Commons Sitting of 2 November 1989

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRAYERS
  PRIVATE BUSINESS
    INTERNATIONAL WESTMINSTER BANK BILL (By Order)
      ISLE OF WIGHT BILL (By Order)
        ST. GEORGE'S HILL, WEYBRIDGE, ESTATE BILL (By Order)
          HYTHE MARINA VILLAGE (SOUTHAMPTON) WAVESCREEN BILL (By Order)
            NEW SOUTHGATE CEMETERY AND CREMATORIUM LIMITED BILL ( By Order)
              CITY OF LONDON (SPITALFIELDS MARKET) BILL (By Order)
              Orders read for consideration of Lords amendments. To be considered on Thursday 9 November.
              CITY OF LONDON (SPITALFIELDS MARKET) BILL (By Order)
                BRITISH RAILWAYS (PENALTY FARES) BILL [Lords] (By Order)
                Order for further consideration, as amended, read. To be further considered on Thursday 9 November.
                BRITISH RAILWAYS (PENALTY FARES) BILL [Lords] (By Order)
                BUCKINGHAMSHIRE COUNTY COUNCIL BILL [Lords] (By Order)
                LONDON LOCAL AUTHORITIES BILL [Lords] (By Order)
                Orders for further consideration, as amended, read. To be further considered on Thursday 9 November at Seven o'clock.
                LONDON LOCAL AUTHORITIES BILL [Lords] (By Order)
                LONDON REGIONAL TRANSPORT (PENALTY FARES) BILL [Lords] (By Order)
                BRITISH RAILWAYS BILL ( By Order)
                BROMLEY LONDON BOROUGH COUNCIL (CRYSTAL PALACE) BILL (By Order)
                BIRMINGHAM CITY COUNCIL (No. 2) BILL ( By Order)
                Orders for consideration, as amended, read. To be considered on Thursday 9 November.
                BIRMINGHAM CITY COUNCIL (No. 2) BILL ( By Order)
                VALE OF GLAMORGAN (BARRY HARBOUR) BILL [Lords] ( By Order)
                CARDIFF BAY BARRAGE BILL [Lords] ( By Order)
                Orders for Second Reading read. To be read a Second time on Thursday 9 November.

  CARDIFF BAY BARRAGE BILL [Lords]
  Motion made,
  That the Promoters of the Cardiff Bay Barrage Bill [Lords] shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office of their intention to suspend further proceedings not later than the day before the close of the present Session and that all Fees due on the Bill up to that date be paid;
  That if the Bill is brought from the Lords in the next Session, the Agents for the Bill shall deposit in the Private Bill Office a declaration signed by them, stating that the Bill is the same, in every respect, as the Bill which was brought from the Lords in the present Session;
  That as soon as a certificate by one of the Clerks in the Private Bill Office, that such a declaration has been so deposited, has been laid upon the Table of the House, the Bill shall be deemed to have been read the first and shall be ordered to be read a second time;
  That the Petitions against the Bill presented in the present Session which stand referred to the Committee on the Bill shall stand referred to the Committee on the Bill in the next Session;
  That no Petitioners shall be heard before the Committee on the Bill, unless their Petition has been presented within the time limited within the present Session or deposited pursuant to paragraph (b) of Standing Order 126 relating to Private Business;
  That, in relation to the Bill, Standing Order 127 relating to Private Business shall have effect as if the words "under Standing Order 126 (Reference to committee of petitions against Bill)" were omitted;
  That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
  That these Orders be Standing Orders of the House. —[The Chairman of Ways and Means.]
  Hon. Members: Object.
  To be considered on Thursday 9 November.

  BIRMINGHAM CITY COUNCIL (No. 2) BILL
  Motion made,
  That the Promoters of the Birmingham City Council (No. 2) Bill shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office not later than the day before the close of the present Session of their intention to suspend further proceedings and that all Fees due on the Bill up to that date be paid;
  That on the fifth day on which the House sits in the next Session the Bill shall be presented to the House;
  That there shall be deposited with the Bill a declaration signed by the Agents for the Bill, stating that the Bill is the same, in every respect, as the Bill at the last stage of its proceedings in this House in the present Session;
  That the Bill shell be laid upon the Table of the House by one of the Clerks in the Private Bill Office on the next meeting of the House after the day on which the Bill has been presented and, when so laid, shall be read the first and second time (and shall be recorded in the Journal of this House as having been so read) and, having been amended by the Committee in the present session, shall be ordered to lie upon the Table;
  That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
  That these Orders be Standing Orders of the House. —[The Chairman of Ways and Means.]
  Hon. Members: Object.
  To be considered on Thursday 9 November.

  NOTTINGHAM PARK ESTATE BILL [Lords]
  Motion made,
  That the Promoters of the Nottingham Park Estate Bill [Lords] shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next

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  Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office no later than the day before the close of the present Session of their intention to suspend further proceedings and that all Fees due on the Bill up to that date be paid;
  That, if the Bill is brought from the Lords in the next Session, the Agent for the Bill shall deposit in the Private Bill Office a declaration signed by him, stating that the Bill is the same, in every respect, as the Bill which was brought from the Lords in the present Session;
  That, as soon as a certificate by one of the Clerks in the Private Bill Office, that such a declaration has been so deposited, has been laid upon the Table of the House, the Bill shall be read the first and second time and committed (and shall be recorded in the Journal of this House as having been so read and committed);
  That the Petitions relating to the Bill presented in the present Session which stand referred to the Committee on the Bill shall stand referred to the Committee on the Bill in the next Session;
  That no Petitioners shall be heard before the Committee on the Bill, unless their Petition has been presented within the time limited within the present Session or deposited pursuant to paragraph (b) of Standing Order 126 relating to Private Business;
  That, in relation to the Bill, standing Order 127 relating to Private Business shall have effect as if the words "under Standing Order 126 (Reference to committee of petitions against Bill)" were omitted;
  That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
  That these Orders be Standing Orders of the House. —[The Chairman of Ways and Means.]
  Hon. Members: Object.
  To be considered on Thursday 9 November at Seven o'clock.

  VALE OF GLAMORGAN (BARRY HARBOUR) BILL [Lords]
  Motion made,
  That the Promoters of the Vale of Glamorgan (Barry Harbour) Bill [Lords] shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office of their intention to suspend further proceedings not later than the day before the close of the present Session and that all Fees due on the Bill up to that date be paid;
  That if the Bill is brought from the Lords in the next Session, the Agents for the Bill shall deposit in the Private Bill Office a declaration signed by them, stating that the Bill is the same, in every respect, as the Bill which was brought from the Lords in the present Session;
  That as soon as a certificate by one of the Clerks in the Private Bill Office, that such a declaration has been so deposited, has been laid upon the Table of the House, the Bill shall be deemed to have been read the first and shall be ordered to be read a second time;
  That the Petitions against the Bill presented in the present Session which stand referred to the Committee on the Bill shall stand referred to the Committee on the Bill in the next Session;
  That no Petitioners shall be heard before the Committee on the Bill, unless their Petition has been presented within the time limited within the present Session or deposited pursuant to paragraph (b) of Standing Order 126 relating to Private Business;
  That, in relation to the Bill, Standing Order 127 relating to Private Business shall have effect as if the words "under Standing Order 126 (Reference to committee of petitions against Bill)" were omitted;
  That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
  That these Orders be Standing Orders of the House. —[The Chairman of Ways and Means.]
  Hon. Members: Object.
  To be considered on Thursday 9 November at Seven o'clock.

  BIRMINGHAM CITY COUNCIL (MISCELLANEOUS PROVISIONS) BILL [Lords]
  Motion made,
  That the Promoters of the Birmingham City Council (Miscellaneous Provisions) Bill [Lords] shall have leave, except as provided by these Orders, to suspend further proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office of their intention to suspend further proceedings not later than the day before the close of the present Session and that all Fees due on the Bill up to that date be paid;
  That, if the Bill is brought from the Lords in the next Session the Agent for the Bill shall deposit in the Private Bill Office a declaration, signed by him, stating that the Bill is the same, in every respect, as the Bill which was brought from the Lords in the present Session;
  That, as soon as a certificate by one of the Clerks in the Private Bill Office, that such a declaration has been so deposited, has been laid upon the Table of the House, the Bill shall be read the first time and referred to the Examiners of Petitions for Private Bills;
  That, notwithstanding the suspension of other proceedings on the Bill, Standing Order 171A(1) shall apply to the presenting of Petitions against the Bill brought from the Lords in the present Session and only Petitions presented under this Order shall be received as Petitions presented under Standing Order 171A(1).
  That any Petitions presented under the foregoing Order shall stand referred to the Committee on the Bill in the next Session;
  That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
  That these Orders be Standing Orders of the House. —[The Chairman of Ways and Means.]
  Hon. Members: Object.
  To be considered on Thursday 9 November at Seven o'clock.

  BRITISH RAILWAYS BILL
  Motion made,
  That the Promoters of the British Railways Bill shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office not later than the day before the close of the present Session of their intention to suspend further proceedings and that all Fees due on the Bill up to that date be paid;
  That on the fifth day on which the House sits in the next Session the Bill shall be presented to the House;
  That there shall be deposited with the Bill a declaration signed by the Agents for the Bill, stating that the Bill is the same, in every respect, as the Bill at the last stage of its proceedings in this House in the present Session;
  That the Bill shall be laid upon the Table of the House by one of the Clerks in the Private Bill Office on the next meeting of the House after the day on which the Bill has been presented and, when so laid, shall be read the first and second time (and shall be recorded in the Journal of this House as having been so read) and, having been amended by the Committee in the present Session, shall be ordered to lie upon the Table;
  That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
  That these Orders be Standing Orders of the House. —[The Chairman of Ways and Means.]
  Hon. Members: Object.
  To be considered on Thursday 9 November at Seven o'clock.

  BROMLEY LONDON BOROUGH COUNCIL (CRYSTAL PALACE) BILL
  Motion made,
  That the Promoters of the Bromley London Borough Council (Crystal Palace) Bill shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office not later than the day before the close of the present Session of their intention to suspend further proceedings and that all Fees due on the bill up to that date be paid;
  That on the fifth day on which the House sits in the next Session the Bill shall be presented to the House;
  That there shall be deposited with the Bill a declaration signed by the Agents for the Bill, stating that the Bill is the same in every respect, as the Bill at the last stage of its proceedings in this House in the present Session;
  That the Bill shall be laid upon the Table of the House by one of the Clerks in the Private Bill Office on the next meeting of the House after the day on which the Bill has been presented and, when so laid, shall be read the first and second time (and shall be recorded in the Journal of this House as having been so read) and, having been amended by the Committee in the present Session, shall be ordered to lie upon the Table;
  That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which the Fees have already been incurred during the present Session;
  That these Orders be Standing Orders of the House. —[The Chairman of Ways and Means.]
  Hon. Members: Object.
  To be considered on Thursday 9 November at Seven o'clock.

  GREATER MANCHESTER (LIGHT RAPID TRANSIT SYSTEM) (No. 3) BILL [Lords]
  Motion made,
  That the Promoters of the Greater Manchester (Light Rapid Transit System) (No. 3) Bill [Lords] shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office of their intention to suspend further proceedings not later than the day before the close of the present Session and that all Fees due on the Bill up to that date be paid;
  That if the Bill is brought from the Lords in the next Session, the Agents for the Bill shall deposit in the Private Bill Office a declaration, signed by them, stating that the Bill is the same, in every respect, as the Bill which was brought from the Lords in the present Session;
  That as soon as a certificate by one of the Clerks in the Private Bill Office that such a declaration had been so deposited has been laid upon the Table of the House, the Bill shall be deemed to have been read the first time and referred to the Examiners of Petitions for Private Bills;
  That, no petitions against the Bill having been presented within the time limited within the present Session, no Petitioners shall be heard before any committee on the Bill save those who complain of any amendment as proposed in the filled up Bill or of any matter which arises during the progress of the Bill before the committee;
  That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
  That these Orders be Standing Orders of the House. —[The Chairman of Ways and Means.]
  Hon. Members: Object.
  To be considered on Thursday 9 November at Seven o'clock.

  MEDWAY TUNNEL BILL [Lords]
  Motion made,
  That the Promoters of the Medway Tunnel Bill [Lords] shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office of their intention to suspend further proceedings not later than the day before the close of the present Session and that all Fees due on the Bill up to that date be paid;
  That if the Bill is brought from the Lords in the next Session, the Agents for the Bill shall deposit in the Private Bill Office a declaration, signed by them, stating that the Bill is the same in every respect, as the Bill which was brought from the Lords in the present Session;
  That as soon as a certificate by one of the Clerks in the Private Bill Office, that such a declaration has been so deposited, has been laid upon the Table of the House, the Bill shall be deemed to have been read the first and shall be ordered to be read a second time.
  That the Petitions against the Bill presented in the present Session which stand referred to the Committee on the Bill shall stand referred to the Committee on the Bill in the next Session;
  That no Petitioners shall be heard before the Committee on the Bill, unless their Petition has been presented within the time limited within the present Session or deposited pursuant to paragraph (b) of Standing Order 126 relating to Private Business;
  That, in relation to the Bill, Standing Order 127 relating to Private Business shall have effect as if the words "under Standing Order 126 (Reference to committee of petitions against Bill)" were omitted;
  That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
  That these Orders be Standing Orders of the House. —[The Chairman of Ways and Means.]
  To be considered on Thursday 9 November at Seven o'clock.

  CITY OF LONDON (VARIOUS POWERS) BILL
  That the Promoters of the City of London (Various Powers) Bill shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office not later than the day before the close of the present Session of their intention to suspend further proceedings and that all Fees due on the Bill up to that date be paid;
  That on the fifth day on which the House sits in the next Session the Bill shall be presented to the House;
  That there shall be deposited with the Bill a declaration signed by the Agents for the Bill, stating that the Bill is the same, in every respect, as the Bill at the last stage of its proceedings in this House in the present Session;
  That the Bill shall be laid upon the Table of the House by one of the Clerks in the Private Bill Office on the next meeting of the House after the day on which the Bill has been presented and, when so laid, shall be read the first and second time (and shall be recorded in the Journal of this House as having been so read) and, having been amended by the Committee in the present Session, shall be ordered to lie upon the Table;
  That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
  That these Orders be Standing Orders of the House. —[The Chairman of Ways and Means.]
  To be considered on Thursday 9 November at Seven o'clock.

Oral Answers to Questions
Mr. Pat Wall: On a point of order, Mr. Speaker. It is rare that I table questions to the Secretary of State for Northern Ireland, but today I drew Question No. 13 in the ballot. I returned to my office 15 minutes ago to find an orange removal crate, on top of which was a black dispatch box marked Northern Ireland. I wonder whether this is normal procedure when one tables a Northern Ireland question or whether it happens only when one draws the unlucky No. 13.
Mr. Speaker: Let us see if we can get to Question No. 13 and find out.

Oral Answers to Questions
  NORTHERN IRELAND

    Irish Foreign Minister
    Mr. Parry: To ask the Secretary of State for Northern Ireland when he next expects to meet the Irish Foreign Secretary to discuss the situation in Northern Ireland.
    The Secretary of State for Northern Ireland (Mr. Peter Brooke): The next meeting of the intergovernmental conference is likely to take place later this month.
    Mr. Parry: When the Secretary of State next meets the Irish Foreign Minister, no doubt the subject of the Guildford Four will be raised. That may also raise the question of the Birmingham Six. Will the right hon. Gentleman ask the Home Secretary to set up an urgent review of that case, particularly in view of the "World in Action" programme last Wednesday?
    Mr. Brooke: When the conference last met, the Irish Foreign Minister raised the matter that the hon. Gentleman mentioned. We agreed that it was not natural business within the conference, but I gave an undertaking that I would bring it to the attention of my right hon. Friend the Home Secretary.
    Mr. Kilfedder: Does my right hon. Friend agree that hostility between the Irish Republic and the United Kingdom largely benefits terrorists, who use it as an excuse for further atrocities and as a means of recruitment to the terrorist cause? When my right hon. Friend next meets the Irish Foreign Minister, will he tell him that wholesale criticism of the security forces in Northern Ireland only gives joy to terrorists in Northern Ireland and hinders reconciliation between its people?
    Mr. Brooke: I entirely take the point made by the hon. Member. The Irish Foreign Minister does not engage in wholesale condemnation. He has expressed to me his praise for the courage of the Ulster Defence Regiment, and we both agree that nothing should be said which gives comfort to the terrorists.
    Mr. Molyneaux: I hope that the Secretary of State will persuade Mr. Collins to endorse the view set out on 9 May this year by a former Secretary of State for Northern Ireland, now the Foreign Secretary, when he said of terrorists:
    "They are professional killers. …. No political solution will cope with that. They just have to be extirpated".
    On a day when we have all been greatly saddened by the
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    pictures of the funeral of the young airman and his baby daughter, would it not be appropriate for the right hon. Gentleman to give an assurance that there has been and will be no change in the position set out by his right hon. Friend? Does he agree that it is vital that that assurance is given today in view of certain ugly reports which were circulating this morning in Belfast?
    Mr. Brooke: I gladly give the assurance that I am at one with my right hon. Friend the present Foreign Secretary on that matter.
    Mr. Peter Robinson: When the Secretary of State next speaks to the Irish Foreign Secretary, will he inform him of the steps taken by the Government to appease the Irish Republic in relation to photomontages of suspects? What measures are available to members of the security forces to identify quickly those who might want to kill them and other people?
    Mr. Brooke: Notice of the subject that the hon. Member has raised was given some little time ago, and it has therefore been the subject of discussion between us. It remains the case that those going out on patrol go out armed with knowledge in terms of the photomontages of which the hon. Member speaks.
    Mr. Mallon: Can the Secretary of State inform the House what firm decisions have been taken by the Anglo-Irish conference to promote cross-border economic co-operation? What efforts have been made by both Governments, working through the conference, to maximise EC funding, especially from the EC structural fund?
    Mr. Brooke: At the last meeting of the conference, the Irish side and our side specifically discussed that matter. A working party of officials on both sides of the border is working for exactly the purposes that the hon. Member mentions.
    Mr. Leigh: When my right hon. Friend next meets the Irish Foreign Secretary, will the two of them reflect that no newspaper image could have been so poignant as the pictures published today of a tiny coffin being carried in dignity from an RAF plane? Will they conclude that the only victim of such mindless terrorism is innocence and not national resolve, and will they redouble their efforts to co-operate to defeat terrorism?
    Mr. Brooke: Everyone in the House must have been moved by those pictures. As I said, I hope that among those who support the terrorists there are those who ask themselves whether their aims can ever be justified by the murder of a baby in that way.
    Mr. McNamara: I welcome the right hon. Gentleman to his first Question Time as Secretary of State. The issue of the administration of justice is continually raised at the intergovernmental meetings. At the last meeting, the role of the UDR was discussed and the question of the Guildford Four was raised. Can the Secretary of State inform the House whether, at the next meeting, he will discuss the case of the four members of the UDR known as the Armagh Four, the circumstances of whose convictions have raised considerable concern and doubt on both sides of the border and in both communities? Will

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    the right hon. Gentleman announce that he is setting up a separate, independent investigation to examine the soundness of their convictions?
    Mr. Brooke: As I said in answer to the hon. Member for Liverpool, Riverside (Mr. Parry), that issue is not specifically one for the conference, but of course it may well arise within it. I have said that I am happy to look at new evidence or new factors put to me which might lead to the matter being referred to the Court of Appeal. I thank the hon. Gentleman for his kind words in welcoming me.

    Short Brothers
    Mr. Cran: To ask the Secretary of State for Northern Ireland whether the transaction for the acquisition of Short Brothers plc by Bombardier of Canada has been completed; and if he will make a statement.
    Mr. Colvin: To ask the Secretary of State for Northern Ireland what plans he has to meet the chairman of Bombardier; and if he will make a statement.
    The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Richard Needham): My right hon. Friend the Secretary of State met M. Laurent Beaudoin, the chairman of Bombardier, on 4 October 1989 when he visited Short's to mark the completion of the sale of Short's to Bombardier. There are no plans for a further meeting with the chairman in the near future.
    Mr. Cran: My hon. Friend will be aware that before privatisation of Short's the Government placed high priority on the company's long-term future. What steps are being taken to ensure that priority is upheld? To what extent is Bombardier investing in Short's? If that information is regarded as commercially sensitive, why is that so?
    Mr. Needham: I do not think that it is regarded as particularly sensitive. The total sum that the Government put into the Short's-Bombardier takeover was £750 million, and Bombardier put forward an additional £30 million. Bombardier, together with Short's, now represents perhaps the best hope for the aerospace industry in Northern Ireland and in Europe in the 1990s. Bombardier has brought a considerable amount of work to Short's with its new regional jet and will continue to bring more work to Northern Ireland. We have obtained guarantees from Bombardier that it will stay in Northern Ireland and that work will continue there. This marriage must be the possible news for Short's and it must give immense confidence to the people of Belfast to see Short's on such a sound and potentially prosperous footing.
    Mr. Colvin: Will my hon. Friend acknowledge that Short Brothers has been undercapitalised historically and that the welcome merger with Bombardier will provide its highly skilled work force with the tools to get on with the job of making the world's finest aerospace products? Does he accept that Bombardier's interest in Northern Ireland demonstrates the enormous advantages that both the Province and his Department can provide for inward investors to the United Kingdom who seek a springboard in Europe post-1992?
    Mr. Needham: I agree entirely with my hon. Friend. An enormous debt has been hanging over Short's and has led
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    to enormous interest problems for a long time. The fact that the Government were prepared to invest such a vast sum illustrates their confidence in the future of Bombardier-Short's. I recently visited the company and saw its work, which is at the forefront of technology. The activities not only of Short's, but of Harland and Wolff and STC in Belfast should give real encouragement for the future. Not every hon. Member realises how fast Belfast is changing for the better.
    Mr. A. Cecil Walker: What price was obtained by the Industrial Development Board for the Lear Fan factory and what was the price for which it was subsequently sold to Short's-Bombardier? Will the Minister provide grant aid for the new purchase price?
    Mr. Needham: The IDB sold the Lear Fan factory to Wilson's for £650,000. The sum paid by Bombardier-Short's to SRC Composites was £1·1 million and there was no grant aid from the IDB as part of the price.

    Government
    Rev. Martin Smyth: To ask the Secretary of State for Northern Ireland if he will make a statement about his plans to increase accountability and democracy of government in Northern Ireland.
    Mr. Brooke: I should like to see substantial responsibilities devolved to elected representatives of the people of Northern Ireland. Progress depends on the willingness of local politicians to talk and work together.
    Rev. Martin Smyth: Will the Secretary of State be announcing any plans in the light of the Government's intention that care for the disabled should be provided in the community? Will there be an extension of powers, perhaps to directly elected local health boards, or does he intend to restore such powers to local government?
    Mr. Brooke: Conversations have been going on in Northern Ireland about whether there are further powers which might be distributed to local government. However, the hon. Gentleman asks a rather larger question.
    Mr. Riddick: To reassure the people of Northern Ireland that power resides wholly in the hands of the Northern Ireland Office, will my right hon. Friend reassure the House that if any changes are made in the structure or role of the Ulster Defence Regiment, those decisions will be taken after discussions within and between the Northern Ireland Office, the Ministry of Defence and the Cabinet, and that such decisions will not be taken as a result of pressure from the Dublin Government?
    Mr. Brooke: I do not think that that question is exactly attached to the issue of devolution, but I am grateful to my hon. Friend for making that observation, which I have noted.
    Mr. McGrady: Will the Secretary of State join me in congratulating those local government officials and councillors who succeeded in attracting to Newcastle, County Down yesterday the United Kingdom tourist convention, which was devoted to the promotion of tourism and, therefore, of job creation in Northern Ireland? Will the Secretary of State equally condemn the action of certain small-minded Unionist councillors who withdrew from that seminar and who added insult to

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    injury for his ministerial colleague, the Parliamentary Under-Secretary of State for Northern Ireland, the hon. Member for Wiltshire, North (Mr. Needham)? Does he agree that that action was detrimental to the promotion of tourism and jobs in Northern Ireland?
    Mr. Brooke: We live in a free society and it is up to individual councillors to decide their own actions. However, I am not sure that tourism has been advanced by the action that they took.
    Rev. William McCrea: Does the Secretary of State accept that the vast majority of people in Northern Ireland desire to have a devolved Government in Northern Ireland and that the present direct rule is wholly unacceptable and undemocratic? Although the Secretary of State has said that he is waiting for others, perhaps he will tell us what steps he is taking to bring devolution to the Province.
    Mr. Brooke: When I became Secretary of State, I invited the leaders of the political parties in Northern Ireland to tell me how they saw matters. All of them accepted that invitation, so I had the opportunity to talk to all of them. As they have all indicated that they are prepared to talk further, I envisage that we shall soon be having a second round of talks.

    Community Workshops
    Mr. Beggs: To ask the Secretary of State for Northern Ireland if he will make a statement on the future of community workshops in Northern Ireland.
    Mr. Needham: New arrangements for the funding and delivery of the youth training programme are being introduced in the year commencing April 1990 which are designed to enhance the quality of training and the cost-effectiveness of the programme. Community workshops will be included within the programme, provided that they meet the standards and criteria for which the arrangements provide.
    Mr. Beggs: Will the Minister acknowledge the excellence of training provided in many workshops in Northern Ireland? Will he accept that that training has helped many young people to gain qualifications and, ultimately, employment? Will he acknowledge that considerable alarm is felt by those who manage the workshops as a result of the haste with which the changes in block funding are being introduced? I appeal to the Minister to consider deferring for one year the implementation of his Department's proposals on block funding to enable his officials to do their homework properly and to enable those who manage the workshops to plan and arrange for a successful transition.
    Mr. Needham: I acknowledge that many of the workshops have done good work in training young people in Northern Ireland. It is because we want to ensure that that quality is provided in all workshops that we have introduced the proposals. As the hon. Gentleman is aware, we have appointed management consultants to help the workshops and the providers of training through this period and I am perfectly happy to talk to those involved in the workshops about the proposals. Nevertheless, it is important that we introduce into the workshops a system puts more emphasis on qualifications, that we incorporate a bigger competitive element than we have at present and,
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    most importantly, that we achieve greater involvement of employers. I do not want to go back on the time scale that I have set, but I am, of course, happy to talk to the providers.

    Dog Licences
    Mr. Andrew F. Bennett: To ask the Secretary of State for Northern Ireland if he will make a statement about the system of dog licences in Northern Ireland.
    The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Peter Bottomley): District councils license dogs.
    Mr. Bennett: Does the Minister agree that the system in Northern Ireland has been working very well and has been encouraging responsible dog-ownership and discouraging irresponsible dog-ownership? Will he recommend that Ministers responsible for the mainland of the United Kingdom introduce that system throughout to the whole of the United Kingdom instead of simply having it in Northern Ireland?
    Mr. Bottomley: I brought the Minister responsible for rottweilers to Northern Ireland to consider that system and other things, but she was moved and became Minister for Health. My right hon. Friend the Secretary of State for the Environment will be able to see the information about the experience in Northern Ireland. However, the system there is not necessarily applicable here.

    Local Government
    Mr. Gow: To ask the Secretary of State for Northern Ireland whether he has any proposals to re-establish local government in Northern Ireland on a basis close to that of local government in the remainder of the United Kingdom.
    The Parliamentary Under-Secretary of State for Northern Ireland (Dr. Brian Mawhinney): We have no current plans for changes to the existing structure of local government in Northern Ireland.
    Mr. Gow: Does my hon. Friend recall the commitment given in the 1979 Conservative party manifesto which stated that in the absence of devolved government we would seek to set up a regional council in Northern Ireland? Why has that commitment been abandoned, and why does my hon. Friend continue to withhold from the people of Northern Ireland the inestimable benefits of the community charge?
    Dr. Mawhinney: The commitment has not been withdrawn. We have fought succeeding elections on a manifesto committing the Government, along with the other major constitutional political parties in Northern Ireland, to seeking a form of devolution for the Province. That remains our position.
    Mr. Maginnis: Does the Minister agree that he was somewhat inaccurate in his reply to the hon. Member for Eastbourne (Mr. Gow)? Has he not in fact changed the democratic structure of local government in the proposals for the composition of health boards after March 1990? Will he at least concede that if he goes ahead with that plan

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    the new health and social services councils will be accorded powers similar to those vested in Select Committees of this House?
    Dr. Mawhinney: It is and remains part of the Government's desire and intention to give the people of Northern Ireland a greater say in the decisions that affect their lives in a whole variety of ways. However, the hon. Gentleman's supplementary question does not follow from the original question.
    Mr. Bill Walker: Will my hon. Friend look again at the reply that he gave to our hon. Friend the Member for Eastbourne (Mr. Gow) about commitments to devolution? I recommend that my hon. Friend the Minister to read the statements made by our right hon. and learned Friend the Secretary of State for Scotland who has very clearly declared views about the instability which would result from any form of devolved government in any part of the unitary parliamentary system. The Minister should bear in mind the impact of his thoughts in Ulster on politics in Scotland.
    Dr. Mawhinney: I am aware of the strength of my hon. Friend's views because he has expressed them before at Northern Ireland Question Time. However, I must remind him that it is, and has been for a long time, part of the Government's policy and commitment to seek to have arrangements in Northern Ireland which command widespread support across the community and which give local people a greater say in the decisions which affect their lives.
    Mr. Ashdown: I congratulate the Secretary of State on his new appointment and wish him well in a very difficult and demanding post. Can the Under-Secretary of State assure the House that if the Government were to give thought to increasing the powers of local government, which would be very welcome, he would ensure that that would in no way jeopardise the Government's commitment to speedy implementation of devolution, which is the Government's publicly stated aim in the Anglo-Irish Agreement?
    Dr. Mawhinney: First, I am sure that my right hon. Friend the Secretary of State would wish me to express his appreciation of the right hon. Gentleman's kind words. In Northern Ireland we are seeking arrangements that command widespread support across the community. If any arrangements are introduced that do not command that support, they will not work. That is the Government's basic position. Nothing that might take place in future with respect to local government will get in the way of the Government's long-standing commitment to devolution, which predates the signing of the Anglo-Irish Agreement.

    Credit Unions
    Dr. Godman: To ask the Secretary of State for Northern Ireland how many credit unions have been established in each of the past 20 years; what is the approximate size of membership of each of these credit unions; and if he will make a statement.
    Mr. Needham: The information for the past 20 years is lengthy and I will write to the hon. Member. However, I can say that there are presently 113 credit unions operating
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    in Northern Ireland and their membership ranges in size from under 200 to over 12,000 with an average of approximately 1,200.
    Dr. Godman: Does the Minister agree that many of those credit unions have been established in communities characterised by high unemployment, poverty and debt? Surely the time has now arrived for the repeal of the infamous Payments for Debt (Emergency Provisions) Act 1971? As there is no comparable legislation in mainland Britain, is not Northern Ireland being discriminated against by the retention of the PDA?
    Mr. Needham: I do not agree. The Payments for Debt (Emergency Provisions) Act 1971 is important in being able to ensure that debt does not rise to totally unacceptable levels in Northern Ireland. However, I support the hon. Gentleman's view about credit unions, which play an excellent role in assisting those who are trying to save, in offering loans at low interest rates and so helping people to avoid getting into debt.

    Local Government
    Mr. Corbett: To ask the Secretary of State for Northern Ireland when he intends to issue a White Paper on local government in Northern Ireland.
    Mr. Peter Bottomley: The Government have no plans at present to issue a White Paper on local government in Northern Ireland. Any legislative proposals arising from the consultative paper on local government published last November will be issued in due course as a proposal for a draft Order in Council.
    Mr. Corbett: May I congratulate the Minister on succeeding where so many of his predecessors have come to grief? Where they brought discord, he has brought harmony among virtually all the chairmen of local authorities who are opposed to the privatisation of council services.
    Mr. Bottomley: The hon. Gentleman may do that, but he would be wrong to do so because I was not in post last November. What happens in the future will be determined by our actions and, no doubt, by local authorities.
    Mr. Clifford Forsythe: Will the Minister assure the House that, in any future local government proposals, he will drop the suggestion, made in the recent local government consultative paper, that the chief executive should act as a paid informer for local government? Will he assure the House of that, because it would be completely unacceptable to councils and will cause nothing but untold trouble in the council chamber?
    Mr. Bottomley: The proper reply to that is that the responses to the consultation are being considered. If the hon. Gentleman is suggesting that those who know that wrongdoing is going on should not declare it, I think that he and I are on different courses.
    Mr. Peter Robinson: Has the Minister noticed that several meetings have taken place at the invitation of the Lord Mayor of Belfast at which all the Northern Ireland parties in the House were represented? Is he aware that, at that meeting, there was unanimous opposition to the Government's proposals on privatisation and compulsory competitive tendering, and there was a fairly unanimous

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    view that some further powers should be given to local government, which presently has a consultative role? If the groundswell of opinion of parties represented in the House were that we should move in that direction, would the Minister include that in the new consultative document?
    Mr. Bottomley: My right hon. Friend the Secretary of State and my hon. Friend the Member for Peterborough (Dr. Mawhinney)—the Under-Secretary of State—have said that if various parties across the country can agree on things, that makes it far easier for the Government to consider the proposals that come forward. Most people look with interest at what the Lord Mayor has managed to achieve. I do not think that many others have brought that many people together in such a harmonious way, for a long time.
    Mr. Harry Barnes: In any plans for the change of local government in Northern Ireland, will the Minister consider developing plans that will fit in with devolved government there? If the Government are frightened of moving towards majority rule, will they protect the rights of minorities by producing a Bill of Rights?
    Mr. Bottomley: That question goes beyond my competence. Most of the things in the consultative paper, especially competitive tendering, which is slightly different from privatisation, can fit in with any form of local government responsibilities.

    Long-term Unemployment
    Ms. Armstrong: To ask the Secretary of State for Northern Ireland what has been the impact of the Social Security Order (1989) on the long-term unemployed.
    Mr. Needham: It is too early to assess the impact.
    Ms. Armstrong: I am sure that the Minister will know that the result of similar legislation in England has been difficult times and increased debt for the long-term unemployed. What will he do to ensure that the long-term unemployed in Northern Ireland do not suffer in a similar way?
    Mr. Needham: What we are trying to do for the long-term unemployed in Northern Ireland is find jobs for them. There are three legs to the stool of our proposals. I consider it entirely right for us to suggest that people may have to change their aspirations to find work. We all agree, however, that long-term unemployment inevitably leads to disillusionment and demoralisation, and that it is important to ensure that people move as quickly as they can to be assessed and to go on to the job training programme, Restart or ACE—action for community employment. I believe that those measures form a worthwhile part of our package.
    Mr. Colvin: How many of the long-term unemployed have been provided with work building the security fence around Short Brothers? Is my hon. Friend happy that the fence will provide the security that the company requires, following the break-ins earlier in the year?
    Mr. Needham: I have no idea how many are thus employed, but I am certain that security outside is crucial to secure jobs inside.
    Mr. Beggs: Does the Minister agree that the social security system should be in place to support families when
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    the head of household is prepared to take low-paid employment? Will he undertake to review the regulations that deny benefit to a person who takes a low-paid and initially temporary post because those regulations currently require the post to be permanent for a family to continue to receive income support?
    Mr. Needham: Family credit is a great help to the heads of families in such circumstances. Clearly, a temporary job must be treated in a way that goes along with the existing rules.
    Rev. William McCrea: Will the Minister tell the House whether it is true that the Government are considering the reintroduction of the old unemployment relief scheme to help the long-term unemployed in the Province?
    Mr. Needham: No, Sir.
    Ms. Mowlam: The Minister has just told us that it is too early for him to assess the impact of the Social Security Order (1989). May I tell him that it is not too early for the long-term unemployed in Northern Ireland? They are already feeling the impact.
    What measures will his Department use to assess the impact of the order? Surely he can let us know this afternoon how much money has been expended on loans since its introduction, compared with the amount spent on single payments before it was introduced.
    Mr. Needham: As the hon. Lady is well aware, the order deals with effects on the long-term unemployed. The reason why it is too early to assess its impact is that we have no knowledge of it at present. Let me repeat, however, that it is vital that the unemployed get back into Restart, ACE or some other form of training. The order offers them a spur, which is crucial to stop the demoralisation that long-term unemployment brings.

    New Legislation
    Mr. McCusker: To ask the Secretary of State for Northern Ireland if he will indicate the appoximate dates on which he proposes to introduce to Northern Ireland (a) the community charge, (b) the privatisation of water services and (c) the privatisation of the Northern Ireland electricity service.
    The Minister of State, Northern Ireland Office (Mr. John Cope): There are no present plans to introduce to Northern Ireland the community charge or the privatisation of water services. The Government propose to privatise Northern Ireland Electricity in the first half of 1992.
    Mr. McCusker: Why should the people of the most deserving region of the United Kingdom be denied the inestimable benefits of measures whose passage has been so hard fought over the past few years so that Scotsmen, Englishmen and Welshmen could gain from them? Why should the people of Northern Ireland be denied those benefits—if there are any benefits?
    Mr. Cope: There are certainly many benefits for Great Britain, but we recognise the differences in the Province. That is why the time scale is different. With respect to local government which we have already discussed this afternoon, only about 10 per cent. of the services that in

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    Great Britain are carried out through local government are currently carried out through local government in the Province.
    Mr. Jim Marshall: I am sure that the Minister will accept that fuel costs in the North of Ireland are among the most expensive in the United Kingdom. One of the consequences of privatising Northern Ireland Electricity will be a further price increase. If that is so, what action do the Government propose to reduce the impact of that privatisation on domestic budgets and on industrial costs?
    Mr. Cope: I must ask the hon. Gentleman to await the White Paper on this subject which is expected next year.

    Lear Fan Factory
    Mr. Wall: To ask the Secretary of State for Northern Ireland if he will give an account of the circumstances surrounding the disposal of the former Lear Fan factory.
    Mr. Needham: The Lear Fan factory was sold by the Industrial Development Board to F. G. Wilson Ltd. in 1988 to meet that company's expansion plans. Wilson, after deciding to expand elsewhere, sold the factory to SRC Composites Ltd. in spring 1989 for the manufacture of composite components. After the IDB refused financial assistance for this project, SRC sold the factory to Bombardier-Short's.
    Mr. Wall: Is the Minister not concerned that, in essence, the factory and its equipment were resold for three times the value placed on them by the Government and the receiver? Will he ensure that when factories and equipment are sold in future, there is a clawback clause so that the IDB can share in the profits that are made? Will I be allowed to make the same sort of profit when I sell the dispatch box back to the Minister?
    Mr. Needham: The original valuation carried out by the valuation and land office in Northern Ireland, which has great experience of industrial properties in Northern Ireland, valued the factory at £650,000, for which sum it was then sold to Wilson. As the hon. Gentleman knows, Wilson sold it, together with the autoclaves, jigs and tools that were later destroyed, for £3 million to SRC, which was one of the reasons why the Government had doubts about SRC. The factory was then sold by SRC for £1·1 million, which included additional amounts spent on it by SRC in the interim. In my judgment, that was a fair valuation. Of course, if it had been possible to see into the future and to realise that Bombardier-Short's would have the use of the factory and what was in it once it had merged, that would have been a good answer. However, we did not know it at the time. The sale was carried out according to a proper valuation on advice by the VLO and the receiver. I am perfectly happy about the way in which the contracts were decided.
    Mr. McNamara: For what reason did the IDB refuse to give grant support?
    Mr. Needham: The reason that we did not give grant support, as I wrote to the hon. Gentleman, was that having looked into the background of the company, we found, on advice from the Foreign and Commonwealth Office, that it was an Iraqi-backed company that may well have had connections with the making of ballistic missiles. Under
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    those circumstances, there was no question of the IDB giving support. I should have thought that the hon. Gentleman would congratulate the Government and the IDB on their precipience in finding that out.

