—the facteur—was the happiest friend of all. He had a new girlfriend. He was driving around very quickly, and he asked me what he should do. I said, "When you deliver the letters before the election, please say 'non', and if there is a 'non' in the house will you give me the same hoot on the horn?". So right around the valley the postman was hooting, "Beep, beep", which meant "non".

There was a great atmosphere, as there is in elections in those countries. It was fun. It was having a go at the government. It was having a go at people who said, "We must have a 35-hour week. You can work for 75 hours yourself, but if you want anyone to work more than 35 hours you have to employ another person and pay the social tax", so the charges go up. That system, with minimum wages and so on, has killed employment. It means that in many of the Latin countries no one wants to work. In Germany, naturally, work is only an unnecessary interlude between two holidays. The Germans are very pleased with the early retirement ages—the 35 years—but they have lost their ability to lead. They have no leaders and do not know what to do next. The worry is that the Left and Right wings are moving back to National Socialism. That is a long way off, but it is there. They are not interested in their future, and they have run out of money.

On the other hand, because they have a slightly grey market, my Italian friends have worked out that they can attract most of the purchasing from around Europe because it is cheaper to buy anything in Italy than anywhere else in Europe, if one pays in cash. The system of the euro does not work, because nobody is keeping to the fixed rules that it needs, so a lot of people would like to pull out of it.

I find it confusing because many people in France still talk in anciens francs. I have no idea how much an ancien franc is. I have no idea or understanding when someone talks about the cost of the next space shuttle in millions or billions. The currency has not worked.

Where does the future lie? It lies in having a rethink, looking at ourselves and saying—maybe like Galileo, who got it wrong and got into trouble—that maybe the world should revolve around us. Let me explain why. If one takes the Queen's stamp on an envelope, our sovereignty incorporates approximately 29 per cent of the population of the world and 20 per cent of the world's surface. That is the Commonwealth. That is a relationship that I have valued over time and that other countries see as being more valuable than we do.

Supposing, in outre-mer—in international activities—we could get alongside the French with the francophone countries, we would have almost half of Africa, where the problems lie. That is where we have relationships, abilities, knowledge and historical understanding.

Then one comes to other factors that cause concern. It is the differences that make Europe. The moment that anybody seeks to harmonise taxation, we will have people jumping down on us saying, "Hang about. What about your alcohol tax? You are completely destroying the market for alcoholic products on the Continent". On the other hand, our taxes are letting things in here. For example, on the continent of Europe a 24-pack of beer costs the same amount as a supermarket in England has to pay in alcohol tax. That is outrageous. Yet, if the German Government were to reduce or get rid of the speed limit tomorrow, they would fall, and if the French Government put back a tax on motorcars, they would fall. Motorcars are important, but people are more important than things.

The democratic and social make-up of that remarkable collection of countries is varied. The more we expand the European Union, the more complex and difficult it becomes. Of course the Turks are not European. They just have Constantinople on this side, but they are effectively Islamic or Arab. Where does Europe begin and end? I am not sure. I cannot understand why, when 75 per cent of the population of America is of European origin, they do not want to have anything to do with it. So there needs to be a slightly more global attitude to all of this.

As secretary of the Parliamentary Space Committee, I spent last week in Paris with people from the European Space Agency and others. We had an interesting time and talked about the problems that the British Government, Mr Chirac, Mr Schroeder and the Italians have, and the problems that all the others will have. But underneath there was mutual respect and understanding. I believe that if, at this time, we were to sit down with the French to negotiate and discuss in camera, and then possibly did so bilaterally with the Germans, without forcing and dealing with money, it would work.

Outside, there are two tableaux, or carvings, on the wall. One shows the Field of the Cloth of Gold. Throughout history, we have had problems with France. We did not have so many problems with Germany; there was a closer alliance. In fact, as your Lordships will know, during the Napoleonic wars we raised regiments in Germany, and in France, Switzerland and throughout the world. That reminds me that the entire armed forces of the Commonwealth exceed those of the United States of America. Those are absolutely useless statistics.

A few thoughts have been advanced to me. The first is on taxation. Why not take all the deprived rural areas of this country and remove all small businesses from any tax? To some extent, that is what the common agricultural policy does. If we lose any form of economic activity in rural areas, the country will polarise around the urban areas. Why do we not say to our aged, "If, once you have reached 65, you want to go on working, you may work for 35 hours a week and you will pay no tax on your income"?

There are simple things that I have discussed with many people. We have made life so complicated for ourselves and more complicated for other people, but the sadness of it all is that we have lost privacy and freedom. The noble Lord, Lord Dahrendorf, said that we should talk about the free world; we should make governments give us back our freedom.

My Lords, I shall resist the temptation and leave it to the noble Lord, Lord Kingsland, to deal with some of the odder comments made by Members on the Conservative Benches. At least in the first half of the debate there were some high-quality contributions. It was an extensive and constructive debate.

