EXCESSIVE DEFICITS

HC Deb 24 March 1993 vol 221 cc1063-210

1. (1) Article 104c.
2. (2) Protocol on Excessive Deficits.'.

Mr. Shore

The amendment seeks to exclude article 104c and its related protocol. I am sure that the Committee will be delighted to know that this is not a probing amendment. It is a serious and substantive amendment, and we shall vote on it when the time comes. That means that we have come to the end of a period of what I call cosy collusion and shadow boxing among the Opposition Front Bench spokesmen, the Ministers and the Liberal Democrats, all of whom are in favour of the treaty and have been conducting a spurious debate on the issue. At least we shall try, now that we have the opportunity, to put the serious arguments before the Committee, because I believe that the Committee should consider them.

As the Committee will be aware, the public sector borrowing requirement has always been one of the crucial instruments of economic policy. I have always thought of the size of the Government's borrowing requirement as the Chancellor of the Exchequer's Budget judgment, to be made each year in the light of the circumstances that pertain. Under the treaty, and especially under article 104c, that judgment is no longer to be taken by any future Chancellor of the Exchequer of the United Kingdom. Instead, the Budget judgment is to be made by the Maastricht treaty.

Article 104c begins with the imperative instruction: Member States shall avoid excessive government deficits. The associated protocol than lays down what it calls the "reference values", according to which an excessive Government deficit is to be judged. I am sure that the Committee will be familiar by now with the two reference values—3 per cent. of GDP for the public sector borrowing requirement, and 60 per cent. of GDP as the reference value, or limit, for the national debt.

It is true that words are added to article 104c that give a certain qualification to the starkness of the 3 per cent. and 60 per cent. specified in the protocol. Extremely carefully chosen words allow some slight movement from those precise values. Article 104c(2) says: The Commission shall monitor the development of the budgetary situation and of the stock of government debt in the Member States with a view to identifying gross errors. In particular it shall examine compliance with budgetary discipline on the basis of the following two criteria"— this is where the slight softening of the harsh terms of 3 per cent. and 60 per cent. comes in— whether the ratio of the planned or actual government deficit to gross domestic product exceeds a reference value, unless…the ratio has declined substantially and reached a level that comes close to the reference value"— I emphasise the word "close"; in the case of the PSBR, that means close to 3 per cent.— or, alternatively, the excess over the reference value is only exceptional and temporary and the ratio remains close to the reference value. That is most important, as I shall show later, in relation to this country's experience. It is easy to imagine the effects of those limitations.

Mr. Winnick

We have been hearing from hon. Members, including some Labour Members, that the treaty favours opportunities for employment and so on. It is true that article 2 contains a passing reference to employment, but article 104c contains two full columns giving all the reasons why Governments should avoid deficits. I am sure that my right hon. Friend will be mentioning the fact that the article goes on to refer to the penalties and fines that could be imposed if Governments exceeded the 3 per cent. Does my right hon. Friend agree that there is all the difference between a passing reference to employment and social policy, of which we would all approve, and the emphasis in article 104c on the deficit and on what could happen to member states that exceed the limit?

Mr. Shore

I can assure my hon. Friend that I shall be saying something about the penalties and coercive powers that are allowed under the provisions, which I find profoundly disturbing.

Article 104c(3) contains a slight concession in respect of the strictness of the 3 per cent. and 6 per cent. limits. As I have said, the Commission is the great disciplining force. It will monitor and identify gross errors. Article 104c(3) states: If a Member State does not fulfil the requirements under one or both of these criteria, the Commission shall prepare a report. Here comes the slight concession: The report of the Commission shall also take into account whether the government deficit exceeds government investment expenditure and take into account all other relevant factors, including the medium term economic and budgetary position of the Member State.

Dr. Godman

My right hon. Friend talks about the Commission being the disciplining force. Is he entirely correct? It appears that, under article 104c, the Commission will perform the role of policeman but that astonishingly,—to my mind—the Council will perform the role of a court. Paragraph 11 says that the Council can impose fines of an appropriate size. Will the Council in turn refer a recalcitrant member to the European Court of Justice, or does the Council have the power to impose fines on member states?

Mr. Shore

I shall discuss that a little later in my speech. My hon. Friend is correct in what he said at the beginning. The Commission basically has a policing role, and it is the Council of Ministers that makes the decision.