    Kilroot Phase II
    Mr. Foulkes: To ask the Secretary of State for Northern Ireland if he will make a statement on progress in the development of Kilroot phase II.
    Mr. Needham: Northern Ireland Electricity has been authorised to proceed with the necessary preliminary work, but it has not yet been decided when construction should start.
    Mr. Foulkes: Is the Minister aware that there has been an exceptionally high increase in electricity sales by Northern Ireland Electricity? In view of that, when will the decision be made about funding the extension to Kilroot, which is vital not just for Northern Ireland, but for Ayrshire open-cast coal and the port of Ayr?
    Mr. Needham: I understand the hon. Gentleman's constituency interest in this subject. We must consider carefully whether we should fit flue gas desulphurisation at Kilroot II and whether we could have an interconnection with Scotland, which would benefit Scotland also. I need to ensure that we do not import Ayrshire coal only to send it back to Scotland as acid rain. I accept that Kilroot II is important. Preliminary planning work is continuing and I shall make an announcement on it as soon as I can.

    Education Reform
    Mr. Haynes: To ask the Secretary of State for Northern Ireland how many responses he has received on the consultation on the draft Education Reform (Northern Ireland) Order 1989.
    Mr. Dunnachie: To ask the Secretary of State for Northern Ireland how many responses were received in the consultation on the draft Education (Northern Ireland) Reform Order 1989.
    Dr. Mawhinney: One hundred and fifty.
    Mr. Haynes: Is the Minister aware that hon. Members on the mainland share the concern of hon. Members representing Northern Ireland about the problems associated with Northern Ireland? Outside the Education Reform (Northern Ireland) Order I would like to know whether the Minister shares my belief that there should be total integration of children in schools?
    Dr. Mawhinney: First, it is one of the sadnesses of the education reform proposals for Northern Ireland that the majority of hon. Members representing Northern Ireland have expressed no views on them during the consultation process. I hope that the hon. Gentleman will welcome the fact that the Order in Council is likely to include specific proposals to promote and to facilitate integrated education in Northern Ireland.
    Mr. Beggs: On a point of order, Mr. Speaker.
    Mr. Speaker: How can it arise out of that question?
    Mr. Beggs: The Minister, regrettably, has misled the House and others in Northern Ireland. As the spokesman for the Ulster Unionists I did correspond with him having—
    Mr. Speaker: Order. That is a continuation of Question Time.

  PRIME MINISTER

    Engagements
    Mr. Franks: To ask the Prime Minister if she will list her official engagements for Thursday 2 November.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting in the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in this House, I shall be having further meetings later today.
    Mr. Franks: Will my right hon. Friend confirm that she would not have a member of the Campaign for Nuclear Disarmament in her Cabinet and that the Conservative party is not in the business of perjuring and prostituting its principles and policies in the pursuit of power?
    The Prime Minister: I gladly confirm what my hon. Friend seeks. Nuclear deterrence is a fundamental part of our defence strategy and also of NATO's defence strategy. I notice that the Opposition refused to elect their official spokesman on defence to their shadow Cabinet and instead elected a member of CND—doubtless to keep the Leader of the Opposition company.
    Mr. Andrew Smith: To ask the Prime Minister if she will list her official engagements for Thursday 2 November.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Smith: Will the Prime Minister categorically deny that British military personnel have been involved in the Cambodian conflict through training forces now under the effective control of the bloodstained Pol Pot?
    The Prime Minister: We are totally and utterly against Pol Pot and we have given no help whatsoever to him.
    Dame Jill Knight: To ask the Prime Minister if she will list her official engagements for Thursday 2 November.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Dame Jill Knight: May I invite my right hon. Friend to use this opportunity to say a word of welcome for a document produced today —
    "An Evolutionary Approach to Economic and Monetary Union"?
    Does she agree with me that it contains a far better suggestion for closer economic and monetary co-operation in Europe than anything put forward so far by Mr. Delors?
    The Prime Minister: Yes, it is an excellent paper which shows that one can achieve closer economic and monetary co-operation much better and more rapidly by working with the grain of market forces than by setting up new bureaucratic and highly centralised institutions which are
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    not accountable to anyone. The paper honours the commitment which we gave at Madrid that we would put forward an alternative approach; this document is that alternative approach.
    Mr. Kinnock: To be fair to herself, will the Prime Minister tell us why she rejected the former Chancellor's proposal for an independent Bank of England?
    The Prime Minister: There is no change in the status of the Bank of England proposed at the moment. The main objective is to reduce inflation. That is the Government's task. We shall not abdicate responsibility for it.
    Mr. Kinnock: Will the Prime Minister confirm or deny the dependable report that she turned down this proposal because she felt that it would have been admitting defeat in the battle against inflation?
    The Prime Minister: No. It is the Government's job to get inflation down. That task we shall carry out ourselves. We shall not abdicate responsibility. It is not our system to place that responsibility on the Bank of England.
    Mr. Kinnock: When the man whom she described as brilliant and unassailable made this proposition, why did she turn it down? Will she tell us candidly?
    The Prime Minister: The matter was not widely discussed. It is not on the agenda. I wonder if it is on the right hon. Gentleman's agenda. Does he propose to pass responsibility to the Bank of England, which would require legislation and to which its constitution is so totally unsuited? Does he or does he not?
    Mr. Jacques Arnold: To ask the Prime Minister if she will list her official engagements for Thursday 2 November?
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Arnold: Does my right hon. Friend agree that the abolition of the national dock labour scheme has now been accepted by everyone in the port industry? Furthermore, has my right hon. Friend noted that in Gravesham a major wharf has already reopened, creating many dock workers jobs? In the light of that and other examples round the country, is it not the case that all who voted against the scheme's abolition should be thoroughly ashamed of themselves?
    The Prime Minister: Yes, the abolition of the dock labour scheme has been a great success and will be of particular advantage to those ports which were previously subject to it. They will be very much more prosperous now that they are not so restricted. We must congratulate my right hon. Friend the Secretary of State for Employment on the skilful way in which the legislation was introduced and passed through the House.
    Mr. Boateng: To ask the Prime Minister if she will list her official engagements for Thursday 2 November.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Boateng: Will the Prime Minister take time today to reflect on the plight of 53,000 war widows who, because their husbands died before March 1973, receive a pension of between a half and a quarter less than those whose

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    husbands died after that date, and have a standard of living substantially below that of pensioners in Japan and Germany? Do we not owe these women a debt of honour and is it not time it were paid?
    The Prime Minister: There are two pensions which war widows can receive. One is paid by the Department of Social Security. This is the war widow's pension which applies equally to all war widows regardless of the date on which they were widowed. The other is an occupational pension scheme which is run by the Ministry of Defence and which, like all occupational pension schemes, is not retrospective. Indeed, it could never have been introduced had it been retrospective. We try. to help the older war widows who are not entitled to any help under the occupational pension scheme by an age allowance which gives them a higher pension as they get older.
    Mr. Alexander: Will my right hon. Friend join me in expressing the sense of outrage by my rail commuting constituents at the prospect of an increase in rail fares of up to 21 per cent. for the second year running? Does she agree that the standard of timing is worse, the buffet service a joke and getting a seat a lottery? What will she do to help to have this proposal reversed?
    The Prime Minister: As my hon. Friend is aware, the British Rail and London Underground decisions are to be announced later this afternoon. I think I should point out that investment in British Rail is at its highest for a quarter of a century. As my hon. Friend has said, perhaps there needs to be a good deal more investment, but it has to be paid for. Investment in the London Underground is also at record levels. I am afraid that that partly explains the increase in fares which are to come about.
    Mr. Buchan: To ask the Prime Minister if she will list her official engagements for Thursday 2 November.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Buchan: Will the right hon. Lady reflect a little more seriously on the deplorable answer that she gave my hon. Friend the Member for Oxford, East (Mr. Smith) about Kampuchea? Has it not been abundantly exemplified that British troops have been involved in the training of forces under Sihanouk which are involved with the Khmer Rouge coalition? Is not our support for the United Nations resolution which, by definition will involve Pol Pot forces, even more explicit? Will she deny that, and if not, will she investigate it and put the Foreign Office in its proper place?
    The Prime Minister: As I said, we are wholly against Pol Pot. I have made speeches to that effect, as the hon. Gentleman knows, and Pol Pot must not return to Cambodia.
    Representation in the United Nations is done by the democratic alliance of Prince Sihanouk, which includes the Khmer Rouge. There has not been a vote on that since 1982, but the representation is that of the democratic alliance.
    Mr. Conway: Would my right hon. Friend consider sending 500 copies of today's edition of the Daily Mail to the Prime Minister of Ireland with the message that this
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    kind of slaughter of innocent victims—especially of children—only stiffens the resolve of the British people —[Interruption] Wait for it, you rabble—
    Mr. Speaker: Order. Remarks of that kind tend only to inflame tempers.
    Mr. Conway: Mr. Speaker, if you could hear what this lot are muttering you would throw them out of the Chamber—
    Mr. Speaker: Order. I must ask the hon. Gentleman to put his question.
    Mr. Conway: Will my right hon. Friend send these copies to the Irish Prime Minister with the message that the British people have the greatest resolve to stand behind their security forces against physical attack by the IRA or verbal attack by the Haughey Government?
    The Prime Minister: Everyone in this House utterly condemns the murder by the IRA not only of the baby but of many other people. We are fully behind our security forces and we make that plain to the Government of the Republic of Ireland time and again. I fully endorse what my hon. Friend says about that.
    Mr. Winnick: To ask the Prime Minister if she will list her official engagements for Thursday 2 November.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Winnick: Do the Government intend to hold an immediate inquiry into the serious allegations of insider dealings? As a Cabinet Minister has been mentioned indirectly, will he make a statement to the House about the arrangements that he made with his stockbrokers?
    The Prime Minister: As the hon. Gentleman is aware, my right hon. Friend made a statement and I have nothing further to add. I am amazed that the hon. Gentleman has raised the matter.
    Mr. Dunn: Does my right hon. Friend agree—[Interruption.]
    Mr. Speaker: Order.
    Mr. Dunn: Does the Prime Minister agree that while it is right to promote the growth of democracy in the Eastern bloc, now is the time to promote it in some of the countries that are members of the British Commonwealth?
    The Prime Minister: As my hon. Friend knows, not all members of the British Commonwealth are democracies. Some have military Governments and some have a different definition of democracy from ours. It is the purpose of the Commonwealth to help all countries to reach the objectives set out in the Singapore declaration of 1971—freedom under a rule of law and full democracy. We should sustain these countries through the intermediate period until they can attain that objective.
    Mr. Cartwright: To ask the Prime Minister if she will list her official engagements for Thursday 2 November.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Cartwright: Does the Prime Minister support the suggestion made on Tuesday by her Chancellor that

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    interest rates had to be raised in order to prevent young people being priced out of the housing market? Are Ministers so out of touch that they do not understand that high mortgage repayments are just as serious a barrier to home ownership as high prices?
    The Prime Minister: I would not accept the interpretation put by the hon. Gentleman on my right hon. Friend's remarks. Interest rates were raised because monetary conditions were too loose and therefore it was necessary to get inflation down.
    Mr. Foulkes: To ask the Prime Minister if she will list her official engagements for Thursday 2 November.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Foulkes: Will the Prime Minister now answer the question—[Interruption.]
    Mr. Speaker: Order.
    Mr. Foulkes: Will the Prime Minister now answer the question asked so eloquently by my hon. Friend the Member for Paisley, South (Mr. Buchan) in relation to Cambodia? This is a very serious matter and on two occasions in this Question Time the Prime Minister has dodged the issue. Now for a third time she has an opportunity to answer to the House. I hope that she will do so.
    The Prime Minister: I note that the hon. Gentleman was taken by surprise, could not think up a question and had to repeat an old one. I will therefore repeat the answer that I gave. Our abhorrence of Pol Pot's murderous regime is well known and there is no question of our supporting the Khmer Rouge. I hope that the hon. Gentleman has got it clear now.

Business of the House
3.31 pm
Dr. John Cunningham: May I ask the Leader of the House to tell us the business for next week?
The Lord President of the Council and Leader of the House of Commons (Sir Geoffrey Howe): The business for next week will be as follows:
Monday 6 November—Progress on consideration of Lords amendments to the Local Government and Housing Bill—
Mr. Eric S. Heifer: On a point of order, Mr. Speaker.
Mr. Speaker: I will take points of order after business questions.
Sir Geoffrey Howe: Tuesday 7 November—Completion of consideration of—
Mr. Helfer rose—
Mr. Speaker: Order. Will the hon. Gentleman please resume his seat? I will take his point of order and any other points of order after business questions.
Mr. Heifer rose—
Mr. Speaker: Order. I asked the hon. Gentleman to resume his seat. I now order him to do so. [HON. MEMBERS: "Name him."] If the hon. Gentleman persists, I regret that I will have to name him. I must ask him to resume his seat until after business questions.
Sir Geoffrey Howe: As I was saying, on Tuesday 7 November, there will be completion of consideration of Lords amendments to the Local Government and Housing Bill.
WEDNESDAY 8 NOVEMBER—Consideration of Lords amendments to the Employment Bill.
THURSDAY 9 NOVEMBER—Until seven o'clock there will be a debate on parliamentary pensions on a motion for the Adjournment of the House.
Proceedings on the Prisons (Scotland) Bill [Lords], followed by proceedings on the Statute Law Repeals Bill [Lords] and proceedings on the Opticians Bill [Lords], which are all consolidation measures.
Motion to take note of EC document on shipping and dangerous goods and motions relating to merchant shipping regulations. Details of all the documents concerned will be given in the Official Report.
The Chairman of Ways and Means has named opposed private business for consideration at seven o'clock.
FRIDAY to NOVEMBER—There will be a debate on world climate change on a motion for the Adjournment of the House.
MONDAY 13 NOVEMBER—Supplemental guillotine motion on and consideration of Lords amendments to the Self-Governing Schools etc. (Scotland) Bill.
Opposition day (2nd Allotted Day—2nd part). There will be a debate on an Opposition motion, subject for debate to be announced.
The House will wish to know, Mr. Speaker, that, subject to the progress of business, the House will meet for Prorogation on Thursday 16 November.
The new Session will be opened on Tuesday 21 November.
[Thursday 9 November
Relevant European Community Document
7074/89 Shipping (Dangerous Cargoes) Relevant Report of European Legislation Committee
HC 15-xxix ( 1988–89), para 1
Merchant Shipping Regulations:
Merchant Shipping (Distress Signals and Prevention of Collision) Regulations 1989 (SI 1989 No. 1798)
Merchant Shipping (Accident Investigation) Regulations 1989 (SI 1989 No. 1172).]
Dr. Cunningham: I pledge the Leader of the House my full co-operation in my new role for any measures that he may introduce to improve facilities in the House for hon. Members and others who work here, and my implacable opposition to those aspects of Government policy to which the Opposition are so consistently opposed. I have been informed that my responsibilities, like his, cover televising the House, and I am told that, for people of my height or above, there is a problem with camera angles. Therefore, I had thought to ask his permission to have a small trench dug in the Floor on this side of the House, but as he would probably like to see me start my job off in a hole, I shall put that request in abeyance.
We welcome the decision to provide time for a debate on world climate change, and we look forward to that debate. However, will the right hon. and learned Gentleman reconsider the proposed arrangements for Monday 13 November? As he has said, the second half of that day is to he given over to Opposition supply time. We urge the Leader of the House to change the business so that we can have the Opposition time first, to be followed by the timetable motion. I hope that he will give sympathetic consideration to that request.
As for the business on 6 and 7 November, the Leader of the House will know that more than 600 amendments to the Local Government and Housing Bill have been tabled in another place. That is an astonishing number of amendments, mainly from the Government. I acknowledge that one or two of the amendments resulted from defeats of the Government by Labour Members of the other place, and we welcome that. Bearing in mind the huge amount of additional work to be considered, may we have an assurance that there will be no move to restrict the time available for discussion of those issues?
The Leader of the House will have observed, as we did, the anger on both sides of the House about the announcement that is to come shortly from British Rail that fares are to be increased by between 10 and 20 per cent. He will know that millions of people, particularly in the constituencies represented by his right hon. and hon. Friends in and around the south-east, will be very angry about these increases, which are way in excess of the rate of inflation. Therefore, I urge the Leader of the House to provide time next week for the House to discuss these appalling increases in commuter fares, which will be so deleterious in their effect on the family incomes of millions of people.
Sir Geoffrey Howe: I welcome the hon. Gentleman to his role of dealing with the business of the House. I have taken note, with interest, of both parts of his declaration of faith. I shall try as far as I can to help him with the first and hinder him with the second.

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I have taken note of what the hon. Gentleman said about the business arrangements for Monday 13 November, and I shall look at the proposal that he has made for changing the sequence of that business. It is probably most convenient for that to be pursued through the usual channels.
I also heard what the hon. Gentleman said about the work that we shall be doing on the Local Government and Housing Bill. The Bill has already received its Third Reading in the other place, and he is right to say that we shall have a substantial number of amendments to consider. However, I emphasise that the vast majority of them are technical or consequential on points that have been raised during debate. The arrangements for debating those matters on the two days that I have identified have been discussed with representatives of the Opposition, and I hope that it will be possible for us to handle them within the framework.
Average rail fare increases have been announced—I recognise that no one welcomes any increase—and they are rather less than a great deal of recent speculation had led people to expect. The details of the increases are beyond my competence at this stage. I cannot offer the hon. Gentleman any prospect of a debate on that matter next week.
Mr. Patrick Cormack: My right hon. and learned Friend will be aware that I have been fortunate enough to be granted an Adjournment debate on 13 November on haemophiliac AIDS victims. Will he talk to our right hon. and learned Friend the Secretary of State for Health and ensure that I have a definitive reply so that these people are given some real hope that they will be compensated as adequately as is possible as soon as possible?
Sir Geoffrey Howe: As I have said on several occasions, it is a matter that I have brought to the attention of my right hon. and learned Friend the Secretary of State for Health. I congratulate my hon. Friend on having secured on opportunity to raise the matter on the Adjournment next week. I shall draw the attention of my right hon. and learned Friend to the importance which my hon. Friend understandably attaches to the debate.
Mr. Simon Hughes: Will the Leader of the House reconsider the timetabling of business to reflect the concern that I am sure is felt on both sides of the House about the events in Cambodia? Would it be possible before the United Nations meets on 15 November—which is the date, as he will be aware, when recognition will either be given or refused to the so-called coalition democratic Government of Kampuchea—to have a debate in this place about which authorities in Kampuchea should be recognised, about the prospect of a change of policy so that recognition could be given to the de facto Government in Phnom Penh, and about what actual and potential links there are between British defence forces and forces there so that we and the British people may be assured that we are supporting people who are the servants and protagonists of democracy and not some of the people who the Prime Minister and others have condemned as being among the greatest tyrants in politics since the second world war? A debate would be extremely welcome.
Sir Geoffrey Howe: I must repeat what my right hon. Friend the Prime Minister said. We can make no comment of any kind on allegations of relationships with the non-Communist resistance forces of the sort raised by the hon. Gentleman. Our objective is, and always has been, a comprehensive settlement that will allow the Cambodian people to elect the Government of their own choice. On the many occasions that I have said that, I have repeated that our abhorrence of the murderous Pol Pot regime is well known and that there is no question of our supporting that regime.
I cannot offer any prospect of a rearrangement of the business next week. I remind the hon. Member for Southwark and Bermondsey (Mr. Hughes) that events in Kampuchea were debated at the end of yesterday's business on the Adjournment.
Sir Ian Lloyd: I welcome the Government's decision to hold an early debate on climate change, or what will undoubtedly be referred to as the greenhouse effect. My right hon. and learned Friend will be aware that the Select Committee on Energy, which I have the privilege of chairing, has recently produced a report on the energy policy implications of this. Will the Government's reply to the report be available in time for the forthcoming important debate? Secondly, will the report that is being produced by the Select Committee on Science and Technology in another place, which I gather is at an advanced stage, if not already in draft, be published in time as it will have a material contribution to make to the debate?
Sir Geoffrey Howe: I am grateful to my hon. Friend for his welcome for the debate that we have foreshadowed. I cannot give a precise answer to either of his questions. I shall be sure to let him have that information as soon as I can.
Mr. Bob Cryer: May we have a debate next week on safety measures for large chemical plants such as Allied Colloids in my constituency, where a serious explosion took place earlier this week? We could then receive an explanation of why it is that the local council is trying to remove the only green area left in that industrial area with the purpose of bringing in more industry. Its actions have been backed, apparently, by the Secretary of State for the Environment.
Sir Geoffrey Howe: The hon. Gentleman understandably raises a point of interest to the community he represents with which he is, also understandably, more familiar than I am, but I shall draw it to the attention of my right hon. Friend the Secretary of State for the Environment.
Mr. Richard Holt: My right hon. and learned Friend's decision to have a debate next week on the climate will be welcome, but since the reports are not yet out it is premature. Would not the Government be doing the House a better service by having a debate on toxic waste disposal as a result of the report published by the Select Committee on the Environment, which has been out for some considerable time and is of great interest to everyone in Britain?
Sir Geoffrey Howe: I can understand my hon. Friend advancing that point of view, but it is not a point of view that has prevailed with those who arrange the business of the House.
Mr. Andrew Welsh: Is the Leader of the House aware of difficulties regarding the allocation of debating time to the minority parties? Can he give an assurance that during his tenure of office past obligations entered into will be honoured?
Sir Geoffrey Howe: I will take account of the hon. Gentleman's point.
Mr. Harry Greenway: If we cannot have a debate next week on the fares increase for London Transport, London Underground and British Rail, may we have a statement so that I can bring out the position of my constituents in Northolt and Northolt Park? In a letter to me today Sir Robert Reid, the chairman of the British Railways Board, said that those people receive a thoroughly unsatisfactory service from Network SouthEast and that something must be done about it. Is it not wrong that they should have to pay a 10 or 10-plus per cent. fares increase on top of an unsatisfactory service?
Sir Geoffrey Howe: I can understand my hon. Friend expressing concern about that matter, but I cannot promise to rearrange the business to make it possible to have such a debate next week.
Mr. Andrew Faulds: The right hon. and learned Gentleman will no doubt have noticed that various innovations have been introduced into the Chamber, about which the majority of Members were never consulted and which a feeble Committee seemed powerless to control. What does he think of these lamps hung with Malaysian moth catchers? What does he think of these cameras that, contrary to earlier assurances, intrude into the Chamber?
Mr. Tony Banks: Hung almost as well as my hon. Friend.
Mr. Faulds: Not quite as well, I can assure my hon. Friend. Regardless of the rather puerile comments of this inevitably loquacious colleague of mine, should not the House examine these internal decorations and should the matter not finally be referred to the Royal Fine Art Commission?
Sir Geoffrey Howe: I would hesitate to adjudicate in the competition on loquacity between the hon Gentleman and his hon. Friend the Member for Newham, North-West (Mr. Banks). As the hon. Gentleman well knows, the arrangements now in place are part of an experiment that is starting in its full form shortly. They are certainly not intended to represent the final state of the art.
Mr. Faulds: When does the experiment end?
Sir Geoffrey Howe: The experiment ends or continues when the House debates it at the end of the Session that is shortly to start. It will not surprise the hon. Gentleman to know that one of the matters that has already been drawn to the Select Committee's attention has been a certain lack of enthusiasm for these designs and the Committee has decided that further work should be done on the preparation of alternatives to take the place of those in due course if the House should so decide on the continuation
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of the experiment. I understand how aggrieved the hon. Gentleman is with his enormous sense of taste, but the matter has already struck a number of other hon. Members.
Mr. Tony Marlow: Has my right hon. and learned Friend received a letter from an organisation which calls itself CMB Image Consultants telling him that 55 per cent. of the impression that we make on television depends on our appearance?
Mr. Speaker: Order. Questions should be about business next week.
Mr. Marlow: With the imminence of this wretched experiment, the sooner the matter is debated the better.
Such a letter to my right hon. and learned Friend would suggest that, as we all know, body language is five times as important as what is said, where he can find a change of hairstyle if he wants one and, if he does not like his glasses and they do not look right on television, what he should do about it. That is an impertinence, and the sooner we debate it the better. For the short period that we must endure this wretched experiment, will my right hon. and learned Friend ensure that television serves the House and not the House television?
Sir Geoffrey Howe: I have not had the opportunity of studying the text of the document, nor do I think that I should have been as moved by its contents as my hon. Friend obviously is. If that is how he feels about it, he must respond to the treatment recommended.
Rev. Martin Smyth: The Lord President will not have heard the answer that the Secretary of State for Northern Ireland gave the right hon. Member for Lagan Valley (Mr. Molyneaux). We welcome the commitment that he gave of no change in Government policy in extirpating the IRA. Would it be possible for the Secretary of State for Northern Ireland to make a statement on policy in Northern Ireland early next week in view of the rumours circulating in Northern Ireland that press statements will be made tomorrow, the contents of which would have, if they are correct, an adverse effect on security? Does the tradition guiding ministerial replies—that they should not knowingly mislead the House—still apply, because today we had a misstatement from a Minister in which he implied that Northern Ireland Members had not responded to a draft Order in Council? Is a reply from a subject spokesman not a reply?
Sir Geoffrey Howe: The hon. Gentleman asks a comprehensive range of questions, which, as he recognises, could have more appropriately been posed to my right hon. Friend the Secretary of State earlier.
Rev. Martin Smyth: He is not here.
Sir Geoffrey Howe: He is not able to answer questions when he is not here, nor is he able to answer questions beyond the time allotted to him. I shall draw to his attention the continuing concern of the hon. Gentleman and his hon. Friends. There is no question of any change in Government policy on Northern Ireland. If anything must be announced or discussed, it will be drawn to my right hon. Friend's attention.
Mr. Andy Stewart: In view of the so-called leaked document, will my right hon. and learned Friend consider holding a debate next week on the future of the

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coal industry so that we can ensure that the people who work in the industry have a secure future after the privatisation of electricity?
Sir Geoffrey Howe: I understand my hon. Friend's continuous interest in the welfare and well-being of those who work in the industry. I cannot promise him the prospect of a debate next week, but he will have an opportunity to raise the matter in the debates on the Gracious Speech.
Mr. Harry Ewing: Will Thursday's debate on parliamentary pensions be on the basis of a take note motion? Will the Leader of the House be in a position to give the Government's response to the dangerous suggestions from the actuaries that the Government should reduce their contribution to the Members' pension fund to soak up the surplus largely accrued by the 9 per cent. of salary contributions of hon. Members?
Sir Geoffrey Howe: The debate will be on the Adjournment, which will enable hon. Members, including Government spokesmen, to express a view not only on the recommendations of the Top Salaries Review Body but on the report of the Government actuaries. The debate will be framed in that way to enable views to be expressed on both reports.
Mr. David Tredinnick: Will my right hon. and learned Friend find time next week to discuss in depth the implications of the Silberston report on the multi-fibre arrangement? There is much concern in my constituency about that report on textiles and the future of the arrangements to protect workers in my constituency. Is there any chance of us soon having a proper debate?
Sir Geoffrey Howe: As my hon. Friend the Under-Secretary of State for Corporate Affairs announced on 19 October, we have invited comments from all parties interested in the report by 17 November. We shall then want to consider those in conjunction with the contents of the report, which we recognise is important. I recognise that the House will want an opportunity to consider the issues thereafter.
Mr. Robert N. Wareing: Does the Leader of the House realise that the millions of our constituents who watched John Pilger's film about the realities of Cambodia are apparently more aware of what is really happening in that part of the world than the Prime Minister showed she was in her answers today? Will the right hon. and learned Gentleman reconsider having a statement made in the House next week, before the United Nations General Assembly meets, to justify the Government's decision to support a delegation to the United Nations which is nominally a coalition but in reality consists entirely of representatives of the murderous Khmer Rouge?
Sir Geoffrey Howe: There is probably no other issue on which I have expressed my view with more consistent strength than on our condemnation of Pol Pot and his cronies. There was a debate on that very issue last night in the House. My right hon. Friend the Prime Minister and I answered questions about it today. I shall draw the points which have been made by several hon. Members to
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the attention of my right hon. Friend the Foreign Secretary, obviously ahead of the debate in the United Nations.
Mr. Roger Gale: My right hon. and learned Friend will know that British Rail today announced a rail price increase of an average of 9 per cent., which masks an increase of some 15 per cent. on some long-distance commuter lines. I welcome the unprecedented investment in British Rail, to which my right hon. Friend the Prime Minister referred during Question Time, but it is also true that many travellers do not yet receive the benefits of that investment. Will my right hon. and learned Friend consider finding time for a debate on the need for a price differential on British Rail services so that travellers such as the commuters on the appalling north Kent line who are currently paying the same prices as everyone else do not have to pay for what they are not yet receiving?
Sir Geoffrey Howe: As one who represents a commuter constituency, I do not under-estimate the extent to which my hon. Friend thinks that it is right to bring this matter before the House. The details of the pattern of fares are a matter for the operators, not the Government, and I cannot add anything on that aspect.
Mr. Andrew F. Bennett: May I take the Leader of the House back to the issue of next Thursday's business and press him on the matter of private business? He has been asked several times to announce the Government's approach to the reform of private business. Can the right hon. and learned Gentleman now give us some assurances from the Dispatch Box that the Government will take some action rather than simply have rumours going round the House that he is sympathetic to some reform? It would do much to speed up the business next Thursday if the right hon. and learned Gentleman could make clear announcements that the Government will reform private business, which has become a scandal.
Sir Geoffrey Howe: I understand the hon. Gentleman's continuing concern with this matter. Obviously, I cannot make any announcement now. I assure the House that I am giving close and serious consideration to the suggestions made in the report which is already before the House. I cannot begin to foreshadow what the conclusions will be. Plainly, the suggestions deserve, and are receiving, my careful attention.
Mr. James Kilfedder: Will my right hon. and learned Friend provide time for a debate on the working of the legislation regarding experiments on animals? There is wide concern in Northern Ireland about the slaughter of about 100 greyhounds at Queen's university as a result of experiments which must have caused great agony to the animals before they died.
Sir Geoffrey Howe: I do not know the details, but I shall draw that case to the attention of my right hon. Friends and reflect upon that point.
Mr. Ieuan Wyn Jones (Ynys Môn): The Leader of the House will be aware of intense press speculation, especially in the earlier part of the week, about the future of the nuclear industry. National Power has made an application to build a pressurised water reactor in my constituency. My constituents are worried about the cost of nuclear power, which seems to have escalated beyond all reason.

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Will the right hon. and learned Gentleman tell the House whether the Government will make an early statement on this issue so that I can reassure my constituents?
Sir Geoffrey Howe: I have no express notice of any intended statement on that topic, but I shall draw the hon. Gentleman's anxiety to the attention of my right hon. Friend.
Mr. Bob Dunn: Is my right hon. and learned Friend the Leader of the House aware that the British Railways Board is likely to announce later today its decision not to present a private Bill dealing with the construction of a high-speed line from Ashford to London? If British Rail returns in a year's time with precisely the same proposals as they have put forward to date, it will cause the most grave anxiety and hardship to the people of north-west Kent, central Kent and south London. If an announcement is made, will he arrange either a statement or an early debate on that vexed matter?
Sir Geoffrey Howe: I cannot comment on speculation about a decision that British Rail may make on this matter today. My hon. Friend will understand that the project is the responsibility of the British Railways Board. If any announcement is made today that may lead to the anxiety that he describes, I shall bring it to the attention of my right hon. Friend the Secretary of State for Transport.
Mr. Robert Parry: Several hon. Members asked questions about Cambodia earlier today and the Leader of the House will have seen my early-day motion 1322.
[That this House calls upon Her Majesty's Government to reconsider its support for the seating of the Kymer Rouge-controlled coalition Government of Democratic Kampuchea at the United Nations, as the seating of the regime responsible for the 'Killing Fields' at the United Nations gives them major advantages while damaging the people of Cambodia; and calls upon Her Majesty's Government in the United Nations General Assembly debate on Cambodia on 15th or 16th November to challenge this proposal which will lead to further intensification of the civil war and an increase in human suffering in one of the poorest countries on earth]
It has been signed by more than 18 hon. Members. Will he ask the Foreign Secretary to ensure that we vote against the United Nations' proposal, to show that we are opposed to Pol Pot?
Sir Geoffrey Howe: As the hon. Gentleman knows, the report of the United Nations' credentials committee was adopted by the General Assembly without a vote on 17 October. The representative of the United Kingdom emphasised then that adoption of the report did not imply support for the Khymer Rouge and still less for the abhorrent Pol Pot.
Mr. Tony Baldry: Will my right hon. and learned Friend find time next week for a further statement on the ambulance dispute? While many of us have great respect for the ambulance staff, a further opportunity is needed to explain to the House that their central condition of comparability with the police force and fire brigade has been investigated by an independent tribunal—the Clegg commission—and rejected. Ambulance staff pay has
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always been determined by the Whitley council, and until the trade unions return to that council and cease their action it is difficult to see how the dispute will be resolved.
Sir Geoffrey Howe: My hon. Friend has done a service to the House by drawing its attention to what the Clegg commission said on the matter. I cannot promise a debate on it in the near future. My right hon. and learned Friend the Secretary of State for Health keeps a close eye on the dispute. I am sure that the best way forward is for the unions to call off their disruption and resume discussions with the Whitley council.
Mr. Alan Meale (Mansfield): Is the Leader of the House aware that television licence charges increased this week, that we had a debate some time ago about the television needs of parliamentarians, and that next week we shall debate the pension needs of hon. Members? Will he find time before the end of the Session to discuss the communication needs and pension needs of pensioners?
Sir Geoffrey Howe: That topic has been discussed on many occasions, both inside and outside the House. I cannot guarantee a further debate during the week immediately ahead.
Sir Antony Buck: Will my right hon. and learned Friend reaffirm that he agrees that it is important to draw attention on the Floor of the House to the work of the parliamentary Select Committees? Will he discuss with me and some of my hon. Friend's next week the need to put before the House the full report of the Parliamentary Commissioners for Administration and for the Health Service, more commonly known as the ombudsmen?
Sir Geoffrey Howe: I know that my hon. and learned Friend has a close interest in the work of the Parliamentary Commissioners to whom he referred and I understand why he makes that point. I shall try to find an early opportunity to discuss it with him.
Mr. Allen McKay: Will the Leader of the House examine the leaked document to which the hon. Member for Sherwood (Mr. Stewart) referred and then reconsider his earlier reply? That document contains statistics and statements which support the case that my hon. Friends and I have been making for a considerable time and which the Secretary of State for Energy has constantly denied. It refers not only to the closure of a third of Britain's coal mines, 18,000 redundancies in mining and 12,000 redundancies elsewhere, but to the possibility that electricity prices will be increased by 15 per cent. for domestic consumers and 25 per cent. for industrial consumers. Such an increase would devastate the steel industry. It is important that we should have the facts and figures and that everything should be clear before flotation of the electricity industry takes place.
Sir Geoffrey Howe: The measures providing for the future of the electricity industry will come before the House in the ordinary way over the weeks and months ahead and they will provide many opportunities for raising matters such as the one to which the hon. Gentleman has just referred. I cannot accept any responsibility for the idea of promoting a debate on a leaked document.
Mr. Kenneth Hind: Has my right hon. and learned Friend taken note of the issue of the

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Polkinghorne report this summer which said that research would be allowed on live foetuses up to 20 weeks old only if controlled by an ethical committee? There is a strong feeling throughout the country, especially in the light of possible Bills next Session, that this is an important matter. Will my right hon. and learned Friend consider providing an opportunity for the House to debate this important report?
Sir Geoffrey Howe: At this stage, I cannot add to what I said in answer to my hon. Friend the Member for Maidstone (Miss Widdecombe) last week.
Mr. Dave Nellist: As the Secretary of State for Trade and Industry has not seen fit to make a statement this afternoon on the announcement this morning by Ford, which is the logical conclusion of his Pontius Pilate sell-out of thousands of Jaguar workers in Coventry and tens of thousands of components suppliers in the west midlands, will the Leader of the House pressurise his right hon. Friend to come back to the Chamber later today to make such a statement? We could then discuss not only the global chess match for Jaguar's name and badge, but the wider question about what happens now to the so-called golden shares in Cable and Wireless, Sealink, British Telecom, British Aerospace, Vickers, British Airports and Rolls-Royce, and not least in water and electricity. If Britoil and Jaguar have shown that the so-called golden shares are worthless pawns in the Government's hands, why is the Secretary of State for Trade and Industry not here this afternoon to defend himself?
Sir Geoffrey Howe: I am most unlikely to bring these matters to the attention of my right hon. Friend on the basis of so intemperate a presentation.
Mr. Derek Conway (Shrewsbury and Atcham): Will my right hon. and learned Friend discuss through the usual channels as soon as possible the suggestion that the Opposition day a week on Monday should be on the subject of housing, especially the effect on young couples seeking a mortgage for the first time and couples seeking to trade up their house for a larger house as the family grows? If the Government were to accept the policy advocated by the new Opposition environment spokesman, the hon. Member for Dagenham (Mr. Gould), who in the Walden interview on 15 October pledged the Labour party to freeze mortgages for young couples, which would be disastrous.
Sir Geoffrey Howe: It is difficult to keep up with the movements of the hon. Member for Dagenham (Mr. Gould), as the Leader of the Opposition seeks to conceal his more intemperate views.
Several Hon. Members rose—
Mr. Speaker: Order. There is great pressure to take part in the subsequent debate. I am reluctant to curtail business questions, but I will allow them to continue until 4.15 pm, after which we must move on because I have already had to put a 10-minute limit on speeches.
Mr. Greville Janner: Will the Leader of the House please find time for a debate on the disruption caused to people's lives by the widening of
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roads and the driving of roads through residential areas? Is he aware of the complete lack of consultation and communication with the residents of Evesham road in my constituency as a result of the Bede island development, which is causing anger and alarm? Will the House have an opportunity to discuss such anxieties, which affect ordinary people in their everyday lives?
Sir Geoffrey Howe: I know that my right hon. Friend the Secretary of State for Transport is aware, for example, of the anxiety that arises from such prospective development, especially in relation to the assessment studies being undertaken in Greater London. He intends to announce which options will be considered as soon as possible, probably in early December. I will draw to his attention the comparable anxieties described by the hon. and learned Gentleman.
Mrs. Alice Mahon: Does the Leader of the House recall that during business questions last week my hon. Friend the Member for Cynon Valley (Mrs. Clwyd) asked him whether the United Kingdom had troops in secret bases in Thailand? The Leader of the House said that he would alert the appropriate Minister to give an answer in the Adjournment debate which took place last night. Is he aware that the Minister did not answer last night? The Leader of the House must surely be aware that today the Prime Minister refused to say. Can we have an urgent debate about Cambodia? Is it true that United Kingdom personnel are training guerrillas in secret bases in Thailand?
Sir Geoffrey Howe: The hon. Lady knows very well that it is not customary to comment on allegations about the possible engagement of forces in that way.
Mr. Keith Vaz: Will the Leader of the House make time available for a debate about the issue highlighted by the Carnworth report? Does he agree that our planning laws are in need of major reform? To that end, will he join me in condemning firms like Neal Brothers in my constituency, situated in residential areas, which hide behind outdated stop notice planning laws? Does he agree that that is an important issue? When can we have a debate on it?
Sir Geoffrey Howe: I cannot offer the hon. Gentleman the prospect of an early debate on that subject. However, I assure him that my right hon. Friend the Secretary of State for the Environment is aware of the importance of the report to which he referred.
Mr. Harry Barnes: May we have a debate on the state of the franchise? The Leader of the House will be aware that we have been in correspondence on that matter and I maintain that it is due to the operation of the poll tax. In the light of that correspondence, will the Leader of the House comment on the statements in a secret document sent to Right-wing Members by "British Briefing", which—
Mr. Speaker: Order. We are discussing debates next week, and we have only four minutes left.
Mr. Barnes: We could have a debate on the "British Briefing" document which was sent around the House which describes me as an
"emerging, vigorous, Stalinist underminer of democracy."

