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1991 - Mr Major’s Commons Statement on the European Community

Below is Mr Major's statement in the House of Commons on the European Community, give on Wednesday 20th November 1991.


PRIME MINISTER:

The Prime Minister (Mr. John Major) : I beg to move,

That this House, believing it is in Britain's interests to continue to be at the heart of the European Community and able to shape its future and that of Europe as a whole, endorses the constructive negotiating approach adopted by Her Majesty's Government in the Inter-Governmental Conferences on Economic and Monetary Union and on Political Union ; and urges them to work for an agreement at the forthcoming European Council at Maastricht which avoids the development of a federal Europe, enables this country to exert the greatest influence on the economic evolution of the Community while preserving the right of Parliament to decide at a future date whether to adopt a single currency, on issues of Community competence concentrates the development of action on those issues which cannot be handled more effectively at national level and, in particular, avoids intrusive Community measures in Social areas which are matters for national decision, develops a European security policy compatible with NATO and co-operation in foreign policy which safeguards this country's national interests, increases the accountability of the Commission, enhances the rule of law in the Community including improved implementation, enforcement and compliance with Community legislation, improves co-operation between European governments in the fight against drugs, terrorism and cross-border crime, and through these policies secures the long-term interests of the United Kingdom.

The European Council in Maastricht is set to decide issues which are crucial to the future of the European Community and to Britain's role as a leading member of it. This afternoon I would like to set out what is at stake, the parameters of what we can accept and also what we cannot accept. I shall deal, first, with a misconception that is held by some of our Community partners. They believe that Britain may argue hard against many of the proposals--object to them and protest--but that then we shall sign up to whatever is on offer at the 59th minute of the 11th hour. I urge them not to make that misjudgment; it would be fatal.

The Government want to reach an agreement at Maastricht. We are negotiating for one. There is still some way to go and I hope that we will be successful, but it may be that a deal is genuinely unobtainable. If we do not reach an agreement, it will be a setback. So it must not be through misunderstanding, or misjudgment, and certainly not through bad faith. Therefore, this afternoon I will make our position clear.

For historical, geographical and political reasons, the issue of membership of the European Community has been more controversial in Britain perhaps than in any other member state. We joined the Community late, and we joined a Community whose rules were drawn up by the original members and not by us. The structure of the Community's budget meant that only two countries-- Britain and Germany--were net contributors. The common agricultural policy was designed to benefit those countries with small and often inefficient farmers. It took time, effort and controversy to redress some of those imbalances. My right hon. Friend the Member for Finchley (Mrs. Thatcher) secured a more equitable budget arrangement, and now we have started on the reform of the common agricultural policy. Those issues have often obscured the benefits to Britain of the European Community. The first and perhaps overriding benefit is the contribution which the Community has made to democracy, stability and prosperity in post-war Europe. The Community is unique in having its own framework of law that is binding on member states. That framework of law is changing, not least to enable us to create the world's largest single market. Prior to the Single European Act, we were at a disadvantage. Britain had removed most of the barriers which stood in the way of countries wanting to export to us, but the reverse in no sense was the case. We often faced barriers to the export of our goods to other Community countries.

It is because of our membership of the Community that Nissan cars, made in Sunderland, can be sold freely in continental Europe. Seventy-five per cent. of the Sunderland factory's production went for export last year.

It is because of Community law that we shall be able to sell our financial, banking and insurance services freely throughout the Community. It is thanks to the collective strength of the Community that we can negotiate a good deal for Britain in international trade negotiations with the United States and Japan.

Those are all positive advantages. They illustrate very clearly why the countries of the European Free Trade Association, none of them economic slouches, have just done a deal with the Community. That agreement gives them the benefits of the European single market. In exchange, they have had to accept our regulations and our standards without having any say in framing them. Most of them now want membership of the Community to give them that equal say in framing the Community's laws.

There are, in truth, only three ways of dealing with the Community : we can leave it, and no doubt we would survive, but we would be diminished in influence and in prosperity ; we can stay in it grudgingly, in which case others will lead it; or we can play a leading role in it, and that is the right policy. It does not mean accepting every idea that is marketed with a European label. It does mean trying to build the sort of Europe that we believe in, and I will turn specifically to that in the course of my remarks.

Mr. A. J. Beith (Berwick- upon-Tweed) rose --

The Prime Minister : If the hon. Gentleman will forgive me, I would like to make a little progress. I have much to say in order to cover the points in which the House will be interested.

At the Luxembourg European Council in June, draft texts on monetary union and political union were produced that had huge deficiencies but which did recognise many of our concerns. In September, a new Dutch text on political union appeared. That was quite unacceptable and we rejected it. It was withdrawn, and replaced a few days ago. These early texts have caused much alarm about proposals that this country would and could never have accepted.

I will turn first to the treaty articles on economic and monetary union. The treaty of Rome defines as its goal the achievement of "an ever closer union among the peoples of Europe."

In 1972, the Heads of Government of the Community--and of Britain, Ireland and Denmark, who were about to join--agreed the objective of the "progressive realisation of Economic and Monetary Union". That goal was enshrined in the preamble to the Single European Act, but these goals were never defined.