Mr. Nicholas Winterton

Can the right hon. Gentleman imagine this scenario? Suppose that the United Kingdom has ratified Maastricht and is part of the structure, and our membership, at some time in the future, of the ERM, has produced a situation similar to that which has prevailed for the past 18 months—that is, it has lost this country thousands of businesses and a million jobs. A million jobs cost this country £8 billion, which contributes to our deficit. Because of our membership of a Community institution and a Community system, we would be in deficit beyond the 3 per cent., and because of that, we would be further fined. That could happen. Is that a situation that the right hon. Gentleman relishes or believes that the people of this country would relish?

Mr. Shore

It is outrageous, and I shall develop my reasons for saying so. The whole notion of an alien body imposing fines and penalties on a sovereign nation is entirely unacceptable.

I was referring to the policeman role of the Commission, which will monitor, identify gross errors and draw up a report. The provision says that it will take account of whether a Government's deficit exceeds Government investment expenditure, as though that were somehow less a matter for condemnation than if it was simply a current account deficit.

We have not been told what weight the Commission will give to such matters, but we should not be over-cheered when we consider Government investment expenditure in this country as a percentage of GDP, because it accounts for a small part of the total. Indeed, in the Red Book published this year, we got a picture of general Government investment. It showed that between £11 billion and £12.5 billion—about 2 per cent. of GDP—is the total of Government investment. I ask the Committee to bear those details in mind as I describe the relevance of the figures.

Sir Teddy Taylor

Will the right hon. Gentleman, in view of his knowledge, explain to what the gross errors relate? Are they errors of judgment or arithmetical errors? Having read the provision many times, I still do not have a clue what it means by gross errors. Does he believe, as I do, that somebody will consider whether an error of judgment has been made? If so, that will be a major step beyond an arithmetical error.

Mr. Shore

I think it refers back to the figures of 3 per cent. and 60 per cent., allowing a margin or tolerance, as I described it. It refers to gross errors, and those errors will be the distance of a country's performance from its targets. The Commission will prepare a report if it believes there is a risk of an excessive deficit. It is empowered, having consulted the monetary committee, to address an opinion to the Council. The Council, acting by a qualified majority, will decide whether an excessive deficit has arisen.

We can conclude that there is an imprecise margin, a tolerance, in the reference values of 3 per cent. and 60 per cent. How helpful is that margin likely to be? To answer that, I must refer the Committee to certain statistics. The first is this year's PSBR. The projected PSBR figures for 1992–93 to 1997–98 are set out in the medium-term financial strategy in Red Book. For 1992–93, the PSBR was 5.75 per cent. For 1993–94, the year on which the Budget has concentrated, it is 8 per cent. of GDP. In 1994–95, it is 6.5 per cent., 1995–96, 5.5 per cent. and 1996–97, 4.5 per cent.

The figure comes close to the presumption in the present forecast only in 1997–98 when it is under 4 per cent. —3.75 per cent.—for the first time. If we had to get within the 3 per cent. level over that whole period, what would be the effects on the British economy, the level of employment and funding of public services?

Sir Teddy Taylor

They would shove up taxes.

1.30 am

Mr. Shore

It is unbelievable to think what would happen. Six billion pounds is equivalent to 1 per cent. of GDP. When we have a public sector borrowing requirement deficit which has been forecast at 8 per cent. of gross domestic product, we are talking about £30 billion in either reduced expenditure or increased taxation to get from 8 to 3 per cent. A lesser amount—although it would still be a high figure—would be demanded in each year of the five-year forecast of the public sector borrowing requirement.

Mr. Wilkinson

Does the right hon. Gentleman find it extraordinary that, far from the Council communicating to the national parliament of a country which is straying outside the guideline reference of percentage gross national product on budget deficit, paragraph 11 merely suggests that the President of the Council shall inform the European Parliament of a decision taken? In our earlier debate, the Financial Secretary said that the member state will continue to have independent fiscal powers. That does not seem to accord with paragraph 11, which says that the European Parliament is the body which must be told about a defaulting country.