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How does that tie in with my concern for the franchise? The document has placed that label against me for opening a Morning Star bazaar in Chesterfield.
Sir Geoffrey Howe: I would find it difficult to comment on a secret document which the hon. Gentleman has seen but I have not. I dare say that the hon. Gentleman has a better chance of answering his questions than I have.
Several Hon. Members rose—
Mr. Speaker: Order. If hon. Members are brief, I may be able to call them all.
Mr. Jeremy Corbyn: Has the Leader of the House seen early-day motions Nos. 1308, 1321 and 1346—
Mr. Speaker: Order. Only one early-day motion will be printed in the Official Report.
Mr. Corbyn: Early-day motion 1308 relates to the ambulance dispute.
[That this House fully supports the ambulance crews in their pay claim, which is absolutely justified, especially against a background of salary increases of 26 per cent. awarded to themselves by company directors and top executives.]
Will the Leader of the House find time next week for an urgent debate on the ambulance dispute, the just claims of the ambulance workers, and the Government's preparedness to use the police and the Army to smash that dispute and the unions with it instead of recognising the importance of the work of ambulance workers, their dedication and the debt which we owe to them all? Will he ensure that there is a debate?
Sir Geoffrey Howe: As the hon. Gentleman knows as well as anyone, more than 94 per cent. of National Health Service staff have settled their pay claims without recourse to industrial action, most at or around the level of the offer available to ambulance crews. The unions should call off their action against patients and return to the negotiating table. I can offer no prospect of a debate on the subject.
Mr. Harry Cohen: May we have a proper statement from the Prime Minister on Kampuchea, or is she so arrogant that she feels that she does not have to tell the House whether British troops are involved in a war out there?
Mr. Speaker: Briefly, please.
Mr. Cohen: The Leader of the House is deputy Prime Minister and was previously the Foreign Secretary. Was he told what was happening or, like so many other issues of State, was he kept in the dark like an old, ill-treated dog?
Sir Geoffrey Howe: I have nothing to add to the answers which have already been given by myself and my
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right hon. Friend the Prime Minister and Ministers from the Foreign and Commonwealth Office in the debate which took place as recently as last night.
Mr. Frank Haynes (Ashfield): Is the Leader of the House aware that not too many moments ago he announced that we would have private business next week? Is he aware that we had some private discussions about a Bill that was debated last night? What happened in this House was shocking. I believe that the Government introduced a payroll vote during our previous discussions of that Bill. Will the Leader of the House assure us that he will keep his eye on the Government Chief Whip so that we will not see the payroll vote in future? That is the responsibility of the Leader of the House—
Mr. Speaker: Briefly.
Mr. Haynes: I warn the Leader of the House that Labour Members will be in government after the next election and the present Leader of the House will be on the Opposition Benches. What is good for the goose is good for the gander.
Sir Geoffrey Howe: I think that the hon. Gentleman is well able to keep an eye on my right hon. Friend the Chief Whip himself.
Mr. Tony Banks: I know that the Leader of the House is a great lover of parrots—he bears more than a passing resemblance to a giant African grey himself. Is he aware that there are 330 species of parrot in the world, and that about one third of them are under threat of extinction? Will the right hon. and learned Gentleman arrange a debate next week on the threat to parrots and to all endangered animal species?
Sir Geoffrey Howe: I am grateful to the hon. Gentleman for imparting to me some additional knowledge about parrots which was not previously available. However, even in response to that, I cannot provide time for a debate next week on that topic.
Mr. Dennis Skinner (Bolsover): Will the Leader of the House arrange for a statement to be made as soon as possible on insider dealing, in view of the fragility of the stock market and the announcements made this morning that it is possible that a Cabinet Minister is involved? Before a statement is made next week, will he make sure that every Cabinet Minister is checked out on insider dealing, and that they, not stockbrokers, give statements?
Sir Geoffrey Howe: My right hon. Friend the Prime Minister pointed out that my right hon. Friend has already made a statement today. I have nothing to add to that, except to join in what the Prime Minister said, and to regret the way in which the matter has been raised in the House this afternoon.

Points of Order
4.16 pm
Mr. Eric S. Heffer: On a point of order, Mr. Speaker. You probably consider me to be a nuisance but, as I have always been a nuisance, I intend to continue to be one as long as I am here. I think that you have to reconsider your ruling on hon. Members raising genuine points of order when an issue is raised in Question Time or at any other time. I know that you, or perhaps your predecessors, were quite rightly concerned about frivolous points of order, for example, when hon. Members got up, as a knee-jerk reaction, to say that they disagreed with an issue, and that they would raise it on the Adjournment debate. That used to annoy all of us, as they never raised it on the Adjournment anyway. Other hon. Members use points of order to stop the proceedings of the House.
I understand your point of view, Mr. Speaker, but once hon. Members know that there is no point in raising frivolous points of order, they will raise only genuine points of order.
The hon. Member for Antrim, East (Mr. Beggs) raised a point of order today but he has had to go. That is understandable. He has probably had to go to another meeting. The Minister has also had to go. Ministers cannot remain in the House. However, an hour and a half later the issue is being raised, and the hon. Members involved are not here. The issue needed to be dealt with there and then.
I am serious about this matter and I have raised it before. I understand your position, Mr. Speaker, but I ask you to reconsider. If a genuine point of order is not dealt with at the time, the issue is lost sight of.
Mr. Speaker: I shall deal with the matter now, because I have given it careful consideration over a long time. It is the consistent practice of the Chair to hear points of order after questions and statements. The whole House knows that; but I will always hear a point of order if it concerns irregularities which require immediate attention. Today, the hon. Member for Antrim, East (Mr. Beggs) raised a point of order to argue that he did not like the answer that he had been given in Question Time. That was a clear continuation of Question Time.
I say to the whole House that if I allowed that, the danger, when the Commons is televised, is that there could be a rash of points of order at what is judged to be prime time after questions, thereby delaying the debate, and taking time from right hon. and hon. Members who wish to participate in subsequent business.
I shall always hear points of order if they require my immediate attention. Otherwise, points of order should come in their proper place which is after questions or statements or Standing Order No. 20 applications.
Mr. Richard Holt: On a point of order, Mr. Speaker. Not long ago, we sought to protect Back Benchers by reducing the number of questions asked by the Leader of the Opposition. At that time it was normal for him to ask two questions; occasionally, you said that that might spread to a third. Now he is asking three on a regular basis. Will you, Sir, take the usual opportunity to speak to the right hon. Gentleman and tell him to get his questions down to two?
Mr. Speaker: It has always been the practice for the Leader of the Opposition to be allowed a certain tolerance at Question Time.
May I remind the House that many hon. Members wish to participate in today's debate? Some may already be seeking to raise points of order.
Several Hon. Members rose—
Mr. Speaker: Order. Points of order take time out of debates, and that is unfair on hon. Members' colleagues.
Mr. Peter L. Pike: On a point of order, Mr. Speaker. It concerns efforts by South Africa to influence unduly the elections taking place in Namibia. I wonder whether it would be possible to arrange—[Interruption.]
Mr. Speaker: Order.
Mr. Pike: There is a British involvement, Mr. Speaker, in that the signals that South Africa is claiming to intercept are British signals. [Interruption.]
Mr. Speaker: Order. But that is plainly not a point of order for me. If the hon. Gentleman had risen to ask me whether I had received a request for a statement, that would be another matter, but I cannot hear arguments about what is going on in South Africa. That is not a matter for me.
Mr. Campbell-Savours (Workington): On a point of order, Mr. Speaker. I want to raise again a matter that I raised with you nine months ago. You will know, Mr. Speaker, that when a Minister says that he has nothing to add to a statement, he is, in effect, blocking questions. I tabled 10 questions at 2.5 pm today about insider dealing in the City—
Mr. Speaker: Order. The hon. Gentleman has not tabled the questions; I understand that they are still in draft.
Mr. Campbell-Savours: I tabled them, and was told that they might well be amended. That is where my point of order comes in.
Mr. Speaker: It has never been the practice for hon. Members to challenge Mr. Speaker on matters that he has not had an opportunity to examine. The hon. Gentleman cannot do that in the Chamber.
Mr. Campbell-Savours: That is not the question, Mr. Speaker. The issue is that the questions that I have tabled are now the subject of a block, and I am asking you to exercise your discretion to allow my questions—
Mr. Speaker: Order. I was in the Chair before the hon. Gentleman tabled his questions. How on earth can I have an opportunity to make any definitive promise or statement on a matter that I have not even considered?
Mr. Dave Nellist: Further to that point of order, Mr. Speaker. I think that the point that my hon. Friend is trying to make concerns not what you may not yet have seen, but what has taken place in the Chamber this afternoon while you have been in the Chair, namely that in several answers the Leader of the House —the deputy Prime Minister—has used the phrase, "I have nothing further to add." That phrase becomes a blocking motion, which may then prevent the tabling of further

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questions. My hon. Friend and I are asking you to consider that, Mr. Speaker, and to rule against the Leader of the House.
Mr. Speaker: I certainly cannot make such a ruling until I have had an opportunity to look at the matter.
Mr. Kenneth Hind: On a point of order, Mr. Speaker. Between 1976 and 1979, on every occasion but three, my right hon. Friend the Prime Minister—then Leader of the Opposition—was at the Dispatch Box to ask the Leader of the House in the then Labour Government to name the business for that week. That tradition seems now to have lapsed: the Leader of the Opposition appears only infrequently to make the request. Surely that is a grave discourtesy to the House, and I seek your ruling on it.
Mr. Speaker: It has been the practice that when the Leader of the House announces the business, he is frequently asked to do so by the shadow Leader of the House. There is nothing wrong with that.
Rev. Martin Smyth: Further to the point of order raised by the hon. Member for Liverpool, Walton (Mr. Heffer), Mr. Speaker. I appreciate the difficulty, but my hon. Friend was not trying to continue an earlier debate; he was trying to clarify an issue. It is one thing for a Minister to make a statement politically, outside the House. It is another matter for him to make a statement in the House that has the import of misleading the House.
You, Mr. Speaker, do not expect Back Benchers not to be interested in a statement made from the Front Bench on their behalf. Is it not a tradition of the House that when a party's spokesperson makes a statement, responding to a departmental request in writing, that is taken to be the response of his party? That was the issue on which my hon. Friend the Member for Antrim, East (Mr. Beggs) sought your guidance.
Mr. Speaker: I ask the hon. Gentleman to calculate what would happen if that practice became general. There would be a rash of hon. Members seeking clarification of answers to their questions. Question Time is limited, because otherwise we would never have time for the business before by the House.
Several Hon. Members rose—
Mr. Speaker: Order. I call Mr. Molyneaux.
Mr. James Molyneaux (Lagan Valley): I shall be brief, Mr. Speaker, because I know that many hon. Members wish to participate in the next debate. The Leader of the House came to your aid, Mr. Speaker, when he put his finger on the spot by deploring the fact that the hon. Member for Liverpool, Walton (Mr. Heifer) had asked a question in the absence of the Minister. However, it could not have been otherwise because the Minister had left the chamber. The hon. Member for Walton raised that point to obtain a correction at the time but naturally you had ruled against it. I believe that the Leader of the House has got the message.
Mr. Speaker: The truth of the matter is that Northern Ireland questions come to an end at 3.15 pm.
Several Hon. Members rose—
Mr. Speaker: Order. I must advise the House that about 30 hon. Members, many on the Opposition Benches wish to take part and may be disappointed.
Mr. Andrew Faulds: Further to an earlier point of order, Mr. Speaker. You will doubtless be delighted to see me back in action, so that we can continue our dialogue about points of order. You said just now, Sir, quite clearly, that it was your consistent practice to take points of order after other procedures in the House had been pursued. May I simply point out with great respect, Sir, that that was not the practice of your predecessor? You also said, Sir, that the proper place for points of order was where you had chosen to put them. The proper place for points of order is when they arise—
Mr. Speaker: Order. The hon. Gentleman has not been here for a while, and I welcome him back. May I repeat and underline—because perhaps he does not read Hansard as regularly as some hon. Members—that I will always take points of order—I said this to the hon. Member for Liverpool, Walton (Mr. Heifer)—on matters that need my immediate attention. Other points of order are taken in their proper place—it is not a new practice—which today was after business questions or after a statement if there had been one. That has always been the practice, and that I shall continue.
Mr. Dennis Skinner (Bolsover): Further to that point of order, Mr. Speaker. I have listened closely to what you have said during this exchange about points of order being taken at various times—either before Question Time, in the middle of Question Time, at the end of Question Time or after statements have been made. You will recall, Mr. Speaker, that some considerable time ago you tried to take a definitive stance on taking points of order at the very end. It was suggested by some hon. Members, including myself, that that could not be carried through successfully because there would be cases when Front-Bench spokesmen in particular would want to raise points of order. Eventually, the thing broke down, albeit on a limited scale.
Today, for instance—it is important that we get this right before the cameras or anything else intrude—at the very opening of Question Time, my hon. Friend the Member for Bradford, North (Mr. Wall) raised a point of order about a Northern Ireland case in his room. You allowed that point of order, and heard it and I believe that it was sensible of you to do so. However, an hon. Member representing a Northern Ireland constituency later tried to raise a point of order, but before the proper explanation was given—it was about misleading the House—the whole thing collapsed because of your intervention. At the end, my hon. Friend the Member for Liverpool, Walton (Mr. Heifer) then wanted to raise a point of order arising out of something that occurred during Question Time, but before you had heard what he had to say, you said that he would not be allowed to make his point of order.
If you say, Mr. Speaker, as you have said three times —or rather twice—today, that you will allow points of order where they are attributable to procedure as distinct from argument, and if you want matters to continue on an even and decent plane, I suggest that you give Back Benchers an opportunity to raise points of order—Front Bench spokesmen always have their chance—and my guess is that you would be wise to hear what. hon. Members have to say before giving any ruling.
Mrs. Alice Mahon (Halifax)rose—
Mr. Speaker: Order. I shall first deal with the point of order raised by the hon. Member for Bolsover (Mr. Skinner).
The hon. Gentleman is totally incorrect. I heard the point of order from the hon. Member for Antrim, East (Mr. Beggs), but it was plainly not a matter of order for me; it was challenging what the Minister had said. I am not responsible for that.
I will always hear points of order if they need my imediate attention. I am not prepared, however—and I believe that the House would not want it either—to have a rash of points of order arising out of Question Time. That would merely mean that we would delay the start of a debate. Other points of order should be raised at the proper place which, as the House well knows, is after a private notice question, a statement or a Standing Order No. 20 application.
Mrs. Mahon: On a point of order, Mr. Speaker. I seek clarification from you. You will be aware that I asked the Leader of the House a question about troops in secret bases in Thailand, which was based on a question asked by my hon. Friend the Member for Cynon Valley (Mrs. Clwyd) last week. Then, the Leader of the House said that an explanation would be given by a Minister, but things seem to have changed this week because a procedural gag appears to have been used. The Leader of the House said that he had nothing further to add. Does that mean that I cannot table a question asking whether British Troops are being used from secret bases in Thailand?
Mr. Speaker: That is a hypothetical question, and until the hon. Lady tables her question it is difficult to say whether it will need my attention. I think that we should move on to the Adjournment debate.

Economic and Monetary Union
Motion made, and Question proposed, That this House do now adjourn. —[Mr. Dorrell.]
4.31 pm
Mr. Speaker: We have had a late start and a large number of right hon. and hon. Members want to participate. I must put a 10-minute limit on speeches between 7 and 9 o'clock, but I implore hon. Members who are called before that to bear that limit in mind because I greatly regret that, if not, few Members are likely to be called today.
4.32 pm
The Chancellor of the Exchequer (Mr. John Major): I greatly welcome this opportunity for a debate on economic and monetary union in the European Community. This is an important occasion and one on which the Government are particularly keen to hear the views of the House. The idea of moving towards economic and monetary union in the Community is not new. It has a long history. As long ago as 1970, a report by Mr. Pierre Werner, then Prime Minister of Luxembourg, made detailed proposals for progressing to economic and monetary union. He proposed transferring major economic policy decisions to Community level, adopting a single currency and setting up a single central bank. The Community endorsed those proposals in 1972 and agreed that full EMU would be achieved by December 1980 at the latest.
After that endorsement, other events intervened and nothing much came of the Werner proposals. They were, in practice, buried. Nevertheless throughout the 1970s the Community continued to endorse the principle of progressing towards economic and monetary union. It was reaffirmed again at the European Council in Brussels in 1977, and the objective of the progressive realisation of EMU is recalled also in the Single European Act of 1986. It has since been reaffirmed again at the European Councils of Hanover and Madrid. There is thus a long-standing commitment to the objective of the progressive realisation of EMU. But there is no universal view of what EMU means or what it entails; or when it should be achieved. That is the issue before us now.
One definition was offered in the Delors report, which was published in April this year. The Governor of the Bank of England, a member of the Delors committee, explained its approach to the Treasury and Civil Service Select Committee in May. It devoted itself
"very much to how economic and monetary union might be achieved, rather than whether or when. We took the view that whether or when was a matter for political leaders".
The Delors report—which was a report from a group of technical monetary experts—was considered by the European Council in Madrid in June. The Council agreed then to adopt the first stage of its proposals, and to set in hand further preparatory work on developments beyond that stage.
The Council of Finance Ministers and the General Affairs Council are now engaged in that further work. My right hon. Friend the Foreign Secretary will be attending a meeting of the General Affairs Council next Monday at which economic and monetary union will be on the agenda. It will then be the central subject for discussion at the ecofin Council on Monday 13 November, when I will present a paper setting out the British Government's view.

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Copies of this have been placed in the Library of the House and put in the Vote Office. Following the ecofin discussion it will again be discussed in December at the European Council. So this debate is a timely opportunity for the House to express its views as we prepare for those important discussions.
As I said a moment ago, there is no agreed definition of what actually constitutes economic and monetary union, but there is a large measure of agreement among all member states about what we want to achieve. We seek price stability, and currency stability. We want to achieve a single market, with free movement of people, services, and goods, free movement of capital, and equal access to capital and financial services for all citizens and businesses in the Community.
We want those things for practical reasons: because they will make our businesses and industries stronger and more flexible as they compete in world markets; because they will enable our economies to grow; and because they will bring higher living standards, and greater choice.
There is no real controversy about these objectives either in the Community or in the House. The disagreement lies elsewhere. It is about the means by which we move towards them.
There is a fundamental question that determines the positions in this debate. It is this: do we want to start moving towards a federal Europe, with all that implies, or do we instead concentrate on developing a yet closer partnership, of individual nation states, and achieve in that way the objectives upon which we are all agreed?
It will be no surprise to the House that this Government favour the latter approach. It harnesses the strength of our national traditions and political structures. It builds on the policies—the liberal, free market policies—that we have followed both here and in Europe, and which have brought success; and it respects both parliamentary accountability and the diversity of member states. In essence, it takes the sting and controversy out of moving to our shared aims. It is this approach that we have adopted to the debate on EMU, and the Delors report.
Mr. Tony Benn (Chesterfield): The Chancellor referred to parliamentary accountability. Will he confirm that in practice, when he or other Ministers go to the Council of Ministers or when such an agreement is reached, it is made under the royal prerogative of treaty making and is not subject to previous or subsequent enactments by the House of Commons? Therefore, to speak of parliamentary accountability in that context is to mislead those who are listening intently to this debate.
Mr. Major: There is certainly no intention to mislead. In essence, we are talking about significant changes which are proposed in the Delors report and which would have far wider significance than most of the previous ones. It is that issue, and the extent to which the House retains its control over monetary and economic matters, that concerns me and to which I shall turn in detail later.
We have already agreed to implement stage I of the Delors prescription. The elements of this are familiar to the House. They include establishing a genuinely single market in goods, services, and capital; the strengthening of competition policy; and the development of co-ordination of member states' economic and monetary policies. The
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Commission's proposals for revised co-ordination arrangements are among the documents listed for our debate today.
Stage 1 of course, also requires all Community currencies to join the exchange rate mechanism of the European monetary system on the same terms. This we shall do, as I told the House on Tuesday, when the level of United Kingdom inflation is significantly lower, when there is capital liberalisation in the Community, and when real progress has been made towards completion of the single market, freedom of financial services and strengthened competition policy.
Our position on stage 1 is clear and constructive, and we are committed to it, but we part company with the Delors recipe on the next steps. Let us be clear at the outset what the report proposes: permanently fixed exchange rates; a single Community currency; binding central rules on national budgetary policies; and a European system of central banks, with sole responsibility for formulating and implementing Community monetary and exchange rate policy. The Government—and, I suspect, the overwhelming majority of this House—have very great difficulty with these proposals.
We do not believe that Community rules on the use of national budget deficits are either necessary or desirable. They are unnecessary because monetary unions can and do tolerate diversity of budgetary positions. That is true in nearly all existing federal states. It is markets which impose a discipline and prevent deficits from getting too far out of line. On the desirability of binding rules, I can do no better than quote the conclusion of the Select Committee on the Treasury and Civil Service, chaired by my right hon. Friend the Member for Worthing (Mr. Higgins):
"The power of the House of Commons over the centuries has depended fundamentally on the control of money, both taxation and expenditure. This would be jeopardised by t he form of monetary union proposed by the Delors Report which would involve central undemocratic direction from within Europe of domestic budgetary policies."
I agree unreservedly with that judgment by the Select Committee, and I hope that our partners in Europe recognise the seriousness of this issue to us. It is fundamental to our parliamentary constitution and practice, and is not a matter which can be bargained away or cast aside.
The Delors proposals for increased regional and structural aid also seem to us to be misconceived. There must, of course, be greater opportunities for the living standards of the less prosperous regions to rise. No one denies that. Indeed, the Community's structural funds are already being doubled in the five years between 1988 and 1993 for precisely that reason. But there is no reason whatever to believe that a route to economic and monetary union that relies primarily on the operation of the market —rather than primarily on Government intervention—would harm the less prosperous areas. I believe the reverse to be the case.
Thirdly, the Delors report's proposals on monetary union are unacceptable, for monetary policy is at the very heart of macroeconomic policy and the proposals in the report make no provision for accountability for monetary policy to national Governments or national Parliaments. Yet the electorate would still hold Governments and national authorities responsible for their economic well-being, and rightly so.
Moreover, there would be no effective means of bringing the central banking system to account for any

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failings—and there can be no guarantees that it would pursue successful anti-inflationary policies, whatever the treaty might require. Indeed, by eliminating competition between monetary policies, it seems likely that the proposals would lead to harmonisation not on the best inflation performance but on the average.
Mr. A. J. Beith: The Chancellor is inviting the House and the country to accept an alternative proposal set out in this document, which is an invitation to a race that the Bundesbank would be almost certain to win—to an independent central bank of the sort favoured by his predecessor.
Mr. Major: If the hon. Gentleman will bear with me for a few moments, I shall turn in detail to our proposals, which may be of some interest to him
In short, the Government's fundamental objection to the Delors approach beyond stage 1 is that its prescription for economic and monetary union centralises power. It relies on administrative fiat and institutional change. It skates over vital issues of political accountability. Changes in economic and monetary arrangements must reflect real changes in economic behaviour in the market place and they must work with the grain of the market and not against it. In our view, the Delors route is quite simply the wrong way for the future development of Europe. But there is a better way to meet our agreed objectives.
The better way is set out in the paper that I laid before the House earlier today. It proposes an alternative approach, an evolutionary approach, to economic and monetary union. It represents the contribution that we promised to the debate within the Community.
We start from three principles: first, the overriding objective of price stability—that is clearly desirable; secondly, increasing the influence of markets and competition, which builds directly on the single market proposals already accepted throughout the Community; and thirdly, retaining national control over economic policy-making to the maximum extent possible, which fully reflects the principle of subsidiarity to which the Community rightly attaches such importance.
Recent debate in Europe seems to leap over the main work that we currently face to contemplate the many steps necessary for stage 1 of the Delors report. That is unwise, because stage I is a massive enterprise in itself. It will have very far-reaching consequences for all our economies and a profound effect on monetary policy and it will give a significant impulse to economic convergence.
Stage 1 means establishing a genuinely single market in capital movements and removing all exchange controls. A timetable has been agreed, starting with France and Italy by next summer. We of course are 10 years down that track. We welcome the commitment by others to follow suit, and the sooner the better.
Secondly, stage 1 means completing the single market. That is a huge task, and it is the dominant priority for the Community between now and 1992. Nearly half the legislative programme has been agreed, and the United Kingdom's influence in formulating that programme has been very great indeed. But there are tough issues still to be resolved, and, of course, all member states must then implement the directives agreed. On this, the record of this country is significantly better than that of many of the
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proponents of a great leap forward on monetary union. By any standard, we have one of the best records in Europe —and we should never be afraid to say so.
Thirdly, stage 1 means strengthening Community competition policy. A single market must necessarily have a level playing field. That patently does not exist when one large member state gives about eight times as much subsidy to manufacturing industry as does the United Kingdom. The Commission has powers to tackle this. It must use them, and not delay doing so.
More generally, the completion of the single market will progressively increase freedom of trade in all goods and services, and freedom of movement of capital and labour. Regulations and technical barriers will be drastically reduced; industries will be restructured; businesses will become more efficient and consumers will benefit. So while we consider the Delors prescription for what should happen after stage 1, let us not overlook the crucial importance of stage 1 itself, and the firm and enduring United Kingdom commitment to its early implementation.
All this has a particular importance for monetary policy, for stage 1 will create powerful pressures on member states to adopt low-inflation policies. With the removal of exchange controls and the creation of a single financial area, the capital markets will react more speedily and directly when they fear that a country is not operating sufficiently sound monetary policies. That will prove to be a powerful discipline. Greater stability of prices will in turn lead inevitably to greater stability of exchange rates. All this will be achieved not through centralised regulation and direction, but directly through the market. It achieves the desirable aims of the Delors report without the Delors apparatus.
We need to build on this. Our paper proposes that we should take the market approach of stage 1 forward to its logical conclusion rather than switching in mid-stream to a bureaucratic and centralised plan. Even after the current single market programme is complete, market forces will be muted by a number of unnecessary restrictions. For example, some countries control too strictly the investments of their savings institutions, or forbid the issues of foreign currency debt by their residents, or the purchase of their Government debt by overseas residents. Our proposal is that, as a priority after 1992, all restrictions of this kind should be examined and, where possible, removed, so that the competition between currencies and, therefore, between monetary policies is further sharpened.
This is not, as some people suggest, a matter of paying for a pint of beer at one's local with Italian lira or Greek drachma. Such a parody is to trivialise an important debate. The proposal is quite straightforward and entirely practical. It is to do away with unnecessary restrictions on individuals or firms doing business in whatever currency best suits the two parties. It is not a matter of compelling either party to use a particular currency: the aim is to reduce restrictions limiting their joint freedom of choice, thus enabling currencies to compete.
Mr. Anthony Nelson: Like all hon. Members, I am trying to listen carefully and to understand what my right hon. Friend is proposing. I put it to him that the Government paper of today is restating what his predecessor, my right hon. Friend the Member for Blaby

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(Mr. Lawson), put forward during the summer at the Antibes meeting of Community Finance Ministers, which I understand was rejected out of hand—
Mr. Major indicated dissent.
Mr. Nelson: If I am wrong, I should be delighted to hear so. As the proposal essentially involves the use of all currencies in member states, surely the tendency will be for prominence to be given to the lowest inflation currency within the system, if this ever comes to pass? That would be to the advantage of the deutschmark and might well be to the prejudice of sterling.
Mr. Major: My hon. Friend is mistaken to suggest that my right hon. Friend's proposals were universally rejected at Antibes—that is by no means so. This is a significant development of what was initially trailed at Antibes, and if my hon. Friend continues to listen he will see the areas to which it has been extended. As for the deutschmark, the whole purpose and intention of what underpins this is to provide a system under which nations will seek low inflation policies. That will most certainly ensure and affect the monetary behaviour of each of the currencies in the system. It may be that at any one time a particular currency dominates, but the market will ensure that that dominance will not necessarily be perpetual.
Mr. Benn: Assuming that all the conditions that the Chancellor has set out were met, could he now relate that to his claim to uphold parliamentary accountability? Is he not saying that he wants the market instead of some Brussels structure to control all Governments here? Is he not also saying that in future no political party could come to power on a manifesto that included exchange control and varying the currency, because once such a Government were elected a decision taken by this Parliament—if it went through on the Chancellor's basis —would tie all future Parliaments and would make it illegal for political parties to come forward and be elected using instruments that the Chancellor's mechanism would exclude?
Mr. Major: I do not think that that follows in precisely the way that the right hon. Gentleman has in mind. Of course in strict terms an incoming Government are sovereign. That is a matter for the House and nothing that I am proposing changes that basic and essential feature of the House of Commons.
With competing currencies, the pressure under the system that we propose will be for Community monetary policies to harmonise at the level of the best. That will inevitably strengthen the process of convergence on price and exchange rate stability. Realignments should therefore, become rarer, fluctuations within the bands of the exchange rate mechanism should become smaller, and we could eventually see a system of more or less fixed exchange rates. With the minimal exchange rate uncertainty and reduced costs of switching between currencies, our approach will lead to a multi-currency solution with interchangeable Community currencies. In that way we would achieve a practical monetary union as a result of a gradual evolutionary process, but without disruptive constitutional change. In our judgment that is the right way forward.
Mr. Edward Leigh: Would my right hon. Friend care to comment on a concept
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arising from competing currencies, which is that efficient British farmers would be able to compete more effectively than hitherto with their continental counterparts in a more open market once monetary compensatory amounts and other artificial exchange mechanisms had been abolished? Is that not a progressive market solution to what hitherto has been an intractable European problem?
Mr. Major: On that point my hon. Friend is almost undoubtedly right. I welcome the pamphlet to which I know my hon. Friend has contributed. It has also reached the conclusion that competing currencies are the right way forward in terms of the future development of Europe.
I should like to deal with one argument for a single currency which I know has attractions for some in the House and beyond. Many people say that a single currency would reduce transaction costs for business men and travellers in the Community. Of course, that must be right. By definition, transaction costs must be reduced if there is one currency rather than 12, but we need to consider at what price and at what risk that convenience is bought. By going for one currency, enormous faith is placed in the ability of the European system of central banks to keep inflation down. Much safer in our view is our approach which maintains national monetary policies and allows currencies to compete to provide the non-inflationary anchor in the European monetary system.
That apart, there is the lack of political accountability to national electorates of a European system of central banks to which I have already referred. I suspect, too, that the requirement to abolish the pound and the franc would be deeply unpopular both in this and in other countries when electorates appreciated what was intended.
In any event, there can be no doubt that as the single market develops the costs of changing between the Community currencies will be reduced as a result of technological improvements and increased competition between banks. Our market approach is intended to encourage just that process.
There are those who would seek to portray the United Kingdom's advocacy of a step-by-step approach to economic and monetary union as foot dragging. I emphatically reject that view. We advocate an evolutionary approach, but not because it is slow. It would not be slow. There is no reason whatever to suppose that it would be any slower than the controversial Delors route. The merit of our approach is that it is evolutionary and practical. It is also robust—more robust than the Delors approach, which courts great risks, needlessly in my view, by proposing that decisions should be taken on the next stage of the process before we have had a chance to assess the outcome of the first stage.
Mr. Ian Taylor (Esher): I am sure that my right hon. Friend is not alone in what he is saying. I have here a letter from the Board of Economic Advisers to the Federal German Ministry of Economic Affairs. It states:
"Informal co-ordination of economic policies through market forces shall have priority over formal ex-ante co-ordination by European bodies."
It also says:
"There is no need for an early commencement of negotiations to modify the Treaty as required by the Delors report."
That shows that my hon. Friend has a powerful ally in the German Government.
Mr. Major: I am grateful to my hon. Friend for that view. I recall that Professor David Currie, a former economic adviser to the Labour party, has also broadly endorsed the approach that I commend to the House. Plainly, we have very compelling support.
Mr. John Smith: Do I understand the Chancellor of the Exchequer to be saying that Professor Currie advocated the competing currencies theory which the Chancellor has been putting to the House?
Mr. Major: A recent paper that I saw the other day by Professor Currie broadly endorses the approach that the House has in front of it. If the right hon. and learned Gentleman cares to read that, he will find that that is the case.
Our view is gaining ground in terms of the report to which my hon. Friend the Member for Esher (Mr. Taylor) referred and it is gaining ground elsewhere in the academic world.
I categorically assure the House that we have no intention of being swept into unwise and premature decisions. The Delors report is important but it is not definitive. As the Madrid council agreed, it is a basis for consideration. It was also agreed that more work was needed. That work must be thorough and very well considered. It must not be rushed because the future development of Europe is of enormous significance.
I hope that it will be clear to the House and, equally important, clear to our partners in Europe that it is our policy to play a central and constructive part in the debate on economic and monetary union in the European Community. Our commitment to its objectives is just as strong and just as deep as that of any of our European partners. Britain is playing a full part in Europe and we intend that to continue. I commend our approach to the House.
4.57 pm
Mr. John Smith: I agree with the Chancellor of the Exchequer that today's debate is timely and important. That is because it is, I think, the first time that the House has been able to debate in full the issues of economic and monetary union and the report prepared under the chairmanship of Jacques Delors, the President of the European Commission. The House will be assisted in its task by the excellent report on the subject published in June by the Select Committee on the Treasury and Civil Service. That report and the evidence provided by the Governor of the Bank of England and the right hon. Member for Blaby (Mr. Lawson), the former Chancellor, also provide useful background information for the debate.
It is noteworthy that the Select Committee report felt it was necessary to warn against and even anticipate the lack of clarity and the deliberate ambiguities in the Government's policy on European economic issues. Hon. Members will recall that the Select Committee complained that at the European Council in Hanover in June 1988 the Government had
"accepted far-reaching language too lightly"
when they endorsed the idea of economic and monetary union. The report recommended:
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"It is important that the Government should make its position absolutely clear at the Madrid summit and should not again go along with language whose full implication it does not accept."
The Select Committee concluded:
"It is obviously dangerous for the Government to go on paying lip service to ideas to which in reality it is fundamentally opposed."
Those were prophetic words. That is precisely what the Government have done and continue to do. In Madrid, they endorsed stage 1 of Delors while they were still internally divided over whether to join the exchange rate mechanism. As they had completely ignored the Select Committee's prescient advice, is it any wonder that the ship of state hit such troubled and turbulent waters, and that the Cabinet has been wrecked upon such "a singularly ill-concealed iceberg"?
Recent events have revealed all too clearly that the Madrid formula was a fudge—lip service designed to conceal the confusion and disarray in Government policy —and it has now been totally blown apart. The gulf between the former Chancellor and the Prime Minister could not be more clear. The House, our European partners or the electorate would not find credible the argument that the former Chancellor's support for United Kingdom entry into the exchange rate mechanism—I quote his latest formulation—at the "earliest practicable time"—can be squared with the Prime Minister's sceptical and reluctant attitude towards what she calls a "higgledy piggledy system".
Mr. Tony Marlow: Will the right hon. and learned Gentleman give way?
Mr. Smith: I will give way, but I warn the hon. Gentleman that this must not become a habit.
Mr. Marlow: I am grateful to the right hon. and learned Gentleman, and I promise that it will not. I wonder whether the right hon. and learned Gentleman would be kind enough to address himself not to Tuesday's debate but to today's.
Mr. Smith: I can understand that the events that we were discussing on Tuesday might be painful for Conservative Members, but I insist that they are highly relevant to the matters that we are debating today. Were the hon. Gentleman to cast his mind back to the matters that we were discussing on Tuesday, he would recall that they were to do with the chasms of differences within the Government over European issues.
The events after Madrid convinced the right hon. Member for Blaby (Mr. Lawson) that he could not persuade the Prime Minister on the issue of the exchange rate mechanism. He knew that advisers advise, and the Prime Minister decides. On the basis of Sir Alan Walters's advice, the Prime Minister has decided to postpone indefinitely United Kingdom entry into the exchange rate mechanism. Having struck his iceberg, the Chancellor resigned and, with his resignation, the credibility of the Madrid formula, which is highly relevant to what we are discussing today, has collapsed.
It will not do for Conservative Members to try to obliterate the events of the past two weeks from their memory. We will not allow them to obliterate their memory of the events. I invite Conservative Members to turn on the television on Sunday, when they will find the right hon. Member for Blaby going over some of the issues again.

