DON'T LET EUROPE RUIN IT

James Hanson sees the Social Chapter and,

still more, the single currency as threats to our economic recovery

IF THERE is any topic on which we need to go back to basics, it is Europe. As we approach the next millennium, what hap- pens on the subject of Europe is the most fundamental issue facing this country. We need to concentrate on the basics because in European matters it is easy to become entangled in thickets of Euro-babble and quickly lose sight of the wood for the trees. This is now happening even over the question of what our membership of the European Union means and what it meant When we voted for it in 1975. Is it not membership of a free trade area, a single market, as in the now discarded phrases Common Market' or 'European Econom- ic Community'? Or is it something far more political, leading in the end to a supranational European Federation, a United States of Europe, controlled and administered by a European Commission !n Brussels? The term 'European Union' is, of course, neatly and intentionally ambiguous between the two, though it is clear enough where those driving the Union are heading and what the change of nomenclature implies. British Europhiles are fond of claiming that the Treaty of Rome, on which we voted in theory in 1975, already encom- passed political goals alongside economic ones. Technically that may be right, even though at the time of our entry into Europe Edward Heath assured us that any fears that we would be sacrificing indepen- dence or sovereignty were 'completely unjustified'. In the 1975 referendum what We thought we were voting on was a com- mon market, to foster free trade among the member states, alongside general friendship and co-operation. We did not think we were voting on the creation of a European superstate or on closer political union. Had that been put to us in such terms in 1975, most of us would certainly have voted against it. Were such a proposi- tionto be put now, I am in no doubt that idea dea would be overwhelmingly rejected by the British electorate. While every country in Europe will have its own views on what Heath now calls _driving forward the European agenda', we in Britain have particular reasons for rejecting a United States of Europe. We have our own traditions, instincts and insti- tutions through which our freedoms have been won and protected over the centuries. These include representative democracy, the supremacy of Parliament, the separa- tion of powers between executive and legis- lature and the common law. Rule by Brussels would threaten all of this.

Even now Acts of Parliament can be overridden by Community law, as inter- preted by European judges, who are them- selves intent on the political goal of a united Europe. The European Parliament is in practice subservient to an unelected Commission, headed by failed national politicians who see their own future only in European integration. Brussels legisla- tion is driven by the prescriptivism of Napoleonic law and the corporatism of European social policy, rather than by British understanding of the freedom of the individual under the common law.

These concerns, though vital to our future as a nation and as a community, may seem abstract in the run-up to a gen- eral election. For most voters politics is about equally vital matters closer to home: law and order, jobs, health services, lower individual taxation and general prosperity. Here we touch on the nerve of our present debates on Europe and we find real differ- ences between our major political parties. These differences will become increasingly significant as we decide how to cast our votes in the forthcoming election.

As is becoming clearer day by day, com- pared to the rest of Europe the British economy is in a very healthy state. Since 1980 British productivity has grown twice as fast as that of France and Japan and three times that of Germany. Our econom- ic growth since 1993 has been 2.7 per cent annually compared to 1.1 per cent in Ger- many and 1.3 per cent in France. Even more striking is what is happening in employment. In December 1996 our unem- ployment rate was 6.7 per cent and falling. In Germany last month a massive surge upwards took its jobless total to what it was in 1933 when Hitler came to power. The German unemployment rate is now 12.2 per cent, similar to French and Italian levels.

Britain is currently attracting one third of all inward investment into Europe, includ- ing 40 per cent of that from Japan and North America and 50 per cent of that from Korea and Taiwan, and, significantly, more direct investment from Germany than anywhere else in the world. By con- trast, because of spiralling overheads and red tape, export of jobs is now common- place in Germany. Already half the staff of Bosch works abroad and in two years Siemens expects to be in the same position.

Two things are particularly striking about our current economic strength. The first is that, just as our recovery was getting under way in 1992, we left the ERM and the pound was allowed to find its natural level. By contrast, other European currencies, including the mark, have been kept uncom- petitive, resulting in deflation and the export of jobs. The second is that as a result of the opt-outs the Prime Minister secured at Maastricht, together with the absence of a minimum wage, employers here are not subject to the costs and rigidi- ties enforced in the rest of Europe. There the labour market is characterised by the classic combination of high regulation, high costs and high unemployment.

A single currency would be an infinitely worse restriction, removing from national parliaments certain key levers of economic control. A single European currency requires a common monetary policy and central con- trols on budget deficits. All right, a single currency would do away with the minor costs of currency exchange, but even on the inflat- ed estimate of the EU that would amount to no more than 0.4 per cent of GDP.

Against that, it would reinforce the vast differences in economic performance and potential which already exist in the differ- ent parts of Europe. It would also prevent individual countries from reacting indepen- dently and flexibly to the different changes in global economic conditions which affect their economies. It would be as if the extremes of stagnation and prosperity which already exist within a nation, such as between the north and south of Italy, were to be reproduced on a far larger scale throughout Europe, with individual govern- ments being unable to manage their cur- rencies and economies to offset the effects of these differences.