Mr. Shore

That is absolutely right. It is a different form of coercion from that which we were talking about with regard to the central bank and its powers. Collective decisions will be made by qualified majority voting in the Council. The Commission will make its recommendation and report, and the Council will act on it by qualified majority voting. That will be a major imposition on the United Kingdom. We might have a report or we might demand a debate on it, but we will have no power to influence it.

Mr. Winnick

As far as Britain and the House of Commons are concerned, do we not lose both ways under article 104c? A right-wing Tory Government who were determined to cut public spending—they need no such encouragement—would undoubtedly say, "We have no alternative under the terms of the treaty." Likewise, a Labour Government—hopefully carrying out policies which we would like to see—would say, "We would like to do otherwise. It goes against the grain; nevertheless, we are part and parcel of the arrangements. We have no alternative because, if we go over the limit as far as the deficit is concerned, and if we do the public spending and so on which the Labour movement is so keen about, we will be penalised." At the end of the day, power is completely taken away from this Chamber.

Mr. Shore

I am coming to a point which will help my hon. Friend's case. It is true that the Labour party has always had a special commitment to public expenditure and public services. We plead guilty. Therefore, to have such limitations imposed on a Labour Government is totally unacceptable.

I do not wish to split the Committee unnecessarily. Many people on the other side of politics also understand the value of public services and public expenditure and do not want to see the devastation and ever-increasing unemployment that would result from the restriction on borrowing. So the matter should not necessarily divide us, although I say again that there is a special affection for public expenditure in the Labour party.

Mr. Betts

I am sure that no Opposition Member would find the rigid imposition of the 3 per cent. or 60 per cent. reference criteria acceptable, but is it not the case that, in their raw and unrefined form, the criteria in article 104c(2) apply to the production of a report? Once that report is produced, as laid down in paragraph 3, other criteria, including the investment expenditure criteria, all other relevant factors, the medium-term economic and budgetary strategy and the comments of the member states, later come into play. My right hon. Friend referred to Government forecasts of debt as a percentage of GDP for the next few years. They include a large element of the non-cyclical part of investment expenditure, which would be taken into account under paragraph 3.

Mr. Shore

My hon. Friend is trying to comfort himself. I understand well why he does so—because the article is so unacceptable. He is trying to say that it does not mean what it says, and that 3 per cent. is not the real figure. I carefully went over the ground saying where the tolerances were. The figures were approximations which would only exceptionally be departed from. I also took special account of the distinction made between investment expenditure and other expenditure. As the total investment expenditure is only 2 per cent., if it is all taken into account and set against the target, anything over 3 per cent. plus 2 per cent. would be ruled out.

Next year, the Government PSBR is 8 per cent. of GDP. In no way can my hon. Friend comfort himself by saying that the matter has been dealt with and that reports have to be produced and a judgment made. Of course that is so. Of course people have to consider it. But at the end of the day, the treaty defines excess deficit. I am not even certain whether action could not be taken before the European Court of Justice in the fulfilment of those treaty terms.

Mr. Skinner

My right hon Friend will appreciate that my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) would have been in one hell of a mess as the leader of Sheffield city council if the same restrictions had been placed on borrowing. Within our parliamentary set-up, he was able to extricate the city council from its problems to a degree. If Sheffield was transposed to the nation state arena inside the Common Market, he would have had supreme difficulties.

My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) remembers 1976. He remembers Mr. Witteveen. I remember the fight that my right hon. Friend put up for an alternative policy to the restrictions. Does he agree that, even though the Labour Government took the wrong turn on that occasion—history has shown it to be wrong, and my right hon. Friend was right in the battle that he took part in—we were able to resolve that problem in a limited fashion within the nation state? Yet inside the Common Market, Mr. Witteveen would have reigned supreme not merely for a few months or years: we would have been in his stranglehold for ever.

Mr. Shore

Absolutely right. That is the central difference. All Governments who are obliged to call in the International Monetary Fund have to come to some agreement with it. But a sporadic visit is a different thing from the permanent requirements of the treaty. It would be as though a European Commissioner sat at the Cabinet table all the time invigilating and watching whether the Government were about to transgress or had transgressed their reference values.