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The attempts by the right hon. Member for Huntingdon (Mr. Major), the new Chancellor of the Exchequer, to square the circle and recover a commitment in good faith to join the EMS will fail to convince, because the credibility of the Government's commitment to stage 1 of the Delors report is clearly questionable. One might almost say that it has been undermined. The House will recall that Delors stage 1 envisages that all member states should participate in the exchange rate mechanism, and stage 1 will begin as from 1 July next year.
It is plain from the Prime Minister's Walden interview and from her infinitely expanded preconditions that the Prime Minister has no intention of accepting United Kingdom entry into the exchange rate mechanism before the next election. Perhaps it is no coincidence that Professor Patrick Minford, a monetarist colleague of Sir Alan Walters, believes that the issue of the EMS is "effectively dead". I suspect that the issue will not be laid to rest so easily, even if the Prime Minister and many Conservative Members wish it to be so.
At the Strasbourg summit next month, decisions will be taken on the convening of an intergovernmental conference due to be held in the autumn of next year to consider the consequent stages 2 and 3 of the Delors report. The current and future presidencies of the Community show no sign of wanting to delay the decision-making process. In fact, they appear to want to speed the process up. It is also apparent that the proposed intergovernmental conference may, on majority voting, proceed to draft an entirely new treaty, rather than amending the existing treaty, which would require a unanimous decision of all the member states. There is no guarantee that Britain can veto proposals that we do not believe to be in Britain's best interests. There is a clear risk that vital decisions can be made about the future of European economic convergence that would leave Britain on the sidelines. Given the Prime Minister's attitude, that may well be the legacy of a decade of Thatcherism.
During the Prime Minister's Walden interview, it became evident that the conditions now attached to United Kingdom entry require the whole of Europe to embrace Thatcherism, but despite all the hype about Thatcherism being exported, it has not happened over the past 10 years; nor will it happen in the decade ahead. Let us take, for example, the Government's isolated position on the social charter, which the Prime Minister has described as Marxist. [HON. MEMBERS: "Oh."] Tory Members may not think that the social charter is relevant to the future of the European Community but we think that it is highly relevant. They have no right to determine unilaterally the terms of debate.
Mr. William Cash: Did I hear the right hon. and learned Gentleman say that a treaty amendment would not require unanimity? On what footing does he say that?
Mr. Smith: I wish that the hon. Gentleman would pay minimal attention to our debate. I said precisely the opposite, and I will not give way to hon. Members who ask such stupid questions.
Mr. Neil Hamilton: Will the right hon. and learned Gentleman give way?
Mr. Smith: I will certainly not give way to really stupid questions. I cannot be accused of not giving way. Of the
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many accusations that might he hurled at me, being unwilling to give way is not one of them. I hope that hon. Members who do not think that the social charter is important will at least listen to what I am saying.
The extent of the Government's isolation on the social charter reveals how out of touch they remain on other key issues of economic co-operation and convergence. Our approach is to accept stage 1 of the Delors report and to negotiate entry into the exchange rate mechanism on reasonable and prudent conditions. These conditions, as I explained to the House on Tuesday, include entry at an effective rate, adequate central bank swap arrangements to tackle speculative flows, increased support for regional policy and agreement on a co-operative growth strategy. These conditions are important and not unreasonable.
Mr. Keith Mans: Will the right hon. and learned Gentleman give way?
Mr. Smith: Two weeks ago, my hon. Friend the Member for Dunfermline, East (Mr. Brown) and I visited Paris, Brussels and Bonn, to discuss these concerns with the relevant authorities. It was encouraging to find on many of these issues a common basis of understanding and shared concerns with our partners in Europe. In key respects, the points that we raised—
Mr. Mans: Will the right hon. and learned Gentleman give way?
Mr. Smith: I will not give way. Will the hon. Gentleman allow me to proceed with an important part of my speech without constantly interrupting me?
In key respects, the points that we have raised are already under discussion and are being addressed as the debate provoked by the Delors report unfolds. We find common acceptance of the need to tackle the growing payments imbalances within the Community, the importance of collective action by the central banks to tackle speculative attacks against currencies within the EMS and the crucial importance of regional policy, which features prominently in the Delors report, to ensure that growth and development are balanced and evenly spread throughout the Community as the single market unfolds after 1992.
These are not impossible conditions. They are practical concerns already on the agenda for Europe in the decade ahead. The Labour party is ready to shape that agenda. Only last week, the European Parliament voted for a resolution that embodies the Labour party's proposals, and is concerned primarily with stage 1 of the Delors report. It urged:
"The pound should participate in the EMS as soon as possible".
It called for
"active industrial policy … coupled with extensive regional policies … control of speculative movements … and the elimination of the largest inter-Community deficits and surpluses."
This resolution, which includes all Labour's conditions for entry into the exchange rate mechanism, will be presented to the Strasbourg summit as a decision of the European Parliament. I am delighted that the Parliament has embraced so much from the Labour party's agenda for Europe in the decade ahead.
Mr. Smith: I have heard hon. Members say that that is what makes them suspicious, but let me give them some further information. I was surprised, although not

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disappointed, when I heard that the Conservative group in the European Parliament not merely voted for the resolution that I have just quoted but also supported some key amendments proposed by Labour Members of the European Parliament. Indeed, a Conservative Member of the European Parliament, Mr. Bryan Cassidy, the Conservative group's economic spokesman, attributed the key amendment to
"the influence of the 45 strong British Labour group which now dominates and controls the Socialist group as a whole."
Mr. Michael Shersby: Will the right hon. and learned Gentleman give way?
Mr. Smith: Does the hon. Gentleman wish to intervene on this issue?
Mr. Shersby: Yes.
Mr. Smith: On the Labour group?
Mr. Shersby: Yes, the Labour group.
Mr. Smith: Very well.
Mr. Shersby: The right hon. and learned Gentleman claims that the Opposition's policy reflects that of the Labour group within the European Parliament. How does he square the policy with the views of the right hon. Member for Chesterfield (Mr. Benn) and his colleagues, who take an entirely contrary view?
Mr. Smith: I think that we are allowed to have different views. My right hon. Friend the Member for Chesterfield (Mr. Benn) and I will have differences on a number of subjects. It seems pretty rich for the Conservative party to say that there is not total unanimity among the Labour party on issues which have divided both parties. The Cabinet is entirely divided. My right hon. Friend the Member for Chesterfield has tabled an early-day motion, and I think that some of my hon. Friends have signed it. My right hon. Friend will probably attract some support from some Conservative Members.
Mr. Teddy Taylor: Yes.
Mr. Smith: Perhaps the hon. Member for Uxbridge (Mr. Shersby) should have checked before he asked me his deadly question that the hon. Member for Southend, East (Mr. Taylor) would not undermine him. He knows perfectly well, however, that if the EDM were passed round the Cabinet and the members of it were asked whether they would sign it, they would reply, "Cabinet Ministers do not sign these motions. You must understand that it would be difficult for us to do so." We could easily get two EDMs from the Cabinet, but neither would be published because the Prime Minister would not let either of them see the light of day.
Mr. Dennis Skinner: If an EDM were circulated around the House and the Cabinet, a list of conditions would be imposed by the Government. Another list of conditions would be imposed by the anti-marketeers. My right hon. and learned Friend has already referred to four conditions and I am sure that my hon. Friends and I could produce another dozen. It would be an extremely long EDM.
Mr. Smith: If Conservative Members ever need any assistance, they should turn to the practical working knowledge of my hon. Friend, who has described the position so well on this occasion. It is not for the first time that he has offered Conservative Members help that they do not deserve.
Mr. Eric S. Heffer: I want to understand precisely what is being said. My right hon. and learned Friend has said that the Labour party's proposals were accepted by the European Parliament. When did the Labour party discuss these matters? Were they discussed at the party conference, or were they discussed by the European Labour group and agreed to? Have we discussed the matters within the parliamentary party? Surely we started that discussion only yesterday. I am not being difficult.
Mr. Smith: I draw the attention of my hon. Friend to the Labour party's policy review, which was discussed at the Labour party conference.
Mr. David Shaw: On a point of order, Mr. Deputy Speaker. I think that we have arrived at a stage where we should suspend the sitting so that the Opposition can get their act together.
Mr. Smith: The less said about that intervention, the better.
We are delighted that some Conservative MEPs understand and even welcome the wisdom of the Labour party's approach. The fact that they are taking our lead and following the Labour party's team in Europe speaks volumes for the style of leadership and the quality of teamwork that they have seen operating within the Conservative party in the United Kingdom. Unlike Conservative Members, they have recently had an encounter with the electorate. That concentrates the mind wonderfully. At the ballot box in June they saw all too painfully the result of the Prime Minister's attitude to Europe and her bungled European election campaign.
In recent years, the British people—
Mr. Neil Hamilton: Will the right hon. and learned Gentleman give way?
Mr. Smith: I shall not give way to the hon. Gentleman.
Mr. Hamilton: The right hon. and learned Gentleman is frightened.
Mr. Smith: I resent that remark, and I shall take it into account when deciding whether I shall give way to the hon. Gentleman on another occasion. He must learn that there are some courtesies in this place. It is obvious that he has one or two to learn.
In recent years, the British people have become increasingly concerned at the growing gap in terms of economic success, standard of living and social provisions between Britain and other leading Community countries. They perceive —I believe that this was reflected in their votes in the European parliament election—that it is harmful to the Community as well as to the Government to resist in a niggardly negative manner the moves to raise social standards and provide a floor of rights for employees. They understand that that is bad for Britain generally. We are not leading Europe; we are falling behind. The Government's obsessional insistence on unrestricted market economics, the removal of social

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protections and a minimalist role for Government, in opposition to the widely held views of the rest of the Community, prevents progress and harms Britain's political interests. It shows that Britain is being unreasonably unwilling to compromise and co-operate with our European partners.
I fear that Ministers are as partisan abroad as they are at home. Whenever their narrow ideological obsessions collide with the idea of greater European co-operation, it is the European concept which is sacrificed. The coming clash on the social charter at Strasbourg is wholly unnecessary. The Government are wrong. They will once again isolate themselves within a Community which is becoming increasingly less tolerant of the Prime Minister's Don Quixote-like charges at European windmills.
The plain truth is that Europe will always be politically diverse. It is as unlikely as it would be illiberal to expect or to demand the entire Community to embrace one economic or political set of values, let alone the absurdities of Thatcherism.
The social, economic and environmental issues of the 1990s will not be resolved by the universal panacea of laissez faire. The EMS has spent the past 10 years curbing the excesses of the currency markets, but in other important policy areas more than the price mechanism will be required to sustain growth and improve the quality of life. Such realism about the limits of market forces will dominate the agenda of the 1990s and influence the evolving trend of economic convergence in Europe. It is vital that in the decade ahead Britain has a Government who are capable of combining that realism with the commitment to deal constructively with our partners in Europe.
Mr. Beith: Will the right hon. and learned Gentleman tell us at some stage whether the Labour party's policy on one of the main issues in the debate remains as it was at the time of the European elections? It was then said that the Labour party saw no advantage at that time in trying to create full-scale European monetary union.
Mr. Smith: I shall deal with that when I reach the appropriate part of my speech. I ask the hon. Gentleman to wait a little longer.
For the reasons that I have given, it is important that Britain participates in good faith in the debate on the Delors report. The Labour party has indicated its willingness to consider these issues. We are prepared—
The Minister of State, Foreign and Commonwealth Office (Mr. Francis Maude): Come on.
Mr. Smith: Perhaps the Minister will allow me to proceed with my speech. The hon. Gentleman is in the Parliament of the United Kingdom and not at a Conservative party conference. He is not sitting at some Thatcherite footstool. He will be questioned in an environment in which debate is allowed. I might have to say everything again so that the hon. Gentleman understands my arguments.
The Labour party has indicated its willingness to consider the issues. We are prepared to accept stage 1 of the Delors plan and are ready to negotiate the conditions under which the United Kingdom should enter the exchange rate mechanism.
What will follow stage 1 of the Delors report remains to be seen. The agenda for the proposed intergovernmental
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conference has yet to be agreed. The proposals set out by the Delors committee for stages 2 and 3 of economic and monetary union are very far reaching, and represent only one among a number of possible proposals to achieve greater monetary co-operation and economic convergence.
There has been—[Interruption.] Will hon. Members please allow me to continue my speech?
There has been cogent criticism of the Delors report. In many ways, it is far too schematic in tone. It makes assumptions which are neither argued nor justified, and it is on the whole dangerously insensitive to the political dimension of economic decision taking and the need for democratic accountability. Perhaps it suffers from being the product of a committee dominated by central bankers.
Mr. Teddy Taylor: By a Socialist.
Mr. Smith: I am glad that the hon. Gentleman agrees with that. The Delors report may be a useful starting point for debate and discussion, but it could never be regarded as a blueprint for the future of Europe. I hope that that answers the question that the hon. Member for Berwick-upon-Tweed (Mr. Beith) addressed to me.
I mention two major reservations that we have about states two and three. Let me make it clear that we would not be willing to accept any system of central banks which would be independent of political control, just as we strongly oppose an independent status for the Bank of England such as the former Chancellor, the right hon. Member for Blaby appears to have been considering a year ago and which was only tantalisingly revealed in his post-resignation comments this week. I do not know whether the present Chancellor will pick up that idea and seek to persuade the rest of his colleagues—
Mr. Major indicated dissent.
Mr. Smith: Almost undoubtedly, the Chancellor looked as if he was saying no, but I am not sure.
We are firmly against such a concept for the EC and we do not accept that binding rules for budgetary or fiscal policy are a necessary condition for the achievement of monetary union. I remind the House that that is one of the central parts of stages 2 and 3
Mr. Nigel Spearing: I am following closely what my right hon. and learned Friend is saying, particularly on the matter of democratic accountability, with which all Opposition Members would agree wholeheartedly. Is it in his mind that such accountability would be with the Council of Finance Ministers, appointed by their respective national Parliaments, or has he some other method in mind?
Mr. Smith: In the proposed system of independent central banks there is no democratic accountability at all. The whole point of having an independent banking system, Bundesbank-style, is that it is insulated from politics. That was somehow regarded as a desirable feature. There is no form of democratic accountability either from Ministers or from any kind of parliamentary mechanism. That is a fundamental objection to the proposal, and, as my hon. Friend reminds me, that will be the unanimous view of my right hon. and hon. Friends.
The binding rules are not a necessary condition for the achievement of monetary union in any event and I agree with what the Chancellor of the Exchequer—
Mr. Teddy Taylor rose—
Mr. Smith: May I finish the sentence?
The Chancellor of the Exchequer drew attention to the Select Committee's conclusion that
"The power of the House of Commons over the centuries has depended fundamentally on the control of money, both taxation and expenditure. This would be jeopardised by the form of monetary union proposed by the Delors Report which would involve central undemocratic direction from within Europe of domestic budgetary policies."
I am happy to accept that enthusiastically, and I am sure that all Opposition Members accept it too. Does the hon. Member for Southend, East still wish me to give way?
Mr. Taylor: I thank the Minister for his excellent recent remarks. We have had some fun, but he has made some excellent recent remarks. He seems to agree with my right hon. Friend the Chancellor that stages 2 and 3 of the Delors report are completely unacceptable as a blueprint for the future. Would he honestly say—I mean this sincerely, John—whether there is anything at all in the three conditions laid down by the Government and the Chancellor for joining the ERM with which the Labour party would disagree—apart from its own reservations? If we could agree, we could send a unanimous message to Strasbourg. Is there anything in our three conditions—freedom of movement of trade, freedom of financial stability and the right exchange rate—with which he would disagree? If not, we can for the first time for many years send a unanimous message to Strasbourg.
Mr. Smith: I am tempted to say, "Well, Teddy, I can't remember when I last heard you speaking like that, whether it was in Cathcart or at Glasgow university." The hon. Gentleman referred to me as the Minister. I must ask him to exercise just a little patience in that respect. In two years' time I shall be happy to accept his words. But I shall do him the courtesy of answering his question. The conditions that have been attached to stage 1, not stages 2 and 3, by the Government are not the appropriate conditions, and the ones that the Labour party has proposed are.
For example, I do not know to what level inflation has to be brought down before the Government are satisfied. I suspect that that might be a moving goalpost. If the Government really mean what they say about these conditions, they would define the level of inflation that would be regarded as desirable. That might be a useful line of inquiry for the hon. Gentleman to pursue when he is asking questions of Ministers who are responsible for formulating policy now and for conducting the negotiations in the EC.
Mr. Benn: What my right hon. and learned Friend said about the retention of the Bank of England under the Bank of England Act 1946 is important and welcome. He will know that under that Act, the Treasury has the power to give directives to the Bank of England, the Bank of England has the power to give directives to any other bank and the Treasury has the power to define what a bank is. Therefore, enormous powers will fall to him as Chancellor and I hope that he will follow that through by saying that, if necessary, he intends to use all of them.
Mr. Smith: The constitutional position of the Bank of England in relation to the Government is satisfactory at the moment. I see no reason why that should be changed. A wide range of powers is available to the Chancellor of
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the Exchequer and no Chancellor should willingly give them up. He certainly should not contemplate handing over power over key economic monetary issues to bankers who are not accountable to the British people. As I think my right hon. Friend has gathered, that conditions our view of the proposals contained in the Delors report for a system of central banks and it is consistent with the view that we take at home.
I was shocked and astonished to discover that the former Chancellor was contemplating handing over the power to decide some of those matters to the present Governor of the Bank of England. I am sure that most hon. Members would basically agree with that proposition, although the fact that the former Chancellor revealed that view makes one wonder whether there are not some in the Conservative party who might take a different view.
The Chancellor has revealed a new plan today. He has produced the plan for competing currencies—to give it a shorthand title. It formed an important part of the Chancellor's speech I am tempted to say that it is one of the matters that should be referred to the Select Committee, since the right hon. Member for Worthing is the Chairman. I am rather torn on whether this wheeze of competing currencies should trouble the Select Committee. I would enjoy the prospect of the Chancellor explaining it to my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Sedgemore), but I am sure that there are many more useful matters that could occupy the Select Committee's expert attention.
It is clear that the Treasury's plan for competing currencies would have pleased Heath Robinson. It is yet another example of the Conservative's addiction to unfettered market forces. It is envisaged that currencies in Europe would engage in a Darwinian struggle for supremacy within the single market after 1992. It is an idea which, as the Chancellor knows well, received a cool reception—to put it as politely as I can—from the other European Finance Ministers when it was informally floated at the regular council meeting at Antibes in September. No other member state in the Community supported the scheme and typically, even the Conservative Finance Ministers of Europe found the idea more than a little bizarre.
A multi-currency scheme would lower the efficiency of the single market. Not for the first time, the application of free market ideology would damage the very market that it seeks to advance. Transaction costs would soar dramatically with the complexity of making payments in numerous different currencies. It is much more likely that a multi-currency system would quickly degenerate into a single currency system. The laws of the currency jungle would guarantee the supremacy of the deutschmark, and to adapt a well-known sentence from Thomas Hobbes, life for the pound would be "nasty, brutish and short."
It is hard to imagine a scheme that would more rapidly hand British monetary sovereignty to the German authorities in the Bundesbank. If ever there were a "half-baked scheme", this is it. It does not reach even the minimum level of plausibility. It is hard to escape the conclusion that the plan for competing currencies is nothing but a diversion, a further attempt to conceal the Government's divisions over the EMS. As the editors of the latest edition of the Oxford Review of Economic Policy conclude:

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"The idea seems so risible that we can only believe that it is not a serious suggestion but a delaying tactic to confuse the debate over economic and monetary union."
I thought that it might be the last joke by the Chancellor of the Exchequer, left as a little surprise for whoever might be his successor. I am astonished to discover that his successor takes it seriously enough to present it unvarnished and unamended to the House.
The other 11 member states of the Community show no sign of wishing to indulge the Government's enthusiasm for competing currencies. Still less do they accept the patronising tone of the Prime Minister when she demands that they catch up with Thatcherism. Far from Europe catching up with us, it is high time that the Government concentrated on catching up with our Community partners and competitors.
Economically and socially, over the past 10 years Britain has fallen behind. We have failed to match the level of investment in education and training, in research and development, in the regions and in manufacturing industry, which has been achieved. for example, by West Germany. The result is our massive trade deficit with the Federal Republic. Despite all the hype about economic miracles and arrogant assumptions that we have now surpassed the German miracle, there is still a lot of catching up to do.
Why are the Government prepared to stand back while social provision in this country falls behind the best practice in Europe? When will the Government conceive the ambition to catch up with European levels of pensions, with European standards of protection for the low paid and with the best levels of European child care provision? Those are the key elements of the social dimension to Europe which the Conservative party opposes, cannot understand and does not even want to discuss today. That is why it has tried to block the social charter, even though it is clearly supported by the majority of British people.
The social charter and the legislative action programme that will flow from it are indispensable to the successful conclusion of the single market. Without adequate minimum standards, the social and political cohesion of the Community will be seriously weakened. Without the social charter, it will be harder to build the strong economy and fairer society that Europe and Britain will need in the years to come. Labour Members know that there can be no lasting economic convergence and monetary cooperation without a strong commitment to a social Europe, which is why Britain needs a Labour Government to build a Europe that is not only a market for business but a community for people.
5.34 pm
Mr. Terence L. Higgins: I suspect that the last occasion on which a European issue of such complexity and with such an unattractive name as the exchange rate mechanism of the European monetary system was debated in the House was probably the Schleswig-Holstein question last century. Both controversies are difficult to understand and the arguments hard to remember.
It is fortunate that the House has this opportunity to debate the issue in depth. The extent to which there is a considerable degree of common ground among hon. Members has emerged from the speeches made by the Chancellor of the Exchequer and the right hon. and learned Member for Monklands, East (Mr. Smith). I
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believe that that will strengthen the hand of my right hon. Friend the Chancellor when he pursues these matters in Europe.
I regret that the Delors committee—or, more accurately, Mr. Delors—has succeeded in setting the agenda for this discussion. I profoundly disagree with paragraph 39 of the Delors report, which says:
"The Committee agreed that the creation of an economic and monetary union must be viewed as a single process. Although this progress is set out in stages which guide the progressive movement to the final objective, the decision to enter upon the first stage should be a decision to embark on the entire process."
There are strong arguments for proceeding to join the exchange rate mechanism, but that does not imply that we should go further down the road of stages 2 and 3 of the Delors report. Considerable advantage, such as exchange rate stability and co-operation between members of the Community, is to be gained from joining the exchange rate mechanism. I agree with those who say that it is not a panacea, but none the less I believe that we should join. It is important to appreciate that joining the exchange rate mechanism would involve no greater loss of sovereignty —indeed, rather less—than we gave up for many years under the Bretton Woods system.
I do not believe that Professor Alan Walters's views on the idea of perverse capital flows are valid. In my view, they are not so much half-baked, if that is the right expression, as grossly overdone.
The Government have made their position absolutely clear—we shall join the ERM when the time is right arid the Madrid conditions fulfilled. Clearly, the object of the exercise is to achieve a degree of exchange rate stability. Today is not the right moment to join, because it is obvious that once exchange controls are removed in France next July there is likely to be considerable readjustment of currency. It would therefore be paradoxical to say that we shall join to achieve exchange rate stability without anticipating that there are likely to be further changes in the next 12 months or so. None the less, I hope that we shall be able to join soon after that.
Much attention has been given to the Walden interview with my right hon. Friend the Prime Minister. There were many interpretations of the fact that she elaborated on the Madrid conditions. If we are to join the ERM, it is not unreasonable at the same time to insist on certain moves towards the European single market. That is how I interpret the Prime Minister's position, rather than her saying, "I shall impose a series of conditions which effectively mean that we shall not join at all." The Chancellor of the Exchequer clearly set out the position in good faith, which is important.
However, there may be a problem if, as I hope, we join in the near future, because sooner or later—perhaps not that much later—we shall be facing a general election. If we join the ERM, the danger is that as we approach that election the prospect of a Labour Government may exert considerable downward pressure on sterling. If the Government then have to realign the currency, it will be difficult to make it clear that that is the fault of the Opposition and not a defeat for the Government. The window for joining, between next summer and the election, may be quite small. None the less, we should take the opportunity whenever it arises because the case has clearly been made. I welcome the fact that my right hon. Friend the Chancellor clearly set out the basis on which we should proceed.
Sir Peter Tapsell: Will my right hon. Friend give way?
Mr. Higgins: Alas, I do not have time because I want to try to keep my speech to 10 minutes.
I turn to the broader issues of economic and monetary union. The Treasury and Civil Service Select Committee report—I am glad to see that a number of points made in it were endorsed by my right hon. Friend the Chancellor and the right hon. and learned Member for Monklands, East (Mr. Smith)—makes a valuable contribution, as does the evidence that we received. Often the evidence that we receive is more valuable than the report. Members of that Committee will know that, although I wholeheartedly endorsed the report, I was not entirely happy with one paragraph of it. Chairmen of Select Committees can express their views on amendments only if there is a tied vote, and that did not happen.
My feeling is that the proposal for a single currency is seriously defective because it means that giving up for all time any opportunity of using a change in relative prices between countries to deal with fundamental changes and variations in underlying costs. That could have a serious effect on regions. I do not believe that the proposals, even on the elaborate and expensive scale put forward by Delors, would be sufficient to overcome that on a permanent basis.
I have serious reservations, too, about the proposals for a European central bank and I concur fundamentally with a view that has been put forward by hon. Members on both sides of the House—that it would be unaccountable to the House and to other Parliaments. Of course, in some countries—for example, the United States and West Germany—existing central banks are not so accountable. Strangely, I find myself once in a while in favour of nationalisation. We nationalised the Bank of England, and the present relationship between the Treasury and the Bank of England is desirable. It would be highly undesirable to extend the idea to a system of European central banks which are in no sense accountable—in Delors, it is not clear to whom they would be accountable —and I would not wish to go down that road.
The trouble with the expression "economic and monetary union" is that it is the wrong way round. The progression must clearly be from monetary union to economic union, not the reverse. We come to the crux of the matter, and there the Select Committee was unanimous. Progress towards monetary union does not require the abdication of control over fiscal matters to any supranational organisation, accountable or not. I wish to make a rather technical, but fundamental, point, which is stated in paragraph 22 of the Select Committee report and is spelt out in greater detail in our earlier report on international monetary co-ordination. The report states:
"We wish to stress that … it is by no means clear what the impact of fiscal policy is on exchange rates. Fiscal policy may affect demand, but its direct impact on exchange rates is ambiguous. Binding rules on fiscal policy seem to be unnecessary even in stage 3 of a monetary union."
There is a strong case for joining the exchange rate mechanism of the European monetary system. It does not involve any more of an abdication of sovereignty than we had for many years under the Bretton Woods system, but stage 2 of the Delors position, where he seeks to hijack control over taxation and public expenditure, is irrelevant and simply a device to expand the powers in Europe over national Governments. As has rightly been pointed out by
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my right hon. Friend the Chancellor and the right hon. and learned Member for Monklands, East, that is the fundamental basis on which the power of the House has rested over the centuries. For that reason, and because the proposal is irrelevant, I hope that my right hon. Friend the Chancellor will continue to make progress on joining the exchange rate mechanism but that he will make clear, as he did this afternoon, our view on the longer-term issues set out in the Delors report.
I hesitate to comment in depth—alas, I do not have time—on the paper that my right hon. Friend the Chancellor lodged in the Vote Office this afternoon, but I should like to make one slightly technical point. I was brought up on Gresham's law—the idea that bad money drives out good—and I am slightly worried about what I suppose one should even now call Lawson's law, which is that good money drives out bad. It does not follow that the most inflation-proof currency is necessarily the one that we most use for transactions. Many companies conduct transactions in a multitude of currencies. They will not necessarily use the most inflation-proof one most often. They may well use that which is weakest and which has the highest rate of return on short-term balances.
These are more complex matters which it is perhaps difficult to explore in great depth, even in a debate as concentrated on a particular subject as this one, but I hope that we can consider them again, perhaps in the Select Committee. The degree of common ground between the two sides of the House is remarkable and I hope that we can make progress on the basis that I have described.
5.44 pm
Mr. Robert Sheldon: The right hon. Member for Worthing (Mr. Higgins) talked about the nationalisation of the Bank of England. One of the most interesting parts of the resignation speech of the former Chancellor dealt with that. He said:
"a year ago, I proposed to my right hon. Friend the Prime Minister a fully worked-out scheme for the independence of the Bank of England."—[Official Report, 31 October 1989; Vol. 159, c. 209.]
It is astonishing that the Prime Minister could not recall that—a fully worked out scheme from the Chancellor for the privatisation of the Bank of England, and she was not able to remember it. It is so important that I should have thought that everything in the economic or financial sphere would have been subordinated until those matters were dealt with.
It did not come so much as a surprise to me, because I had been present at the debate on fiduciary note issues in 1976, which I took, and those in 1978, taken by the then Minister of State—my right hon. Friend the Member for Llanelli (Mr. Davies). There was practically no one in the House on either occasion. I heard the right hon. Member for Blaby (Mr. Lawson) say:
"the Government could lay before Parliament each year in statutory form the annual monetary target for the coming year. The Bank of England would then, in effect, be charged by Parliament with ensuring that the target was met."
There would be legislation to give those powers. The right hon. Gentleman went on to quote someone approvingly, saying that it was
"no accident that West Germany and Switzerland, which in recent years also have managed their economy better than others, happen to have strong and independent monetary authorities".—[Official Report, 13 March 1978; vol. 946, c.168–9.]

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I assume that that was an early indiscretion by the right hon. Gentleman which he had subsequently been able to overcome. With that in mind, as the House will recall, I frequently taunted him with that view. It was interesting to see that the right hon. Gentleman returned to that point.
All these matters were fully discussed in the debates on the nationalisation of the Bank of England. Those debates still make excellent reading because they are about the same problems that we have today. The circumstances are rather different. We have had exchange controls, which has changed things dramatically. Our background is exchange controls and we are comparing what happened under exchange controls with what is happening now.
What is happening now and what is likely to happen are the same features to which Boothby and others were referring when looking back to the 1930s. A number of important people spoke in those debates—Nigel Birch, Hugh Dalton, Hugh Gaitskell among them. Nationalisation of the Bank of England was the only issue on which Boothby voted with the Labour Government. Quoting, he said,
"They who control the credit of the nation direct the policy of Governments, and hold in their hands the destiny of the people",
Boothby went on to speak about what had happened in the 1930s:
"What was perhaps worse, credit was denied to modernise our industrial plant, to build houses for our workers at home … On the other hand, into Central Europe and, above all, into Germany, millions of pounds of good British money were poured, much of which we never saw again."
He went on to say that
"not only in the City but far beyond its confines"
there was
"the embodiment of power without responsibility."
Again quoting, he said:
"We returned to the Gold Standard in 1925 for the benefit of the City of London and so ruined our basic industries. It does not follow that what is best for the City of London is best for the country."
The speech is well worth reading in full. Boothby said:
"This Government … might one day want to go back to a Gold Standard"—
or, if one likes, an ecu—
"but if any Government ever committed such an act of insensate folly I should want to attack the Chancellor across the Floor of the House. Further, I should not want him to say that it was really the business of the Bank of England rather than his affair." —[Official Report, 29 October 1945; Vol. 415, c. 112–6.]
That is the same accountability which my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) rightly said was crucial. I hope that it will be an important part of the negotiations.
It is important that we have political control. When the German Bundesbank increased its interest rates, no one in Europe questioned it. Was there no division within the Bundesbank about whether the rise should be 0·5 per cent. or 1 per cent. and whether it should follow M0, M1 or M3? A decision was made that affected the lives of 200 million or 300 million people and no one questioned whether it was the right decision. The decision on that matter of enormous importance may have been made by a majority of just one.
My right hon. Friend is right to set firm conditions for our entry into the ERM. The experts always say that these are technical matters, but my experience has always been that banking decisions tend to be political decisions. The British people are entitled to make those decisions, as are all the peoples of Europe.
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People say that the Bundesbank has done wonders for the German economy. I say that German industry, has done wonders for the German economy. German industry, with its excellent training and manufacturing potential, created a strong German Bundesbank, not the other way round. The countries that owe a great deal to their Governments are not Germany and Italy. The north of Italy is strong—it is even able to bear the nonsenses of the third of the population in the south—but its success has nothing to do with the Government.
If we enter the exchange rate mechanism it will be essential to have proper political control, as my right hon. and learned Friend said. That will not be easy to achieve, even with the Bank of England.
Mr. Mans: Would the right hon. Gentleman apply the same argument to the Federal Reserve bank in the United States of America?
Mr. Sheldon: The Federal Reserve bank is different. It has a greater measure of political control and links with the White House. Those who have experienced its operation know that it is more complicated than the German Bundesbank.
It is not easy to achieve political control. Those who work in the Treasury know how difficult it is to deal with the Bank of England. Crises can arise in minutes and decisions have to be made in a hurry. General policy can be laid down, but much depends on matters which have to be decided immediately. The following comparison illustrates my point. If, for example, I were in charge of investment in any organisation, I should expect my actions to be closely circumscribed, but if 12 superiors to whom I owed equal allegiance were appointed, I could do exactly as I liked. When dealing with day-to-day market operations, greater control is needed, not less.
The Bundesbank has the powers to which I referred. There are those who say that it does not matter and that we are subservient to the Bundesbank because Germany is so strong. I say to them that that problem stems from our balance of payments deficit of £20 billion, which looks as though it will persist for no one knows how long. That is why we are and shall continue to be subordinate to strong bankers. If we had the balance of payments surplus that Germany has, I should have no worries at all. Other countries would then have to listen to the Bank of England and follow money market operations here. Our balance of payments deficit means that we shall need flexibility and a wide range of rates.
It is said that before we can enter the ERM we must sort out our inflation problem. Some say that to enter the ERM would help us to reduce our inflation to the levels in other countries. That is probably right. Inflation would probably come down for a time because people would have confidence in sterling because it was tied to a strong currency, but the cost would be a greater problem later. No one can genuinely think that we could reduce inflation immediately, if at all. We would require greater deflationary measures than if we had not joined the mechanism. That is not to say that we should not join. We have political reasons for not showing too great a reluctance towards our European partners, but we have problems which need attention and the cautious approach that my right hon. and learned Friend the Member for Monklands, East outlined.

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Some say that the nature of foreign exchange trading has altered fundamentally. They see enormous swings across the exchange markets and say that they are completely different from what went before. They say that we cannot have neanderthal attitudes, because we have new problems. However, our problems are not new although they are probably more common than they were 10 years ago before exchange controls were abolished. Until then, it was difficult to hedge on the foreign exchange markets. Now people can do what they like. There are huge flows and speculators abound. They abounded in the pre-war years.
History did not begin in 1979. Vast sums were traded on the foreign exchanges before then, although there was less international trade. There were vast fluctuations on the foreign exchanges. One has only to consider the history of John Maynard Keynes, who nearly lost his shirt playing with foreign currencies until on one occasion he got it right and made a great fortune. The foreign exchanges were the great casino of the wealthy and large sums were traded —probably larger than the sums traded today, when genuine world trade has increased enormously, creating genuine foreign currency movements.
Speculation or, as is also common, prudent anticipation of one's foreign exchange requirements—the two cannot be distinguished—have always been with us and will remain with us. A speculator or investor—sometimes it is hard to separate them—seeks high returns with security. In Britain today he obtains a high return and looks for a weekly or even daily reaffirmation that the Government do not intend to allow the pound to fall. The Chancellor of the Exchequer knows that he has to state repeatedly that he supports a strong currency. If he stops saying that, speculators will abandon sterling. We are paying heavily for that in high interest rates. The Government give that assurance, but for how long? Such questions are of great importance to investors. Large sums are involved and analysis is keenly undertaken by those with large sums to lose if they get it wrong.
How long the Government can continue to pay exorbitant rates of interest to support the market and the pound depends on the income or the capital of the borrower. If I have capital, I can deal with outflows; if I have income, I can deal with them more easily. Speculators are aware of our foreign exchange reserves—our capital —and our negative income of £20 billion per year. They see that our capital does not last long and is being eroded.
Once again we return to fundamentals. The balance of payments surpluses of Germany and Japan make them strong. Our deficit makes Britain increasingly weak. For that reason, my right hon. and learned Friend is right to be cautious, to outline firm conditions which must be fully met, and for those reasons I support him.
5.59 pm
Mr. Donald Thompson: It is almost nine years since I last spoke from the Back Benches. In the intervening years, I was a Whip and therefore silent in the House, and I was then the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food, speaking from the Dispatch Box. Others now do those jobs, and I wish them well. There is no iceberg here, but a shire horse
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unharnessed and put out to graze on the blue Conservative grass, which I now find is turning greener in every way and every day.
I will be brief, so I hope that the House will allow me to be a little parochial. Europe—both the European Community and the wider Europe—is of the greatest importance to my constituents in Calder Valley, as manufacturers on a multinational, national and local scale, as traders, financial marketeers and citizens. Many fled from the Ukraine, Poland, Estonia, Latvia and Serbia to establish themselves in our valleys. Their families still live there and form an invaluable part of our community. How delighted they must be to see the breaking of the iron grip of Socialism in their homelands. However, this debate is about the European Community and, although events in old Europe are, to say the least, making the Eurocrats in Brussels tremble, I will stick to the European Community and its effect on the United Kingdom and my constituents.
Without doubt, my constituency is lucky enough to be the most enterprising in the west Yorkshire industrial area. There are several reasons for that, including the traditional adaptability and tenacity of the people, and their ability to get on is paramount. As their Member of Parliament I have endeavoured to channel any assistance I can to that enterprise. The local "Business in the Community" team has sought to mobilise and maximise available European and Government assistance. Led by the Prince of Wales, who is their unstinting and hard-working chairman, it sets an example to the rest of Europe, showing what can be done when European, national and local resources are harmonised sensibly.
The elimination of inflation—or price stability, as my right hon. Friend the Chancellor called it—is paramount for British industrialists. High interest rates are hard to bear, but not as hard to bear as the destruction of the value of stock or of work in progress. Inflation is a tax on everything. It is permanently debilitating to have goods in store paid for yet losing value day by day and to turn those goods into manufactured items on prices that are losing profitability week by week. We should look for lower interest rates soon and low inflation permanently.
The Opposition call for us to enter the exchange rate mechanism. Many of my constituents think that the conditions are right and proper, and that the Commission and the European Ministers should accept them at once so that we can all get on with it. A responsible Opposition should be calling on Europe to accept our conditions, not bandwagoning in Europe with a set of conditions that seem to some of us to have been scribbled on the back of an envelope during a lengthy parliamentary intervention and then expanded on the instructions of Members of the European Parliament.
The details of our conditions have been spelt out and include the freedom of capital movement and the abolition of exchange controls. Unless companies can invest and reinvest freely in Europe, whether those companies are nationals or multinationals, small companies or large, their freedom is being attacked. They need that freedom, and Europe is not about inhibiting business but about creating employment.
A single market with a level playing field or, as my right hon. Friends have described it, a strengthened European competition policy, is essential, especially for my textile companies. They have enough worries with the