The treaty now before us envisages the realisation of economic and monetary union through the creation of a single European currency to replace the historic currencies and a European central bank to manage monetary policy.

In stage 1 the single market and single financial area will be completed; competition will be strengthened; capital movements liberalised ; and the greatest possible number of currencies will join the exchange rate mechanism of the European monetary system. The United Kingdom is fully committed to stage 1 which began on 1 July 1990. The substantive provisions of the treaty apply to the second and third stages of economic and monetary union. It is here that we begin to run into the areas of greatest difficulty and controversy in much of the negotiation before us.

In the second stage, the text proposes to establish a European monetary institute, essentially the present meeting of European central bank governors under another name. Its task would be to strengthen the co-operation between the member states' central banks and to promote the co-ordination of monetary policy. In stage 2, the European currency unit would be developed and hardened. During the whole of this period, monetary policy would remain entirely in the hands of member states. The European monetary institute would have a consultative and advisory role, and that alone.

The present stage envisages that, before the end of 1996, the member states of the Community would take stock, in the Economic and Finance Council and in the European Council, and reach a decision as to whether to move to the final stage of economic and monetary union. A crucial element in the decision whether or not to move to stage 3 would be the economic convergence of the member states. We were the first country to argue that convergence was vital before monetary union could even become a possibility. That view is now accepted by our partners. The latest text sets out strict convergence criteria on inflation, on interest rates, on successful membership of the narrow band of the exchange rate mechanism and on the avoidance of excessive budget deficits.

The Council of Ministers would decide who has met the conditions, and the European Council would decide unanimously whether or not the conditions were right for a move to stage 3. We believe that there should be at least eight member states ready to move to stage 3 before that step could be taken.

Our insistence that there should be no imposition of a single currency is well known : by that we mean that we cannot commit ourselves now to entry at a later date as a result of the treaty. We are therefore insisting that there must be a provision in the treaty giving us the right, quite separately from any European Council decision, to decide for ourselves whether or not to move to stage 3. That decision can be taken only by this House.

That means that, even if the requisite majority of member states decide to embrace full economic and monetary union with a single currency and a single central bank, Britain will not be obliged to do so. Whether to join- -not just when to join--will be matters of separate decision by Government and by Parliament. Nothing in the treaty that I sign will bind us now to the decision that we must take then. Nothing in the treaty that I sign now will bind us then, because at this stage we cannot know what the circumstances then will be and whether it will be in the economic interests of this country to take part.

Mr. Beith : Is not the Prime Minister now outlining a fourth option, which is that Britain remains a member of the European Community, but excludes itself from the development of the single currency, and thereby excludes itself from being the financial centre of Europe and from gaining the full advantages of membership?

The Prime Minister : Expressly not. I am outlining circumstances that mean that we would decide to join provided the circumstances were right and that the House thought it was right. We are not committing ourselves to joining now without knowing the circumstances, without knowing the conditions, and without knowing what economic chaos it might lead to.

Mr. Giles Radice (Durham, North) : Can the Prime Minister see any advantages for Britain in joining a European single currency?

The Prime Minister : I shall come to those points in a few moments.

Mr. Jim Sillars (Glasgow, Govan) rose --

The Prime Minister : I have given way twice already. I will give way to the hon. Gentleman later.

One of the most sensitive issues in this debate is the conduct of the United Kingdom's fiscal policy--the powers to tax, borrow and spend. It is common ground that excessive budget deficits should be avoided and that the absence of such deficits should be a convergence condition for moving to stage 3. It is also agreed that there should be no legally binding budget deficit ceilings and sanctions in stage 2.

For stage 2, the treaty would provide for a formal process whereby the ECOFIN council can, on the basis of a Commission report, examine any state's economic policy and budgetary position. If it finds a budget deficit to be excessive, it can make non-binding policy recommendations. While the arrangements for prompting a Commission report would be an innovation in the text, the other powers of examination and recommendation are not. The Council can do that now--and it does.

Mr. Terence L. Higgins (Worthing) : Does my right hon. Friend agree that the Dutch draft as it now stands says, in paragraph 1 of clause 104B, that countries "shall not"--I repeat, "shall not"--have an excessive budget deficit, which is then defined ? Clearly that wording needs to be amended.

The Prime Minister : I agree with my right hon. Friend. We have made it clear to our partners that we are still negotiating on that point and that we have not accepted that binding element in stage 2. As my right hon. Friend will see in a moment, we shall go further in terms of our position on binding deficits subsequently in stage 3. Where we part company from some other member states is on stage 3. The Dutch draft treaty provides the ECOFIN Council with legally binding powers, backed up by sanctions, to require a member state to reduce its deficit. We consider that there is no better sanction than the market, and we will continue so to argue in the intergovernmental conference.

There are some hon. Members who say--I respect the feeling behind this-- that the creation of a single currency and a European central bank should be blocked now. They believe that, if it is not, the pressures on us to join at a later stage will be irresistible. I am not of their view. It is true that, technically, we could block the adoption of an economic and monetary union treaty in its present form--that is, as an amendment to the treaty of Rome.