Mr. Cash

The so-called opt-in which has been negotiated on behalf of the United Kingdom, relating to the central bank and the deficit arrangement, excludes during the transitional period article 104c(1) and other provisions, including the requirement not to have excessive Government deficits. Does the right hon. Gentleman agree that, although the opt-in or opt-out that has been so acclaimed is no more than a fig leaf, as Robin Oakley of the BBC made clear he had understood from everyone he came across in Whitehall and the European Community, there is another protocol, which says that all these arrangements are irreversible and irrevocable and must come into effect on 1 January 1999, come what may, and which tells the truth about what is going on. Just in case the Minister—

The Second Deputy Chairman

Order. This is an intervention, not a speech.

Mr. Cash

In case the Minister is tempted to say that all the provisions are left out under the protocol, I simply want to point out that the protocol is a worthless piece of paper, and that a future Parliament will not be in a position to make a decision. The decision is being taken now. The Minister may be shaking his head, but that is the position.

Mr. Shore

I shall certainly await with interest what the Minister has to say.

One of the difficulties of tonight's debate is that there are three closely related economic debates on which more amendments have been tabled than for the rest of the treaty. Unfortunately, those three immensely important interrelated debates will be pushed through in a single unbroken session. We have not had the opportunity of studying in Hansard what the Minister has said in response to the first debate before being launched into the second, and it looks as though the Government will try to press us into the third debate.

The point raised by the hon. Member for Stafford (Mr. Cash) cannot sensibly be answered until we have studied the Minister's replies to the first two debates. We shall not have that opportunity. It is a terrible misuse of the House of Commons on matters that everyone will agree, whether or not they are in favour of the treaty, are at the heart of it—economic and monetary union and the transfer of powers from Britain to European institutions.

Dr. Godman

May I ask my right hon. Friend a question about the monetary committee? In passing, I offer my compliments to my right hon. Friend and the 20 or 30 other hon. Members who, in the absence of a referendum, are performing a fine service for the people of the United Kingdom in scrutinising the treaty so closely. As the Council seems to have the power to impose fines against a recalcitrant state, has that state the right of appeal to the European Court of Justice? Given that there are 26 persons to be appointed to the monetary committee, does that committee's opinion have to be unanimous when it recommends that a state be fined by the Council?

Mr. Winnick

On a point of order, Dame Janet, before my right hon. Friend replies to that intervention—I apologise to him. I sought earlier to move to report progress and, no doubt on reflection, you decided not to accept my motion. Was your refusal such that you would not consider it at any future stage during the night, or would you be willing to accept a motion, or at least ponder it at some appropriate time?

Some of us believe, arising from what my right hon. Friend said, that it is totally wrong, quite inappropriate, that we should be debating these matters all through the night, and that we should have a further opportunity at some other time to do so.

1.45 pm

Mr. Nicholas Winterton

Further to the specific point of order, Dame Janet, raised by the hon. Member for Walsall, North (Mr. Winnick). I believe that I am correct in saying that the Select Committee on Procedure has produced a report, which has not been fully debated or agreed by the House, based upon the Jopling inquiry carried out on behalf of the House, which firmly recommends—senior and distinguished Members were part of the Committee and agreed to the report—that the House should not sit beyond 10 o'clock on Government business.

I put the point particularly to you, Dame Janet, because of the observations just made by the right hon. Member for Bethnal Green and Stepney (Mr. Shore). In these particular groups of amendments that we have considered, are considering and, depending on your ruling, may well be considering a little later, on critical constitutional matters, it is important for those of us who are trying to scrutinise this legislation to have an opportunity to study the ministerial responses.

As a constitutionalist and a man deeply wedded to the rights of the House, I put it to you that we are being deprived of that opportunity. Bearing in mind the report that the Select Committee on Procedure has produced, this is surely an abuse of the Committee by the Government of the day.

The Second Deputy Chairman

The Chair must operate under existing rules, customs and Standing Orders. As the hon. Member will know very well, it is perfectly possible to extend the sittings of the Committee under the present regime. As regards any motion to report progress, whoever is the occupant of the Chair at the time will have to come to that decision. I would certainly not wish to give any opinion in advance.

Mr. Spearing

On a point of order, Dame Janet. Can you confirm that the rules of order, both for the Committee upstairs and the Committee downstairs, permit the Chair to accept a motion for closure, even when there has been no wind-up or reply from the Government Benches after the introductory speech which they have made, as no doubt they will shortly, in relation to any group of amendments?