I am personally grateful to a host of noble Lords for some enlightenment about how the European Union needs now to proceed after the turmoil of recent weeks and the summit last Thursday and Friday. No apology is needed from anybody if they say that bewilderment and confusion can produce constructive results after the necessary subsequent analysis.

I am glad to say that we in this part of the House, despite some bizarre and colourful suggestions to the contrary made by Peers on other Benches, remain committed Europeans, practically and, indeed, without any apologies, emotionally as well.

Why should we not be proud of the astonishing achievements of a united Europe since 1957? I was grateful to the noble Lord, Lord Grenfell, for his suggestion of getting extra parliamentary and public participation in the new ideas of the future. It is good to see, after four years of Trappist silence, my noble friend Lord Roper emerging with some constructive suggestions about how national Parliaments should be involved in these processes, and behind him, the pioneer of the Regional Fund, the first commissioner from the opposition side in those days when the Regional Fund was created. Many benefits have flowed to various member states, including ourselves, from those things.

The Prime Minister is demonstrating impressive leadership in requesting modernisation of the budget system. Its excessive leaning towards agriculture in the past has damaged the Union's reputation for common-sense polices for the modern world.

France, which I believe currently receives roughly a quarter of the total CAP receipts, should definitely be prepared to spend more national resources on the aménagement du territoire and on support for farmers in preserving the countryside, a system that is beginning anyway, as well as receiving a modest and reduced but modern 21st century share of any recast EU CAP structure, which should aim much more to help the 10 new members and, of course, Portugal and Greece, for a residual period of years. That should be the priority. I am sure that more and more people in the Community agree with that.

However, in calling quite rightly for other member countries to see our point of view in what should be a club of reciprocal friendly progress, we in Britain must at long last learn the lessons towards the others. There is still far too much primitive nationalism, indeed even chauvinism and xenophobia sometimes, both in the cruder sections of the British broadsheet press—the tabloids of course are usually too grotesque to consider here with the honourable exception possibly of the Daily Mirror—and among some British politicians in both Houses. The rump of the existing and perhaps rapidly declining Tory party in Parliament contains some legendary figures whose irrational hatred of the European Community knows few proper pragmatic limits.

UK politics has been poisoned deeply by these insalubrious manifestations, with the main parties regularly going anti-European when they go into opposition. That has been our history.

The sheer distaste and, as I said, "hatred"—a word I hate to have to use—for mainly France, but also Germany in the Times—and there are many examples in recent articles—is something that I find greatly disturbing. I am, like other Members of our party here, grateful that the Liberal Democrats have a leadership which will not play to that atavistic gallery on fundamental questions of the importance of Europe to us.

Likewise, when we extol rightly the benefits of the single market, achieved with an accord on majority voting and what it has done for our European comity, we need to acknowledge that other countries have an enthusiasm for other aspects of economic, social and cultural policy formation, which in a club we also need to respect. Just as the budget cries out for modernisation—more and more people appear to accept that—so, too, must we promote together the need for procedures that will ensure the smooth progress and functioning of this Union of, I stress repeatedly, sovereign member states working within democratically agreed, integrated and benevolent structures. To my mind, there is no loss of sovereignty in that process.

Above all, we must continue to assure the public in France and the Netherlands that we respect deeply and follow their verdict on the referenda and the constitutional treaty. That remains a solemn obligation, even if we know that such referenda included many items of domestic political resentment and a complicated matrix of all kinds of arguments. The existing treaties are perfectly adequate to cover present-day pragmatic working-together in the various councils, and the Commission has the inbuilt authority to continue its work on behalf of the Council and the European Parliament.

The budget system itself can carry on without any operational difficulty. After all, the Commission spends most of its time putting forward suggestions to the various ministerial councils and the European Council, which they then decide upon. So mild has been the content of the new constitutional treaty, enabling—I stress, once again—sovereign member states to operate together in a more streamlined way, that its loss, permanently or temporarily, depending on the other member states, 10 of which have already ratified the constitution, is not a serious blow.

If the member states eventually deem it a good idea to consider a new treaty and then perhaps to put it to the people for support, there will be no need to revive the same long-winded, tedious text that Giscard d'Estaing and the noble Lord, Lord Kerr, constructed after the much more inspirational aspects of the Laeken conference and the launch of the project. A much shorter declaration of broad principles, such as citizens' rights, human rights and justice and home affairs co-operation, coupled with a set of machinery items for collective decision-making, the longer-running presidency and the single foreign minister to take forward any agreed areas of joint foreign policy between sovereign countries, would surely be adequate in any new document if the people of Europe so decided eventually. If they do not, that must be respected.

I repeat: these are all sovereign countries working in the friendly club in the intrinsic sense. They are not the product or decision-making of the fantasy erotic nightmares of a marauding Union violating national virginity that the anti-Europeans, in this country mainly, shriek about continually. If any treaty basis in the past has delimited sovereign freedom of action for practical objectives, that, too, is a sovereign decision freely arrived at under treaty-made legislation. The idea that it is sinister and menacing is ludicrous in the extreme.