What we could not do is to prevent some or all of the other eleven member states making a separate treaty on their own outside the treaty of Rome. Those who argue that they would not do so are mistaken. They are as mistaken as those who said that, without Britain, the original Community would never happen, or that if it did, it would amount to nothing. I fear that I do not agree with hon. Members who take that view. I believe that they are wrong, and potentially damagingly wrong for the long-term interests of Britain.

Mr. Sillars : Will the Prime Minister give way?

The Prime Minister : No, if the hon. Gentleman will forgive me for a moment.

Therefore, I do not believe that it would be right to block the treaty on economic and monetary union, provided that it contains within it the conditions that could make such a union a success. Nor is it necessary to do so to safeguard our own interests. For the text gives this country the crucial provision that we need, which means that we can decide at a time of our own choosing whether to join or not.

Mr. Sillars : Let us imagine that we proceeded down the road that the Prime Minister describes. The other countries create a single currency, the ecu. This Parliament decides not to become involved. Would sterling then float free, or would it be forced to shadow the ecu? If it is forced to shadow the ecu, what is the point of remaining out?

The Prime Minister : That is one of the matters which have been discussed only in preliminary form. It is likely that sterling would have a relationship with the ecu, but that is not yet determined, because the treaty is not yet concluded. It is precisely for that reason that we are still negotiating both in ECOFIN and at the European Council.

If the convergence conditions set out in the draft treaty are not met, we would certainly not wish to be part of an economic and monetary union with a single currency. But if they are met, our successors may wish to take a different view. A single currency could be the means of safeguarding anti-inflationary policies for the whole of the European Community. That would be a great prize. But the House knows that there is a price to pay for that prize. The price is that it would take from national Governments the control of monetary policy. That would be a very significant political and economic step for Britain to take. We cannot take that step now, but nor should we exclude it.

We have in front of us not, as it has been described, an opt-out clause but a clause that we have secured which enables us to opt in--if we wish, when we wish, and in conditions that we judge to be right. I believe that we should keep open that option and not foreclose it now.

In many respects, the treaty on political union poses starker problems. We are committed under the treaty of Rome to

"ever closer union among the peoples of Europe".

Under the Single European Act, the member states of the Community agreed

"to transform relations as a whole among their states into a European union".

The purpose of the new treaty text is to define what political union means in practical, legal terms.

For many of our Community partners the definitions are not as important as they are for us. For many of them the diminution of the power of national Governments and national Parliaments is not an issue. They accept the idea of a European federation. We have never done so. When we joined, we accepted that Community law would take precedence over national law, but for that very reason we have always been concerned about the scope of Community law--precisely because it took precedence. In these negotiations, we have shown ourselves ready to discuss individual changes in the role of the Community where these are in the national interest, but we are not prepared to accept wholesale changes in the nature of the Community which would lead it towards an unacceptable dominance over our national life.

Mr. Tony Banks (Newham, North-West) : I am sure that the Prime Minister accepts that the Germans are as interested in their national interest as we are in ours. Why, then, does he believe that the Germans want to move so quickly towards a federal Europe?

The Prime Minister : The Germans have a different political history and structure from the one that we have in the House. It is for Germany to make its judgment. It is for the Government and this House to make the judgment that we believe is right for Britain. We should not be bound by what other countries think is right for them.

It is against that background that we approach the political union treaty with its implications for our national sovereignty. Unlike the provisions on economic and monetary union, these provisions can be adopted only if all 12 member states and their Parliaments agree. That safeguard is there to be used if it needs to be used. There are many definitions of what federation means, but to most people in this country the notion of a Federal Europe leads over time to a European Government and Parliament with full legislative powers, to which national Governments and Parliaments are subordinate. I do not believe that that is a road down which the country would wish to go. We will not therefore accept a treaty which describes the Community as having a federal vocation. Such a Community will not succeed.

Let me set out the main elements of the political union treaty, and our attitude to them. First of all is the treaty's structure. The first Dutch text in September brought all the elements of the treaty under a single structure--a unitary structure. That would have brought foreign policy, defence policy, interior policy and justice policy under the treaty of Rome and within the jurisdiction of the European Court of Justice. It would have been a massive stride towards a centralised federal structure.

Such a treaty may be popular with some of our European partners, but it is unthinkable for us. We made that clear, and those provisions have now been withdrawn.

The new treaty text would create what have become known as separate pillars. Some elements of our co-operation with our Community partners will come with the existing framework of Community law. Other elements of co-operation--notably on foreign and security policy, and against crime and terrorism--would be conducted on an intergovernmental basis. So, too, would co-operation in dealing with immigration and asylum. Those elements would be outside the treaty of Rome and outside the jurisdiction of the European Court of Justice. This means that there would be no supranational authority to adjudicate on the decisions taken by member states.