The customs and courtesies that I have experienced upstairs have been that there has been a reply from the Government Bench after other speeches have been made and as a sort of wind-up comparable to that at Second Reading. I take it—perhaps you will confirm it—that no Standing Order prohibits your accepting a motion for the closure even when that has not happened?

Can I put it to you, Dame Janet, that it may well be within your discretion—perhaps you could confirm that it is possible—for you to decline to accept that motion for closure if such a reply has not been given in these debates of enormous constitutional significance?

The Deputy Chairman

The Chair has discretion, but one looks to the principles behind it, which are clearly stated—that there should be no gross abuse of the rights of minorities in the House. I think that we must make further progress.

Mr. Shore

A ruling on what is a gross abuse or what is a gross excess is among the things that we are discussing tonight.

My hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) intervened just before points of order were raised, and I will try to deal with the question he put. My understanding is that the Council of Ministers, by qualified majority vote and excluding the member state which is, as it were, in the dock, will make the decision.

I do not think that there is an appeal to the European Court of Justice against that, but if a member state refused to comply with the further penalties, the Commission could take that state to the court.

Dr. Godman

On a point of order, Dame Janet. My questions to my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore), concerning the power of the Council to impose swingeing fines, and the powers of the monetary committee, raise important legal questions, and, as you know, I am not a lawyer. It would be helpful if the Attorney-General were present during the debate to give us guidance on those important questions. From article 104c, it would appear that the Council will take on some of the functions of an international court. I am not so sure that any hon. Member present can answer the questions that—perhaps unfairly—I asked my right hon. Friend. They are important legal questions, and an English and a Scottish Law Officer should be present.

The Second Deputy Chairman

I think that the hon. Member has been here long enough to know that it is not for the Chair to compel the attendance of the Attorney-General or any other hon. Member. Representatives of the Government are on the Front Bench, and no doubt they will have heard the hon. Gentleman's point of order.

Mr. Shore

Obviously it would be helpful if the Attorney-General were here to deal with the sort of questions that my hon. Friend the Member for Greenock and Port Glasgow has raised. I also find it surprising that the Chancellor and shadow Chancellor of the Exchequer have not looked in. I cannot think of any measure which more directly affects the power of a Chancellor than the impositions that will be placed upon him in the exercise of his Budget judgment, under the terms of the treaty.

Mr. Wilkinson

Might not that power be redundant in the future, in as much as it will be transferred to the Commission and the Council of Ministers?

Mr. Shore

Perhaps so, but I cannot believe that that could be welcome to the Chancellor, or his shadow, if they take their responsibilities seriously, as I believe they do. The present Chancellor is already a transgressor of the treaty, as he has gone way beyond the limits of tolerance, which I was trying delicately to outline. He has behaved like Sheffield council at its worst.

I was seeking to establish that the matter concerns both sides of the House. I have given the figures for the Government's medium-term forecast for the economy. Every year, it has been well in excess of that forecast, except for last year, when it just crept under 4 per cent. It cannot be right that we should subject ourselves to that sort of discipline. It cannot be the Government's judgment that that is right for the country—they have their own economic doctrines and priorities—and it certainly is not the judgment of those on the Labour Front Bench and in the Labour party that it is good for Britain to be forced to make the sort of cuts, or raise the taxes, indicated by the figures.

Mr. Cryer

That issue is of peculiar importance to Labour Members. My right hon. Friend has outlined a scenario in which a Labour Government could be elected, inheriting a deficit created by a Conservative Chancellor of the Exchequer and a Conservative Government. As my right hon. Friend said, we would be elected to have particular regard to the virtues of the services provided by the public sector but, if the Maastricht treaty were in operation, we would have to embark on a programme of cuts, perhaps amounting to £30 billion in present circumstances. Therefore, it is of special interest and concern to Labour members that we do not go down that road, as it would wreck the chances of a Labour Government and the potential of the Labour party.

Mr. Shore

I thank my hon. Friend. It is extraordinary that the most senior representatives of our own party are not taking part in this debate. If they disagree with the treaty, they should say so. If they agree to accept the disciplines on their future conduct, they should explain their position.