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renegotiation of the multi-fibre arrangement and imported Turkish yarn without a tilt here and there on the Common Market pool table.
Free movement in financial services is a prerequisite. To give up that negotiating card would be considered a betrayal by companies ranging from the Halifax building society, through insurance companies and into the board rooms and the shop floors of my companies, which are not only selling into other countries but buying and running companies in non-EEC countries. British financial companies should be able to sell their products Europewide. Europeans should be able to invest their money in the Halifax or the Leeds at will. The same life policy should be available in Brighouse and Baden-Baden. Just as importantly, if one of my companies wants to buy a manufacturing company, or any kind of business, anywhere in the world, it should not concern the European Commission.
British business can help itself and the Government in this respect. Here in the United Kingdom, often with the help of the Opposition, it is possible for commerce and industry to approach Ministers who are responsible for United Kingdom policy. Industry can at least make its point, and it can and does ask the Opposition to emphasise its views. However, such systems are not always in place in other European countries. I urge British business to thrash out its own responses to directives and proposals from Europe and then to seek out its counterparts in Greece, Spain, Italy or wherever and impress on them the arrangements made for a proper way to conduct competitive business. British business should urge those abroad to adopt those ideas and to press them on their national decision makers.
Decision makers abroad, as we all know, are not necessarily Members of Parliament or Ministers. They may be bureaucrats, business men or trade associations. It is vital that our companies reach them before the Commission and the Council impose their will and their methods, which may not be the best for international business.
The right hon. and learned Member for Monklands, East (Mr. Smith) chides British Ministers for being "at it again". He says that the cry continually comes from Europe that the Brits are at it again, complaining, moaning and wanting to change the rules. However, on the few occasions when we do not do that, he complains that we have not made the British point. It would be wrong for our Ministers to stop making the British point.
We must teach our business and political counterparts how to influence the decision makers in the Council. We must teach them to lobby as well as our trade unionists lobby us. How often have we sat in Central Lobby, on the Terrace or, if we are lucky, in the Kremlin bar with trade unionists from all over the country, while they urge on us the unfairness of Europe. They tell us that "prato"—the unfairness of the social security system and slave labour in Italy coupled, with the Italian Government's massive aid —is killing their trade. They tell us about the diabolical social security systems that allow foreign farmers to get away with murder. The fishing industry, the steel industry and every other industry tell us the same.
We are now urged to accept a social charter composed by a little Jack Homer of plums from different pies. It is not a realistic concept. My constituents look rather for a huge, liberal, deregulated market, which will give small firms confidence and our largest firms a springboard to sell
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not only in that market, but unimpeded throughout the world. The united Socialist Europe urged on us a few years ago is not a runner anymore even in East Germany.
Now that the Commission has got us—or is getting us to 1992, its role must change. It must become the secretariat to the Council of Ministers and the Council must propose the next steps after 1992. The ideas that the Council of Ministers brings back to sovereign Parliaments must be thrashed out here. The Commission can then polish those ideas and the European Parliament can at last take up its proper role of administering the wishes of the Council of Ministers.
I have been lucky enough to represent British interests on several occasions in various Councils of Ministers. We must press for British interests relentlessly, not only on behalf of my constituents, but for the country as a whole.
6.9 pm
Mr. Giles Radice: I will not respond to the speech made by the hon. Member for Calder Valley (Mr. Thompson) because it was very much a maiden speech. I believe that it is the courtesy of the House not to criticise maiden speeches.
I accept the point of the right hon. Member for Worthing (Mr. Higgins), who is Chairman of the Treasury and Civil Service Select Committee, that there is common ground between the parties about Europe. The cautious pragmatism to which the right hon. Gentleman referred extends across the parties. However, there is not enough common ground on the key issue, the first stage of the exchange rate mechanism, within the Cabinet itself.
Anyone who watched the Walden interview must have gained the impression from the Prime Minister that she was basically against the ERM. The former Chancellor in his valedictory bore that out. There is a fundamental divide which has been papered over by a formula about conditions—there is the Prime Minister on the one hand and a number of senior Cabinet Ministers, including the Deputy Prime Minister, the Foreign Secretary and, I believe, the new Chancellor of the Exchequer on the other. That is the political reality and I am not surprised that the right hon. Member for Worthing did not mention that problem
When the Labour Government decided not to enter the ERM when the European monetary system was set up in 1979, I supported that decision because I feared that linking the pound to the mark—the strongest currency in the system—could have severe deflationary consequences.
Mr. Austin Mitchell: It would.
Mr. Radice: However, I believe that the situation has now fundamentally changed, and I will explain why.
The EMS has been operating now for a decade and it has proved itself to be a considerable success. There has been a significant convergence of inflation rates within the ERM down towards the low German level. In particular, the gap between the French and German rates has been substantially narrowed. There has also been far greater interest rate stability. It is noticeable how, despite some variations, the level of interest rates within the EMS is far nearer the low German rate than to the high United Kingdom interest rate outside the EMS. Above all, there has been far greater exchange rate stability. Although the ERM is not a fixed exchange rate system, the limitation on changes has created the original intention of the EMS—"a

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zone of monetary stability." That has been very much in contrast with the much greater exchange rate volatility outside the system.
Mr. Patrick Ground: How can the hon. Gentleman say that about interest rates in view of the level of interest paid on the Italian lira over the past five years?
Mr. Radice: I said that there was much greater interest rate stability within the ERM as all the studies have shown. I hope that the hon. and learned Gentleman will accept my word for that and if he does not, he should look at the evidence.
There has been an even more important change in the conditions in comparison with the 1970s. I take issue with my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). He did not quite grasp the point that the volume is less important than the fact that today, in contrast with textbook economics, the flows of international capital are driven as much by interest rate differentials and the desire for speculative gain as by differences in the balance of payments or inflation rates. That is a very important difference.
Mr. Sheldon: That was the case before the war.
Mr. Radice: No, it was not.
Outside the ERM, the United Kingdom exchange rate has been highly volatile. If hon. Members do not accept that, I remind them that in 1980–81, the pound was driven to a level which made manufacturing industry totally uncompetitive, so much so that 20 per cent. of manufacturing output was destroyed. In early 1986, the pound was driven down to an all-time low, to almost £1 to the dollar. There has been a considerable fluctuation.
Of course British manufacturing wants a competitive rate, and it is right to want that. However, it also wants a stable rate so that it can plan ahead. I conclude that although it is important that we should enter the ERM at a competitive and effective rate, as my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) said, it is even more important that rates should remain stable.
I want now to consider the sedentary intervention made by my hon. Friend the Member for Great Grimsby (Mr. Mitchell). The argument about tying the British economy to a more deflationary European level has far less validity in 1989 than it had in the 1970s or early 1980s. I accept that European unemployment levels are still high, but we should remember that our unemployment levels are affected by the way in which we calculate them. Also, the French were able to narrow the gap between the French and German inflation levels without having to experience the massive squeeze which British industry faced in 1980–81. Those who talk about a stagnant western European economy must consider the fact that over the past two and half years, the main European economies —West Germany, France and Italy—have been able to expand as fast as, if not faster than, the United Kingdom economy, but in a far more sustainable way because they are not running our massive balance of payments deficit.
We are also told that the Prime Minister attaches great importance to independence and sovereignty, but the truth is that, even outside the ERM, we are affected by what
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happens within it. After all, the Bundesbank's decision to raise interest rates a few weeks ago triggered corresponding increases not just in the ERM, but in the United Kingdom as well.
I do not claim that joining the ERM is a panacea. No one would do that. It is no substitute for operating and managing the economy in a balanced way or improving the supply side of the economy, which the Government have failed to do.
I believe that there is now a powerful case for joining the ERM sooner rather than later. It would help to stabilise exchange rates and secure lower interest rates than we would have outside. In addition, it could provide a useful counter-inflationary discipline, certainly a far more effective discipline, than the discredited system of domestic monetary targets in which one or two Conservative Members still apparently believe.
In addition, we must take our political argument very seriously. Unless we join the ERM, we will not be in a position to influence the future direction of economic and monetary co-ordination in Europe. Membership of the ERM would give us the influence that we so clearly lack at present.
Mr. Spearing: While it may be true that there would be a seat at the table, does my hon. Friend believe that our £20,000 million trade deficit might reduce our influence?
Mr. Radice: I warned this Government about the problem with the trade balance a long time before many other hon. Members, and I realise that it is very important.
I want now to consider stages 2 and 3 of the Delors report and the moves towards full economic and monetary union. I want first to consider the principle of economic and monetary union. Strangely enough, there is nothing about that in the Delors report and no one in this debate has so far made much of it. However, there is a powerful case to be made in principle for such a goal, albeit a long-term goal.
The basis of a monetary union can be defined as an arrangement between countries by which their exchange rates are permanently fixed in relation to one another. Because that commitment makes currencies freely interchangeable against one another at the same rate, they become, in effect, one currency.
The benefits of such a system, which are not set out in the Delors report, are that it reduces the transaction costs of doing business and, more important, it removes the cost of exchange rate instability, which is very great at the moment.
I accept the case that has been put by my hon. Friends that the disadvantage of monetary union is that it would no longer be possible to use the exchange rate to provide adjustment to economic changes or shocks which affect individual countries.
However, as I have already argued, the use of the exchange rate as a means of adjustment is increasingly problematic for Britain in a world in which international capital is not linked, as it used to be, to differences in balances of payments, but which goes after interest rates and speculative gains.
Mr. Peter Shore: It may be problematic to use the exchange rate to solve our appalling balance of payments problems, but does my hon.

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Friend agree that it is inconceivable that the balance of payments problem can be solved without some major change in the value of sterling?
Mr. Radice: I agree. There will also have to be massive cuts in internal demand because we need to cut imports. We need a depreciation of our currency and that is why my right hon. Friends are right to say that we have to go in to the exchange rate mechanism at a competitive level. That is an important proviso. Once we are in the system, there will be a limit to the variation in the exchange rate. That is good counter-inflationary discipline, because we cannot go on depreciating, as that would undermine the whole economy, as we have found out before. Once we find the right level, we must try to stick to it—that is an important part of balancing and managing an economy. As the Swedes and other nations have found out, one cannot go on devaluing all the time.
Mr. Shore: Surely the additional problem is to decide what is an appropriate rate, against the background of our massive trade deficit and, I regret to say, our serious lack of competitiveness. Once that rate has been decided, there is also the problem of having to adjust it again, as so many other countries with fixed exchange rate regimes have had to do. Does my hon. Friend agree that it would be sensible to defer the whole thing until we have reached balance of payments equilibrium?
Mr. Radice: I believe that, if we continue to run a balance of payments deficit of the size that we have at the moment, the market may decide what that level should be.
There is considerable disagreement about what the level should be. I cannot give a figure, but I suspect that it should he considerably lower than it is at the moment, as that would be competitive and we certainly need a competitive edge—I think probably something in the region of DM2·50.
As I have said before, we are not talking about joining a fixed exchange rate system. The ERM is not a fixed system, but one with variability, albeit limited. It is true that full economic and monetary union would mean a fixed exchange rate system, but that will come later. I am talking about the principle of the thing.
A more pragmatic argument for supporting the long-term goal of monetary union, is that the single European market is likely to lead to greater integration of European economies. That integration will require a response at a monetary level.
Under the terms of the Single European Act, as we have been reminded, trade barriers will be removed and all exchange controls will be dismembered. That will lead to greater co-ordination of monetary policy and particularly of interest rates. We have seen how the other ERM economies are increasingly following the lead of the Bundesbank. That partly explains why France supports so strongly the idea of the European central bank. The French hope to retrieve a share of sovereignty that they have lost to the Bundesbank, by participating in the decision making of such a bank. In a European economy which is increasingly interdependent, one can recover control by sharing, and that is the principle behind the idea.
One can support the long-term goals, but that does not mean that one is not sceptical about the details of the Delors proposals. The important thing is that they ar not immutable but can be cast aside.
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I do not believe that it is necessary, with full monetary union, to have binding rules on budgetary and fiscal policies of member states. It is essential that member states should be able to use fiscal policy to provide adjustment to short-term problems of balance in their own economies or the gap between the rich and poor economies will widen.
It is true that the Delors plan envisages wider structural and regional policies at the European level, but they have to be buttressed by fiscal policies at national level.
The Government have to adopt a more positive approach to economic and monetary union. Instead of the negative, nationalistic attitude of the Prime Minister, we should develop a policy that ensures that we are able to influence the outcome in a sensible, practical way.
The Treasury proposal for competing currencies is not a serious runner. It has already been rejected by our European partners and it is a pretty odd proposal, by any standards. It either means little more than the present arrangement or, if competition works, everyone will turn to the deutschmark, which will become the common currency of the union. That is the reality of the situation.
A more genuine approach to EMU should be based on two things. The first is a genuine commitment to the long-run objective of EMU, and not the kind of commitment that Government have used as a bargaining proposition. Secondly, we have to insist that an irrevocable fixing of exchange rates should take place only after the full effects of 1992 have worked through the European economies. That is not likely to take place before the end of the century.
Mr. Austin Mitchell: The year 2010.
Mr. Radice: Perhaps not that far ahead, but it will take some time.
Meanwhile we should join, and then build on the existing exchange rate mechanism, develop greater co-ordination between central banks and ensure that we get realignments at increasingly rare intervals. We should also develop the ECU as a parallel and increasingly important currency. Gavyn Davies, one of our advisers to the Select Committee on the Treasury and Civil Service, said, in his valuable study of the European monetary question, that the more important the ECU becomes, the nearer European monetary policy will be to the average of member states. There is something to be said for that. He also said that that would make the Bundesbank less dominant in setting European monetary policy.
A European central bank will not be necessary until exchange rates are finally, irrevocably fixed. That is a long time ahead. Economic and monetary union has to be preceded by a major expansion of regional and structural funds, and the implementation of the social charter. We should also develop democratic institutions at national and European level, and give greater powers to the European Parliament.
Europe is one of the most important issues facing the House. Instead of standing on the sidelines, like the Prime Minister, shouting nationalistic slogans, it is essential that the United Kingdom starts to play a full part in the development of Europe's future.
6.29 pm
Mr. John Biffen: I will be brief, Mr. Deputy Speaker, and I therefore hope that you will bear with me if I take my argument at something of a gallop.

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I much enjoyed the speech of the right hon. and learned Member for Monklands, East (Mr. Smith). He seems to have established himself as one fully conversant with European debate: his remarks were wide-ranging and, on the whole, paradoxical. He was almost a one-man pantomime horse—one half, the rear half, trying to establish Labour's credentials in warm and charitable European terms and making the party fit once more for Roy Jenkins, the other half much more pragmatic. Addressing my hon. Friend the Member for Southend, East (Mr. Taylor), the right hon. Gentleman reflected on the absurdity of some of the ambitions in phases 2 and 3 of the Delors report. It would not have been difficult for those in the Press Gallery to assume that a good deal of consensus existed between the two parties on what constituted the wider challenges, and on what was the appropriate national reaction to them.
Let me again place on record my innate ambivalence —if not hostility—in relation to fixed exchanges. The right hon. Member for Bethnal Green and Stepney (Mr. Shore) will remember struggling, as first a supporter and then a member of the Labour Government, to validate an unreal exchange rate between 1964 and 1968. Every social and economic value of that party was prostituted in the unreasonable pursuit of the untenable. The speech of the hon. Member for Durham, North (Mr. Radice) prompted the same reflections.
European monetary union would involve both pluses and minuses. The idea is not for constant changes of parity to take place to offset that, but for surpluses to be recycled through a regional policy—and doubtless a social and industrial policy. The hon. Member for Dagenham (Mr. Gould) who is clearly growing into a good European after a shaky start, has mentioned energy policy. But I can think of nothing more daunting than mechanisms whereby the resources for such policies were provided in such circumstances—that those resources should be available for judgment and distribution through public processes about as remote as they could possibly be. I do not take into account the relationship between the Council of Ministers and the House; I merely say that the circumstances in which resources are created for distribution should cause us to think very seriously, Socialists as much as Tories. The remoteness of government is an equal challenge to both sides.
My first point of substance concerns the exchange rate mechanism. This is the immediate problem. It is alleged to be a test of the authenticity of our attempt to relate to our European partners. I must say that I am sorry that there has been so much acrimony over the safeguards that have been attached to British membership, the Madrid settlement and the statements made thereafter. My right hon. Friend the Prime Minister is clearly the object of considerable political attack, which is inevitable—I do not think that anyone would resile from that.
When I watched the Walden interview, I thought that my right hon. Friend was changing her style. In contrast to the economical use of verbiage in her statement after the Madrid summit, she now elaborated on the safeguards, as though, under the emollient influence of Woodrow Wilson, she wanted to reach the magic figure of 14. As I listened, I reflected on Clemenceau's observation that 10 was good enough for the Lord. Let me put back on the
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record what my right hon. Friend said in the House after the Madrid summit. She talked of the practice that would accompany—that would, indeed, be a precondition of—our membership of the exchange rate mechanism:
"These include completion of the single market, abolition of all foreign exchange controls, a free market in financial services and strengthening of the Community's competition policy by reducing state aids."—[Official Report, 29 June 1989; Vol. 155, c. 1107.]
Does anyone contest those four safeguards? Does any hon. Member on the Opposition Front Bench contest them? The silence is eloquent, and I am immensely grateful.
Mr. David Howell: Will my right hon. Friend give way?
Mr. Biffen: Although I have great affection for my right hon. Friend, he is not a member of the Labour party; but I will give way to him none the less.
Mr. Howell: I am grateful to my right hon. Friend, and I am listening with fascination to his speech, as I always do. I have only one contesting point to make—not entirely minor, but interesting. The Madrid communiqué said something slightly and crucially different: it mentioned the exchange and other controls of major countries within the EMS, not all countries. That is just a little point for us to bear in mind, should we ever come to textual hair-splitting in the future.
Mr. Biffen: I am grateful to my right hon. Friend. In fact, I recollect that Mr. Brian Walden pressed the question of Portugal in his interview. The issue did not bring that to a halt, and I do not believe that it would bring our relationship with our European partners to one either; I am glad, however, that my right hon. Friend has sought to fill the void left by the parliamentary Labour party.
We must emphasise the seriousness of our safeguards, and, moreover, the Labour party's safeguards. Labour makes great play of the problems of parity. The hon. Member for Dagenham, after all, said:
"We must not be forced to sacrifice competitiveness to maintain an ERM parity".
It is well known that deep concern is felt about the need for legitimate and defensible safeguards before we proceed with the arrangements. There is deep scepticism on both sides of the House—I except the hon. Member for Berwick-upon-Tweed (Mr. Beith)—about the wider ambitions of economic and monetary union and Delors stages 2 and 3. What better way to demonstrate the authenticity of that scepticism than to insist on safeguards at stage 1? otherwise, the very signals set up by a relaxed "Let's get in and work it out once we are in" approach will merely encourage those who believe the old French proverb, "C'est le premier pas qui compte." I believe that the scepticism is well founded.
We have argued the matter in economic terms; the Minister, although he is from the Foreign Office, knows that this is basically a Treasury debate. That is natural and within the conventions of the House, but make no mistake: the debate must be set in a highly political context, created by the present turmoil across Europe. I can well believe that Mr. Delors—who is, I think, as good a Frenchman as he is a European—has on his desk those wonderful words of Francois Mauriac: "I like Germany so much I want two of her."
Developments in the Soviet Union and in other Warsaw pact countries are unfolding at a pace that few would have anticipated. Old nationalisms are being

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refurbished; old institutions are being re-established. They may be old, but set in today's circumstances, they provide a powerful new dimension to the whole of European relations. We see within that all the indications of a potential German reunification, however much it is whispered behind hands, rather than proclaimed openly. We know that there is the prospect of an eventual, but perhaps not too distant, American military disengagement from western Europe, if America can make the appropriate arrangements with the Soviet Union.
It is against that background that, to my mind, there is the imperative of thinking, in the words of De Gaulle, of
"a Europe from the Urals to the Atlantic".
We should think about the political, social and economic structures that could provide the shock absorber for the impending re-unification of Germany. We should ask ourselves whether in continuing to try to bring about a closer, more integrated and centralised western Europe, we are facilitating a process that will have to reconcile those emerging factors in central and eastern Europe.
All that I can say as I bid my right hon. and learned Friends godspeed on this enterprise is that I hope that it can he done in the spirit of cross-Bench co-operation. If the right hon. and learned Member for Monklands, East wants to set out the Labour party's stall on Community affairs along the lines that the Government are foolishly trying to protect national interests in the way in which they are proceeding over the question of membership of the European exchange rate mechanism, I advise him that the debate will not end there. It will be translated to the wider issues that I have mentioned, and I look forward to that contest with relish.
6.41 pm
Dr. David Owen: For years I have believed that this Prime Minister would never take us into the exchange rate mechanism of the European monetary system. I have felt that that would and was gravely weakening this country's capacity to play a constructive and full role in the development of Europe. Listening today to the Chancellor of the Exchequer and to the right hon. and learned Member for Monklands, East (Mr. Smith), I believe that we will now enter the exchange rate mechanism of the European monetary system some time in 1990. If Italy and France abolish their exchange controls—as I think that they will early in 1990—it will be possible for us to enter in the first half of that year.
However, I do not think that it will be easy. I believe that the Prime Minister will continue to put up stubborn resistance to it. The resignation of the former Chancellor will have had a substantive effect. I am one of those who believe that policy differences and principle still matter in politics. As resignation from such a great office is not done lightly, as the former Chancellor said, I believe that it will have a profound and long-lasting effect. Indeed, I believe that it will have an effect far beyond the mere matter of joining the exchange rate mechanism because, important though that is, it is as nothing to the fundamental debate about European economic and monetary union. There is no doubt whatever that if this country continues to hold out—unreasonably, in the eyes of most people in Europe and, I would suggest, in the eyes of most hon. Members —we will not have the political weight to stop some of the more foolish aspects of the European economic monetary union that are contained in the Delors report.
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I speak as a lifelong European, but I believe that to force the European Community down the federalist route would not only damage the European Community but possibly destroy it. It is an unnatural beast, which the European Community was never meant to be. But it has never before been given such a massive federalist twist than by the Delors report. The concept of an independent and free nation giving up the right to fix its own levels of direct taxation and its own borrowing requirement is to emasculate the nation state to the extent that there would be no other option than to be a united states of Europe.
I am married to an American and my children are therefore half American, but to believe that one can draw any parallel between the United States of America and a united states of Europe is to live in a world that is wholly different from the one in which I live. If that federalist model were forced on Europe, it would eventually split it apart.
The war cemeteries of Europe are a massive demonstration of the folly of nationalism, but in the strains and stresses, and in the potential break-up of the USSR, we are also seeing all the dangers of forcing independent nations into an artificial grouping.
The cultural history and traditions of Europe allow us to develop European unity in a unique way. Few have been able to predict the path of European development in the past and the title of the Government paper "An Evolutionary Approach to European Economic and Monetary Union" uses well-chosen words. Evolution is a progressive and natural development, but one can never be sure of its pace or the ultimate direction in which it is leading.
Mr. Spearing: Will the right hon. Gentleman give way?
Dr. Owen: Time is short, so I shall not give way.
The development of Europe is therefore of fundamental importance and this is possibly one of the more important debates that we will have in this Parliament. There are some signs of an interesting consensus developing on this question as there are in relation to the European exchange rate mechanism.
The Prime Minister has allowed her prejudices and instincts to triumph on the issue of the exchange rate mechanism. It does not raise fundamental questions of sovereignty, and to pretend that it does is nonsense. We went into the European monetary system in 1978 and the Labour Government took the necessary legislation through the House, but it was always permissible within that legislation for any Government to go into the exchange rate mechanism over a mere matter of a weekend. No other form of parliamentary approval was needed. That was a recognition that we were dealing with a mechanism that did not raise the fundamental questions that are raised by some aspects of the Delors report.
I turn to some aspects of that Delors report that trouble me. I believe that the Government's competitive currency arrangement will not run. Indeed, I am surprised that the new Chancellor has put his authority behind that non-runner. It is not necessary at this stage for any of us to take firm and fixed positions about the development of the currency. None of us knows how successful 1992 will be and none of us knows the effect of all the Community countries—I hope—being in the exchange rate mechanism. It may turn out to be a naturally stable system of

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virtually fixed exchange rates, although there will always be—and rightly so—the capacity to change the exchange rate.
I would not go back into a fixed system. If we were to get stable currencies, as is well argued in a document by the Social Market Foundation, by Sam Brittan and Michael Artis, entitled "Europe Without Currency Barriers", if we were to have a virtually fixed system, there would not be transaction costs; there would be exchange rate stability. It may well be that we could use the extension of the ecu and that that would form a sufficient balance. As has been said, we may develop a dual currency so that a European currency will run alongside national currencies.
However, when the wider public comes to understand that the system might mean giving up the franc, the deutschmark, the pound and the peseta, there will be an instinctive reaction against it. Those advocating it will have to prove that they have solid arguments for necessitating such a major cultural change. I believe that they will be hard pressed to do so.
I would be cautious about being hostile to the idea of a European system of central banks. It will not be like the Bundesbank system. That system was developed in peculiar circumstances—in the inflation of the 1920s and 1930s and the post-war German situation. If it was modelled on any existing system of banks, it would be much closer to the Federal Reserve, which has a stronger political element, as has been mentioned already in the debate. I suspect that it will be different even from that. We must recognise that at this very moment the 12 national governors of the banks within the European Community meet regularly. That co-ordination has already been found to be necessary. When exchange controls are completely lifted, there will be a need for greater co-ordination. The governors of the banks will become more important within the European Community.
I beg the Government not be too pedantic. Many of our European partners like creating institutions; frankly, I do not. I found that my European enthusiasm always used to wane the closer I got to Brussels. We must, however, be a little flexible on this. The phraseology that describes a European system of central banks is about as neutral as one can get. If our European partners feel that such a system is an important symbol of making progress towards greater unity in this sphere, we would be most foolish to put up artificial road blocks against it. We should accept such a system provided that it meets some of our essential safeguards and provided that, within that system, our own Governor has an input which reflects his relationship with the Government of the day and, through that Government, with the House of Commons.
It will be difficult to get the balance right, but it is right to accept that we are living in a much changed world of exchange rate movements. Massive sums of money move rapidly, and within a fully fledged exchange rate mechanism we will need co-ordination mechanisms which have an indigenous authority and which operate quickly.
We should be more flexible, but I will not push it any further. I do not think that I would argue against, in principle, some institutional development in that regard provided that certain democratic and national safeguards were maintained. I cannot offer a blueprint, as I think that it would be impossible even to design such a blueprint until
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we were within the exchange rate mechanism, seen it work and we were a little past 1992. Jacques Delors must frankly be told—I hope by more than one country, Britain—that a lot of the stuff he proposes is arrant nonsense. It may serve as his presidential launch pad, but much of it does not make sense within an evolving European Community.
Within that context it may be that we are developing, once again, a consensus on European matters in this House. No one can deny that that is of great value. It does not make sense for the Chancellor, the Foreign Secretary or the Prime Minister to stand up for British interests in a European Council meeting and then to come back and always have to justify being in a minority of one. There are times when it is right for a British Prime Minister to be in a minority of one—but not quite so frequently as the right hon. Lady finds it necessary to be. There are moments when it would be greatly helpful for a British Prime Minister to go into negotiation knowing that he or she is likely to be in a minority of one, but knowing that they can speak for a united House of Commons or at least for the main thrust of the political contributions made in the House. That sort of consensus—I know that the Prime Minister will not like the word—is rather helpful in diplomatic terms.
It is also helpful within the European Community to go out deliberately to make a few friends and there are friends to be made. The Federal Republic of Germany has great reservations about whole chunks of the Delors report. It is very happy, however, for Britain to take the flak and all the odium for making sensible points against that report. For the past two decades, the German technique has been to nuzzle close to and to butter up the French on such issues. It recognises that President Mitterand and Prime Minister Michel Rocard are committed to those issues. These days they are more or less federalists and, unfortunately, we cannot rely on Gaullist attitudes to withstand some aspects of the Delors report. It is necessary to try to prise France and Germany apart on this issue.
Holland has a splendid and independent-minded Prime Minister, Mr. Lubbers. On a number of occasions he has displayed a sensible view from a committed European position, in common with previous Dutch Prime Ministers. Mr. Lubbers now heads a grand coalition with the Dutch Labour party—it has been party to negotiations despite having lost the election—with the Christian Democrats. The Danes and Portugal could also be reasonable allies on this question.
It is also important to consider the social contract—
Mr John Smith: The social charter.
Dr. Owen: "Chat was a Freudian slip. The social contract has a long history in French politics and it is not something that has been discussed in this country alone.
The biggest absurdity in the social charter is the minimum wage legislation. It is a big enough nonsense to argue in favour of such legislation for the United Kingdom, but it is an even greater nonsense to argue that it can be run on a European level. It has its political advantages, but they evaporate the moment one fixes the level. Any Government—I am sure that the right hon. and learned Member for Monklands, East would discover this —would find that they would have to fix the minimum wage at such an embarrassingly low level that they would back off it.

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What we should be talking about is a guaranteed minimum income. That is a perfectly legitimate demand on a national Government and there are strong demands, in social terms, for Europe to have guaranteed minimum incomes. That would link wages, sometimes grossly inadequate, with the benefit and tax systems. If we were signing up for a social charter that stood for a minimum wage or income, it would not cause many problems to the present Government. Why do they not argue that case instead of getting themselves into a great lather?
There are other aspects of the social charter to which objections can be raised. The Commission has modified it substantially and has made it clear that most of the legislation is the responsibility of the member Governments and that it will become Commission responsibility only where appropriate.
Every possible piece of phraseology within the social charter does not fit us and it does have some grandiose elements within it, but it is fairly harmless stuff. If we get ourselves into a great lather about it and put ourselves in a minority of one, it looks as though we are incapable of giving any ground in what is, essentially, collective bargaining. Effectively we are expected to operate within a coalition. We know that the Prime Minister has some difficulty with that even within her Cabinet, but we should remember the basic facts. We are in the European Community and we are not coming out. There is no question of a two-tier Europe, which would be strongly against British interests. At various times we must give a little to maintain a vital national interest.
I hope that the Chancellor's resignation means that the Prime Minister has been reined in. There is no doubt that the former Foreign Secretary and the former Chancellor bent her over before the Madrid summit. No sooner was the agreement reached, however, than it was clear that, with one bound, she was free. One had only to listen to the press conference that she gave to understand that. She was undoubtedly heading to undermine that agreement.
The Prime Minister has a political purpose in not wanting an exchange rate mechanism. She fears that in the four weeks during an election campaign an opinion poll may well be published to show that the Labour party might win. There might he a run on the pound, although if people listen to what the right hon. and learned Member for Monklands, East said, I am not sure that there would be. If there was a run on the pound, instead of letting the rate go down we might be forced to raise interest rates because of the exchange rate mechanism. That might be slightly embarrassing during a general election campaign.
That mechanism could also stop a consumer boom being generated before an election. Some of the disciplines within the exchange rate mechanism of the European monetary system would be helpful in stopping the gross manipulation of the economy prior to an election. We saw that happen at the time of the 1987 election, but the Conservative party did it in 1955 and 1959 and it jolly nearly got away with it in 1964. If it could, the Labour party would have done the same. The disciplines within the mechanism would inhibit to both sides of the political scale at the time of the general election. I welcome that.
The European Community has been a political, divisive issue in this country from 1962 until about 1988, which is far too long. I have listened to the debate today, and for once I am beginning to believe that our membership of the
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European Community is becoming something to which all sensible people in this country can give a wholehearted commitment.
Mr. Deputy Speaker (Sir Paul Dean): The 10-minute limit on speeches begins at 7 o'clock. Hon. Members will find the digital clock winking at them when they have half a minute to go.
7 pm
Mr. Nigel Forman: I must begin by saying how much I agreed with a large part of what the right hon. Member for Plymouth, Devonport (Dr. Owen) has just said in a good-humoured and sensible way.
The idea of economic and monetary union obviously poses problems for this House and for political decision makers in this country. That is mainly because, although a distant goal, it implies a real shift of political power away from politicians at national level to politicians, bureaucrats bankers and judges at the European level. In the long run of history, this may happen. If it does, it will do so only with the prior approval of the national Governments and Parliaments concerned—through a new Community treaty which will need the unanimous approval of all the member states if it is to be brought into being.
In the shorter term, the priority for Her Majesty's Government must be to resolve the doubts and contradictions in their attitudes towards the European monetary system. The Financial Times correctly argued in an editorial yesterday:
"Membership of the EMS has become a litmus test for Britain's commitment to the broader political aspirations of the European Community".
The most pressing problem for the Government is to resolve the issues raised by the interaction of European policy and monetary policy. That cannot be sensibly managed without taking full account of the European—and even the global—dimension of monetary policy. We should consider carefully the interaction of these two great issues before spending much more political time and energy on the longer-term issues of institutional shifts and political deficits in the European Community, to which this House will doubtless return on numerous occasions.
In an open economy such as that of Britain today, with more than 30 per cent. dependence on foreign trade, the Government cannot be indifferent to significant movements or volatility in the exchange rate. If they are, damaging consequences will follow. Between 1979 and 1981, Ministers seemed indifferent to a rapid and large appreciation in the pound which rendered at least 20 per cent. of our manufacturing capacity obsolete, drove up unemployment, exacerbated the seriousness of the recession and significantly tightened the monetary stance.
In early 1985, the dollar shot up like a rocket and the pound plummeted towards parity with it. Not even the most relaxed monetarists felt able to sit on their hands in those disturbing circumstances for the exchange rate and British interest rates were raised by four percentage points in as many weeks to prevent the pound falling further and weakening the monetary stance.
The moral of the tale is that monetary policy must have regard to significant movements in the exchange rate. Indeed, that is an understatement of what is required in the modern world because internal indicators of monetary

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conditions, and hence future inflation, have been shown to have only limited utility. MO is an accurate coincident indicator of monetary conditions, but a poor predicter of future inflation. Sterling M3 should have had a better record of prediction, but experience in the mid-1980s showed that it was not giving the correct signals. M4, sometimes known as broad money, probably provides the least unrealiable domestic indicator of monetary conditions, and hence future levels of inflation.
However, all these internal indicators of monetary conditions take insufficient account of changes in monetary velocity and especially of externally triggered economic developments such as changes in German interest rates or violent swings in the dollar, both of which can have a significant impact on monetary conditions in this country.
Any Government of this country, which is no more than a medium-ranking power in today's world, are obliged to run their monetary policy with more that one eye on external monetary conditions. The only reliable way to measure these and their impact on the economy is to look at the pound's performance in relation to a particular key currency of a basket of currencies.
It may be possible for great economic powers such as the United States, Japan or West Germany to run their monetary policies principally according to domestic conditions, but it has become effectively impossible, and hence most unwise, for Britain or France, South Korea or Taiwan, Australia or Canada to attempt to do so. We are forced to recognise the reality of our position. If we really want to defeat inflation—and we do—we have no alternative but to give considerable and perhaps overriding weight to an external standard for our monetary policy.
Before the first world war, this was provided by the gold standard and it was relatively easy for us to work within it because for much of that period we were the dominant economic power in the world and it suited us better than anyone else. Between the wars, there was no absolutely reliable monetary standard and leading currencies gyrated for a variety of reasons. A weakened Britain attempted heroically to go back on to the gold standard in 1925—at an overvalued parity—and was eventually obliged to break the link and devalue in 1931 at the time of the great depression.
From Bretton Woods in 1944 to the Smithsonian agreement in 1971, the world was effectively on a dollar standard and the regime of fixed dollar exchange rates provided the necessary signals and disciplines for periodic adjustments in British monetary policy. That period was brought to an end by the surge in United States inflation associated with the Vietnam war, which obliged the Americans to break the link between the dollar and gold, and by the emergence of other economic power centres in the world—notably West Germany and Japan—which began to create what Henry Kissinger described at the time as an emerging multi-polar world.
That is the world in which we have been living ever since—a world that is multi-polar, increasingly liberalised and economically interdependent, in which the turnover in foreign exchange dealings in one day on Wall street may be equivalent to three times the total foreign exchange reserves in this country. In a world subject to capital and
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currency movements on such a scale, the idea of achieving national monetary autonomy is no longer realistic, especially in a country of the economic weight of Britain today. It is not even completely possible for the economic super-powers. We should recognise that reality and apply its lessons to our policy.
We are left with three choices in the conduct of monetary policy. First, we can operate an ineffective, misleading and vulnerable monetary policy based on the best available indicators of internal monetary conditions —perhaps M0 and M4 together. Secondly, we can operate a more realistic but still vulnerable monetary policy based on a mixture of internal and external monetary indicators. In the process, however, we run the risk that our policy will be misread and misunderstood by the markets, thus forcing us to incur unnecessary extra costs in terms of short-term interest rates which are higher than they might otherwise have needed to be, and exchange and interest rate volatility greater than might otherwise have been the case.
The third, and most effective, choice is to opt for a framework capable of providing both a higher degree of certainty and a higher degree of financial confidence in the markets by joining the exchange rate mechanism at the earliest sensible date. In effect, that will mean putting ourselves and our domestic monetary policy on to an external deutschmark standard. That may be disagreeable for those who cling to anachronistic notions of national monetary autonomy, but our recent experience of having to maintain our interest rate differential with the Germans by raising our rate 1 per cent. when they raise theirs should have cured us of any lingering misconceptions on that score.
Even that course of action will be no panacea and may bring considerable difficulties for us, especially in the early stages after we lock ourselves into a fixed parity with the deutschmark. With French experience as the best evidence to go by, it may take between three and six years in the ERM for us to converge completely down to German inflation levels, and we may not even achieve that if we persist with the short-sighted industrial attitudes shown by the Confederation of Shipbuilding and Engineering Unions. Initially, we would almost certainly have to pay the price of high interest rates and considerable interest rate volatility, but after a while the markets should settle down, confidence that we are in to stay should increase, and hence the interest rate premium and the inflation differential should gradually diminish.
Since all this could be a difficult political pill to swallow, the question of timing becomes important, as does the question of the best institutional arrangements to support it. With the next general election now probably delayed at least to the autumn of 1991, and perhaps even the spring of 1992, the best time to lock ourselves into the ERM would be either in the autumn of 1990—once French and Italian exchange controls have been fully removed and our own inflation rate has fallen closer to that of Germany —or in the first week immediately after the next general election.
If the latter choice seems politically preferable, it should be accompanied and supported by an unambiguous commitment in our next manifesto to establish the Bank of England on a new basis of strength and independence analagous to that of the Bundesbank or the Federal Reserve. That will give extra confidence to the markets and increase the credibility and, if necessary, the austerity of