I believe that the Government are anxious truly to keep Britain as a leading player in the future. There is a silly minority of officials in the Commission—one thinks sometimes of the social affairs director-general—who feel that the one-stop imposed policy shop is the only way forward. They need to understand at long last that the citizens of the Union mostly do not appear to want too much of this kind of remote diktat.

Any new structures to emerge eventually from the current crisis should surely adhere to the leitmotif: Community legislation should represent only the top layer of agreed international policy within and between member states, with not too many regulations—mainly, traditionally, in finance and treasury policy—and more broad framework directives that leave member governments with the task of implementing them through tailor-made national legislation that has already been explained properly and, more importantly, scrutinised in the national legislatures. That should be increasingly the way forward, with the Commission remaining as it is: a very small civil service or secretariat, as someone mentioned.

Meanwhile, a modern budget should surely concentrate assistance on the new member states, both in more modern and limited farm support parameters, and structural and cohesion fund injections of public finance investment capital. Indeed, if common agricultural policy outlays in the various compartments were limited to the current areas of approximate figures expressed for the 2007–13 perspective, and redirected towards the new members, with a reduction for existing members, we could easily envisage the ratio of farm spending to the total budget falling finally to very low levels for the longstanding 12 or 15 members.

In Britain, we need to acknowledge, too, that the rebate that we have received since the early 1980s showed the reality, not only of lower farm outputs and greater efficiency, but the stark reality that we import proportionately far more non-farm goods and services than the other member states do from third countries. Indeed, the UK continues to import too much of all kinds of goods and services. That is our problem, not that of Germany, France or Italy, with their normal high output profiles and visible trade surpluses—the German total exports figure is staggering, because there is a massive export boom in Germany at the moment that is never mentioned in the British papers—and higher investment ratios for net domestic capital formation, particularly in Germany and France.

It makes me smile when the Murdoch press describes France and Germany as problem economies and our Anglo-American economy as the only success story. We all learn from each other. The idea that France and Germany do not have ideas and proposals as good suggestions for a dynamic, modern future economic policy is ludicrous. That is repeated all too often in the mass media in Britain. The wasted column inches of those comics that masquerade as newspapers never mention the massive export boom in Germany—mainly—and in France, where exports are strong. They never mention that the whole of euro-land has a substantial visible trade surplus; that Italy remains a major exporter of engineering products and consumer durables; or that we need twice the level of interest rates in Britain to attract enough hot money as an overdraft to cover our excessive import mania. In April, the United States had the largest trade deficit in its history of $57 billion—somewhat more than the cost of the common agricultural policy.

Although it is true that the 12 countries in the euro-zone are experiencing low rates of growth at present, even the IMF praises the decisions taken in recent times that will produce faster, non-inflated growth. So, we can all learn from each other. That is the essence of the community—the club of the European Union. In the United Kingdom, our more flexible economic approach, which includes people having to accept low pay, a reality of the modern system, has produced good results for individual companies in retailing—although we should wait to see the effects of the retail recession in this country and elsewhere—and many corporate sectors.

That reflects in our employment figures, even if they include part-time workers, who are normally classified as unemployed elsewhere. If you add back substantial numbers of people on long-term sickness and disability benefits, for which the Government plan legislative changes, in the UK our real unemployment figures rise significantly. Can we not deal with real arguments, the real truth, the real situation and not the nonsensical, hysterical propaganda against Europe that we see time and time again in our media—and, to a lesser extent, on radio and television?

At all events, France and Germany remain high output countries, despite their many problems. We have sectoral and individual examples of high productivity and high earnings per man hour, but they remain localised. I am as patriotic as the next person and I wish that we would become a truly high output country. We can do it.

If the new enlarged EU works together with whichever budget arrangement and whichever treaty framework suits the moment from now on, with full participation of the bewildered citizenry, then the Union will come out of this stronger and more equipped to help the third world, emphasising the rise of prosperity as the target in the new states, as well as Bulgaria and Romania, who must be apprehensive about what is happening with the current crisis in the European Union. It should work with a less histrionic United States to promote a just peace and security for all United Nations members, a place in the sun for the Kurds, the Kashmiris and a fully sovereign Palestinian state, among many important geo-strategic examples.

So, there is much for the European Union to do overseas, working together as a friendly and constructive club, not scoring points from each other and being obsessed with only national interests. That also means resolving our budget crisis and getting together to agree the new mechanisms for the future. I sincerely wish all success to the UK presidency.

My Lords, this has been a characteristically stimulating debate in your Lordships' House on developments in the European Union.

I am particularly grateful to my noble friend Lord Howell of Guildford for setting the scene with his 16 points. I trust that the Government have taken a very careful and comprehensive note of them. I am also most grateful to my noble and learned friend Lord Howe of Aberavon and my noble friends Lord Lawson of Blaby, Lord Waddington, Lord Stevens of Ludgate, Lady Noakes, Lord Inglewood and Lord Selsdon for their excellent contributions.