Mr. Andrew Smith

Does not my right hon. Friend acknowledge that our right hon. and learned Friend the Leader of the Opposition made it quite clear that the attempt to impose a 3 per cent. deficit limit in present circumstances would be both misguided and absurd?

Mr. Shore

Very good, but we are not talking just about this year. The forecast is that the deficit will be well in excess of the 3 per cent. limit for the next four or five years. And that is quite apart from additional programmes that my right hon. Friends may wish to introduce if we are successful in the next general election. Indeed, the absence of my right hon. and hon. Friends is extraordinary for another reason, and for the same reason this is a matter of common concern between the Government and Opposition parties.

I can best illustrate my point by referring the Committee to the PSBR record between 1972–73 and 1981–82. During those years, the requirement was never under 3 per cent. Under the Heath Government, the figures were as follows: 3.7 per cent. in 1972–73, and 5.9 per cent. in 1973–74. Under the following Labour Government, they were: 9.1 per cent. in 1974–75, 9.4 per cent. in 1975–76, 6.5 per cent. in 1976–77, 3.6 per cent. in 1977–78, and 5.4 per cent. in 1978–79. The next Conservative Government had similar problems, the figures being 4.8 per cent. in 1979–80, 5.4 per cent. in 1980–81, and 3.4 per cent. in 1981–82.

A particular Government may face very difficult problems, but these figures suggest that both parties and three successive Governments found it necessary to have a PSBR substantially in excess of the reference limit that this treaty seeks to impose.

Mr. Skinner

It is worth noting that the years to which my right hon. Friend has just referred were the great privatisation and North sea oil tax years. Now we are talking about going up to 8 per cent. I read in the Financial Times the other day a story to the effect that the Chancellor's Budget figures had been doctored. We are not talking about £35 billion for this financial year; the figure is about £10 billion worse than that. Had it not been for North sea oil and privatisation, the PSBR figures for the years between 1982 and 1989 could have been up to 8, 9 or 10 per cent. Indeed, that will probably happen before this lot are finished.

Mr. Shore

My hon. Friend is correct. The fact that the PSBR is very significantly less than it would otherwise have been is accounted for by the sale of publicly owned assets, bringing in £6 billion, £7 billion or more a year. My hon. Friend is absolutely right about North sea oil also. The North sea produced a great flood of revenue, particularly during the 1980s. But for that, too, there would have been a much larger PSBR.

Ms Diane Abbott (Hackney, North and Stoke Newington)

My hon. Friend the Member for Oxford, East (Mr. Smith) said, with just a touch of irritation, that any attempt to impose a 3 per cent. limit would be misguided and absurd. We can all agree about that.

If Labour Members vote for this part of the treaty, that is what we shall be signing up to. Back Benchers can only marvel at the way in which the Front-Bench team seeks to evade the issue of what the text of the treaty states.

Mr. Shore

I can only agree 100 per cent. with my hon. Friend. If anyone objects to having the yoke of 3 per cent. put upon them, they should stand up and say so and vote against it. That is the message that should go out.

2 am

Mr. Austin Mitchell

Thanks to the unforgivable silliness of the Liberals in allowing the Government to force crucial economic measures through the night, I am not at the peak of my mental activity, which is fairly low anyway. The Liberals have forced us into the position of hurrying the measures through in the dead of the night when hon. Members are half asleep so that the Liberals can hide their shame at what is being done. Therefore, it is difficult to follow the argument.

The figures that my hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) gives are those for the PSBR, but the 3 per cent. limit referred to the public sector financial deficit, which will constitute the PSBR plus the borrowing receipts from privatisation. Therefore, the deficit will be bigger than the borrowing requirement.

Mr. Shore

That was the point being made by my hon. Friend the Member for Bolsover (Mr. Skinner).

What deeply disturbs me is that some of my hon. Friends whose professional activity is to put a favourable gloss on the treaty try hard to say that it is not quite what it seems. The most astonishing omission from the treaty is the fact that it never faces the issue of counter-recession policy, about which it contains not a word. We all know from experience that there is a built-in cyclical movement over five or more years in a market economy—there are absolutely predictable waves of activity. There is a tendency for a boom, which then falls away into a recession. That is a common experience, not only of Governments of both parties over the years, but of the western world.