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monetary policy in this country. I had meant to read a quotation from Mr. Poehl in my support, but I have not time to do so. This will also make it institutionally easier for Britain to co-operate in a future European system of central banks such as that proposed by stage 2 of the Delors plan for progress towards economic and monetary union.
These are large issues. The interaction of economic and European policy will probably be the most critical area of decision-making for the Government between now and the next general election, and probably well beyond that. Despite the temptation to follow the advice of many in this House by playing the nationalist card, it would be an historic mistake for the Government to do other than to follow through the European commitments that they have already made in the Single European Act and at the Madrid European Council. Let us therefore press ahead, as the Government and the party best equipped to defeat inflation, restore a competitive edge to our economy and lead Britain further towards its European destiny in the 1990s and beyond.
7.11 pm
Mr. Austin Mitchell: It is interesting that this debate has concentrated on the EMS and the exchange rate mechanism. That is appropriate because commitment to the ERM is a central part of the first stage. It is also interesting to look back at the conditions set out in 1978 by the Labour Government for membership of the EMS, two of which—and they are basic—have not yet been fulfilled.
There were eight conditions. The third was that the EMS
"should provide a basis for improved economic growth and higher employment in the Community".
Since the system came into being on 1 April 1979, Europe has become both the high unemployment and the low growth black spot of the advanced industrial world. Between 1980, the first full year of operation, and 1988, manufacturing output in France grew by only 4 per cent. and in Italy by 8 per cent. Both countries were growing far more rapidly before they entered the exchange rate mechanism. Unemployment in both countries is now at record levels; that is not unconnected with the fact that they are members of the ERM
The other condition that was not met was that the system
"should impose obligations on its stronger members symmetrical with those falling on its weaker members".
As with Bretton Woods, it does not do that. West Germany is still running up a huge surplus and dominating the Common Market economically by keeping the mark deliberately undervalued to enhance its surplus in manufactured trade and its domination of the markets of other countries, all of which are in deficit to West Germany.
This is a real problem. The only way in which Europe can trade fairly is if the mark is revalued upwards—yet the exchange rate mechanism acts as a series of guy ropes using the other currencies to keep the deutschmark down. The system forces these currencies down to the unnaturally low level of inflation in West Germany. In that sense, it helps Germany to keep the deutschmark down so that Germany's manufacturing surplus can grow to the dominant level at which it now stands.
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The system has ruined the Mitterrand attempt to recapture the French market; it ruined his expansion n 1981 when the French Government were forced to choose between membership of the exchange rate mechanism and sustaining their expansion. They chose Europe, arid Delors went off to his reward in Brussels.
If, as the document on the evolutionary approach suggests, we join the ERM, we should issue another Green Paper to explain why the two unfulfilled conditions can now be dispensed with and why they are no longer relevant. I believe that they are still relevant.
My party stipulates that we shall enter the ERM on four conditions. I am happy with that—although I was not consulted—because those four conditions are unattainable, especially the one about a full and competitive exchange rate. What is a competitive exchange rate? The only possible definition is the exchange rate at which a country can balance its trade in conditions of full employment and a high and sustainable rate of growth. We are nowhere near that, and it is difficult to imagine the scale of the devaluation that would be necessary to bring us to that level of competitiveness. The pound is substantially overvalued in real terms against the deutschmark, even compared with 1986 levels. The deficit in manufactured trade is directly due to that over valuation.
This brings me to some of the more naive arguments for membership of the mechanism. They are advocated by the Democrats and the Confederation of British Industry in a united chorus. They say that the mechanism would help to bring inflation down. It will: it is easy to achieve nil inflation in a graveyard. The exchange rate mechanism has certainly been successful in giving France and Italy high levels of unemployment and low levels of inflation—that is its achievement.
The other argument advanced by this group is that industry wants a stable exchange rate because that would encourage trade. But we are a country in massive deficit. If the system encourages trade, it encourages those who import into this country to build up the deficit as much as it encourages those who export to whittle it down. If that is the benefit of stability, we shall suffer under it.
None of the studies carried out by the Federal Reserve or the Bank of England shows that such stability is necessary—fluctuations are no great barrier to trade. In a context of massive deficit it will be impossible to maintain any exchange rate at which we entered the ERM.
The central difficulty and the nub of the argument over the ERM is that it imposes on us—if we enter it—an externally determined exchange rate. That was the difficulty on which the Labour Government broke themselves in the 1960s, but with this difference: this determined exchange rate would be determined by competitors who have every interest in seeing the currency of this country overvalued because of the massive surpluses that they are running up in their trade with this country. That is the treadmill that will be imposed; we shall be back in the trap of the 1960s, only worse.
It is true, as hon. Members have said, that there are wild fluctuations, but it is also noticeable that they mainly affect the deregulated economies with strong financial sectors —the United States and Great Britain, which are the only two countries to have experienced the wild overshoots that have been so detrimental economically. Over the long term, we can still affect and manage the exchange rate largely through interest rates. That is what the

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Government have done. They have done so for the wrong purposes, keeping interest rates too high and thereby greatly overvaluing our currency. That is folly, but it proves that we can manage and use the exchange rate for national purposes. It would be central to the policy of any Labour Government whom I would want to see in power to use the exchange rate for the purposes of the people —for expansion and growth, to rebuild the manufacturing base of this country.
We are at a turning point. The economy has fundamental problems; it is in comparative decline and it has just wasted the great opportunity that oil gave us to expand our industrial base, which is now too shrunken and weak to fulfil these purposes for the people—providing growth and jobs and generating the surplus that we need for our well-being. If we now go further and faster into an open market that weakens weakness and strengthens strength, leading to the phenomenen of peripheral decline —draining development from the periphery to the centres of population and wealth—we compound our problem. If we also accept monetary union on top we compound the problem of peripheral decline even more for then a balance of payments problem becomes a regional problem.
This is the danger, and we are now at a time of choice. Either we act for ourselves using the traditional weapons of the exchange rate, interest rates, control of credit and tax policy to rebuild our industrial base, or we throw ourselves on the mercy of Europe. That requires us to demand as a weaker element in that relationship ever stronger central institutions to help us even more. That is implicit in the commitment to allow the EC to redistribute in the way that the national state redistributes in a national economy. In other words, if we pursue this path, we shall become dependent, especially on West Germany. Is West Germany's record of generosity such as to encourage the belief that it will support us in that situation, or will it look, as it must, towards reconstruction in eastern Europe? That is the choice. The Opposition have no alternative and certainly I have no alternative but to choose our own weapons for our own purposes for building up our own strong economy.
7.20 pm
Mr. Ian Taylor: It is a great privilege for me to speak after my hon. Friend the Member for Carshalton and Wallington (Mr. Forman), who made a first-class contribution to this important debate. If one of the possibilities that emerges as a result of the unfortunate events of the last week or two is that my hon. Friend is free to speak on economic issues, the House will be better for it.
We are having two debates—one about the relatively short-term policy impact of the conditions on which we join the exchange rate mechanism, there no longer being any doubt by the Government that we shall join, and the second about the longer-term problems of how the consequences of the development of the exchange rate mechanism would work out in terms of economic and monetary union. Britain has been committed to economic and monetary union for a long time, and that was reinforced by the Single European Act. The definition of
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how that should be shaped was never made crystal clear until it came to the Delors programme. I shall return to that.
In the short time that is available it is difficult to rehearse all the arguments that led me to conclude that it would be better for this country and for sterling to join the ERM sooner rather than later. The arguments advanced by my hon. Friend the Member for Carshalton and Wallington were clear and concise. However, it is important that if we regard exchange rates as an important part of economic policy, although not the most important part, it is better to look upon them in the context of a co-operation agreement with our major trading partners rather than to try to continue treating them in isolation. For that reason I do not agree with some of the arguments of the hon. Member for Great Grimsby (Mr. Mitchell).
The protection that will be provided for stability within the exchange rate mechanism, the benefit of the collective action of reserves, can have a major beneficial impact and also give the clear sign that there is a policy of stability that will require strict monetary discipline in this country rather than an excuse to avoid it. That seems to be a double advantage. The benefit, of course, would be increased because, as soon as our rate of inflation was declining, we would be more able to manage the problems of our interest rates on the downward side if we were part of the exchange rate mechanism at that stage.
There is no questioning the clear conditions that were laid down at the Madrid summit about our entry. As my right hon. Friend the Chancellor of the Exchequer said in his speech two days go, it would not make sense either for this country or for the members of the exchange rate mechanism for us to join if the conditions were not being met. Therefore, I fully endorse the reality that we must make sure that the conditions are adhered to.
As regards timing, we need to look closely at exactly what is happening to those conditions and keep them under supervision. We can leave aside for the moment the prospect of a declining rate of inflation in Britain and the rate to which it will decline. We must not assume that the member countries of the Community are static. For example, the French have gone a long way down the track of removing their exchange controls and liberalising their currency movements. There remains a problem for individuals who wish to have foreign bank accounts or hold foreign exchange in France. But as any French Minister will confirm, France has already removed most of its controls and yet that has not had a destabilising effect on the exchange rate mechanism.
It is most unlikely that the Italians will fail to reach their target, despite the problems that anyone who looks at the Italian economy will understand. Politics comes into this, because the Italians will hold the presidency of the European Community in the second half of next year and 1 July is the target date for the removal of exchange controls. That may be when the intergovernmental conference is held, should one be called.
It is possible to say that by July 1990 there will be no exchange controls in countries which represent 80 per cent. of the Community's output. That is a significant and important factor. The timing must also take politics into account. The highly desirable achievement of the conclusion or a move to the conclusion of the internal market could well be speeded up if our colleagues understood that joining the exchange rate mechanism was part of a political trade-off. That needs to be kept in mind,

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because it is in Britain's interests that the internal market should be realised. That implies that we must support the Commission when it wishes to take tough powers to enforce the deregulation of the European Community. That applies particularly to Sir Leon Brittan, the Commissioner responsible for competition policy and for removing state subsidies in countries which still practise it to an alarming extent. We should bear those factors in mind, because occasionally statements are made which appear to give the contrary view of our attitude to the Commission.
I shall now deal with economic and monetary union. It is not at all inconsistent for me to have stated clearly that I believe that we should join the exchange rate mechanism earlier rather than later and then to say that I utterly reject stages 2 and 3 of the Delors plan. They seem to be reminiscent of the constitutional discussions that are quite popular in France, where people spend much time trying to set up an edifice in order to solve a small problem. It seems that that is exactly what is happening in stages 2 and 3 of Delors. It is an unacceptable transfer of sovereignty to somewhere. I do not like the word "sovereignty". Let us say influence, power and decision-making being transferred somewhere with no provision for democratic accountability. Many of the measures relating to whether countries should be allowed budgetary and fiscal control seem to be meddling of the worst sort. What is worse—this is where we accord with the Bundesbank and the advisers to the Ministry of Economic Affairs in Germany—is that it does not guarantee the one thing that is very important in the whole process—sound money.
There is no guarantee that stages 2 and 3 of the Delors plan will ensure the one thing which will come out of the exchange rate mechanism, which is that we shall be linked to a sound monetary policy and the anchor currency, the deutschmark. The Bundesbank is worried about that. It has made it clear that it does not wish to see the move from the current system, where it calls the shots with a strong anti-inflationary policy, to something that is amorphous and in which no clear ground rules are laid down. Therefore, it must be clearly rejected.
I welcome as a major contribution to the debate the Government paper "An Evolutionary Approach to Economic and Monetary Union". The evolutionary approach must make sense because we are moving into an unknown area. It is impossible for us to try to invent institutions in the hope that the path that the process is taking will meet them at the right time and in the right place. That could well not happen and, as I said earlier, it could undermine the whole exercise. I am delighted that it is called "An Evolutionary Approach to Economic and Monetary Union" because there is an occasional thought that the Government might wish to keep resubstituting the word "co-operation" for the word "union". That is a significant point, because we have now to show our Community partners that our ideas are the best way to achieve in a much more effective manner what they have already decided that they want to achieve and that therefore they are not going back on their political commitments towards the realisation of economic and monetary union.
I urge my right hon. and hon. Friends in the Treasury to make sure that we develop allies among the members of the European Community who think in a similar way. As has been pointed out, there is often a tactical difference because we go in making our objections well known when
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it is clear that many other members of the EC have profound worries about what the Delors report has done. We must realise that our job is to get a lot of them on our side so that we can have a great influence on any outcome of calling an intergovernmental conference. A block of 11 against us on the continent, pursuing a different economic and monetary union, would be a grave disadvantage to us. Therefore, I urge the Government to make their proposals with great energy and to win friends for our cause.
7.30 pm
Mr. Tony Benn: This is a political debate, and not an economic seminar in which people discuss inflation rates and money supply. We are talking about the future of Britain and of Europe. There are interesting questions about the rapidly changing situations. We are not discussing the Europeans against the anti-Europeans. We are all European. History and geography decided that. How do we want to see this rapidly changing continent develop? We are not discussing nationalism against internationalism, because nobody believes that one country can isolate itself from what happens in the world. We are discussing whether we should be free to respond to what is happening in other parts of the world or whether we are to be told by others how we ought to respond. We are not discussing the past versus the future, because the founders of the treaty of Rome have been wholly overtaken by the events in eastern Europe. Furthermore, this is not a party battle, as is evident from the variety of opinions expressed. We are discussing the guiding principles on which we should proceed.
The hon. Member for Esher (Mr. Taylor) spoke as if the purity and clarity of the market were the beginning and the end, and that if one had a pure and clear market one had solved one's problems. Listening to him, I wondered how many other guiding principles we had had in our history. When Julius Caesar and William the Conqueror tried to get us into the Common Market, separated by 1,000 years, their ideas were either to uphold the Roman empire or to uphold the glory of Normandy. I suppose that later, when the crusades were conducted by Richard Coeur de Lion, it was the Christian versus the infidels. Then there were the mercantilists, who said that if one could get all the money one would have the world. They set up the board of trade, with Mr. Speaker on it. I do not think that a Speaker has been on it for 100 years. Then there were the imperialists, who said that it was all about the empire; then it was all about free trade; and then it was about the gold standard. One has to decide what one thinks life is all about before one can decide what structures one wants.
I do not believe that a pure and open market is what life is about. Nor do I believe that those who struggled hard to elect Members of Parliament to come here think that that is what it is all about either, or they would have taken shares in small companies, attended annual meetings, and hoped that they would have had some influence via the financial market.
Furthermore, we are discussing the constitution under which we are governed. The French had a revolution on the basis of "liberty, equality and fraternity". The Americans, a year or two later, had one based on "life, liberty and the pursuit of happiness". We are told that it is about the "free movement of capital and labour" and we must sacrifice everything else to that. I have heard of people going to the stake for their belief in liberty, but I

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have never heard of somebody going to the stake because he took a different view of the public sector borrowing requirement. That is not what life is about. That is not what motivates people, so let us cut some of that out of the debate and have a real discussion.
Since the Common Market was set up after the war, for a variety of reasons, there has been an inexorable drift towards greater central control. We debated the EEC in the House, and I participated in the debate from the Front Bench in 1971. I played some part in the referendum, which decided the matter publicly. The Prime Minister went along with British membership. She was a member of the Cabinet that signed the treaty of assession. In 1985 she signed the 1992 agreement and she has given assurances in Madrid, which, however one interprets them, show that it is at least the public posture of the Government to go in. I think that she will be driven into the ERM mighty quick, for one reason. The power of capital is so great that they will not accept a Prime Minister, even an elevated Prime Minister, who stands against what they demand.
I remember the Prime Minister once making a speech from the Front Bench in which she said that she would not pay our contribution. That was the boldest stance on Europe that I have ever heard anybody make, from either Front Bench, and within a week or two it had changed. In the latest Cabinet that she has appointed, the majority are in favour of joining the ERM, and perhaps even the economic and monetary union. With pressures, we shall see her change. We are told that the lady is not for turning, but perhaps she is for wriggling. As the right hon. Member for Plymouth, Devonport (Dr. Owen) said, within a few months, we shall be in the ERM.
Some intend to go in for a full political union, but I have detected in the debate a sort of turning of the tide. I do not know how to describe it, but I think that the last federal enthusiasts have begun to get themselves out from under. I detected in the speech of the new Chancellor of the Exchequer, whose views are important, a certain healthy caution. I agree strongly with what my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) said about the nationalisation of the Bank of England, and he sounded a note of caution about it. We are beginning to recognise that the changes in the world are not in the direction of bigger and better, and are turning against an idea that was popular when I was Minister of Technology 20 years ago. It was then that, if one merged everything in, the end result would be stronger. We are moving in the opposite direction.
The Commission and the organisation in Brussels are centralised, bureaucratic and secretive. I remember, during the time of my presidency of the Energy Council, suggesting that Ministers met in public. My right hon. and learned Friend was a Minister in the Department of Energy then. The last thing that they wanted was anyone to know what they said in the privacy of the Council of Ministers. They wanted to give things away in the Council of Ministers and then give press conferences to say how marvellous they had been upholding their national interests.
Nobody has yet mentioned that the Federal Republic of Germany is the one country that could leave the Common Market the day that German reunification occurs. The Federal Republic has always made it a condition that they
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would never sign a treaty that bound a united Germany, which it did not then have. The bargaining power of Germany is not the Bundesbank or the strength of the deutschmark; it is the power of Germany to dictate the future of Europe by deciding whether to stay in the EEC or move in another direction.
I strongly welcome the changes in eastern Europe. But does anybody think that the development of democracy and the desire for representative Government instead of the dictatorship of proletariat would be replaced by an enthusiasm for the dictatorship of Jacques Delors or of the Bundesbank? Does anybody think that the market place, with its special Brussels bureaucracy, will look better than Gosplan, which they are just getting rid of? Does anyone think that the United States would agree to be governed by 15 commissioners instead of a president whom the people elect? Does anyone think that the structure of the EEC has any future? Of course it has not. It is in retreat because it is out of date and meets neither our interests nor the interests of Europe.
The Prime Minister has set down funny conditions for going into the ERM, with which I do not agree. I do not agree with the Prime Minister on many things. She says that if the power of the market were supreme, she would go in, if only the other member states would give up their democratic safeguards and reservations. That would mean that the market would be in charge, instead of Delors. I do not believe that bankers should run this country, because I am a democrat and believe that people should be in power through election. The day that bankers are elected, I shall look on them with greater favour.
I do not agree with the assessment made by my right hon. and learned Friend the Member for Monklands, East of the policy review. I will try to read what was said, but I have left my specs somewhere.
Mr. Tony Worthington: Have mine.
Mr. Benn: I do not know whether they would help much, but I will try. I suppose that, now there is a charge for eye tests, we shall all be sharing specs soon. Yes, I can read well. The policy review says:
"We believe that the European Monetary System, as at present constituted, suffers from too great an emphasis on deflationary measures as a means of achieving monetary targets and that it imposes obligations which are not symmetrical. We oppose moves towards a European Monetary Union which would further impede progress in this area."
That is followed by other references to the European exchange rate mechanism.
The problem that I have with my right hon. and learned Friend is this: we have had one Chancellor of the Exchequer resign and I do not want my right hon. and learned Friend to resign before he assumes that office. I think that the incoming Labour Government will find that they are in office before 1992. The Prime Minister will become the Countess of Dulwich living in Finchley or the Countess of Finchley living in Dulwich. There will, however, be a change of Government, and the incoming Labour Government will be faced with a massive deficit, high inflation, high unemployment, weak industry and a weak pound that is under pressure.
My right hon. and learned Friend is wrong in supposing that the ERM will offer full protection and that confidence will return. Instead, pressure will be institutionalised and legalised, and he and the other members of the next

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Labour Government will have to live with it in the same way as the IMF made the previous Labour Government live with it, and that cost us the general election in 1979.
The instruments that we shall need will be wide-ranging, and I do not suppose that Conservative Members will agree with them. We shall need exchange rate control, exchange control, industrial policy, public investment and perhaps import controls. We shall have to use the Bank of England and interest rates, and that will be our right, if a Labour Government are elected. If the Conservative party does not like that, let it defeat us. No one can say that, because a deal has been done with Mr. Delors, a Labour Government must abide by it.
The only answers to Britain's problems lie in Britain. We cannot get Delors to give us a social charter. We shall have to fight for that ourselves. We cannot get the Prince of Wales to get us better buildings: we shall have to fight for decent architecture. We cannot rely on proportional representation to defeat the Prime Minister: we shall have to win a parliamentary majority. Until the Members of this place recognise that responsibility for change and the future of Britain lies with those who elect them, which is why we must speak the truth to them, we shall continue pursuing the chimera of economic and monetary union and a federal Europe, and we might on that exceed our time limit.
7.42 pm
Mr. Neil Hamilton: We have heard a most beguiling speech from the right hon. Member for Chesterfield (Mr. Benn). I thought I heard the right hon. Gentleman speaking with the same enthusiasm, nay passion, that we hear from my right hon. Friend the Prime Minister on similar topics when she has appeared on television without a script. We may find that the right hon. Gentleman has more in common with my right hon. Friend than he would like to think.
I agree with the right hon. Member for Chesterfield that in Britain there is not the slightest desire for economic and monetary union with other countries in the European Community, apart from a few harmless eccentrics such as the hon. Member for Berwick-upon-Tweed (Mr. Beith). In general, Britain is entirely opposed to Mr. Delors's proposal. I suppose, however, that there is one compelling reason for at least going so far as to accept stage 1 of the proposal, and that is the threat of a Labour Government. Labour Governments have always needed external disciplines to control the domestic money supply. That benevolent function was provided by the gnomes of Zurich in the mid-1960s and by the IMF in the mid-1970s. It usually takes about two or three years for the bailiffs to be called in. At the end of the day they have had to do roughly what has been proposed by means of the exchange rate mechanism of the EMS.
I do not believe that the Labour party has a serious policy on the EMS. I am sorry that the right hon. and learned Member for Monklands, East (Mr. Smith) has left the Chamber temporarily because I am about to refer to my attempts to intervene in his speech. I was unable to intervene because he has taken to not to allowing me to do so. He is not as amiable to me in the Chamber, unfortunately, as he is in the Tea Room. I wanted to ask him how he can reject stages 2 and 3 of the Delors plan, on the basis that they would give power ultimately to the Bundesbank, which would be outside Britain's economic
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policy, and yet accept stage 1. The ERM is effectively a deutschmark zone. It is because of the stability that is provided by the Bundesbank, which drags along all the other currencies in its wake, that the economic sovereignty of Britain would be prejudiced by the ERM.
Policy in the Labour party is usually made in unscripted interviews with the hon. Member for Dagenham (Mr. Gould), who is then swiftly contradicted by the Leader of the Opposition. In this case, however, even that degree of policy making has not been adopted by the Labour party. It has produced a remarkable set of conditions for entry into the ERM, and I think that we should find that it would be impossible for them to be met.
It is extraordinary that the Opposition say that the essential element in their negotiations to join the exchange rate mechanism of the EMS would be an agreement by all the other members to change the most essential feature of the arrangements. which is the extent to which the control of the ERM bears down upon inflation and monetary control within the Community. It is moonshine to believe that the other member states, especially Germany, will be ready to negotiate away the one redeeming feature of the system. I do not believe that the Opposition's policy is a serious one.
I welcome the adoption by my right hon. Friend the Chancellor of a policy of competing currencies. As with so many of the successful policies of the Government, it was first foreshadowed in a No Turning Back Group pamphlet entitled "Europe Onwards from Bruges", which was published in April. I am sure that once the good sense of that pamphlet sinks in, it will be met with a great deal more support than it received initially.
I believe that it is dangerous for us to get mixed up once again with the world of rigged exchange rates. It has produced tremendous problems for us in the past three or four years. We shall be presented with many more problems if ultimately we enmesh ourselves in it permanently. The inflationary stimulus which we have suffered over the past three or four years derives from the G5 and G7 meetings at the Plaza and the Louvre, which were designed to attempt to massage downwards the value of the dollar.
Our temporary, unscripted and unannounced membership of the EMS in 1987 until the early part of 1988 was responsible for exacerbating and prolonging the inflation that we have suffered. A requirement of maintaining a certain value of the deutschmark was that we should intervene massively in the foreign exchange markets to hold down the value of the pound, thus boosting enormously broad money measures. It was necessary for us sharply to reduce interest rates, and that compounded the inflationary stimulus which was present. That was a catastrophic development which produced ultimately the political turmoil which we have suffered over the past few days. It is a pity that we have not learnt fully from the experience of the right hon. Member for Leeds, East (Mr. Healey) when he was Chancellor of the Exchequer in the late 1970s. The right hon. Gentleman learned that it is impossible simultaneously to pursue monetary and exchange rate targets, except in limited circumstances.
I believe that we have a choice. We can have either a stable exchange rate and volatility in our domestic economy or a flexible exchange rate and reasonable stability in our domestic economy. There is a distinct choice, and I think that the conditions that the Government have placed upon our entry into the exchange

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rate mechanism will be sufficient to determine that we shall never enter it. If we were to enter it, however, many of the difficulties that we have experienced in recent months would become permanent features of our political and economic system until the system itself broke down.
I believe that that will happen when the other countries in the Community abolish their exchange rate mechanisms. Those exchange controls have managed to reconcile the conflicting pressures which we, who have not had exchange controls over the past couple of years, have been unable to reconcile, but I am not in favour of the restoration of exchange controls. I consider that their abolition was the most significant act for which the Government have been responsible over the past 10 years, and it has been beneficial in the main.
I am astonished that Opposition Members are nostalgic for all the economic difficulties from which their Administrations have suffered. If anyone wants an object lesson in the troubles that those difficulties would bring in their wake, let him read the autobiography of Harold Wilson, as he then was, and the distinguished memoirs that have recently been published by the right hon. Member for Leeds, East. I know that autobiographies more properly should be shelved under fiction, but in the memoirs of Lord Wilson of Rievaulx, as he now is—I have in mind pages 447–61 on the 1964–70 Labour Government —there are wonderful passages about the difficulties and complications that were imposed upon that Government because of their absurd fixation in keeping the pound in a fixed relationship with the dollar. Paradoxically, the attempt to maintain a stable exchange rate in a world that is anything but stable ultimately produces an instability the opposite of that which it is desired to achieve.
I am sorry that eminent gentlemen such as the Governor of the Bank of England should seek to promote the argument that if we do not join the EMS now, whatever the cost it might impose on the British economy, Britain, in some mysterious way, would lose influence in the Community, or within the world, or within the financial world generally. I have never heard such arrant nonsense in my life. As if Britain's importance depended in any way on grand meetings of bureaucrats, bankers and politicians. The real strength of a country depends on what its people produce and consume and their economic strength in relation to others.
The City's success would not in any way be compromised by our failure to be part of the EMS. After all, the City has gone from strength to strength in the past 40 or 50 years, particularly since Britain deregulated its financial markets, although we have only been a member of the European currency rigging mechanism for a small portion of that time.
That opinion ignores the important trend in recent years towards the increasing internationalisation of business and decision taking and the increasing internationalisation of capital. As markets are freed up and regulations are done away with around the world, capital is footloose and fancy free, and that is one reason why, above all, artificial mechanisms designed by politicians and bureaucrats to attempt to control what are, in effect, uncontrollable amounts, because the official
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reserves with which one tries to do that are far too small in relation to the amounts of money that are flowing around the world, are ultimately doomed to failure.
London will remain a favoured centre for finance and, notwithstanding our staying out of the exchange rate mechanism of the European monetary system, we shall prosper as a financial centre, and continue to prosper because of the inherent abilities and strengths of the London market.
I recommend that my right hon. and hon. Friends should continue with a policy which will ultimately preserve Britain's economic and financial sovereignty and political sovereignty. It is a mistake to believe that the argument ends here. As the right hon. Member for Chesterfield pointed out, this is the beginning of another chapter in the long saga of political control and integration in the EEC.
I could not support a policy whereby we exported the political control of our social policies to Brussels and our financial policies to Bonn or Frankfurt. Therefore, in supporting the policy of my right hon. Friends in general, I counsel them to be even more cautious—
Mr. Deputy Speaker: Order. I am sorry, but I must interrupt the hon. Gentleman because he has overrun his time.
7.52 pm
Mr. A. J. Beith: With support like that, the Government hardly need opponents.
Two strange and conflicting claims have been made during the debate. One is that a consensus is emerging during the debate which demonstrates widespread support for membership and full participation in the EC. The other is that a consensus is emerging on the range of conditions which must precede any further steps in that direction. They cannot both be true and I fear that the latter rather than the former is true of those present, but that neither accurately reflects opinion in Britain.
What seems to be emerging is an ever-larger scaffolding of conditions upon which a wide variety of people can stand—the Prime Minister's conditions, which are clearly interpreted by the hon. Member for Tatton (Mr. Hamilton) on the one hand, just as the Leader of the Opposition's conditions are interpreted by the hon. Member for Great Grimsby (Mr. Mitchell), on the other hand, as making it quite clear that we shall not enter the EMS. That is the interpretation that they each place on the conditions advanced by their respective party leaders, each of which claims to be in favour of our entering the ERM. What a confusion is there here. Every time the debate continues, the scaffolding of conditions is further extended. In particular, every time the Prime Minister opens her mouth, still further conditions and variants on conditions pour forth.
On the Government Benches there is also confusion on the interesting subsidiary debate which was dramatically raised by the former Chancellor, the right hon. Member for Blaby (Mr. Lawson), in his intervention on Tuesday, about the independence of the central bank. A number of Conservative Members share my interest in that idea and my belief that the lack of independence of Britain's central bank is a weakness in our tackling of inflation.
One of the merits of a European central banking system which enjoys some political independence is that it could provide an anti-inflationary mechanism which was not so

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subject to the short-term whims of politicians as elections approached. There is considerable merit in that. Nor is it a constitutional abnormality or enormity to have mechanisms which are in part for a time removed from immediate political influence. The judiciary has precisely that position. Many other aspects of the constitutions of other member countries provide some measure of temporary detachment from the political process, and for good reason.
The Government have added further to the confusion in their own ranks and elsewhere by producing the extraordinary paper that appeared in the Vote Office today, the title of which I do not disagree with at all, "An Evolutionary Approach to Economic and Monetary Union." That sounds like a fine and generous principle, but the proposal that is put forward is a recipe for the deutschmark to be the predominant and successful competing currency and for the Bundesbank to be Europe's central bank. That does not seem to make a great deal of sense if the objective is that we should be full participants in European monetary union.
I favour a European central banking system somewhat on the lines of that proposed by Delors in the belief that we will be full participants in it. Indeed, it should be based in London. That must be the most natural place for a European central bank since that is where banking expertise has been built up over the years. But it will not be if, by open competition, we allow the deutschmark to become the European currency and the Bundesbank to be, in effect, Europe's central bank.
The confusion is no less on the Labour Benches. One has but to read the comments of various Opposition Members who have spoken today, or even Members of the shadow Cabinet such as the hon. Member for Dagenham (Mr. Gould), who has made no secret of his dislike for the EMS and his much greater dislike for European monetary union of any kind.
I understand that an interesting debate on the subject is going on in the Labour party, but that it has had to be adjourned uncompleted because so many people wished to speak. It will be a long time before we find out what we did not find out today, which is whether the Labour party has any policy on European monetary union other than hostility to it. We had a repeat of the definition of Labour's current policy on the exchange rate mechanism—not much supported by Opposition Back Benchers—but we had no clear statement of Labour's position on European monetary union.
That was the case when my party argued in this Chamber two and a half years ago that we should be working towards European monetary union. That is attended with as much hostility on the Labour Benches now as it was then, whatever may be said by the Front-Bench spokesman.
The key advantages that we must keep in our minds are surely the stable framework which can be provided for our exchange rate by membership of the ERM, the anti-inflation capacity of that mechanism, the removal of transaction costs which could be achieved by British business if we were participants in that mechanism, the role that London could have in a developing European central banking system and the need for Britain to be in the lead in a process which will take place whether we take part in it or not—let there be no doubt about that.
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It does not follow from what I have said that I have to agree with every word written in the Delors report. It would be difficult to do so, because the Delors report went beyond the objective of monetary union into other areas. As Sam Brittan rather vividly put it, they were looking in a dark room for a black cat that was not there, as they searched for other dimensions of economic policy on which union could be achieved. That is why the Delors report went wrong in areas of fiscal harmonisation which are not technically necessary to monetary union, are not of practical advantage in securing it and which are likely greatly to increase the unpopularity of any other moves that we are trying to make in Europe.
Control at European level of national budgets has no reasonable basis in the argument for monetary union. As the Chancellor effectively argued before the Treasury and Civil Service Select Committee, it is not necessary to have control of national budgets in order to operate monetary union any more than it is necessary to have federal control in the United States of the budgets of the states of the Union. Nor is it necessary to have the control of local government budgets that the British Government insist upon.
I was surprised that the Chancellor used that argument, but he was right to do so because such control over the budgets of member countries is not necessary for monetary union. It is necessary only to ensure that large deficits cannot be financed by monetary means, which will not be possible once monetary union has been achieved. In the transitional stage of the EMS some limit must be placed on budgets but under European monetary union it will not be possible to finance large deficits by monetary means.
Lurking behind all this is the Prime Minister's prejudice, which is shared by other Conservative Members. Even the right hon. Member for Shropshire, North (Mr. Biffen), who has so profoundly disagreed with the Prime Minister so many times, shares her hostility to any loss of sovereignty or any loss of power to make decisions, many of which are already being made elsewhere. The sovereignty that some Conservative Members are trying to safeguard and defend—it is admitted more openly by Labour Members, because they know what they are after and are prepared to admit it —is the ability to devalue the currency and to print more money. The Prime Minister has rightly criticised previous Governments for doing that, so why is she so desperate to safeguard it?
As with other subjects, I find it difficult to understand how the Prime Minister can turn her dislike of losing power into something that is more important than the objectives about which she is supposed to believe deeply. Hon. Members who have expressed doubts and tried to introduce fresh conditions want to protect the right of the British Government to devalue our currency and print more money. We could usefully accept curtailment of those freedoms in order to achieve stable currency, defeat inflation and provide a framework in which Britain can prosper.
8.1 pm
Mr. Anthony Nelson: I am very much in agreement with the sentiments expressed by the hon. Member for Berwick-upon-Tweed (Mr. Beith). I congratulate the Government on arranging this debate and on producing a document that we can consider.

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The debate is thought-provoking if overdue. It is fortunate that it is on the Adjournment of the House, which is probably better than a substantive motion. It is, however, unfortunate that it did not take place before Madrid, as the Treasury and Civil Service Select Committee pointed out, but at least it is happening before further discussions take place about European monetary union post-Delors part 1.
My credentials are that I am, and have been throughout my 15 years in the House, a committed European. Many people say they are committed Europeans, and the sentiments behind the statement are understood. Both parties have been laggards in Government and have not realised the full potential of our membership over the years. As the past week has progressed, and as this debate has progressed, I have judged the tenor and content of speeches by whether hon. Members are committed to achieving the aspirations that were set out when we joined the Common Market. These were to create for our people more prosperity, more opportunity, more trade, more stability and more security for the future. On the other hand, would they prefer Britain to be a fringe member? We can all read the coded messages in these speeches, which fall into one camp or the other.
I know where I stand, and I know where I stood when I became a Member of Parliament. When the European monetary system was established, I argued that we should become a full member. In 1978, with my hon. Friend the Member for Aldershot (Mr. Critchley), I tabled an early-day motion which said:
"That this House believes that the creation of a European Monetary System could do much to increase the prosperity and political stability of Europe; and, recalling the failure of Great Britain to join the EEC in good time, and the problems that have resulted, urges Her Majesty's Government to make every effort to work out with our EEC partners an acceptable system of monetary co-operation"
That was 11 years ago, and I was encouraged to receive signatures of support from the chairman of the Conservative party, my right hon. Friend the Member for Mole Valley (Mr. Baker), the Government Chief Whip, my right hon. Friend the Member for Mid-Sussex (Mr. Renton), the Secretary of State for Energy, my right hon. Friend the Member for Colchester, South and Maldon (Mr. Wakeham), the Secretary of State for Scotland, my right hon. and learned Friend the Member for Edinburgh, Pentlands (Mr. Rifkind), my hon. Friend the Member for Croydon, South (Sir W. Clark), who is chairman of the Conservative party finance committee, many past and present Ministers and many Conservative Back Benchers. I hope that this will bolster the determination of four or more senior Cabinet Ministers to seek full membership of the EMS sooner rather than later. What was right then is even more right now. We have lost out by not being full members of the EMS in the past, and we should at the earliest opportunity become full members.
Much of the debate has revolved around conditionality. I have been concerned at how the goal posts seem to have been moved by my right hon. Friend the Prime Minister and others, in an apparent attempt to put off the day when Britain becomes a full member of the EMS. I may be wrong, but I believe that the hope is that, following the removal of remaining exchange controls in France and Italy, such will be the pressure on the EMS that it will break apart. They will then he able to throw up their hands
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and say, "It was an untenable system and we should not have joined it." The system would be much more resilient if we were members of it now. How much more likely it would be to continue and to remain durable after the removal of exchange controls if Britain was playing its part now. Why are we not leaders within the system? Why are we not playing our co-operative part within the exchange mechanism to bring about that stability?
The EMS is not just a political argument within this place and Europe. It has economic and financial consequences for our constituents and for the businesses in the areas that we represent. We are paying significantly more in interest rates than we need to because we are not a member of the EMS and a full member of the ERM. In my judgment, that is currently costing us at least 2·5 per cent. more in interest rates. If we were members, such would be the confidence of the international financial community in the currency of Britain that we would not alone have to support our exchange rate by massively high rates of interest.
I sometimes feel that those who criticise and oppose the system do not understand its mechanics. They do not fully appreciate that the parameters within which currencies are allowed to move against each other have behind them a co-operative effort of central banks in Europe. There is not just one central bank trying to support its own currency in the foreign exchange markets—as the Bank of England has been doing over the past week at massive cost to our foreign reserves—but the Bundesbank, the French banks and other European banks combine to stabilise currencies within the ERM. If there is a deviation, the knowledge of that intervention is such as to inspire confidence and not make the fluctuations so great. It is a self-fulfilling mechanism, and the history and experience of other members of the ERM in the past 10 years is that it has proved to work. Their interest and inflation rates are significantly lower than ours.
The Prime Minister and others may say, "We have a massive trade deficit, which is why we must have high interest rates. Our interest rate policy may be affected by immediate membership."
However, we have incurred that massive trade deficit when we have not been members of the EMS. Like my hon. Friend the Member for Carshalton and Wallington (Mr. Forman), who made a courageous and forthright speech, I believe that we have much more to gain than to lose from subscribing to the best prudential practices of the central banks in Europe. As the hon. Member for Berwick-upon-Tweed said, why are we so suspicious of joining a system which will make the management of our monetary aggregates and the exchange rate of our currency less susceptible to political opportunism? As an election comes closer, the temptation for Government manipulation becomes more likely. For all those reasons, we have much more to gain than to lose by becoming a member, not tomorrow, not today, but if possible yesterday.
We should toss aside this conditionality and take a bold step forward. If we act immediately and have courage and conviction in our actions, we can carry people with us. If we show that we are determined to make it work, we can make it work. If we dither and wait until every condition is met, we will never join.
Is Government policy really evolution towards European monetary union, or is it a never-never approach? I have the highest regard for and faith in the

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integrity of my right hon. and hon. Friends in the Treasury. I ask them to get on with the job and to take the message, which is evident from the tenor of the debate, that it is in the interests of the people of this country to join the exchange rate mechanism sooner rather than later. We want to see political courage exercised. If the Government do that, they will be vindicated by the result at the next general election and they will have made the most decisive contribution yet to full participation in the European Community, bringing about long overdue financial rewards in terms of the standard of living for all those whom we represent.
8.10 pm
Mr. Nigel Spearing: The hon. Member for Chichester (Mr. Nelson) urged us to join the exchange rate mechanism now. He also remarked, appositely, that this is a debate on an Adjournment motion. I refer to that matter as Chairman of the Select Committee on European Legislation, which recommended a debate on the Delors report as long ago as 10 May 1989 because we knew that the decisions made at Madrid would be important. As we were charged by the House to recommend debates of such importance, we thought that we would get one, but the resolution of 30 October 1980, which binds the procedures of the Committee, and the Government, referred to "any proposal" for European legislation. The Government did not believe that the Delors report fell into that category. They said, "No, it was a recommendation for future legislation, which we can debate later." I believe that that is something of a get-out and a tautology, and so did the Committee.
In paragraph 16 of our full report on the Madrid summit—HC 15—xxxiii—which was published during the recess and which I commend to the House, we unanimously said:
"The Committee considers that the House could reasonably have expected to have had an opportunity to express its view on the principles involved before a decision of such importance was taken by the European Council. It considers that the Government's failure to meet this expectation was contrary to the spirit of the 30 October 1980 Resolution. As a result, the House will, in practice, simply be left with exercising the subsidiary role of influencing the details of the relevant implementing proposals for Stage 1 of economic and monetary union. In the light of the exchange of correspondence between the Chairman of the Committee and the Leader of the House on the timing of debates in circumstances such as arise in this case, the Committee looks to the Government to ensure both that there is no repetition of this failure in similar circumstances in the future and that, in any event, the House is given an opportunity to consider any proposals for further steps in relation to economic and monetary union well before any decisions are taken as regards their nature and timing."
As the hon. Member for Chichester said, today's debate is not on a substantive motion. It is good sometimes to have an all-round debate on a matter such as this, but I hope as a parliamentarian that at some stage there is a substantive motion and that the opinion of the House is somehow defined, even if on a Division. If that does not happen, all our talk about scrutiny and the input of the House of Commons will be as naught. The debate should have been held before Madrid. The Treasury and Civil Service Select Committee said so, too. The Government said no. We look forward to future debates of this type.
I turn to some more personal views. It seems to me —this has been echoed in the debate—that the function of the ERM can be twofold. It may be a bridge towards
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advance to EMU. If it gets that far, can European parliamentary union be far behind? They are twin concepts which cannot be separated. It may be being used as a moat to prevent the ERM from advancing beyond that stage. I suspect that many of the conditions that the Government have laid down are to that end. I have no objection to these safeguards which my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) outlined and to which my hon. Friend the Member for Great Grimsby (Mr. Mitchell) referred. I disagree with what the Chancellor said. I do not think that there is a universal commitment in the House to the objective of economic and monetary union. However, as the Select Committee was told when meeting the Minister of State, the hon. Member for Warwickshire, North (Mr. Maude), in legal terms we were probably committed from 1972 and the White Paper.
I was sorry that the right hon. Member for Plymouth, Devonport (Dr. Owen) did not give way to me, especially as his remarks were made before 7 o'clock and he had the time to do so. He said that movement towards a united states of Europe was not possible and referred by analogy to the United States of America. The House had better come to terms with one major and important matter: the European Community is a unique constitutional creation. The evidence shows it to be federal in the taking of its powers but unitary in exercising them. As the hon. Member for Berwick-upon-Tweed (Mr. Beith) has pointed out, the states of the United States have their own important and unique financial powers, whereas I do not think that the European Community—because of its constitution and the institutions that form its core—would allow member states to exercise such powers.
Economic union, as distinct from monetary union, means unity of legislation, monetary policy and taxes. That is why Delors referred to it. It means that there is a unitary system of economic policy. The United States does not have that, nor does any federal system where the states have their own money-raising powers and are not significantly controlled centrally. Unless people, including senior spokesmen such as the right hon. Member for Devonport, come to grips with that, we will be misleading ourselves. Some people say, "I do not believe that the treaty of Rome leads in that direction," and of course they are right. It leads in the direction of a unitary state with unitary institutions.
The path to those unitary institutions is full of peril for the House. It is perilous in terms of what my hon. Friends wish to do for our nation. Clearly it is splitting the Conservative party. The idea has also diminished debate in this place. If the proposals from Madrid were clearer and did not pose that threat, we would have debated them before Madrid and before today.
8.18 pm
Mr. Ray Whitney: The hon. Member for Newham, South (Mr. Spearing) said that he was speaking in a personal capacity, but the negative, even hostile, attitude to the European Community, which he displayed with admirable consistency, is closer to the centre of gravity of most members of the Labour party than the views that we heard from the right hon. and learned Member for Monklands, East (Mr. Smith). If the hon. Gentleman will forgive me, I will not pursue that negative role but will turn to the broader issues.