I shall try to be relatively telegraphic. I would like to say a few words about the next six months which face the Government. Perhaps I may start by asking the Lord President whether she can confirm that the Government regard the constitution as dead.

The noble Baroness in her opening remarks rightly laid great emphasis on the question of enlargement. I most respectfully support her fully in that wish. My noble friend Lord Lawson of Blaby also rightly underlined that this is a political aspiration of the European Community. But the fact that it is a political and not an economic aspiration should not in any way undermine or weaken its importance.

The European Community had as one of its original goals the objective of security on the Continent. That remains in the eastern parts of the Continent still a precarious matter. It is, in particular, crucial that Turkey becomes a part of the Community. As the noble Lord, Lord Dahrendorf, said, it is also hard to see how the Balkans can remain stable without a full relationship with the European Community. So we fully endorse what the noble Baroness has said about enlargement and hope that the Government will place it in the forefront of their objectives during the next six months.

Much has been said about the common agricultural policy that takes up 40 per cent of the budget and of the high proportion of that proportion that goes to the French farming community. I, like all of your Lordships, take the view that that is outrageously excessive. But the particular point that I want to pick up is the impact of the CAP on foreign trade.

The noble Baroness is second to none in her grasp of international trade matters between Europe and the less developed countries. The noble Baroness, therefore, will know just how damaging the impact of the CAP has been on the development process. Will she undertake, on behalf of the Government during the next six months, to direct a searchlight on the system of export subsidies and import levies that are right at the heart of the damage that trade in CAP commodities does to the less developed world? It is only by reforming that aspect that countries, particularly countries in Africa, will have any chance of finding markets on our continent.

Many of your Lordships raised the question of a European foreign policy, which was firmly and rightly rejected by the voters in France and the Netherlands. Can we now be assured by the noble Baroness that the Government regard the idea of a single European policy and a single European Foreign Minister as dead? It is very deceitful of the European public to pretend that the European Community is in any way a government. Yet, by giving the Community foreign policy responsibilities, we are in effect holding out the Community as an institution with governmental powers. All that does is make us look ridiculous when we fail to agree on foreign policy.

The worst instance of that I recall was during the tragic years of the conflict in Yugoslavia where the most elaborate institutional arrangements were made to formulate a joint foreign policy, which was consistently undermined by disagreements between Britain, France and Germany over what was going on in Yugoslavia. It is counter-productive to pretend that something exists when it does not, above all in an area so crucial as foreign policy. These are matters for nation states, to be decided intergovernmentally; and I trust that this lesson has now been firmly learnt at the hands of the electorate.

Indeed, I would extend that point further into the constitutional arrangements of the European Community itself. I was particularly struck by the remarks of the noble Lord, Lord Blackwell, about democratic authority in the Community, and respectfully agree with a number of his observations. The system of democracy in the European Community is indirect, not direct. The European Parliament has an important role because it makes the Commission accountable, and it also has joint legislative responsibilities with the Council. But it is not an institution that possesses democratic legitimacy; even though it is elected, it lacks legitimacy in the eyes of the voting public. It is a curious fact, by the way, that your Lordships' House is unelected, yet it has a legitimacy in the eyes of the British electorate. The European Parliament is elected but it lacks that legitimacy. In many decades' time, the situation may change; but at the moment it does not have legitimacy.

This must mean that a much more important role than hitherto must be played by national parliaments in the process of European law-making. The noble Lord, Lord Grenfell, showed us the way in his excellent speech at the beginning of the debate. Will the noble Baroness undertake to put this matter in the forefront of discussions in the Council during the next six months?

There is another dimension to this. It is not even enough for national parliaments to play this role. They must be in constant contact with their own electorate to ensure that people are being brought along with the thinking of their representatives. I am sure that I am not alone in concluding that the arrangements in your Lordships' House and another place are less than satisfactory in ensuring that the electorate are properly informed about the developments of law-making in the European Community. Here is a real opportunity for the Government to take note of what has happened in the referendum and put in place proper institutional measures that engage the electorate and, at the same time, enrich the process of representative government.

I wonder what the result of the referendum would have been if the European economy was running at as successful a rate as the Chinese economy, the Indian economy or, indeed, the United States economy. Supposing that instead of having 19 million people unemployed, the European Community had full employment, with everybody looking forward to the prospect of an adequate pension. What would the result of the referendum have been then? It is hard to say, but the European Community, whatever its merits, would have been associated with economic success. But the electorate associated the European Community with economic failure; and that has to be one of the crucial components in why the referendums went the way they did.

Here I think is the most important lesson for not just the Government but all of us about where to go in the next six months, six years, six decades. The European Community will stand or fall by its success in competing in a global economy. Therefore, right at the heart of what the Government do over the next six months must be to go back to the fundamentals of the Community—the freedom of movement of goods, services, labour and capital—to do everything in their power to ensure that the Community is re-equipped to cope with the challenges of a global economy. Whatever else they do in Europe, if they do not succeed in doing that, the European Community will crumble.