One lesson that we should have learnt from the disasters of the inter-war years was that tendency to go too high in a boom, and too low into recession and slump. Why is that aspect not written into the protocol? Why does it not say that we must recognise those counter-cyclical problems, and will certainly do so if unemployment grows by X per cent.? Instead of having merely 3 per cent. and 60 per cent. for borrowing and debt, why not have 3, 4 or 5 per cent. of the level of unemployment or the fall in gross domestic product? If such indicators were part of the protocol, we would have some reason to take seriously the arguments of those who try to gloss over the reality of the outrage that is being inflicted on us.

Mr. Betts

I agree with my right hon. Friend on the need for a counter-cyclical policy, but what does he think that the words other relevant factors, including the medium term economic and budgetary position of the Member State mean in paragraph 3 of article 104c? I take them to mean exactly what my hon. Friend is advocating—the need for a counter-cyclical policy.

Mr. Shore

If that is what the treaty means, it should have been spelt out, but I do not for a moment believe that it does. The paragraph refers to the sort of run of figures provided by the Government in the Red Book so that a judgment can be made on whether the nation state is tending towards, deviating from or approximating to the 3 per cent. and 60 per cent. reference points contained in the protocol.

Mr. Skinner

Woolly statements have just been mentioned by my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott) and others, and my hon. Friend the Member for Oxford, East (Mr. Smith) described them as safeguards. In a nutshell, those statements mean only what the Chancellor and the Prime Minister said a few weeks or months ago about extending VAT. They are as strong as their statements when they said that they had no present plans to do so. Statements from the Common Market and from the protocol will be treated in the same fashion. They are not specific, but they will be rammed down our throats. I cannot understand why our Front-Bench spokesmen connive with the Government Front Bench when for the rest of this week they played merry hell about the Government not using precise words. But they are prepared to accept this woolly, abstract statement, because it is about their beloved Common Market. The whole thing stinks.

Mr. Shore

Some statements are later denied or withdrawn—that is a common experience—but we are not discussing statements: we are talking about a treaty, for God's sake, which is legally enforceable. That is the reason for concern. As I have said, the omission of any direct reference to deficit financing is extraordinary.

Mr. Spearing

May I relate my right hon. Friend's excellent questions and arguments to his earlier comment about the absence of the Chancellor and his opposite number? One explanation is that, if they were present, they would have to silently acquiesce to my right hon. Friend's argument or attempt to reply. Their absence during a debate deliberately brought about in the middle of the night by the Government on the major issue of our national finance shows that they do not wish to engage in the debate. That is because they cannot face my right hon. Friend's questions on behalf of our nation.

Mr. Shore

That adds to my general criticism about the sadness of this ruse to obtain a debate in the middle of the night. We are talking to ourselves, and there are only 30 or 40 of us here. We are debating an issue that could damage our people more than anything else if they knew about it. That damage will occur if they are clamped into this straitjacket. We have been tricked into a debate, thanks to Liberal connivance, late at night without being able to distinguish between one major issue and another. The Financial Secretary does not do himself any credit by grinning foolishly. It is a disgrace, and he knows it.

Mr. Leighton

Nobody is fond of deficits, but surely they should be for the judgment of the Chancellor of the day and not enshrined in an international treaty. Does ray right hon. Friend agree that deficits in virtually all the Community countries are well above 3 per cent. at the moment? Can he envisage what it will mean for those countries to try to come down to 3 per cent. in a time of recession? Does he know that the Prime Minister of Belgium resigned two days ago because of a budget to reduce Belgium's deficit from 6 point something per cent. to 3 per cent? The measure could not get through, and he had to resign.

Is my right hon. Friend also aware that my right hon. and learned Friend the Leader of the Opposition recently said: If all member states of the EC tried to satisfy the 3 per cent. target by the end of 1996,…the combined effect on total EC output would be a reduction of over 2 per cent. In other words, the attempt to get down to 3 per cent. by 1996 will cause another recession. Is that not crazy and a betrayal of everything that our party has ever stood for?

Mr. Shore

My hon. Friend does well to remind us of the international dimension. If European countries that are clearly not conforming to the guidelines set themselves on a deflationary course of converging upon those targets, it would cause terrible damage not only to those countries and their employment, but to the international trading and economic community. It could be done terrible damage, and we could conceivably find ourselves in a 1929–31 situation.