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As the right hon. Member for Plymouth, Devonport (Dr. Owen) said in a noteworthy contribution, this is a very important debate. It will be as important as any we have this side of the next general election. The debate is not only about the technicalities of exchange rate policy or even the broader issue of economic management. During the past seven days, debate has arisen about the attitudes of the Government and the Conservative party towards the European Community. The events of the past seven days and, in particular, the speech of my right hon. Friend the Member for Blaby (Mr. Lawson) in the debate on Tuesday have put the issue of Europe firmly on the public and parliamentary agendas, and it is right that that should be so. Our attitude towards Europe is of overwhelming importance to the future of the country and of the people whom we represent.
It is strange that the Conservative party should be debating its attitude towards Europe. We have known for years that the Labour party is at sixes and sevens in its attitude, but, apart from a small, well-versed and effective minority of my colleagues, who seem to be having their dinner at the moment, the majority of the Conservative party has been convinced that we must belong to the European Community 100 per cent. so that it develops into a liberal, market-oriented society of nation states. For many years there was never any doubt about that, but doubts have been sown during the past 12 months, starting with the Prime Minister's Bruges speech.
It is a sad irony that the five principles enunciated by the Prime Minister in that speech were completely unexceptionable and absolutely right. They included active co-operation between independent sovereign states, the need for a practical Community which encourages enterprise but does not adopt protectionist policies and the need to maintain defence through the mechanism of NATO. Sadly, the Bruges speech sparked off again arguments against our membership among people—some in my party—who have never been convinced that it was right and saw an opportunity to reopen the debate. That is deeply regrettable, but it is the problem that we now face.
Some of us warned persistently of the dangers after Bruges. In the debate in December and the run-up to the European elections in June, we warned that the Conservative attitude to Europe has been laid open to question, although I have no doubts that the Cabinet and the Prime Minister are committed to Europe. My party ran an unsuccessful campaign for the elections to the European assembly which reached its nadir with the notorious advertisement paid for by our generous supporters:
"Stay at home on June 15th, and you'll live on a diet of Brussels."
That completely misread the views of the British people who, I believe, understand that for the foreseeable future —for the rest of this century, possibly the next 10, 20 or 50 years—there will be three centres of power in the world: north America, Japan and the Pacific developing countries, and western Europe. It is in our gift to adopt such a negative attitude and to be left behind in western Europe. I understand that some people regard that prospect with equanimity, but I do not, and nor do the British people.
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The debate about our Europe has continued for decades. Most of our constituents would be bored stiff with the ins and outs of the ERM and the other technicalities that we are trying to grasp tonight, but they understand in their guts that Britain's future is in Europe. It is our duty to deliver that, but it is beginning to look as though we may fail. My party must recognise that that is what is at stake.
Some hon. Members have talked scathlingly about the business community. The business community on which we depend, virtually to a man and a woman, is clear about our commitment to Europe and the ERM. It has become confused during the past year. The Department of Trade and Industry ran an effective campaign about 1992 and the single market. At the same time, perhaps inadvertently, the Government created negative vibes about their attitude to Europe.
My right hon. Friend the Member for Shropshire, North (Mr. Biffen) asked what would happen in Germany. He seemed to imply that, because of changes in central Europe and the possibility of change in the two Germanies, we should lift up our skirts and move away from western Europe or join some extraordinary own-goal concept of a union from the Atlantic to the Urals. That is nonsense. All our European colleagues want Britain firmly in Europe to help them avoid the position to which my right hon. Friend alluded in his typically fey way. We must avoid such a position by playing our part in Europe.
The weakness in the way in which we conduct our affairs, which is as much a matter of style as of substance, is demonstrated by the social charter which, rightly, has been attacked several times during the debate. The sad fact is that many members of the European Community have misgivings about the social charter, including the Germans, the Irish, the Spanish and the Portuguese. If we allow ourselves to be marginalised we cannot take advantage of that or use our influence where it is so badly needed. That is the tragedy of the Government's style.
As for the substance, as my hon. Friend the Member for Chichester (Mr. Nelson) said so effectively, we must take a positive step towards the exchange rate mechanism. Tuesday's debate made that case incontrovertibly, as anyone with a balanced view would agree. As my right hon. Friend the Member for Blaby said, we must join sooner rather than later. We should not set down conditions and invent new ones, but should join as soon as is practicable. We all understand that there are differences in exchange rates, but it is in our national, political and economic interest, and for the sake of the exchange rate and inflation to cease shilly-shallying. We must enter stage 1 of the ERM and make our voice heard. The debate must continue about whether we should enter stages 2 and 3. The paper provided by my right hon. Friend the Chancellor of the Exchequer has contributed to the debate. I am uneasy about the competitive currency system that he has offered, as it would not stand close examination.
In conclusion, I draw the attention of the House to my right hon. Friend the Prime Minister's call for unity in the European Community in August 1984 in a memorandum on the future of Europe to her colleagues in Europe. She began by declaring the need to
"heighten the consciousness among our citizens of what unites
us".

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That is what the Government must do. They must emphasise in Europe what unites us and not concentrate on what divides us.
8.29 pm
Mr. Tony Worthington (Clydebank and Milngavie): I have listened carefully to the debate and I have found it one of the most enjoyable experiences in the short time I have been here. The debate has been wide-ranging, and some of the finest minds in the House have addressed themselves to it.
I have sometimes asked myself what I can contribute to this debate. I have tried to take the argument back from the wider political, historical and economic issues raised by other speakers to what the subject means to my constituents. I link this with what the former Chancellor, the right hon. Member for Blaby (Mr. Lawson), said this week when he admitted that we are once again on the downswing and that a "dull 1989" will be followed by a "difficult 1990". "Difficult" means that we are heading for a home-inspired recession. It also means the collapse of investment, very high interest rates for a long time to come and, in my area at least, mounting unemployment.
A crucial aspect of the debate is to consider whether we should have found ourselves in this position if we were in the exchange rate mechanism. I was interested to hear the hon. Member for Chichester (M r. Nelson) making a point that corresponds with my view that we would not have the high interest rates that are currently plaguing us if we had been in the ERM. People are not investing in us at present; They are speculating in us. In all the talk about sovereignty, I ask myself what sovereignty we have with the interest rates we currently face.
Our economic affairs seem to be conducted in the frenetic atmosphere of the City, dominated by City interests. The former Chancellor has a high reputation as a poker player and it seems to be those skills that are dominating the conduct of our economy. I hope that membership of the ERM—and I take a pragmatic approach—would allow us to concentrate on the real economy to a far greater extent. It is interesting that over the past few weeks, the term "real economy", which previously only the Opposition used—and were scoffed at for using—has started cropping up among Conservative Members as they realise that there is a difference between what occurs in the City and what happens in the country as a whole.
I want to concentrate on three areas in which I hope to illustrate how membership of ERM would have helped us. It may seem quite a jump from ERM to housing, but my first point concerns the basic need for housing. I remember meeting, to my surprise, Sir Nicholas Goodison, the former chairman of the stock exchange. He said that it is only when we stop investing so much in housing and invest more in industry that we shall start to get ourselves out of our present problems.
Over the past 10 years and especially in the frenzy of the past three or four years, increasingly more of the country's assets have been invested in housing. The former Chancellor has said that the British public has lost the habit of saving, but that is not true. The money has increasingly gone into people's houses.
I am grateful to the Library for working out how much people would he paying on a £100,000 mortgage, which is not exceptional in this part of the world, over 25 years at
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14·5 per cent. For a mortgage of £100,000, they would pay £351,000. That is an incredible sum to go into a house that has been bought several times over, and the assets are usually realised only in the case of death. Is it sensible for so much of our money to go into houses? The Government's policy of high interest rates would have been moderated in the ERM and fewer of our resources would have had to go into sustaining our houses. If fewer resources had been used in that way, we might have had more money going into industry.
The second area, the workings of the financial markets, is my benchmark for testing ERM. The financial markets have a peculiarly frantic atmosphere which seems to be at the root of our problems of under-investment. Years ago, when I was innocent, I used to believe the claims of the stock exchange film about what the stock exchange did, such as investing in British industry. I expect that most hon. Members have seen the film, in which the stock exchange claimed that its word was its bond and that people went to their stockbrokers to put their money into British industry. How naive can one be! All that happens in the stock exchange is concerned with the generation of profit rather than investment. One enters a world of fantasy. The firm of Amstrad, for example, is now one quarter of its value of a year ago. It must be a strange market that can value companies so accurately.
Do our competitors work in such a frantic atmosphere? Are the West German and Japanese markets as fevered as ours? Much of our money goes into the housing market and the stock morket, but it is not invested in British industry. I am especially concerned about the operation of institutions such as the pension funds, which control vast sums of our—not their—money. The money does not seem to go into supporting British industry; it goes into causing growth in dividends, rather than a growth in wealth.
Will the ERM take some of the frantic, frenetic atmosphere out of our present obsession with the markets? It is strange that, whenever we have a crisis, the BBC and ITV park their television cameras in the City and ask what is happening there. It is assumed that what happens there has a connection with the people who work in my constituency. We must find mechanisms—the ERM may be one—that allow us to think in terms of investing in the long term, rather than finding, as happens at present, that every decent industrialist despises the City and sees the City not as a friend, but as the means by which the decent industrialist who is investing long term will be the leverage for takeovers. We must aim for long-term interests to overpower short-term interests.
The third area is regional policy. Under this Government we have had a collapse of regional policy. In so far as there has been such a policy, it has led to a choking up of the south-east and to consistent damage in the area I represent. If we were in the ERM, the Scottish economy would not have to close down when it has reached ice-coldness because of overheating in the south of England. Having considered housing, the business of investment and regional policy, I believe pragmatically that we should be better off within the exchange rate mechanism rather than outside it.
8.39 pm
Mr. Patrick Thompson: I am grateful for this opportunity to speak, because I believe that this has been one of the most interesting debates that I have

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had the opportunity to attend since I first entered Parliament in 1983. I agree with the hon. Member for Clydebank and Milngavie (Mr. Worthington) that the discusson is very worth while and I congratulate him on the thoughtful way in which he approached the topic.
Time and again, hon. Members have transcended the usual party political divide and different views have been expressed even by hon. Members within the same political groupings. I agree with the right hon. Member for Chesterfield (Mr. Benn) and with my hon. Friend the Member for Wycombe (Mr. Whitney) that this is a very important and interesting debate. Although I rarely agree with the right hon. Member for Chesterfield, I agree with him that this debate is about vision and about the future of this country rather than simply about the technicalities of the exchange rate mechanism which, frankly, I do not think that I will ever really understand.
Like the right hon. Member for Chesterfield, I took part in the referendum campaign on Europe, but on the opposite side. In a way, we are re-running that debate because we are debating our attitudes and vision towards Europe. It is interesting to look back to the debate on the European monetary system which took place on 29 November 1978. My hon. Friend the Member for Chichester (Mr. Nelson) and the hon. Member for Newham, South (Mr. Spearing) both referred to that debate, in which they both spoke. Their views have been completely consistent throughout, and they repeated today the attitudes that they took then.
The right hon. and learned Member for Monklands, East (Mr. Smith), who spoke from the Opposition Front Bench, showed the divided and even schizophrenic approach to the subject that the Labour Front Bench showed in 1978. It was not clear whether the right hon. and learned Gentleman wanted to move towards the ERM faster than the Government, more slowly than the Government, with more enthusiasm than the Government or with less. The confusion on the Opposition Front Bench seems to be total.
It has been good to listen to this debate for another reason. So often we debate the European Community and European matters very late at night. It is only 8·42 pm and it is much better to be speaking now than at 1 am or 2 am. Anyone watching those late night debates would have the impression that a group of sincere Members were totally opposed to the European Community and were somehow fighting a continuing rearguard action against an unending series of complex legislation which appears fleetingly before the House only to disappear into statute, never to be seen or understood again.
Even if time permits me to say no more, I must state that we need more debates of this kind on the future of Europe in prime parliamentary time. Let us do this more often. After all, this is an important subject and the contributions this evening have only emphasised the truth of that.
Events are moving very fast in Europe. Business leaders and others in my constituency have told me that the direction that we take in Europe over the next few years is the most important political issue that we face. I agree with them. During my study of the voluminous papers before us for this debate, I came across some graphs showing inflation rates and other statistics for the various members
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of the European Community. No more than a cursory, inexpert glance at the graphs is needed to show how closely bound is our financial well-being with our partners in the European Community. That is all too plain from a simple glance at the diagrams and graphs.
As my right hon. Friend the Chancellor of the Exchequer said today, we are debating means, not ends. It is right that many of my right hon. and hon. Friends have welcomed the Treasury paper on the evolutionary approach to economic and monetary union. I do not have time to debate the details of that, but I welcome its initiative and the opportunity to debate it further. In debating the means, we must not lose sight of the spirit which lay behind the signing of the Treaty of Rome in 1957.
There has been a strong feeling in this debate against the Delors report—or at least against stages 2 and 3. It seems obvious to me, even though I am not an expert, that stages 2 and 3 of the Delors report are probably wrong. If that is so, as I suspect, it is vital that we seek in a positive and pro-European way to persuade our Community partners of the superiority of our view. That point has been made by hon. Members on both sides of the House today. We should not let events run out of control.
I take a particular interest in the engineering industry. Throughout Europe—not just in this country—there are continuing problems despite the economic successes and improvements by this Government, of low productivity and, perhaps even more importantly, of poor innovation. There is also the appalling threat of industrial action in that industry.
Those problems can and must be solved on a European scale. That means co-operation. Even those opposed to the whole idea of the Community must at least be in favour of European co-operation. The European Community countries spend as much on research as Japan, but because those efforts are duplicated and there is not adequte co-operation, we still fall behind Japan with regard to the results of that research and innovation.
The wider European political background far outweighs some of the finer technical points that we have been learning about tonight. Peace and reconciliation were the prime motivations of the creators of the Community. I have not forgotten reading a biography of Konrad Adenauer in my teens and being impressed by the historical background to the European Community. That has had a great effect on my attitudes in politics.
We must be sure that our true motive in putting forward alternative approaches to the Community or the European monetary union, in addition to the protection of our national sovereignty, is also a much needed enthusiasm for European civilisation and European culture and a desire for prosperity, stability, peace and a desire to influence the exciting events that will occur in western and eastern Europe in coming years.
8.48 pm
Mr. Ron Leighton: I very much agree with the hon. Member for Norwich, North (Mr. Thompson) that this has been a fascinating debate. I have heard most of it, and it has been one of the best on European matters. There has been a great deal of agreement across the Floor of the House that the House does not want to buy the Delors package. That has been the view from both the Government and Opposition Front

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Benches, and it was echoed by the right hon. Members for Shropshire, North (Mr. Biffen) and for Plymouth, Devonport (Dr. Owen). That is a wide cross-section in the House.
The hon. Member for Norwich, North said that the debate was to an extent a re-run, of some of our debates on the Common Market. There are always echoes, but I believe that this debate has been different. It is moving the discussion on to new areas. It is not quite a re-run, because the Delors package was not part of the prospectus on which the British people voted in the referendum. The manifesto issued by the Government during the referendum stated clearly that there would be no loss of sovereignty. It said that no decision would be taken in Brussels without the agreement of a British Minister answerable to the House of Commons. The Delors package is completely different. All that went with the Single European Act, which introduced majority voting for the single market.
The Delors package contains three stages. Some hon. Members say that they are not too fussed about stage 1, and they can live with it. However, even the right hon. Member for Blaby (Mr. Lawson) made it clear that he was totally opposed to stages 2 and 3 on political grounds because it would mean establishing a central bank that was not answerable to anyone. I have read the evidence that he gave to the Select Committee and which it has done a good job to publish.
Nowhere in the Delors report is there any mention of democracy or democratic accountability. The right hon. Member for Blaby was opposed to that because he said it would eventually mean a centralised, supranational super-state with a directly elected European Parliament and a pan-European Government, and virtually every hon. Member in the House is opposed to that.
I must inject a note of caution into the debate. We cannot rubbish the Delors report and say that it does not matter. It was not just Jacques Delors, the politician who put his name to it. He was the chairman, but the rest of the people on the Committee were primarily governors of the central banks, including the Governor of the Bank of England who put his signature to it. He said that the heads of state told the committee what they wanted and he assumed that the heads of state who agreed on economic and monetary union meant what they were saying. He said that the committee was instructed to recommend how it could be achieved. The Treasury document entitled "An Evolutionary Approach to Economic and Monetary Union" does not carry credibility. In typical British fashion it says that we shall have an evolutionary approach. This is a type of joke document. It complains about the Delors report and says that there are two approaches—that of the United Kingdom and that of Delors. The report will not be a runner: I think everybody agrees on that.
The Delors package is the real option. We must not kid ourselves about the Treasury document. The British whinge, complain, sometimes stamp their feet and wave their handbags, but then they give way and go in, talking about safeguards, but the ratchets get ratcheted up and we get led into something we do not want.
If we do not want Delors stages 2 and 3, I suggest that we do not have Delors stage 1. The Treasury and Civil Service Committee report makes that clear when it quotes Delors:
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"the decision to enter upon the first stage should be a decision to embark on the entire process".
The Governor of the Bank of England says that stage 1 is irrelevant and meaningless and that one would not accept stage 1 if one did not want stages 2 and 3. I say that, because I do not want stages 2 and 3, 1 do not want stage 1 either.
Some hon. Members talked about the advantages of the exchange rate mechanism. It seems that some people take the view that, because of the economic crisis and because the pound is in trouble, we ought to wave a wand. We should have a panacea and put the pound into a safe haven, a casualty ward where all the central bankers would look after it, feed it every day and make sure that it is OK. That does not make a lot of sense.
If countries have different rates of inflation and of economic productivity, the value of their currencies will differ. That is an economic fact of life. If a country such as Britain, with a higher rate of inflation, links its currency to that of a country with a lower rate of inflation, for example, Germany, after a time that will lead to a de facto devaluation of the mark and an upwards revaluation of the pound. That would make German goods cheaper than British goods and enable them to build up a surplus. That is what the Germans have been doing.
The European monetary system has not led to balanced trade, but the opposite. In the past, the strain has been taken by the exchange rate. What will happen if one cannot do that? The Treasury Select Committee asked that question, and the Treasury gave a clear answer:
"when exchange rate adjustment is no longer possible other ways of adjusting to disturbances that affect the relative position of different countries would have to be employed. The best mechanism would be a market adjustment such as wage flexibility and labour mobility."
What that means in plain English is that workers' wages are lowered in deficit countries. Mobility of labour means that they will have to get up and moveto get on their bikes.
My hon. Friend the Member for Clydebank and Milngavie (Mr. Worthington) is not here now. Workers in his constituency might have to move to the south of England or to the golden triangle.
Regional policy could theoretically be the answer to the problem. The budgets of nation states are often around 40 per cent. of gross domestic product, but the EC budget is only around 1 per cent. and that is tiny. Most of the budget goes on agriculture and very little to the structural funds. The United Kingdom, in net terms, does not get a penny, but subsidises richer countries to the tune of nearly £1·9 billion this year. We subsidise them, rather than receiving any money for regional policies in Britain.
The regional fund would have to be on a heroic scale to have an effect. I cannot imagine people in Germany paying huge sums of money to Clydebank. In any case, they would be at the end of the queue. The Mediterranean countries would head the queue.
Some hon. Members have said that the social charter will compensate us. The Select Committee on Employment invited Mrs. Papandreou, the EEC Commissioner, to talk about the charter. It became clear that it is a political gesture to the trade union movement to keep it sweet and on board. The social charter will not happen. The Government need not get too worried or upset about it, and Labour Members should not get excited, thinking it is the solution to the problem. As the Commissioner explained to us, the charter is not legally binding.

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At the next summit meeting, heads of state will be invited to agree to a solemn declaration. I do not know whether the Prime Minister will agree—she might. If they all agree to it, what legal effect will it have? None whatsoever.
The social charter mentions a minimum wage. I asked how much that wage was. There is no such thing. It would be different in each country and each region of a country. So much for that.
I heard Glyn Ford on the radio the other day saying that the workers at GCHQ would be able to join a trade union because they will have that right under the social charter. Not so: Mrs. Papandreou explained that each country's legislation would have precedence.
Whereas for the single internal market there was a White Paper, a treaty that provided a legal base and majority voting, for the social charter there has been no White Paper, no treaty and no majority voting; there must be unanimity. Even if it obtained a solemn declaration, the Commission would have to go away and draw up about a dozen draft directives, each with an uncertain fate. Unfortunately, the social charter simply will not happen.
8.58 pm
Mr. Alan Haselhurst: I am never entirely sure from which angle Labour Front Benchers will choose to talk about the European Community. Generally they bring such a wealth of differing experience to the subject that they go twice around the same circuit—except the hon. Member for Newham, North-East (Mr. Leighton), who has shown a remarkable but depressing consistency over the years.
I see three kinds of objection to economic and monetary union. There are the technical objections, the fear about where it will all lead and, in some cases, even a questioning of Community membership. Some wish to use debates about the details of movement towards economic and monetary union as an opportunity to rehash the arguments about whether we should be in the Community at all. The British public, however, do not understand such doubts—they now believe, whether enthusiastically or pragmatically, that we are in the Community and should make the best of it and play our role to the full.
Anxiety is being induced by the way in which the path towards harmonisation, convergence and unity is being portrayed. Words such as "federalism" are being used, and we are being invited to worry about a potential loss of sovereignty. I do not have too much difficulty with those possibilities. I do not know when we might form democratic political organisations commensurate with economic and social events, but I do not wish to exclude them in advance—it will depend how we proceed. The idea, however, that there is a viable alternative in the form of full sovereignty in today's Parliament, constituting complete power over our affairs, is surely an illusion. Certain events could rock Britain, and could not be faced up to by Britain alone. Only by pooling or sharing sovereignty could we find the means to be equal to such events. We must then examine our democratic structures to ensure that they are capable of keeping us in charge —in a democratic way—of the institutions that we have joined and developed, to attain meaningful sovereignty in today's world.
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The technical objections are, of course, much more difficult. The history of the EMS and ERM reveals disagreement between economists about how beneficial they have been. If technical argument about what such systems have achieved in the past is a possibility, there is certainly scope for argument about the way in which they will go in the future. There are many questions to be answered, and it would be foolish to imagine that there is any certainty about the results of joining or not joining, or about the impact of sterling on the ERM. We cannot forecast all the consequences, although on balance I feel that we would be better off in the system—for all the arguments deployed so eloquently by many of my hon. Friends.
Above all, I believe that a positive attitude is needed, not a negative or grudging one. I hope that we shall breathe a full-hearted commitment into stage 1 of economic and monetary union—and that means going into the ERM at the earliest possible moment, if we believe that it is right. We must demonstrate a constructive approach to economic and monetary union. If we cannot even get to first base, there will be deep suspicion about Britain's attitude to what might happen later.
As my right hon. Friend the Member for Blaby (Mr. Lawson) said on Tuesday, we must also show that we have the political strength and will to participate. It is vital for us to show that we are committed, and are actively looking for the right way forward. I am certainly not prepared to endorse every last dot and comma in the Delors report, but we must be realistic and accept that the report is there on the table. It is one of the first documents to be there, and it is of great symbolic significance. Although my right hon. Friend the Chancellor has today produced a paper "An Evolutionary Approach to Economic and Monetary Union", we shall have to be extremely ingenious to persuade our partners that that is necessarily better than what is already on the table. However, as long as we are positive and forward-looking, I hope that our arguments will be accepted in good faith by our partners in the Community.
Although there are positive reasons for wanting to be as constructive as we can be, we must also accept the downside risk. If we are not prepared to go along with the spirit of moving closer towards economic and monetary union, there is a danger that our partners will go ahead without us. Too often in the history of our relationships with Europe, we have been behind and had to catch up. We have then faced with terms which are not necessarily the most advantageous to us. It would be better for us to be on a par with our partners right from the beginning, exercising the maximum influence.
The other danger is that we must not ignore the momentous events occurring in central and eastern Europe. We desperately need to be in close partnership with our allies in the European Community so that we are in the best position to guard the future. We do not know exactly what will happen, but we cannot afford to be out of the influential council chambers of the European Community when these new opportunities of different relationships with the eastern European countries develop in the years ahead, as it now seems that they might.
While I understand that there will obviously be heart-searching among some of my hon. Friends about the fact that, however cautiously or boldly we move, we are willing a different role for this Parliament in relation to the institutions of the Community and the European

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Parliament, it will not serve the interests of our people best if we are faint-hearted. I hope that we shall go forward with a spirit of determination to gain success and a willingness to compromise in order to do so.
9.6 pm
Mr. Calum Macdonald (Western Isles): In the brief time available to me, I shall forgo some of the more technical issues that have been raised in the debate and will try to give it a peculiarly Scottish perspective, which I hope will be useful.
Some of the speeches—I am thinking of those from hon. Members whom one can generally consider to be anti-European, to put it at its crudest—have been labouring under somewhat of an illusion. Indeed, that illusion could be found in the memorable speech by the right hon. Member for Blaby (Mr. Lawson) last Tuesday. He said that he had a desire or commitment to see a Europe of nation states. In using those words, he evoked the words of the Prime Minister at Bruges. Underlying that phraseology—"a Europe of nation states"—is what I would term an Anglocentric illusion. It is the illusion that the United Kingdom is a nation state. On the contrary, as the very names "Great Britain" and "United Kingdom" tell us, Great Britain is not a nation state. It is an amalgam. It is an economic, monetary and political union of four nations with different historical traditions. The United Kingdom is a union of nations. It is a supranational state.
Indeed, apart from its excessively centralist character, with which, I am sure, we would all disagree, the United Kingdom is a model of the kind of supranational European economic and monetary—and, I believe, eventually political—union that those who support the notion of a nation state wish to deplore. There is thus an underlying inconsistency and incoherence to those who falsely defend the notion of the United Kingdom as a nation state and who posit that against the notion of a European supranational state.
The importance of the balance of payments deficit has already been mentioned. From time to time some Conservative Members like to pretend that in today's global financial environment the national balance of payments no longer matters. Mr. Samuel Brittan, the financial columnist already referred to tonight, said in support of that point of view that, today, no one, for example, worries about the putative imbalance in the balance of trade or the balance or payments between Wales and the rest of the United Kingdom.
That is fundamentally wrong. Of course there is no official accounting of the flow of trade and the balance of payments between different regions of the United Kingdom, but that does not mean that such imbalances do not occur. They occur and they matter. We are constantly concerned about the deep-seated regional imbalances which such figures, if available. would show within the United Kingdom.
If we get down to economic basics, we should remember that the balance of payments is a form of accounting that merely highlights a more general economic phenomenon —different geographical areas enjoy different rates of economic growth at different times. When those differences are merely temporary, there is no cause for alarm, but when they appear to be endemic and long-term, they are certainly a cause for concern, as the inevitable result is an ever-increasing gap in the average wealth and
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living standards of the people in those different regions. In the past 50 years we have seen that happen not only in the United Kingdom, but between the United Kingdom and its international competitors.
Two responses can be made to the general phenomenon of different rates of growth. One is to make adjustments in exchange rates and the other is to smooth out the results of the divergence in growth by following a policy of fiscal transfer. That means that fiscal policies are used to transfer wealth from the faster growing areas to the slower growing areas. The first response is the usual one used when economic imbalances occur between different currency areas and the latter response is characteristic when imbalances occur within an individual currency area.
Some of my hon. Friends hold completely different views from mine, but I suspect that, when faced with choosing between the two means of tackling regional problems, which are inevitably caused by different patterns of economic growth, it is obvious that—certainly as Socialists—that we should prefer, as we do in practice, a strategy of fiscal transfer. That strategy is more direct, efficient and equitable than any adjustment to the exchange rates.
Surely the case for such a strategy is so strong that no hon. Member, no matter his opinion, would today propose that we should return to having a separate Scottish currency area to tackle the regional problems that are obviously caused by the different rate of economic growth between Scotland and the south-east of England. The Chancellor was extolling the virtues of competitive currencies, but I note that he did not think to import that marvellous device into the United Kingdom, although that has been suggested by some of his Front-Bench colleagues in various pamphlets.
Were it not already the status quo I do not believe that anyone would defend—in any case it would not be right to do so—the existence of separate currency areas within the European Community. I have already outlined the superiority of the fiscal transfer strategy as opposed to adjustments to exchange rates as a means of evening out or narrowing regional imbalances. Therefore, when economic and monetary union is achieved, it is important that there is also a powerful social dimension. I am not talking just about a social charter which advocates basic employment and welfare rights, but about a full range of policies and instruments of fiscal transfer available to other federal governments. Therefore, regional and industrial policy, the development of the social fund and even a properly targeted common agricultural policy could be used.
It also follows that economic and monetary union with a strong social dimension must mean a continuing and obvious increase in the Community budget. A further consequence of that increase would be a gradual but inexorable gathering of power at the political centre of the Community, in the institutions of the European Parliament and the Commission. Hon. Members may not like that, but that is the truth. We Scots have learnt to live with this since 1707 and, after 300 years, it is not that bad.
Despite the Government's foot dragging, we have set out on an historic road which will enventually lead to a supranational Europe which I welcome and hope will have the strong powers necessary to enable it to pursue on a Community level the regional policies which enlightened member states already pursue on an individual level.
9.15 pm
Mr. Patrick Ground (Feltham and Heston): I respect and understand the views of those hon. Members who accept that stability in exchange rates is desirable, but believe that it is undesirable if bought at the cost of expensive intervention or inflation caused by reducing interest rates to let down the value of the currency. If those criticisms of the exercising of such policies here are valid, they are invalid criticisms of the record of the exchange rate mechanism during its existence.
The outstanding achievement of the ERM in the past few years has been increased stability between the currency of members and a significant lessening of inflation. It is true that it has achieved this with exchange controls in two major countries, but it is a great improvement on what preceded it.
My right hon. Friend the Member for Shropshire, North (Mr. Biffen) referred to the horrors of intervention. It is quite difficult to obtain figures on what intervention has cost in th ERM. However, the signs are that only the Belgians and French have spent large amounts of money on intervention, as the philosophy of the Bundesbank—that intervention on any substantial scale is a waste of money—appears to have taken the field.
Despite what the hon. Member for Durham, North (Mr. Radice) said, there have been, and still are, large variations in interest rates between, for example, the mark and the lira. Despite what many hon. Members have said about the rigidity of the exchange rate mechanism, for many years there have been quite wide bands for some currencies, and those bands have been adjusted at least seven times during the mechanism's existence.
Therefore, I support those who say that we should enter the exchange rate mechanism and that the only question is that of timing. With the mark worth about 2·90 to the pound, and the franc about 9·90 to the pound, the time is right to enter the mechanism if we are right that inflation is on the way down. The crucial factor about entry is the market rate of the currency at the relevant time. That is much the most important factor to consider. I doubt whether we are right to resist joining until all the exchange control rules have been abandoned. It is better to join sooner rather than later.
I have been a bit disappointed by the debate on stages 2 and 3 of the Delors proposals and by the debate on the Government's proposals for an evolutionary approach to economic and monetary union. There will be a demand by business for more usable currencies throughout the Community, and the Government are right to look for greater freedom in the use of currencies in commerce. We have not done justice in this debate to these proposals and they should be considered much more in the future.
I accept that there are great constitutional difficulties in proceeding further with the Delors proposals for stages 2 and 3, but I am attracted, as a move in the direction of a more unified currency, by the proposals for a freer role for the Bank of England. The Federal Reserve and the Bundesbank have certainly been more successful in currency matters than most central banks, and I would welcome a change in the Bank of England in the same direction.
9.20 pm
Mr. George Robertson (Hamilton): We have all agreed that this has been an excellent debate on an issue of crucial and fundamental importance to the future of this country. In what is usually described as a wide-ranging debate, we have heard from many people with an amazing variety of experience. I estimate that we heard four ex-Treasury Ministers and one former Foreign Office Minister—the changes seem to be rung as rapidly as figures on a cash register these days.
My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) made a relevant contribution to the raging debate on this issue, but the House may have found most interesting the words of another ex-Treasury Minister—the former Chief Secretary and right hon. Member for Shropshire, North (Mr. Biffen), who was an anti-marketeer before he became a Treasury Minister and subsequently Leader of the House. He then met an iceberg in the shape of the Single European Act, but it did not knock him off his perilous course—he pushed it through the House with a guillotine, no less. Now that he is back on the Back Benches, however, the old scepticism re-emerged.
Mr. Biffen: They call it resurrection.
Mr. Robertson: There was no iceberg in the story of the resurrection, but anything can be reborn—including the hon. Member for Carshalton and Wallington (Mr. Forman) who made his maiden speech after having been parliamentary private secretary to the late lamented Chancellor. We welcome him back.
Three Select Committee Chairmen also made a wide-ranging set of contributions. I particularly welcome the fact that a Foreign Office Minister is to wind up the debate. As many hon. Members, including my right hon. Friend the Member for Chesterfield (Mr. Benn), have said, the issue that we are debating has enormous foreign policy implications, and it is right that it should not be seen merely as a Treasury matter—or even a Treasury-Downing street matter, as most things appear these days.
It is unfortunate that the new Foreign Secretary is not with us this evening. That is not to say anything against the Minister of State, against whom I have plenty of other things to say, but the Foreign Secretary will have the vote —if a vote is ever held—in the Cabinet on the great issues that we are debating this evening. Just as the Prime Minister expressed her sympathy for the 48 who voted against Britain at the Commonwealth conference, so we have considerable sympathy for the 22 ranged against her in the Cabinet day by day.
The debacle in the last seven days which has so appalled the British people has highlighted the real tragedy of the Government in this important area. The whole continent of Europe is changing faster and more fundamentally now than for at least two generations. Communism is collapsing in the eastern bloc states. [Interruption.] Communism, not Socialism, is collapsing and after 40 years democracy is coming alive in Poland and in Hungary and is even stirring in the German Democratic Republic. Even the Soviet Union, after 70 years of totalitarianism, has seen elections, an embryonic Parliament and real debate. All those things are bursting through the soil.
The cold war seems to have ended and the eastern bloc does not appear in any way monolithic. The frozen post-war structure which has endured for 40 years is