What proposals do the Government have in the next six months? I am aware of their desire to establish the services directive. That is an excellent objective, and I wish the Government well in it. But I was rather confused by something that the noble Baroness, Lady Amos, said about the social dimension. She coupled the importance of the single market with a social dimension; but does the social dimension, as the noble Lord, Lord Lawson of Blaby, asked, really belong at the European level?

At the time of Maastricht, the right honourable John Major, the Prime Minister, as he was at the time, fought very hard, and rightly in my submission, to keep the Social Chapter out of the Maastricht Treaty. In the end, we had an opt-out. That opt-out, as the noble Lord, Lord Inglewood, said, was "opted in" by the Government in 1997, greatly to the detriment, as the noble Lord, Lord Waddington, said so eloquently, of the British economy.

As the noble Lord, Lord Lawson of Blaby, also said, we have no objection to any individual country in the European Community providing whatever level of social protection it wants to its citizens; but that should not be imposed on the other countries. That is a matter for each individual country to decide. That is not to say that we as an Opposition are against social protection; it is simply that we regard that as an aspect of subsidiarity, as something that ought to be dealt with at the national rather than at the European level. To deal with it at the European level will simply lead to harmonising to the level of the country that gives the most social protection, which is a disastrous recipe for international competition.

So whatever else the Government do during the next six months, I trust that they will reinvigorate the original principles of the European Community to the benefit of the economy. These are going to be difficult months for the Government, but they also provide them with a bigger opportunity than any government have had in the European Community since, I suppose, the earliest days. I just hope that the Government have the courage and vision to grasp it.

My Lords, in looking at the speakers' list in preparation for today's debate, I hazarded a guess about the issues that would be raised. Participants in the debate have spoken with knowledge, experience and expertise, and, of course, from a range of perspectives.

I had a forlorn hope that there would be some surprises—perhaps a transformation in the views of the noble Lord, Lord Pearson of Rannoch, or of the noble Lord, Lord Stoddart of Swindon. But it was not meant to be. Perhaps it may happen on another occasion.

The noble Lord, Lord Stoddart of Swindon, said that, in responding to questions on the Statement yesterday, I made excuses for the "No" vote. Perhaps I may quote what I said yesterday directly from Hansard. I said:

"I watched with great interest the interviews with individuals after those "No" votes, and the issues that they talked about ranged from concerns about the domestic economy, immigration, asylum, and the possibility of EU enlargement. Few people actually mentioned the treaty itself".—[Hansard, 20/6/05; col. 1448.]

The people who made those comments voted in those referenda.

Perhaps I may say to the noble Lord, Lord Pearson of Rannoch, that if I had indeed "flashed him a look" yesterday, he would definitely know it, rather than just think it.

I start with the big picture. The noble Lord, Lord Wallace of Saltaire, sparked a difference of opinion with the noble Lord, Lord Lawson, about globalisation and the Government's management of it. In my view, globalisation requires responsive government. Why? Because change is unsettling, and because the impact of globalisation is felt in differential and local ways in communities around the world. It may be about jobs and trade, the impact of conflict, information flows or the migration of people or ideas. What governments need to do is to understand and respond.

I agree with the noble Lord, Lord Lawson, when he said that people want stability. They do—they want their governments to manage the process of globalisation and to shield them from its effects. But managing that process requires political and economic vision and clarity of purpose. That is why we have made it clear that our commitment to a reform agenda in Europe is from a pro-European rather than from a sceptical standpoint. I do not share the view expressed by the noble Lord, Lord Howell of Guildford, that it does not matter if one is pro or sceptical. It does, because it leads to a fundamental difference in approach. Criticism from a standpoint of recognising what has been achieved within the European Union is very different from a relentlessly negative tone, as clearly characterised in our debate by the speeches of the noble Lords, Lord Waddington and Lord Stevens.

Some have described the current situation in the European Union as a crisis. I would agree with the noble Lord, Lord Thomson of Monifieth, when he says that it is a much over-used word. I would not go so far as to describe the current situation as a crisis, because there are major areas of EU business which will continue and which need to do so. I agree with the noble Lord, Lord Dykes, on that matter. In a Union of 25, there will be significant differences of approach; the challenge is how we deal with those differences, and how we deal sensibly with those areas on which we agree.

I am somewhat surprised that the noble Lord, Lord Blackwell, and the noble Baroness, Lady Noakes, have used the term "one size does not fit all", as if that has been our approach. It has not. It has been clear from the start of the Union that it could not speak with one voice on all issues. The purpose is to find areas of collective action which will bring—as I said in my opening remarks—added value. I agree with the noble Lords, Lord Howell and Lord Inglewood, that we are at a moment of opportunity.

As an aside to the noble Baroness, Lady Noakes, I must say that her opening remarks, in which she praised the noble Lord, Lord Stoddart of Swindon, as the "voice of reason" on Europe's ills, and her later description of the Government's position on the financing perspective as "admirable" certainly gave me some pause for thought.