Those changes are welcome. The countries of the European Community would be able to co-operate within a legal framework, but the European Court would not be involved ; the Commission would not have the sole right to make proposals. Those changes represent a significant step forward towards practical, more flexible arrangements.

We began co-operation in foreign policy, security and defence on an intergovernmental treaty basis, and we did so as a result of the Single European Act. Co-operation in foreign policy with our partners in the Community is in the interests of this country. On most issues, we carry more clout collectively than we would alone. It has therefore been a successful policy.

Under the Single European Act, we strengthened our co-operation by introducing the concept of joint action. That will continue under the new treaty. The text proposes that joint action, once determined by consensus, would be binding on all member states. Decisions on what should constitute joint action would be taken by unanimity, but it is proposed that detailed decisions, putting a decision of principle into practice, would be taken by a majority of member states.

Sir Patrick Duffy (Sheffield, Attercliffe) : Will the right hon. Gentleman give way on that question?

The Prime Minister : I have not quite finished the point, if the hon. Gentleman will forgive me. He may not then wish to interrupt. I see merit in joint action and in that joint action being carried out by member states. For example, were we to take a decision, as 12 member states, to impose sanctions on a country, it would be damaging for one member state to abrogate those sanctions unilaterally. In most areas it would be in our interest to work for joint action, but we cannot allow the search for joint action to inhibit our right to take separate national decisions essential for the pursuit of our foreign policy. Where we can act together, we will do so. Where we need to act on our own, we must be free to do so. Even where joint action has been agreed, there must be provision for a member state to act separately and unilaterally if it decided that its vital interests required it to do so.

Mr. Robert Hughes (Aberdeen, North) rose--

The Prime Minister : The text proposes that majority voting should be used for implementing decisions. We see great difficulties in that proposal. What, for example, is the difference between a decision of principle taken by unanimity and an implementing decision to be taken by majority vote? None of our partners has yet found a satisfactory answer to that question.

Mr. Hughes rose--

The Prime Minister : That seems to be a recipe for muddle and confusion. The onus must be on those who want to change the existing arrangements to justify that change. Thus far they have not managed to do so.

Mr. Hughes rose --

The Prime Minister : If the hon. Gentleman will forgive me, I have declined to give way to him and I do not propose to change my mind. On defence, the position is clear. We have in NATO the means of our defence. At the recent summit, all the members of NATO were clear that we must do nothing to call in question the continuing American and Canadian presence in Europe. Europe should undoubtedly do more for its own defence, but we do not need to invent a new structure for that to happen. We need to develop a policy that is consistent with our existing obligations and arrangements through NATO and the Western European Union.

It is for that reason that Britain and Italy put forward proposals which would build up the WEU, not as the European alternative to NATO, but as the European pillar of NATO. We would establish close links between the WEU and the European Union. We can discuss security issues in the European Council, but we cannot accept a situation in which the European Community would effectively set up a competing security structure.

Mr. John Wilkinson (Ruislip-Northwood) rose --

The Prime Minister : I give way to my hon. Friend.

Hon. Members : Oh.

Mr. Wilkinson : May I say how much I welcome my right hon. Friend's announcement today that WEU is to be the European pillar of NATO, that we should fully contribute to WEU and to NATO, and that there should be no incompatibility between them? As he has dealt with many matters in detail, can he say what the aims and objectives of Her Majesty's Government will be at Maastricht?

The Prime Minister : I can certainly say to my hon. Friend-- [Interruption.]

Mr. Speaker : Order. The Prime Minister.

The Prime Minister : The Government's aims at Maastricht on that point are entirely clear. They are to build up the WEU and to ensure that it has an adequate relationship with NATO and the European Council but is not subordinate to either NATO or the European Council. That point was made perfectly clear after the NATO summit, and I am happy to reiterate it today.

Europe should undoubtedly do more for its own defence. It is for that reason that Britain and Italy put forward proposals which would build up the WEU substantially. We would establish close links between the WEU and the European Union, precisely as my hon. Friend expected me to indicate a moment ago. We can discuss security issues, but we cannot under any circumstances have any shred of subordination of the WEU to the European Council. There is no case for making the WEU subordinate to the European Council. We cannot and will not accept any treaty that contains such provisions.

Sir Patrick Duffy : The Prime Minister properly recognises that the British-Italian proposal satisfies the essential tests of complementarity and lack of duplication, and therefore is entirely compatible with NATO and the continued presence of the United States in Europe. He has not mentioned the competing Franco-German proposal. Is not that still on the European security agenda?

The Prime Minister : The Franco-German proposal suffered a considerable rebuff as a result of the meeting on NATO in Rome some time ago.

As I expressly said a moment ago, we cannot accept a treaty that requires the Western European Union to be subordinate to the European Council--that is the essential core element of the Franco-German paper. It follows, therefore, that we do not accept the provisions of that paper, but we do accept those of the Anglo-Italian paper, which would lead to the arrangements that I described to the House. We must not get into the habit of thinking that all European development has to take place through the European Community. I know that there are many in Europe who want to set everything in a Community legal framework, for fear that, if they do not, old nationalisms may reassert themselves, but that is not our view. We want to work more closely with our partners, but that co-operation does not always have to be in the same fixed framework. We have to find patterns of co-operation which work, and that may frequently be on an intergovernmental basis rather than in a full Community framework.