Doubtless there would then be massive increases in the already huge subsidies given to the underdeveloped regions of Europe. Whether government spending of this sort would actually mitigate the worst effects of the single currency is at best uncertain. As night follows day, though, what would certainly happen, as we already see in Italy, would be general resentment and calls for secession in the north and cor- ruption on an unprecedented scale in the south. Some small indication of the rows and pitfalls to come is given by the wrangle between Germany and Italy as to whether Italy should be allowed into the single cur- rency before it has even started. In Britain, both political parties are playing a waiting game on the single cur- rency. On the face of it, this is reasonable. Even if we have no ultimate intention of joining, it is crucial that we be involved in the negotiations. Whether we like it or not, what the rest of Europe decides will affect us, so it is better to be in there negotiating rather than taking our bat and ball home before the contest starts.

However, there are important differences beneath the surface between the major par- ties. We have a largely Eurosceptical Prime Minister and Cabinet who have made clear their opposition to any further moves towards a centralist Europe and who are committed to fighting for an enterprise Europe built on competitive nation states. By contrast, Tony Blair has been at pains to emphasise that under his leadership, this country would never be 'isolated or left behind in Europe'. Only last month he rejected the prospect of variable European integration, with some countries forging ahead and Britain outside. More recently still, we saw Robin Cook seriously enter- taining joining the EMU in 2002. What does all that mean? Simply more bland, meaningless statements. As recently as last November, Gordon Brown ignored dissen- sion in the Labour ranks equal to anything on the Government benches and pro- claimed Labour support for the single cur- rency, praising its benefits.

And when it comes to social legislation, Labour's support for Brussels is not support merely in principle. Last autumn the EU sought successfully to circumvent our Social Chapter opt-out, claiming that a maximum 48-hour week was part of the Health and Safety regulations. In this piece of chicanery it received full support from Robin Cook and Gordon Brown, the latter speaking of the right of an individual not to work more than 48 hours, unless there were certain exemptions; nothing there about the right of an individual to work more than 48 hours if he and his employer wanted it. Earlier Cook had stated that Labour is 'at home with' the European social model, which is hardly sur- prising since the model is inspired by the corporatist and collectivist thinking Labour itself, even in its new guise, still espouses.

Despite occasional soothing statements from its leader, new Labour would quickly sign up for the Social Chapter and the centralised European programmes suppos- edly aimed at helping 'the regions'. They would reintroduce the very employment market restrictions and interference which blame the fat cats.' have not only been dismantled over the last 17 years, but have brought about the basis of Britain's miraculously improved eco- nomic performance. And 'miraculous' is the word. After decades of being Europe's sick man, Britain's recovery now leads that of every European country.

In line with the dictates of the European Commission, Tony Blair and the Labour Party are prepared to renounce our veto on many issues. They claim to be contemplating majority voting only on regional, environ- mental, social and industrial policy, but few areas of life could not be covered by these headings. The veto would then effectively be undermined for the sake of not wishing to appear isolationist in Europe and also to usher in a raft of socialist policies by the back door. You have all the evidence. Labour MEPs consistently call for the removal of border controls within the EU, which would hamper efforts to combat crime and stop illegal immigration and imports. If the statements of the shadow Scottish Secretary, George Robertson, are a guide, subsidiarity to the Labour leadership means devolving to the regions much of what Brussels leaves us of our sovereigntY. In other words, power anywhere but in the nation state, which for centuries has been our bulwark against oppression and domi- nation. Small wonder then that Klaus Kinkel, Germany's foreign minister, closed 1996 with advice to the British electorate to vote Labour in 1997. Do we really want to take our election orders from Germany? John Major's Government is striving with great success to protect Britain's interests in Europe and it is vital for Mr Major to keep our negotiating position open as long as possible. Any future government, how- ever, must first arm itself with an electoral mandate to require changes in those parts of the treaties, such as the abuse of the Health and Safety provisions to regulate working times, which forbid us from pursu- ing economic policies which the European Commission does not judge to be in the Community's interests. It must also spell out its determination to reform the Euro- pean Court of Justice and to make sure that decisions taken on a national level are not subject to European law. Finally, make no mistake, our future does lie in membership of the European Union, If considered strictly as a trading commtuutY. We should, though, resist further erosion of our sovereignty, particularly that from the EU social legislation to which the present Labour opposition is committed or from the rules on which a single currency might be based. Our future definitely lies wall, Europe, but not exclusively. Being good Europeans is not inconsistent with continu- ing trading and diplomatic ties with other parts of the world, particularly those with whom we have traditionally been linked, the Commonwealth and the United States.

Lord Hanson is chairman of the multi- national Hanson plc.