I agree with the noble and learned Lord, Lord Howe, that we should not be speaking in graphic terms about the death of the Union. But we are at a key moment in its development. I share the view expressed by the noble and learned Lord that there are many areas in which the EU can exercise considerable influence—the areas of foreign and security policy and, indeed, trade policy. That chimes with the questions asked by the noble Lord, Lord Wallace of Saltaire, about how we can spread the benefits of peace, security and democracy that we have achieved in Europe.

The noble Lords, Lord Lawson and Lord Dahrendorf, endorsed the need for a period of reflection. The noble Lord, Lord Thomson of Monifieth, asked, "What is the purpose of Europe now?". My noble friend Lord Tomlinson asserted clearly that we needed to be clear what we were against and what we were for. That is one of the questions that the constitutional treaty should have helped us to answer. Many noble Lords, including the noble Lord, Lord Moran, criticised the constitutional treaty for its length, its focus on institutions rather than vision—indeed, for its very name. The noble Lord, Lord Maclennan, who was a member of the convention, suggested that member states did not permit the convention to go far enough to reconnect with Europe's citizens.

There are many different interpretations of the failure of the constitutional treaty to connect with some of Europe's citizens—and I use the term "Europe's citizens" because I certainly agree there are European citizens, and that does not mean that I am a federalist.

As I said yesterday, on the basis of the French and Dutch "No" votes, the treaty cannot proceed and it is sensible to have a period of reflection in which the critical questions about Europe's future direction can be debated. Perhaps I can repeat what I said yesterday. The British people will have their opportunity if there is a constitutional treaty to vote on.

The noble Lord, Lord Kingsland, asked me whether the Government regard the constitution as dead. I again repeat what I said yesterday. The treaty was agreed by 25 member states and it is not for any one nation state to declare it dead. We have said that we will not have a Second Reading of the EU Bill until there is clarity about how the French and Dutch can proceed with their ratification. The Dutch Prime Minister has said that there is no prospect of his bringing this treaty text back to this Dutch Parliament, which is scheduled to last until 2007.

My Lords, can the noble Baroness clarify that a little? As I understand it, the treaty has to be ratified by every country. If two countries do not ratify it then it cannot be ratified by all. Therefore the treaty must be dead, is it not?

My Lords, a political declaration was included within the treaty in which it was made clear that if one or more countries voted "No", the European Council would come back to this matter in 2006. So there is a process; we have described it in this House this afternoon and this evening as an opportunity for pause and a period of reflection. However, a process was built into the constitutional treaty. A declaration was agreed at the weekend at the European Council and that process continues. So no one country at this point can declare the constitutional treaty dead, given that there is a process to be gone through. I explained that yesterday and I have explained it again today.

My Lords, I am most obliged to the noble Baroness; I am sorry to interrupt her flow. My intervention is on the question that has just been asked. The noble Baroness says that there is a provision in the constitutional treaty that enables the countries to consider the matter if one or two countries vote "No". But am I not correct that the treaty cannot be operative until it has been ratified? It can be ratified only by the people of the various countries by their own arrangements. So how can the proposal in the treaty be enacted if the treaty has not been ratified? How can it be done legally?

My Lords, of course there has to be a ratification process. But there was a recognition when member states considered the constitutional treaty that this was a process over a period of time. So the European Council agreed that it would return to this issue in 2006 if all countries had not ratified. That is the current position. Ten countries have ratified; a number of other countries were going to go through referendums. Decisions have been made by some countries to delay those referendums pending further decisions by France and the Netherlands.

I set out to the House what the Dutch Prime Minister has said, which is that he does not intend to return to this issue until 2007. So the European Council will have to consider that as part of the process when it reconsiders the issue next year. It is a process. I think that there is an assumption that all of these decisions will somehow be made in 2005. The British Government have made it clear that, although we did not set a date for a possible referendum, it was unlikely to be before 2006.

My Lords, this is a very important point. Did the British Government agree with this provision that the noble Baroness is describing—that it would all be delayed if there was not unanimous agreement? I am not sure that that is what this House or indeed the other place were told. I think we were told that it had to be unanimous agreement, period. Can she point to the—

My Lords, I am beginning to wonder whether I am not making sense. There was a political provision within the constitutional treaty that allowed member states and the European Council to reconsider this matter in 2006 if all countries had not said "Yes". That is all I am saying to the House. At the weekend the European Council reaffirmed that position. That is all I am saying to the House. It is no different from what was reported to the House as part of the arrangements for looking at the constitutional treaty when the constitutional treaty was endorsed by the European Council.

My Lords, if the noble Baroness will allow me, the counterpart to that political agreement is nevertheless the legal position that the thing cannot come into effect in any event unless and until each and every country has ratified. Is that not correct?

My Lords, I have not disputed that. All I have said is that there is an ongoing process. I am being asked to say across this Dispatch Box at this moment in time that the constitution is dead. I am saying that I cannot say that because there is a process. That process includes a political element to the agreement that was made at the relevant European Council which stated that European leaders would reconsider this point in 2006 if all countries had not ratified. I think that what I am saying is perfectly clear. I am not sure why there is such confusion around the Chamber.