Mr. Tony Benn (Chesterfield) : May I ask an essential question with which the Prime Minister has not yet dealt? Even with the reservations that the right hon. Gentleman has set out, which will be studied with great care, the changes that he proposes are fundamental in character and will affect parliamentary democracy itself. Does not the right hon. Gentleman believe that partnership with Europe must be paralleled by partnership with the British people? He has placed much emphasis on the citizen's choice and the citizens charter--the people's right to hold accountable those who have power over them. Are not the British people entitled to give the final verdict on whatever emerges from Maastricht?

The Prime Minister : As I said at Question Time yesterday, I do not favour the idea of a referendum, which underlies the right hon. Gentleman's question. I do not favour referendums in a parliamentary democracy, despite the arguments that others have advanced. The role of the European Parliament is one of the most difficult issues in the development of the Community. There are widely differing views about it. Some believe that it should have the power to initiate legislation. We do not believe that. Many member states would like to give the European Parliament an effective power of co-decision, to make it an equal partner with the Council in determining Community law. We cannot agree to that. The Council of Ministers, whose members are answerable to their national Parliaments, must be the body which ultimately determines the Community's laws and policies. But the European Parliament is elected. From its inception it has had the power to block the budget, to sack the Commission, to propose amendments to Community legislation, and to give assent to certain international agreements. Its powers were increased by the Single European Act.

If we are to control the growth of Community law, it is essential that we have democratic control. National Parliaments, this Parliament in particular, have played a crucial role in that, and will continue to do so. I pay tribute to the Scrutiny Committee and the hon. Member for Newham, South (Mr. Spearing), who has chaired it with tireless skill. That work must continue.

Under the treaty of Rome, the European Commission has sole power of initiative for Community legislation. It also has certain independent powers--for example, supervising the implementation of Community law and initiating legal action against states thought to be in breach of it. Yet the Commission is unelected and largely unaccountable. The Government would like to see the European Parliament given a greater role in monitoring the Commission and in scrutinising its role as the implementing authority of Council decisions. The Parliament should have a greater role in auditing the Community's expenditure. We would be willing to see the Parliament's links with the citizens who elected it strengthened through the appointment of a Community ombudsman directly answerable to the Parliament. The European Parliament already has the power to dismiss the Commission. We are willing to see it take a greater role by approving the appointment of the Commission, although we do not think it right to give the Parliament the power of dismissing individual Commissioners. Those who favour the idea argue that it would lead to greater efficiency within the Commission. I am more inclined to believe that it would be likely to lead to a witch hunt against those Commissioners who carry out their duties without fear or favour.

Mr. Tam Dalyell (Linlithgow) : How would the Prime Minister envisage arbitration between a Government and the Commission on thorny problems such as additionality and RECHAR, which is affecting all our constituencies?

The Prime Minister : That is a matter for the Government to discuss bilaterally, not a matter to put in the treaty.

At an earlier stage, some member states were preparing to give the European Parliament far-reaching powers to impose its will on the Council of Ministers. We could not accept that, and we have secured radical changes that take us a long way from co-decision. The latest Dutch presidency text would give the European Parliament a more limited right to block certain Commission proposals once they had been adopted by the Council of Ministers. The Dutch presidency envisages applying this principally to those subjects to which majority voting was extended under the Single European Act. We are prepared to consider some blocking power for the European Parliament, but it must cover a far narrower range than that set out in the present Presidency text.

There is a tendency for the Community to want to legislate over a wide area. That tendency needs to be curbed [Hon. Members :-- "Hear, hear."] That is the essence of what has become known as subsidiarity. I am aware that different people view it in different ways, but what subsidiarity must mean is that, if a problem can be dealt with at national level, it should be. If it can be dealt with at international level only, it should be. At international level we must then decide whether a problem is best tackled by the Community--which means the Commission, the Council of Ministers, the European Parliament and the Court of Justice--or by co- operation between Governments. We are looking to enshrine that principle of subsidiarity in the treaty.

There are areas where Community law must apply. A single market can work only if there are common standards. We need to know that our goods can compete on equal terms when we export. We want to be confident that imports meet safety standards.

There is no point in one country having one standard of river pollution and another country another. Pollution of the Rhine is equally damaging to France and to Germany, not to mention other North sea states. Majority voting was introduced in this area under the Single European Act and it could be extended under the new treaty, but there must be limits to this action. Whether a town bypass goes to the east or to the west has nothing whatsoever to do with cross-frontier pollution or competition policy or any other aspect of the single market. Those are issues that should rightly be settled at national level.

So too are matters relating to industrial practice, union relations and wage bargaining. We will not agree to extensions of Community competence which have nothing to do with fair competition but which would undermine the hard-won ability of industry to compete. Some claim that such measures would be in the interests of the working people, but in truth, they would not. One example under existing competence is the working time directive. That would make it illegal to work for more than 48 hours a week. It would add £5 billion a year to the costs incurred by industry. It would cost jobs. It would interfere in the right of individuals to decide how long they work, and it would inhibit their ability to earn for themselves and their families. We certainly do not wish to extend competence in this area.