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rapidly blowing away. We are seeing a bonfire of the certainties that have survived since the war. The European Community is beginning to look at fundamental issues such as whether to go for full-blown political and economic integration or whether to stop for a moment to look at developments to the east to see whether there are new structures that could be developed to encompass the exciting possibilities ahead.
During all those developments, what has the Cabinet been doing? It is bogged down in an acrimonious, suicidal squabble about the invention of ever more ingenious conditions in order further to renege on the commitments regularly given by Conservative Ministers to join the exchange rate mechanism of the European monetary system. We are at a genuine crossroads in European history, but this constantly reshuffled bunch of Ministers are fighting like ferrets in a bag over who meant what in the last or the last but one commitment to the EMS.
While that is going on, other people and other nations have a vision and they are expressing it. For example, France, for its own reasons perhaps, wants to seize back some of the control that has been lost by its institutions to the German economic machine and has a vision about where Germany should be in the western nations. France is pursuing that objective but where in all that is the British vision? Where did we hear in the Chancellor's speech in the debate or in any of the speeches that we have heard recently about the vision which disagrees with that or a prospectus that would allow the British people to see where in the new reshaping of Europe we wish to be fitted in?
The debate on economic and monetary union goes to the heart of the matter. It is a matter of honour for Britain, but that honour has been betrayed by twists and turns of promises, declarations and commitments on European monetary union. They have been relentlessly rephrased, rejigged and ultimately reneged on. Crucially, it is a matter of the influence that Britain should have in the reshaping of the Community that will take place with us or without us. As hon. Members have said, it is a matter of keeping faith with the aspirations of the British people for a place in Europe's future and with the obligations that we have accepted as a nation in the Community of 12.
On the question of honour, how can the Government stand with any dignity among our European partners, having signed all the declarations itemised for us by the Chancellor? For example, the Stuttgart declaration of 22 June 1983 says in specific terms that the objective was:
"Strengthening of the European Monetary System, which is helping to consolidate an area of monetary stability in Europe and to create a more stable international economic environment, as a key element in progress towards Economic and Monetary Union and the creation of a European Monetary Fund."
There it was in Stuttgart, as it was in the Single European Act, and as it was in Hanover in the communiqué which established the Delors committee report.
The former Chancellor, when asked about this by the Select Committee, replied:
"This does not, in the opinion of the British Government, mean that the British Government is committed to monetary union."
Somebody read that afterwards. We do not know whether it was somebody in Downing street. Whether it was Sir Alan Walters we shall not know until he tells The Sunday Times. Somebody read it and went back, because it says at the bottom:
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"Note by witness. Further to this answer, the witness wishes to make it clear that the reference in the last sentence is to the monetary union set out in the Delors report.
The Delors report says:
"This report has been prepared in response to the mandate of the European Council `to study and propose concrete stages leading towards economic and monetary union'."
We have come full circle. The Government say that they are in favour of concrete steps towards economic and monetary union and have signed the Stuttgart declaration and the Single European Act. They subscribed to the Hanover communiqué, but now we are reduced to the dodging, weaving, bending and twisting that are the hallmark of Government policy.
Mrs. Theresa Gorman (Billericay): I agree that an enormous change is taking place in eastern Europe, and the communist bloc appears to be breaking up. As one of the basic concepts of the European Community was opposition to that bloc, is this not a good time to pause and have second thoughts about what we are doing in forming or going on with our own bloc?
Mr. Robertson: The Community has nothing to do with opposing the eastern bloc. The hon. Lady may be mixing it up with NATO, which was formed at roughly the same time but with a slightly different purpose. I subscribe to her conclusion, however, that this is the right time for the major debate on how to accommodate the aspirations of new democracies which may be developing in a part of the world that we had written off for democracy.
We have seen this situation developing, the deputy Prime Minister and Leader of the House has pointed out. He said:
"At Madrid we said yes, we want the existing EMS to be strengthened. Yes, Britain should join and will join the ERM. We committed ourselves to stage one of the Delors report."
The right hon. Member for Blaby (Mr. Lawson), in his resignation speech which transfixed the House on Tuesday, made exactly the same point. Instead of confirmation from the Prime Minister, however, the Walden programme saw the "higgledy-piggledy" insult thrown at the ERM which she had previously endorsed, while Sir Alan Walters disappears into the American jungles with "half-baked" as his description of it.
The Minister of State, Foreign and Commonwealth Office (Mr. Francis Maude): This is all very interesting, but will the hon. Gentleman tell us whether he supports the objectives of economic and monetary union and, if so, in what form?
Mr. Robertson: We shall be interested to see what the Minister says about this. After all, he is in the Government. I wonder where he was when my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) was speaking earlier this afternoon. My right hon. and learned Friend dealt with the point specifically and told the House our views both on stage 1 of Delors and on stages 2 and 3.
Although Conservative Members would like to ignore or neglect the problems and traumas of the past week—I am sure that even the beneficiaries would like to forget some of the agony—we have to live in a situation in which condition has been added to condition, to the extent that 1992 no longer seems to be a date but rather the number of new conditions invented as preconditions for joining the ERM. Each time the Prime Minister is questioned and asked for her view, the goalposts move. Indeed, they move

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even more quickly than the number of different Foreign Secretaries. It is small wonder that Mr. Andrew Marr of The Scotsman commented on Monday that, when Conservative Members had watched the Walden programme, many sighed with relief, but many more just sighed.
Mr. Biffen: It seems that the hon. Gentleman is concerned about a lack of specificity in the conditions laid down by my right hon. Friend the Prime Minister. Will he be specific and say at what level the exchange rate would have to be struck to make membership of the mechanism acceptable to the Opposition?
Mr. Robertson: It would be entirely inappropriate for me to say that. As a former Chief Secretary to the Treasury, the right hon. Gentleman knows very well that it would inevitably be a matter for negotiation. It would be interesting to know whether the right hon. Gentleman would make a specific pledge or whether anyone on the Treasury Bench would care to venture a suggestion.
Mr. Major: We do not have to do that.
Mr. Robertson: Perhaps the floating rates of Sir Alan Walters will determine the result. The right hon. Member for Shropshire, North (Mr. Biffen) described the Prime Minister's contribution to Mr. Walden's programme as excessive verbiage and in excess of the whittled down points which she put to the House after the Madrid summit. This week we have a new Foreign Secretary, after the debut of his predecessor at Question Time last Wednesday.
Mr. Cash: My right hon. Friend has experience.
Mr. Robertson: I thought that the hon. Gentleman was about to say something entirely different and rather more relevant.
What the new Foreign Secretary said in a "Panorama" programme was of considerable significance. When asked about the deputy Prime Minister's speech, which the Prime Minister had not seen in advance, he said:
"The Government have a policy; let's stick to it."
That would be fine if there were a policy, but if there is indeed a policy, whose is it? There is the Prime Minister's policy as articulated on Saturday evening or there is her policy as broadcast at lunchtime on Sunday, and there may be a few more icebergs ready and willing to take holes out of the side of whatever new administration is running the ship in the next few weeks.
More crucial to the future of the United Kingdom is influence. What sort of influence will Britain have in the Community that we have been discussing with such profundity today when a commitment made by the Government seems to mean so little? What sort of influence can we have on our partners when we stand isolated on so many issues in the Community? We stand alone on the social charter, which all our partners in the Community, Left-wing or Right-wing, believe to be a crucial and essential precondition for the balanced development of the single European market. We even stand alone on matters as trivial as cancer warnings on cigarette packets. Cabinet Ministers are sent to Brussels to express views which are then described by the Prime Minister as not worth making a song and dance about. We
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stand alone on the Lingua programme for language teaching in schools. We stand alone, too, on pensioners' bus passes and the Framework research programme. All the time we are marginalising and failing to let Britain's voice be heard.
Mr. Cash: Will the hon. Gentleman give way?
Mr. Robertson: I shall not give way to the hon. Gentleman. He wants regularly to have a dialogue with me, but time is limited.
In the Daily Mail on 18 May, Sir David English came out with one of the great truths in an editorial which appeared side by side with the Prime Minister's famous interview. He wrote:
"In Europe's Council of Ministers, with its primitive form of proportional representation, shifting coalitions of member states are going to reign supreme. That is the power game in Europe. For our own sake and Britain's, it is one that she must learn and indeed master."
We are seeing in this debate on the ERM—and we shall see the same in the debate on what is to come under European monetary union—that that lesson has not been learnt from Sir David English and it is not likely to be learnt from any of the Prime Minister's Cabinet colleagues. The European elections, however, show that the British people know precisely which side of the argument they take.
My right hon. and learned Friend the Member for Monklands, East outlined in some detail and with considerable eloquence the Labour party's view on the exchange rate mechanism and the specific nature of the conditions. We have made our conditions plain. They are unambiguous and attainable. We stand by them as a basis for stage I of the Delors report. As my right hon and learned Friend has said, they have been publicly welcomed for the constructive contribution that they represent—not to say the contrast that they provide with the contrary and fickle posturing of a Government who remain completely divided even at the highest level.
As the debate has shown, nobody pretends that going beyond stage 1 of the Delors report will be easy or uncomplicated. The many views that have emerged in the debate have illustrated that. The report was, after all, written by bankers and, in many ways, for bankers. There are essential principles which must underline the policy which takes us beyond the present debate. There are principles which must underlie the campaign and the negotiations which will take place. There are ground rules for any subsequent debate that must take place and they must be established before the intergovernmental conference is convened.
That is why the resolution of the European Parliament, passed last week with all the Labour party's conditions and policies contained within it and with the support and acclamation of Conservative Members of the European Parliament, is a good signpost to where the Government should be taking us in the future. If it is good enough for Conservative Members of the European Parliament, the residual few who manage to hold on to their seats—it should be good enough for the Government.
The debate has shown that there is wide interest in this matter both in Parliament and in the country, and this belated debate has shown how important it is for our future. I doubt whether the Government have the conviction to go beyond the Prime Minister's prejudices, and I doubt whether they have the nous or the imagination to take on the challenges which face us today in the great

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European continent. The only way for the British people to have a future in the Community which will deliver what they want and demand is to elect a new Government at the earliest opportunity.
9.41 pm
The Minister of State, Foreign and Commonwealth Affairs (Mr. Francis Maude): Some debates in the Chamber follow what seems to be a preordained course, but everyone who has spoken in the latter parts of this debate has paid tribute to the nature of the debate. It has been a rare and special occasion, one which the House of Commons has taken extremely seriously. There has been a degree of consensus among virtually everyone who has spoken which I had not foreseen at the outset, but which is a source of considerable pleasure to us.
Views have been expressed from members of most parties in the House and from most parts of most parties. Those who have contributed to the debate have shown considerable breadth and depth of experience and expertise.
One would expect the House to take the matter seriously because it goes to the heart of the reasons for the existence of the House. What has shone through the debate is the fact that Mr. Delors' grand design, the blueprint for a stampede into effective federalism, has not a friend in the House.
It was remarkable that the Labour party was desperate to find ways of disagreeing with the Government. The right hon. Member for Plymouth, Devonport (Dr. Owen) made a speech which was remarkably close to what my right hon. Friend the Chancellor had already said and, listening to the right hon. and learned Member for Monklands, East (Mr. Smith), I thought at one stage that he had hijacked my right hon. Friend's speech.
I suppose that it was inevitable that much of the debate focused on the exchange rate mechanism. I have only this to say about that. Our commitment is one made in good faith. It reaffirms the commitment made in Madrid and we will stick to it. Many of the conditions have to be fulfilled by others. We hope that they will be fulfilled sooner rather than later.
My right hon. Friend the Chancellor said on Tuesday that the ERM was not a panacea, and nobody should expect it to be so. My hon. Friend the Member for Chicester (Mr. Nelson), who made a passionate and effective speech, came close to expressing the belief that it is a panacea. We should not fool ourselves that that is so. There could be nothing more disastrous than to take, for political reasons, what must be an economic decision. Above all, it would be absurd to take such a decision simply to demonstrate our commitment to the Community, a commitment which is amply demonstrated in any event. It is far too important an issue to be the subject of gesture politics.
Remarkably few suggestions have been made that we are dragging our feet about Europe. The right hon. Member for Devonport, in his quite notable speech, made a slightly ritualistic complaint about us being isolated from time to time, but he tempered his strictures by accepting that there will be times when we are right to resist, even if we are alone, and the House would expect no less of us.
A number of hon. Members spoke of the social charter. The right hon. Member for Devonport, in a fit of nostalgia, referred to it as the social contract. He rightly
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deplored the minimum wage provisions of the charter. We are not holding out ferociously against any social charter, but we insist that any charter we sign gives full weight to the unanimous conclusions of the Madrid council. There should be no EC action where national action will suffice. It should respect national traditions and voluntary practices, and it should give top priority to job creation. The present draft does not do so, and while it remains in that form we will not sign it. At present it is a document designed to make politicians feel better about themselves, not to bring benefits to our people.
On so many matters, far from being laggardly, Britain is ahead, driving the Community forward. We are not doing so alone. In alliance with the Commission and other member states, we want faster and better progress. For example, the single market is an aspiration that is 30 years old, but only now is it becoming a reality. Who has pressed for that?—the United Kingdom. It is only now, after years of urging by us, that it is beginning to take shape. Who is holding up progress? Whose foot is on the brake? The Germans are reluctant to expose their insurance companies to open competition. The French are trying to frustrate the Commission's drive to open up competition in telecommunications.
How can we have a single market when lorries are crossing frontiers empty because protectionist regulations prevent them from picking up return loads? Who is holding that up? It is France and Italy, while we support the Commission's proposals. Who are the keenest proponents of the people's Europe? Again, it is France and Italy. Which country is holding up progress on one of the measures that would benefit our citizens most directly, the liberalisation of air transport to make it easier and cheaper to travel to Europe? Yes, the French and Italians. These are not objectives that Britain is trying to foist on an unwilling Community. They have been agreed time and again unanimously by all 12 member states.
We do not claim to be alone in our virtue, but time and again we have started in the minority, with allies, and won over the majority. It is high time that more member states matched their deeds to their words.
Let us consider compliance with Community law and the implementation of measures that have already been agreed. On every count we are leading; we do what we have all agreed to do. Stage 1 of the Delors report has been agreed by all 12 of the member states, but it is being pursued more enthusiastically by ourselves than by others. Others are at last catching up on abolishing exchange controls. We shall strongly support the Commission's action to strengthen competition policy to reduce the distortion that unequal state subsidies bring. How can there be European integration and progress to economic and monetary union when the Italians alone give state subsidies of £16 billion a year, eight times the amount that we give? We are all agreed in principle that that must stop. The Commission deserves the full support of all 12 member states in its renewed drive to turn principle into practice.
Those measures are all essential components of further integration. The form of integration has already been agreed by all of us, but it has been heavily promoted by US. Far from wanting to hold it back, we want more speed, not less. We have no difficulty with the further integration involved in progress towards economic and monetary union. The objectives which my right hon. Friend the Chancellor set out at the opening of the debate are ones

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with which we agree and which we support. But we have concerns about the route by which those objectives are obtained. It is the clear view of the House tonight that it is not unreasonable to raise concerns about what is proposed in stages 2 and 3 of the Delors report.
We do not accept the proposals for yet further increases in regional and structural aid. There is no reason to suppose that achieving economic and monetary union through the operation of the market would damage less prosperous areas. We argue strongly in our paper that only by allowing less prosperous areas to benefit from their cost advantages can disparities be eradicated. Again, we do not accept that binding Community rules on national budget deficits are needed. It is possible to have further integration in practice while allowing national Governments and Parliaments to retain control over national budget deficits. Any proposal to the contrary would be resoundingly rejected by the House.
We do not accept that economic and monetary union requires a single monetary policy, a single currency and a single central bank. All these are in conflict with the principle of subsidiarity—to which much lip-service is paid —that things should only be done at Community level when they cannot be done at national level. All those proposals would centralise powers that are critically important in a way that is unnecessary and undesirable.
Mr. Worthington: I thought that I heard the Minister say that the free market would eventually bring about an equalisation of living conditions in different regions. Does he agree that, over the past 10 years, there has been an espousal of free market principles under this Government and a widening of the gap between north and south? When may we see a reversal?
Mr. Maude: The hon. Gentleman could not be more wrong. I certainly did argue that. I believe that the facts sustain our argument. One need only look at the burgeoning of prosperity in the north-east and, indeed, in Glasgow, the hon. Gentleman's area. The free market has brought that about. The disparities were at their worst when subsidies were at their highest. I do not resile in any way from the proposition that the free market would bring about this eradication of disparities.
In any event, there could be no guarantee that a single, centrally run monetary policy would converge on the best anti-inflation record of member states, no matter what the treaty might say. It is more likely that inflation would tend to converge on the average inflation rate across the Community. Therefore, this centralist and regulatory presecription would be likely to have the reverse effect to that claimed for it. Inflation could well turn out higher than under our market-led, liberal proposals.
Although we are not alone in having these grave anxieties about those aspects of the Delors report, it would clearly be wrong for us simply to sit on the sidelines and snipe at it. As members of the Community, we have never done that, and we will not do it now. Our role in the Community has been central and hugely influential. We need only look at how some of the Community's problems are resolved. We can look at the vast budget imbalances —so skilfully negotiated by the last Labour Government —and the huge surpluses of the common agricultural policy. Both yielded only to the vigorous urging of my
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right hon. Friend the Prime Minister, arguing not from the sidelines or the margins but from our central position in the Community.
So it is with these proposals. We say that there is another route to economic and monetary union. It is one that works with the grain of the market, a solution that will, by evolution, build on what we already have. It is a solution that could easily be quicker than the prescriptive and centralist route of Delors. The precedent of the Werner report—with its timetable, blueprint and centralist and prescriptive approach—is not such as to give one confidence that the Delors approach will deliver quick results. A step-by-step approach is by no means a slow one. It could be a jog, it could be a sprint, but it will not be a leap in the dark.
We argue that our approach would deliver the objectives of economic and monetary union, on which we are all agreed. It could even deliver those objectives more quickly than the Delors report. Above all, and of great importance to this House, our approach would retain control of the fundamentals of economic policy with the British Government and the British Parliament.
Many of my hon. Friends have endorsed the approach we have offered in our paper published today. There has been some criticism, mainly from the Opposition, but most of it appears to have been based not on a reading of our paper, but on garbled reports of the Council meeting at Antibes. Some hon. Members referred to it as a scheme of competing currencies. It is not; it is a scheme for competing monetary policies.
The right hon. and learned Member for Monklands, East was somewhat shy when asked about the views of the former economic adviser to the Labour party. I shall tell him what David Currie said:
"there is a serious case yet to be made in favour of the idea of competing currencies. This idea need not be in conflict with the objective of exchange rate stability, so that it is not incompatible with the EMS. Competition between currencies need not mean exchange rate instability. Rather it may mean competition over responsible monetary policies, encouraging their spread within Europe."
The right hon. and learned Gentleman should listen to advice.
Mr. George Robertson: As the hon. Gentleman has quoted one piece of Professor Currie's article, would he care to complete it? There was a condition to his endorsement of the idea of competing currencies. He said: "provided that it is recast within the EMS framework. Currencies can compete one with the other within the type of fixed parity system towards which the EMS is evolving." Does the hon. Gentleman endorse that as well?
Mr. Maude: I am obliged to the hon. Gentleman for making precisely the point that we made in our paper. Whatever views the hon. Gentleman and his hon. Friends may have about advisers, it might not be a bad idea for them to listen to one occasionally.
All of this could be achieved within the constraints of the existing treaty. How could it make sense for us to commit ourselves to further treaty reform when we have by no means exhausted the possibilities of the existing treaty? There is still much to do within the treaties we have already signed.
Some of my hon. Friends have argued that we speak from the sidelines and that we are marginally involved, but that is not correct. My right hon. Friends and I regularly attend Council meetings. We are not only involved

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centrally, but hugely influential within the European Community. We shall be arguing not from the sidelines, but from the centre and we shall continue to be extremely influential.
It should not be thought that the United Kingdom is alone in expressing scepticism about stages 2 and 3 of Delors. We are not alone in wanting to consider alternatives or in emphasising the need to avoid rushing into hasty decisions. The president of the Bundesbank has said that economic and monetary union needs neither a central bank nor a common currency. He went on to say that the basic issue in discussions of a European central bank was the transfer of monetary sovereignty away from the present national institutions and that this had been grasped by relatively few people, one of whom was the Prime Minister of the United Kingdom. In October this year, he said that economic and monetary union must be an evolutionary process.
His ideas represent only one of several strands of thought in Germany, but an important one. As is well known, Mr. Genscher favours rapid progress towards Delors stages 2 and 3. To add flavour to the debate, the German Economics Ministry has published a distinctly critical analysis of the Delors prescription. Those differences of opinion show a healthy public debate in Germany on this important issue. Similar differences have emerged in many other member states. Foreign Ministers often see political advantages in the rapid progress down the route of prescription. Finance Ministers, who must deal with the practical effects, take a more sober view. That is why the United Kingdom paper is so important. It sets out a comprehensive and consistent approach to economic and monetary union which takes account of political objectives and economic realities.
We shall argue the case for our approach very vigorously in the Community. It offers two substantial prizes. First, it offers the attainment of the objectives of economic and monetary union. at least as quickly as the Delors report. Secondly, and we believe equally important, it will retain national control of economic policies. In many cases we have argued our position vigorously, and we have persuaded and won over other member states.
It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

EUROPEAN COMMUNITY DOCUMENTS
Motion made, and Question put forthwith pursuant to Standing Order No. 102(5) (Standing Committees on European Community documents.)
GAS APPLIANCES
That this House takes note of European Community Documents Nos. 4093/1/89 and 8819/89 relating to gas appliances; and welcomes the Government's aim of breaking down barriers to trade in gas appliances as a step towards the completion of the Single Market.

NUTRITION LABELLING
That this House takes note of European Community Documents Nos. 8673/88 and the Supplementary Explanatory Memorandum submitted by the Ministry of Agriculture, Fisheries and Food on 24th July 1989 and 8446/89 on nutrition labelling of foodstuffs; and supports the Government's intention to negotiate satisfactory arrangements to harmonise food labelling and to ensure the standardised presentation of nutrition so that consumers can compare products more easily thus helping them to choose a balanced diet.—[Mr.Lighbown.]
Question agreed to.

PETITION

  Travellers' Site (Leicester)
  10 pm
  Mr. Keith Vaz: I wish to present a petition on behalf of Sally Brookebank of 27 Holden street, Leicester, Peggy Smith of 123 Loughborough road, Leicester, county councillor Margaret Berridge of Windsor avenue, Leicester and 60 other residents of Belgrave in Leicester who are very concerned about the fact that the city council has decided to impose a site for itinerants on the junction of Ross walk and Loughborough road. They believe very strongly that they should have been consulted by the city council before any site was chosen. The petition
  Sheweth that they, being residents of Belgrave are opposed most strongly to the proposal of any site for travellers in the area of Ross Walk and Loughborough Road because there has been no prior consultation with residents.
  Wherefore your Petitioners pray that your Honourable House will urge the Secretary of State for the Environment to intervene in this matter.
  To lie upon the Table.

  Health and Safety Commission and Executive
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lightbown.]
  10.1 pm
  Mr. Greville Janner: I am very pleased to have the opportunity in such distinguished company to raise the issue of the powers, authority and work of the Health and Safety Commission and the Health and Safety Executive. I do so following a vast series of accidents, each one of which has occurred in an area outside the powers and supervision of the Health and Safety Commission, each one of which has led to an inquiry, has caused death and misery and many of which would have been avoided had the Government ensured that the commission and the executive had powers over those areas.
  I will list some of the incidents and state which Department had responsibility. They include the Marchioness pleasure boat accident on the Thames, the Clapham train disaster, the King's Cross fire, the Lockerbie air disaster, the Kegworth air disaster and the Herald of Free Enterprise Zeebrugge ferry disaster, all of which were the responsibility of the Department of Transport and the Piper Alpha oil rig fire which was the responsibility of the Department of Energy. That litany of disasters was outside the responsibility of the one body in this country capable of ensuring, in so far as is humanly possible, that accidents are prevented instead of simply being investigated once they have occurred.
  It is an oddity that in the Health and Safety at Work etc. Act 1974 the Health and Safety Commission and the executive were created to look after health and safety, but the Government could require the contracting out of functions to specific Departments—in particular the Department of Transport and in the case of offshore oil, the Department of Energy.
  It is remarkable that the Health and Safety Commission and executive have achieved so much success with the resources that they still have—resources which, unfortunately, are being reduced. There are not enough inspectors, of course, and I am not asking that their jurisdiction be increased while their numbers decrease. I pay tribute to Dr. John Culler, the energetic and excellent chairman of the commission, for the work that he supervises and leads, and to his colleagues.
  I ask the Government to say that we should stop farming out work that should properly be carried out by the commission and executive to Government Departments that are ill-equipped to deal with it. It is no coincidence that almost every disaster that has occurred, with massive loss of human life, has been outside the purview of the commission and executive, and no coincidence that the Departments of Transport and of Energy have been the ones that have had to set up investigations in almost every case.
  Nor is that quite the end of it. We also have the horror of the Hillsborough football tragedy, where the local authority is responsible. In the county of Leicester—part of which I am proud to represent—we have seen the misery of the Donnington race track pop concert, where two youngsters were trodden underfoot and died. With the help of Mr. Fertleman, my researcher, I have gone into the details of that tragedy. Last week I saw Earl Ferrers, who
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  did not know much about it, because it does not seem ever to have been brought to the attention of the Home Office in a way that would sink in. He had not seen the awful video taken by the police, showing a crowd of 100,000 youngsters on the race track listening to the music. As people were trodden underfoot, others lifted them up and passed them over their heads as they surged forward with the music. It is a miracle that only two people were killed.
  When we asked who had been responsible for safety, it turned out not to have been the Health and Safety Commission or the Health and Safety Executive: the operation was licensed by the local authority, the police carried out their function and the ambulance and security people carried out theirs. The promoters did their best, but no one was in command. No single authority had the power to say to that group of performers, "Stop: there is a danger." No one had the chance to co-ordinate the people who were looking after those 100,000 youngsters.
  The miracle is not, of course, that there were deaths, which, judging by the video, were an absolute inevitability. The wonder is that there were not more. How many more death will there have to be before the Government say, "We must stop the nonsense of leaving crowd safety to local authorities"? When will they stop allowing major events attended by 100,000 to be left to the whim, almost, of people who are not trained or co-ordinated, and who do not know how to handle crowds?
  I inquired of the Minister, "What are you going to do?" His answer was, "Well, we have not seen the video." I obtained it from the chief constable of Leicester, and the Minister will have received it today: he will see on it a sight that I had never believed possible.
  We have a sorry arrangement—or disarrangement—in this country. Instead of all safety co-ordination being in the hands of experts, it is spread out. Experts have their own areas of expertise but, of course, there will still be miseries. Indeed, there was a disaster in Leicestershire only today. There was an explosion and people were injured. There will always be problems, carelessness and risks and alas—there will always be deaths. However, the Government should be minimising those risks by ensuring that prevention is carried out under proper supervision by those who are skilled, equipped and trained to do that job. That means making use of the organisation that was set up by the House in the 1974 Act. It was an all-party effort and a statute that everybody supported. To me it seems crazy that, when there is such a set-up, proper use is not made of it.
  I ask the Minister to be good enough to consider whether he should say to the Department of Transport, "Stop setting up inquiries after tragedies." That is not good enough to deal with tragedies such as the Marchioness, the Clapham train crash and the King's Cross fire. Indeed, Which? magazine reported only today:
  "Large numbers of passengers could be trapped if London Underground is faced with another emergency like the King's Cross fire . … Despite the disaster, some of the busiest stations still have plastic fittings which can give off black toxic smoke in a fire."
  The consumer watchdog said that safety had improved since the tragedy two years ago this month in which 31 people died, but added that some of London Underground's improvements will take a considerable time. How long do we have to wait? How long do hundreds of thousands of people have to travel in unnecessary danger?

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  I should like to inquire of the Minister why there were no prosecutions after the Zeebrugge ferry disaster. Why did it have to be left to individuals to take action? How is it conceivable that there were no prosecutions when the ferry sailed with its back gate down? Who is supervising the Department of Transport? It is not doing its job. This is not a party political matter; it is about people's safety. I do not understand why action was not taken.
  Why should crowd safety be left to local authorities? Why should not somebody co-ordinate? Why should that individual or body not be organised and equipped to do the job? Why must we always wait? Why should we wait until there is a crash or until something happens as was the case at Donnington? Why can action not be taken now before there is another complaint?
  As chairman of the all-party industrial safety group, I remember people asking me. after the Marchioness pleasure boat sinking, "Why did it happen?" Of course, it was a terrible error and it might have happened anyway, but one reason is that nobody bothered to take the necessary steps until after dozens of youngsters died.
  Therefore, I ask the Minister to carry out a census, survey or audit of the safety arrangements under his control. The Department of Employment is in charge of the Health and Safety Commission and Executive. Therefore, it is his responsibility. There is no reason why the Departments of Transport and of Energy should not hand back to the Department of Employment the functions that they should never have been given in the first place. However, the Government are not prepared to take that action. Their responsibility is a heavy one, because there will be another disaster. We do not know where or when, but we do know why—because we are waiting for disasters to happen before we take action to prevent them. Therefore, I ask the Minister to give a positive response to my real plea, which is made on behalf of the relatives of the people who have died in these tragedies.
  We know what happens with each individual inquiry, but what is the Minister going to do to prevent such tragedies from occurring in the future? In the spirit of co-operation that has always existed in the House on matters of health and safety, I ask the Minister to give a positive answer, some hope and at least an undertaking that he will consult, consider and take the steps within his power to strengthen the Health and Safety Commission and Executive to try to prevent such accidents occurring in the future.
  10.14 pm
  The Parliamentary Under-Secretary for Employment (Mr. Patrick Nicholls): I thank the hon. and learned Member for Leicester, West (Mr. Janner) for giving us the opportunity to discuss health and safety matters. I also compliment him on the way in which he opened the debate. Even if I cannot agree with every conclusion that he draws and accept every nuance of what he said, it is right that I should remind the House that he has a long-standing interest and passionate devotion to this cause. He introduced the subject this evening with his customary eloquence.
  The Government are committed to seeing that workplaces enjoy the highest standards of health and safety that are reasonably practicable. That is why we met in full the Health and Safety Commission's requests for the
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  resources it judges necessary to do its job. That point must be stressed as it is the main area in which I must disagree with the hon. and learned Gentleman, particularly on what he said about resourcing. If time permits, I shall return to that subject. It follows naturally that we also wish to ensure that work activities do not affect the health and safety of members of the public.
  Health and safety is an area where a degree of common ground should, and I believe does, exist between all parties, and the hon. and learned Gentleman was right to remind us of that. The Health and Safety at Work etc. Act 1974 is an outstanding example of that common ground. The legislation was drawn up by a Conservative Goverment and put on the statute book by an incoming Labour Government.
  Before responding to some of the interesting points which have been raised this evening, I would like to explain in broad terms how the Health and Safety Commission and its Executive operate. Both are, of course, statutory bodies, created by Parliament through the Health and Safety at Work etc. Act 1974. Their powers and functions flow from that Act and related legislation.
  The commission is appointed by my right hon. Friend the Secretary of State for Employment and is responsible for advising Ministers on matters of policy relating to health and safety and for proposing new regulations 1:0 Ministers. The commission's area of responsibility is thus extremely wide. It is concerned not only with health and safety in the workplace, but with the protection of all those who may be affected by workplace activities. In some areas of health and safety, the commission is answerable to Ministers outside the Department of Employment. For example, the commission oversees nuclear safety and is answerable to my right hon. Friend the Secretary of State for Energy, and my right hon. and learned Friend the Secretary of State for Scotland.
  One of the commission's major statutory objectives is the modernisation of earlier health and safety legislation 1 o produce a new integrated system of regulations and approved codes under the 1974 Act. Recent important regulations include the Control of Substances Hazardous to Health Regulations, which replaced more than 40 pieces of earlier outdated legislation. All were developed following in-depth consultation with interested parties, including both sides of industry.
  The commission's major instrument is the Health and Safety Executive which, through its inspectorates, enforces health and safety law to protect both work people and the public. The executive advises the commission in its major task of laying down safety standards through regulations and practical guidance. It has been fully involved in Europe, helping to mould directives to ensure they reflect domestic legislation which meets the needs of modern industry, while at the same time protecting health and safety without detriment to competition.
  Having set out the responsibilities of both the commission and the executive, I should like to describe how they exercise those responsibilities with specific reference to public safety. The executive is responsible for enforcing the 1974 Act. Section 3 of that Act is wide ranging in that it places a duty on an employer to conduct his undertaking in such a way as to protect, so far as is reasonably practicable, the health and safety of non-employees. Section 4 of the Act also places certain duties on persons in control of non-domestic premises towards members of the public. "Undertaking" covers an

  575
  infinitely wide range of premises and activities such as factories, railways, airlines, fairgrounds, and sports stadiums, to name but a few. It is therefore inevitable that section 3 will cover activities for which there exists specific legislation which is the responsibility of other enforcing authorities and, therefore, other Government Departments.
  For this reason, the commission has adopted the policy that, as a general principle, HSC and HSE will wish to avoid duplication with other enforcing authorities. But in deciding its approach to any hazardous area, HSE's main concern would be the health and safety of employees, the self-employed and the public. It aims to achieve this efficiently, effectively and economically, with fair and consistent policies responding to legitimate public concerns. That sometimes means an area being dealt with by HSE alone, sometimes by another authority or authorities, occasionally by a mixture of the two. When the general provisions of sections 3 or 4 of the Act overlap with other, more specific legislation enforced by other authorities, the executive seeks to agree demarcation lines with those authorities, in the light of health and safety expertise, economy. efficiency, effectiveness and suitability.
  In many areas of overlap, agreement has been reached that the executive should not generally attempt to enforce the requirements of sections 3 and 4, because public safety will be adequately guaranteed by the enforcement of other legislation covering the risk in question. An example is the use of vehicles on the public highway, which is subject to the Road Traffic Acts and the Motor Vehicles (Construction and Use) Regulations. There are similar agreements over general fire precautions, which are the responsibility of fire authorities, over consumer safety, over the structural safety of buildings and many other areas of potential risks to the public. In its demarcation discussions with other authorities, the executive seeks to avoid needless duplication of enforcement, while ensuring that no area of risk remains uncovered.
  However, it should be remembered that the executive is not the sole enforcing authority under the Act. The commission can appoint agents and it works in conjunction with local authorities, which enforce the Act in a wide range of non-industrial premises, such as offices, shops and warehouses. The commission has made a number of agency agreements with other expert bodies to enable them to enforce the Act in place of the executive, where this fits well with those bodies' other responsibilities. Some agreements have been made, for example, with the Department of Energy in respect of the offshore industry and with the Department of Transport in respect of railways. In these areas, the commission retains its overall policy responsibility for advising Ministers.
  Similarly, agreements can and have been made for the executive to enforce other legal requirements where the executive has the relevant expertise and the new duties are consistent with its basic responsibilities. For example, the executive enforces part III of the Food and Environment Protection Act 1985 and the associated Control of Pesticides Regulations, under an agency agreement with several Government Departments.
  I turn to some of the specific points raised by the hon. and learned Member for Leicester, West tonight, in
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  particular the existing arrangements between the commission and various other Government Departments. In the time available, I shall highlight a couple of them.
  HSE inspects sports grounds to ensure that employers are complying with their duties in relation to their employees. However, they do not seek to enforce section 3 with respect to spectators because there is more specific legislation in existence—the Safety of Sports Grounds Act 1975. The Act is the responsibility of the Home Office and it sets out the safety controls at sports grounds. For that reason, the Home Office has been the lead Government Department in the investigation of the Hillsborough disaster. However, the HSE assisted the inquiry with technical issues concerning, for example, crash barriers and the means of entrance to, and exit from, the ground. However, the HSE has responsibility for sports grounds not covered by the 1975 Act.
  Currently, the HSE has overall responsibility for the enforcement of the 1974 Act. However, many local authorities have taken powers under the Local Government (Miscellaneous Provisions) Act 1982 to license pop concerts and put crowd safety and control conditions into any licence which is issued. The executive works with the local authority issuing the licence, as do others such as the police.
  In the Donnington tragedy of 1988, to which the hon. and learned Gentleman referred so well and in which two people died when the crowd surged forward and lost its footing on soft ground, the local authority were the licensing authority for the event and so undertook the investigation. The executive gave advice to the local authority about staging the 1989 festival, and I believe that it has responded that way again to a request about the 1990 festival.
  The establishment of the Health and Safety Commission and Executive has demonstrated, I believe, that there are advantages in having a central body which covers a wide range of health and safety matters. But it does not necessarily follow that the coverage of such a body has to be universal. While there was general agreement when the HSC and HSE were set up as to which inspectorates should become part of the executive, it was more difficult to draw the line in relation to some industries. It is therefore understandable that from time to time questions should be asked about the suitability of current arrangements.
  What I believe is important—this has been recognised by the commission—is the need to have the boundaries between commission responsibilities and those of other authorities clearly defined to avoid duplication and perhaps even more fundamentally to ensure that there are not areas which fall between various authorities. The commission keeps this matter under continuing review.
  The hon. and learned Gentleman has criticised the sponsor Department having responsibility for the regulation of safety matters. I do not believe that such arrangements are in themselves detrimental to safety. Some industries—for example, marine and aviation transport—demand very specialist expertise which usually is only found in those working in the industry. The Departments are well placed to draw on the specialists from those industries. For other industries such as railway transport and offshore oil, the agency agreements allow the commission to exercise some general oversight of the policy pursued.

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  The hon. and learned Gentleman has also made out arguments for transferring some outside inspectorates back to the commission. We are aware of the arguments, and as with any question of how best to fulfil our responsibilities in any area of Government activity, we keep the matter under review.
  Health and safety are vital. They concern us all, whether at work or as members of the public going about our normal business. I am pleased to note that through their commitment to health and safety and their professionalism the commission and executive have won the confidence and respect of both industry and the public. I am sure that that is common ground between us.
  The Government have sustained health and safety by ensuring that the commission is properly funded and operates in an efficient and effective way. We have also gone out and put over the message that health and safety are vital. However, it must never be forgotten that the prime responsibility for health and safety lies with employers and that their responsibilities include the protection of the public.
  I said that in the time available I would try to deal in more detail with the hon. and learned Gentleman's point about resources. They are vital, because without proper funds the commission and the executive could not discharge their obligations. Contrary to what has been claimed on several occasions, this Government's funding of the commission and the executive has been at least as good in real terms as that of the last Administration. At constant prices, the figure for 1978·79 was £100 million against £109 million for 1988·89. The executive has a I April 1990 target of 160 nuclear installations inspectors —up 30 per cent. in two years—and more than 800 factory and agricultural inspectors—up 9 per cent. in two years. In the public expenditure survey negotiations of the past two years, the commission has received in full the funds that it has bid for.
  I hope that I have been able to reassure the hon. and learned Gentleman that we shall consider what he has said. He has an acknowledged expertise and interest in this area, but it must be stressed time and again that ultimately it is not merely a question of throwing money at the problem. There is more to it than that, but the situation must be kept under review.
  Mr. Janner rose—
  Mr. Nicholls: Unusually for a debate of this nature, I am glad to give way to the hon. and learned Gentleman.
  Mr. Janner: Will the Minister be good enough to undertake that he will discuss with fellow Ministers in the Departments of Transport and Energy the possibility that they should transfer the powers that they have in safety matters back to the Health and Safety Commission, in view of the awful disasters that have occurred in the areas of responsibility contracted out to them and of the fact that many people believe that at least some of those disasters could have been avoided had there been proper central control?
  Mr. Nicholls: I should like to make two points in reply to the hon. and learned Gentleman. I hope that I have made it as clear as I possibly can that the common ground between us is the need to see legislation working effectively. The hon. and learned Gentleman was fair enough to say that accidents will happen, but we have to do everything in our power to minimise their number.
  I do not accept the slightly too easy conclusion drawn by the hon. and learned Gentleman that if everything was dealt with centrally there would be no problem. The conclusion implicit in what the hon. and learned Gentleman said was that the matter was not properly centralised under the Commission. He repeated the word "transport". I will not quibble with the hon. and learned Gentleman about whether the word that he used was "many" or "most", but, it was central to his theme that the matter should be centralised. I am glad to see that the hon. and learned Gentleman accepts that summary. On the evidence that I have, I do not accept that that would be the answer. It is well known that the arguments are in the public domain. It is implicit in everything that I have said in the debate that we are listening and want to see the situation improving. I suspect that the solutions may not be as easy as the hon. and learned Gentleman would want, but I promise him that the matter is kept under constant, real and active review.
  Question put and agree to.
  Adjourned accordingly at half-past Ten o'clock.