My Lords—

My Lords, if noble Lords do not mind, I have already spoken for 14 minutes. It is now 20 minutes to 10. There is still an Unstarred Question to follow this debate. I should like to move on to other issues. I am very happy to put the points I have just made in a letter which I shall place in the Library of the House setting out absolutely clearly again what I have just said.

My Lords, I realise that—

My Lords, I have asked to move on.

My Lords, I think that the answer to the question is "Yes"—

My Lords, I consider that I have given very clear answers to the questions which have been posed. I have outlined to the House that I will set out those points again in a letter which I will place in the Library of the House with respect to the position on the process on the constitutional treaty. I really cannot see what else noble Lords would like me to say in relation to that. I should like to move on to the other points that have been raised in the debate.

I turn to the points that were raised with respect to economic reform and the Lisbon agenda. The noble Lord, Lord Dahrendorf, made it clear that he thought that there was no such thing as an Anglo-Saxon economic model or, indeed, a European social model. I agree. It is a false dichotomy. It is not the case of either/or, or of a one-size-fits-all European social model. The United Kingdom has one of the most successful social democratic models in Europe, but with 19 million Europeans out of work the main task of those of us who believe in a social Europe is to get Europe back to work. Reform does not mean ignoring the social dimension but focusing on structural reform which will deliver enhanced economic flexibility and more jobs. This Government are committed to reforms that promote fairness and choice alongside flexibility.

The noble Lord, Lord Lawson, suggested that the Lisbon agenda should be dealt with only by member states, not by the European Union. It is, of course, true that the challenge of economic reform is one for member states. However, the Lisbon agenda can add value at the European level. Indeed, I mentioned in my opening remarks the opening up of EU telecommunications. We have seen the liberalisation of energy markets which is bringing better prices, efficiency, choice and levels of service to consumers.

The noble Lord, Lord Wallace of Saltaire, set out what he saw as a number of priorities for the European Union including Lisbon economic reform, the stabilisation of a wider Europe, a strengthened role on the world stage, and a budget that reflects those priorities. I agree in substance with those priorities. The priorities for the UK presidency are economic reform, security, climate change and Africa. With respect to Lisbon, in March EU heads blessed the Commission's jobs and growth strategy and signed up to structures to improve Lisbon governance.

The noble Lord, Lord Lawson, also raised concerns that the 10 new member states might have about the failure to reach agreement on the budget. My right honourable friend the Prime Minister made it absolutely clear yesterday in his Statement to the other place that the United Kingdom is committed to securing a budget agreement that meets the needs of the 10 new member states. But it has to be the right deal, a fair deal that allows them fair access to the common agricultural policy and to structural and cohesion funds, which are going disproportionately at the moment to the original 15.

I shall touch briefly on the 16 points made by the noble Lord, Lord Howell. There are some areas on which we can agree. We have always believed that the Union should be an organisation in which the views of all the member states, small or large, old or new, are respected. We also agree, as has been set out by my right honourable friend the Prime Minister at length over the past weeks, on the need to reform the common agricultural policy. I say to the noble Lord, Lord Kingsland, that we see two elements of that reform process as being very important indeed in terms of developing countries. One is opening up access to markets and the second is a reduction in the subsidies that are paid to farmers not only in the European Union but in Japan and—

My Lords, the point—

My Lords, may I just finish the line before I lose my train of thought? Then I will sit down. The second is a reduction in the subsidies that are paid to farmers not only in the European Union but in Japan, the United States and other major economies.

My Lords, the point that slightly worries me about the argument is that if the undeveloped countries broadly are incapable of feeding themselves at the moment, how, with the reduction of tariff barriers, are they going to be able to feed us?

My Lords, it is not a matter of asking the developing countries to feed us. It is much more complicated and at the same time far simpler than that. Two different things need to be looked at. First, what happens within developing countries and regions. In the continent of Africa there are high customs duties and high tariff barriers operating between countries, which mean that countries are not able to trade fairly across regional boundaries. Helping countries to break down those barriers and to reform their rules and regulations is one important element of it.

Secondly, the farmers in those countries are not themselves able to sell their produce on a domestic market at a cheap price, because we subsidise products within the European Union that then end up in developing countries being sold more cheaply than locally produced products. That is not because we are cheaper; it is because we subsidise our farmers to such an extent. Both of those need to happen. Then if we open up access to our markets, those farmers will then be able to sell their products not only in the region or the continent, but they will have export markets, if the competition works in that way.

My Lords, they broadly have not the capacity.

My Lords, I also say to the noble Lord, Lord Kingsland, that the figures from the World Bank show that approximately 300 million people could be lifted out of poverty—far outweighing the impacts of increasing aid across the world—if we were able to reform our trade rules in this way.

I come to the points on which I disagree with the noble Lord, Lord Howell. I cannot see how increasing the rotating presidencies from six months to a year would bring greater consistency and coherence than we already have. He referred to a revived EU allowing for bilateral or multilateral positions to be taken; we already have that. He also referred to primacy. The primacy of EU law was firmly established when we joined in 1973. I have other comments on his points but, given the time, I shall not go into them now.