In health, it may be right for the Community to complement national programmes through co-operative research and collaborative health campaigns, but the basic provision of health care is a matter for the national Government. So too for education. It is right for the Community to ensure mutual recognition of qualifications; it should promote student exchange and language training; but it cannot have a place in determining national educational curricula.

Significant extensions of Community competence were agreed in the Single European Act. Other extensions have happened by a gradual process of accretion. It makes sense therefore to codify and ring-fence Community competence, but the Dutch text goes much further than is justified by any of the criteria I have set out. We shall therefore seek to curb the proposed extensions of Community competence either by cutting out some of the proposals altogether or by ensuring in other cases that decisions can be taken only by unanimity.

Our present system of frontier controls helps protect this country from not only crime but illegal immigration, drugs, and terrorism. It would be irresponsible to weaken our controls, and we are not prepared to do so, but in the fight against international crime we need the maximum international co-operation, exchange of information and joint action. The Twelve are considering the creation of a European version of Interpol to bring our co- operation together on a coherent basis. I welcome that proposal. It is a classic case for intergovernmental co-operation between the countries of the Community rather than for co-operation within the framework of Community law. It is an area where Governments, not the Commission, have expertise. I hope that Europol can be established at the European Council at Maastricht on an intergovernmental basis.

For an agreement to be reached at Maastricht, there will have to be give and take on all sides. I have set out for the House the most crucial points.

On EMU, there must be strict economic convergence, and a provision that will allow this country to decide whether, not just when, to join a single currency.

On political union, we must safeguard NATO and avoid the creation of competing European defence structures.

We will co-operate in foreign policy, but that co-operation must not interfere with our ability to take decisions on our own national interests.

We must include powers for the European Parliament that give it greater control over the Commission but do not allow the Parliament to become an equal of the Council in making policy for the Community.

We must constrain the extension of Community competence to those areas where Community action makes more sense than national action or action on a voluntary, intergovernmental basis.

The Community has been the motor force of Europe's post-war development. The aim from the beginning was to achieve far-reaching goals by down-to-earth means. The goals were democracy, prosperity and stability in Europe. The means were the creation of a single market in goods and services.

Mr. Gerald Bermingham (St. Helens, South) : Will the Prime Minister give way?

The Prime Minister : No.

Today, the Community is still the motor force for Europe's development, but there is more at stake in Maastricht than the legal text that we shall have before us. In recent months, we have seen tumultuous changes in our continent.

Mr. Cryer : Will the Prime Minister give way?

The Prime Minister : I shall not give way to the hon. Gentleman. At Maastricht in December, we shall shape the future of the Community. We must shape it in ways that will accommodate those wider European changes. Our overriding aim must remain democracy, stability and prosperity in Europe, but our responsibility is now wider than just to the existing members of the Community. It must also be to all the other European countries which are now returning to democracy for the first time in 50 years. Our door must be open to them. We must prepare for the day when the EFTA countries in the north of Europe and the new democracies in the east of Europe want to become part of the Community. When they are economically ready to join the Community, we must be ready to accept them; and we must tell them so now.

We can now plan for a European Community stretching north to the Baltic and east to the Urals--a Community that embraces the free market principles that are at the heart of the treaty of Rome. Such a Europe would be more than an economic entity. It would not only guarantee prosperity, but would underpin democracy. It would put an end to centuries of mistrust, suspicion and war. It would secure a lasting peace across the whole of our continent. I believe that that is a Europe worth building and worth making sacrifices for. That is the Europe for which I shall argue at Maastricht.

I commend that Europe and this motion to the House.

Mr. Neil Kinnock (Islwyn) : I beg to move, to leave out from "House" to the end of the Question and to add instead thereof : regrets that Her Majesty's Government's preoccupation with divisions in its own Party has meant that in the Inter-Governmental Conferences it has not taken the negotiating approach necessary to ensure that the United Kingdom exercises decisive influence on the future of the Community in ways which will help to advance the living and working standards of the people of this country in company with other peoples of Europe; calls upon Her Majesty's Government to work for an agreement at the European Council which ensures inclusion of the Social Charter, qualified majority voting on social and environmental matters, powers for the European Parliament to hold the Commission to account in ways that complement the role of national parliaments, decision-making at the level--local, regional, national or Community--where maximum democratic control is at all times exercised, foreign and security policy co-operation without the development of a European Community military role, widening of the Community as rapidly as practicable, co-operation to combat terrorism and other crime, and strengthened powers for ECOFIN as the politically responsible counterpart to any European Central Bank system ; and urges the Government to work to secure agreement to, and adopt policies for, high levels of employment, sustainable non-inflationary growth, balanced regional and national economic development and social cohesion, and for the fundamental reform of the CAP, in order to achieve real economic convergence in the years leading to economic and monetary union and a single currency as the essential foundation for those changes and to safeguard the long- term interests of the people of the United Kingdom.'.