The noble Baroness, Lady Noakes, and the noble Lord, Lord Willoughby de Broke, raised the issue of regulatory reform. We have been successful in promoting regulatory reform. Indeed, the commissioner has now pledged to make it his trademark and has called for all EU presidencies to make it a priority. We have rallied support for a six-presidency initiative to make cutting red tape an EU priority, and, in May, 11 member states plus Norway signed up to a specific EU-level initiative on administrative burdens.

Enlargement was raised by the noble Lords, Lord Roper, Lord Selsdon and Lord Pearson of Rannoch, and others. We have always championed enlargement; the European Council has just reaffirmed its clear commitment to it, which is pleasing. During the presidency, we will take that forward. I say to the noble Lord, Lord Roper, about the western Balkans that we recognise the role of enlargement in spreading peace and stability. We hope to see Croatia and other countries in the western Balkans working to fulfil political and economic conditionality, including full co-operation with the International Criminal Tribunal for the former Yugoslavia, which has been an issue of some contention, as he will know.

The noble Earl, Lord Ferrers, asked where enlargement of the EU's borders would end. Enlargement is one of the most successful peaceful foreign policies in history. It has helped to stabilise the former Warsaw Pact countries of eastern Europe, and the prospect of accession has also been one of the strongest drivers of stabilisation and modernisation in Bulgaria, Romania, Croatia, Turkey and the western Balkans. We are pleased that the recent European Council has reaffirmed its commitment to enlargement.

The noble Lord, Lord Pearson of Rannoch, asked what parts of the EU constitutional treaty were being implemented. I am not aware of any formal or informal legislative proposals that rely on the treaty as their base. He mentioned some studies. There are a wide range of studies and, of course, it is not possible for us to evaluate them all.

I turn to greater involvement of our citizens, national parliaments and accountability. The noble Lord, Lord Grenfell, who has great expertise in the matter, raised subsidiarity and national parliament mechanisms that could be brought in without the treaty. It is too early to get into the debate about what can be implemented without the treaty. It was negotiated over years and is tightly interlocked. However, my right honourable friend the Foreign Secretary signalled some sympathy with the view expressed by the noble Lord in his Statement in another place on 6 June.

The noble Lord, Lord Kingsland, also asked whether I would give a commitment to national parliaments being at the forefront of involvement during our presidency. We have always been a strong advocate for national parliaments, including advocating the subsidiarity early warning mechanism in the treaty.

The noble Lord, Lord Roper, pointed to the need for a debate in each national parliament on the future of the European Union. We support that need and fully expect there to be such debates over the coming months. Mention was made in the debate of the Conference of European Affairs Committees, which is comprised of representatives of the European affairs committees of EU member states' national parliaments, along with representatives from the European Parliament. Its main function is to strengthen the role of the national parliaments in relation to the Community process by bringing together the European affairs committees. That is a most helpful process in building networks and interest throughout Community states.

The noble Lord, Lord Maclennan, was eloquent in his call for the need for greater accountability in the EU. One of the issues that will need to form part of the wider debate following the rejection of the constitutional treaty by French and Dutch voters is accountability. It is a little too early to say how that will pan out over the next few months.

My noble friend Lord Tomlinson asked: "We know what we are against, but what are we for?". The noble Lord, Lord Selsdon, asked: "Where does the future lie?". My right honourable friend the Prime Minister has made it clear that the United Kingdom will play a leading role in the debate on reconnecting citizens to the European Union. We are for a strong Europe that bolsters the strength of nation states. Of course we are for a fair budget, which is an important part of the debate.

The noble Lord, Lord Willoughby de Broke, asked what the UK got for its money from EU membership. In my opening remarks, I talked about the important way in which the European Union enabled our businesses to trade freely across Europe and allowed British people to move and work where they want. The European Union creates an area of freedom, security and justice in Europe; it supports Europe's poorer regions; and it delivers environmental improvements, to name but a few things.

Before I end, I return to a point raised by the noble Lord, Lord Kingsland, on foreign policy. One example of the importance of the EU being able to work together on areas of foreign policy is the EU common position on Burma. As regards peacekeeping, for example, I well remember when the European Union was asked to send peacekeepers to the Democratic Republic of Congo. The United Kingdom contributed to that peace mission, which was under the leadership of France. There are many areas where the EU can work collectively, but we are all agreed that there will be many areas in which national governments will want to retain control over their foreign policy. The two things are not mutually exclusive.

In conclusion, I want to reiterate what I said at the beginning. European citizens have voiced their concerns, which European leaders will need to listen to and address. It is therefore right that the European Council recommended a period of reflection to enable a broad debate to take place. It is an opportunity to reconnect citizens with Europe. We have a clear interest in shaping that debate and in leading reform in Europe, and that is what this Government intend to do.

On Question, Motion agreed to.