The background to this debate, and clearly the cause of this debate, involves the great change--or different kinds of change--taking place across the continent of Europe and within the European Community. The basic question at issue in the debate is whether the United Kingdom is to be carried along in the wake of those changes or to be a driving force for change. It is essential that our country takes a lead. That is the only way to exert the decisive influence over the direction and nature of the economic, political and social development under way in Europe. The British people know that; they are well aware of the dangers of Britain being in a second division in Europe, and they do not want to be left behind.

The need for an active and positive approach to change is well understood by Governments in the rest of the Community. They recognise the reality of the economic interdependence that now exists and which will be intensified by the completion of the single market. As a result, they are determined to build on that interdependence by moving towards economic and monetary union. They are clear about their objectives; they know what they want. This Government most certainly are not clear.

"As so often in the past, our Government are stuck in the defensive mud. Grabbing a begrudged compromise here ; clutching an opt-out clause there. Devoting maximum diplomatic effort to dilution and delay. This is a dreary, demeaning and ultimately self-defeating posture. It is playing for a draw."

I am grateful to the Daily Mail for that accurate description of the Government's attitude. It is not good enough for our country to have a Government who are playing for a draw. It became clear as the Prime Minister's speech progressed that that is precisely the most that he is playing for.

The country cannot be properly served by a Government who pretend that they can somehow call a halt to or defer the agreed purpose of the rest of the Community. As the right hon. and learned Member for Surrey, East (Sir G. Howe) advised everyone in the Financial Times last week,

"There is nothing to prevent a group of countries pressing on with a separate Treaty The fact is that we cannot, even if we wished, stop the others going ahead."

The Government must face that reality and its implications squarely, but they have not. They must stop trying to persuade themselves or the country that some sort of semi-detached arrangement can be made that will serve Britain's interests--there is no such arrangement. Anyone who thinks there is should simply consider what our country's position would be if our neighbours and trading partners formed a monetary union and, even though economic convergence had been achieved, Britain stayed outside. The Prime Minister refused to answer that question, which was asked by the hon. Member for Glasgow, Govan (Mr. Sillars). The implications of the Government staying out of a union when they had decided, on the basis of convergence, to form one, are serious and potentially disastrous.

More immediately, before those years pass and there is any immediate prospect of monetary union, it must be recognised how vulnerable Britain would be if the Government's strategy were to avoid commitment to the process under way in the European Community. That is not a theoretical matter, but a practical issue. If a British Government continued, as a matter of policy, to stand apart from the process, would inward investors who need access to markets of the whole community think of locating in a semi-detached country? The Prime Minister referred to Nissan at Sunderland. Everyone in the House must want further inward investment and the development that comes with it. In the intervening period between Maastricht and the further stages, the Prime Minister and the Government must face the fact that, if they are standing apart, they will put a question mark over the prospect of further investment and further development.

Mr. Robert Adley (Christchurch) : The right hon. Gentleman spoke a short while ago of consistency and clarity. A few seconds ago, he mentioned inward investment and a Japanese company. I do not recall that that was always his keenest and most enthusiastic point. In 1972, when he and I were both in the House, I voted in favour of the European Communities Bill, as it then was, and the right hon. Gentleman voted against it. In 1974, I opposed the referendum on Europe when he was in favour of it. Will the right hon. Gentleman give the House one example-- [Interruption.]

Mr. Speaker : Order. The hon. Gentleman is making an intervention, not a speech.

Mr. Adley : Will the Leader of the Opposition give the House one example of one major issue since 1970 to this very afternoon on which he has not changed his mind, purely for the electors' convenience, that relates to the European Community?

Mr. Kinnock : Immediately the hon. Gentleman and I entered the House --on the same day--I formed the view that he was a jerk, and I still hold that view.

Hon. Members : Withdraw!

Mr. Speaker : Order. Let us settle down. This is a very important debate that is being listened to outside the House. I am not sure--[Hon. Members :-- "Withdraw."]--whether "jerk" is an entirely parliamentary expression. I have heard worse things here. Perhaps the right hon. Gentleman will refine his reference to the hon. Gentleman.

Mr. Kinnock : The question to which the Government must respond--

Hon. Members : Withdraw.

Mr. Speaker : Order. This gives a very bad impression to those outside the House.

Mr. Ivor Stanbrook (Orpington) : On a point of order, Mr. Speaker. Is it in order to insult an hon. Member by calling him a jerk?

Mr. Speaker : I have just said that I think that "jerk" is not among the list of unparliamentary expressions but I asked the Leader of the Opposition to refine it. Perhaps he will now do so.

Mr. Kinnock : Thank you, Mr. Speaker.

The question that the Government must answer--[Hon. Members :-- "Withdraw."]--if they are to maintain their position-- [Interruption.] If the Tory party demonstrates its great nervousness by its attempts to disrupt, the whole country will form an accurate opinion-- [Interruption.]

Mr. Speaker : Order. Let the House settle down. I said to the Leader of the Opposition that "jerk" is not on the list of unparliamentary expressions but, bearing in mind the nature of this debate, it would help the House if he refined what he has said in the interests of good order.

Mr. Kinnock : I respect you, Mr. Speaker, and I respect the House. If the hon. Member for Christchurch (Mr. Adley) is offended, though I doubt it, I withdraw any offence.

The question that the Government must answer is whether, if they were to maintain their stand-back attitude and what they call their options, British investors--not simply inward investors--who want to sell their produce throughout the Community and the rest of Europe would give priority to investing and developing in Britain when they had every reason to believe that the Government were ever ready to withdraw from the European process. That is the real problem.

Mr. Terry Dicks (Hayes and Harlington) : Get on with it.

Mr. Kinnock : The hon. Gentleman has an incurable problem, so I cannot help him.

The Chancellor of the Exchequer (Mr. Norman Lamont) : The House will be grateful to the right hon. Gentleman, because he has been making a clear statement and drawing a clear distinction between the two sides of the House. May we take it from what he has said that he is saying definitely that he would be prepared at Maastricht to make an irrevocable commitment to a single currency? That is what he is saying.

Mr. Kinnock : I am coming to that precise point. It is interesting that the Chancellor should anticipate it, and I am sure that he will find the answer very satisfactory indeed. He will also discover that my desire-- indeed, my absolute commitment--to ensuring that the House has a proper decision to make at any stage of development in the EC is at least equal to his. [Interruption.]

Mr. Speaker : Order. Will Conservative Members now please settle down? The Prime Minister was heard in silence, and I expect the same courtesy to be extended to the Leader of the Opposition.

Mr. Kinnock : The problem of the Government demonstrating a commitment to the continuing process in the EC is highlighted by the so- called opt-out clause. I understand that the Prime Minister wants to call it the opt-in clause. That is an interesting literary distinction, but I do not think that it is much more than that. As there is no possibility of any Government in the Community, certainly no British Government and certainly no Labour Government, not referring to their Parliament for a mandate before taking a step into entering monetary union, the opt-out clause simply codifies what will happen in any case, I believe, in every single one of the European Community democracies.

If that clause was taken to be a definition of the Government's position and repeatedly referred to as an escape route, which appears to be the intention, it would fundamentally undermine confidence in the Government's commitment to the European process. It would be a deterrent to investment and a disincentive to industrial development. That is a matter of basic practical issues, of jobs and of prosperity. Opting out would mean losing out. That is not an issue for some distant day in 1996 or 1998.

Mr. Norman Lamont : I assure the right hon. Gentleman that what he has said is not correct. Other countries are prepared to give a commitment that they will move to a single currency without reference back to their domestic Parliaments. We are not prepared to do that, and that provision will not be in the treaty unless we ask for it. Is the right hon. Gentleman saying that he would give a commitment on any terms less than those that we are prepared to give? That is a question that he has not answered.

Mr. Kinnock : I would not be giving evidence of bad faith by looking for an opt-out clause--and the reason is that, unlike the Prime Minister, I do not have to try to patch my party together. The issue of the strength of the Government's commitment to the process is not one to be kept until 1996 or 1998, but must be faced by the Government now--not with devices to mollify the rival factions in the Conservative party, but with a determination to promote the opportunities for, and the living and working standards of, the people of this country.

Mr. John Butterfill (Bournemouth, West) : Will the right hon. Gentleman allow me to intervene?

Mr. Kinnock : No, I will not give way. There have been a few interventions.

The divisions in the Conservative party have already undermined the Government's position in their negotiations at the intergovernmental conferences. Every other Government in the European Community know that, for months past, the British Government's negotiating energies have been directed not at shaping the future of the Community but at papering over the cracks in the Tory party.

The Prime Minister must, even at this late date, put country before party. In the 20 negotiating days that remain before Maastricht, the Prime Minister must work for a treaty that will serve the best interests of Britain, and in doing so serve the wider interests of the Community. The right hon. Gentleman can do that by negotiating a more practical approach to the co-ordination of economic policies within the European Community.

Would it be right to conclude from the Prime Minister's remarks about the limitations on deficits that he completely rejects the 3 per cent. limit? Would it be right to conclude from his remarks also that in place of the stipulations that exist--which are much too rigid and impractical to be accepted--he would allow the co-ordination of deficits by the market? Would it not then be the case that the market would have a form of control-- indeed, sovereignty--that would not work to the advantage of the Community generally or of Britain specifically? It would be useful if the Prime Minister intervened to tell the House precisely what formula he had in mind for the limitation of fiscal deficits.

In a reply to me in July, the Prime Minister recognised that there was a need to achieve "flexibility" in responding to changing economic circumstances. Is that what he has been seeking to negotiate in the references that he made to the limitations on deficits? There is widespread interest in that aspect, and I am sorry that the Prime Minister does not take this opportunity to make clear what should be a very straightforward point.

The Prime Minister : I have done so already, expressly and explicitly, in my speech--as the right hon. Gentleman would know if he had listened.