Mr. Wilkinson

Is not the Maastricht process a grotesque double whammy—the ERM and the monetary discipline required to remain within the parities necessitated by the mechanism? Countries such as Spain have unemployment of about 20 per cent. and at the same time a whopping budget deficit. Were the budget deficit criteria to be implemented, the effect would be absolutely catastrophic. It would be like the slump of the early 1930s.

Mr. Shore

That is true. Another illustration of that is the fate of the socialist Government in France, with 3 million unemployed by conforming to a Frankfurt policy, leading to high interest rates and strong deflationary pressures. After 10 years of socialist government, something more was expected than 3 million unemployed. Incidentally, that figure existed throughout those 10 years, because France's folly was to join the ERM in 1979 and to give up those easy adjustments in the first few years, when the ERM became increasingly hard and rigid—with the results that we now know.

Another important point relates to the process of the identification of punishment under article 104c. Of course there are considerations, and judgments must be made, but we should have no doubt about the penalties.

Paragraph 9 of article 104c states: If a Member State persists in failing to put into practice the recommendations of the Council, the Council may decide to give notice to the Member State to take, within a specified time limit, measures for the deficit reduction which is judged necessary by the Council in order to remedy the situation. In such a case, the Council may request the Member State concerned to submit reports in accordance with a specific timetable". In other words, "We'll give you a couple of years to change. We want to see a new Red Book, with very different figures from those that we see now."

Sir Trevor Skeet (Bedfordshire, North)

The right hon. Gentleman makes a very good point, but paragraphs 9 and 11 are knocked out by the protocol. As to the avoidance of budget deficits, one should refer to article 109e(4): In the second stage, Member States shall endeavour to avoid excessive government deficits. The statement in article 104c(1) that Member States shall avoid excessive government deficits only applies to stage 3, where the other provisions are knocked out.

Mr. Shore

There is that difference. I understand that avoidance is not mandatory under stage 2, but a member state is supposed to make the effort and to give evidence of it. If it does not, the Commission will monitor the member state anyway, to ascertain how far short it has fallen.

The most coercive part is article 104c(11): As long as a Member State fails to comply with a decision taken in accordance with paragraph 9"— which I read— the Council may decide to apply or, as the case may be, intensify one or more of the following measures: —to require the Member State concerned to publish additional information, to be specified by the Council, before issuing bonds and securities; —to invite the European Investment Bank to reconsider its lending policy towards the Member State concerned. —to require the Member State concerned to make a non-interest-bearing deposit of an appropriate size with the Community until the excessive deficit has, in the view of the Council, been corrected. —to impose fines of an appropriate size.

Dr. Godman

I am sorry to keep interrupting my right hon. Friend, but these are critical questions that need to be answered in a tough scrutiny of the implications of paragraph 11, and, in the absence of a Law Officer, I need his guidance.

Can my right hon. Friend confirm that, if a state is being judged by the Council and the imposition of a fine is possible, the Minister from that state will be excluded from the Council's deliberations? In other words, will the recalcitrant state be denied representation at a meeting which may or may not decide to fine it?

2.15 am

Mr. Shore

Presumably, the Minister from the delinquent state will be called in to explain why he has not conformed to the guidelines laid down by the Council. Having given his explanation, he will be asked to leave the room so that a vote can be taken in which he will not participate.

Dr. Godman

With respect to my right hon. Friend, we are talking about a meeting of the Council. How can the Council exclude the Minister from its deliberations without infringing other articles of the treaty?

Mr. Shore

That is an interesting question, and I cannot really answer it—

Mr. Dorrell

rose—

Mr. Shore

—but the Minister is going to help.

Mr. Dorrell

As the hon. Member for Greenock and Port Glasgow (Dr. Godman) rightly says, we are talking about a meeting of the Council. The member state whose record is under scrutiny will be represented in the normal way, and the Minister can contribute to the discussion; the only change is that the Minister will not be able to take part in the qualified majority vote.

Mr. Shore

The Council can, if it wishes, use an incredible series of powers to impose penalties on a recalcitrant member state that exceeds the so-called deficit.

Mr. Dorrell

I think that I misled the House in a minor way when I used the phrase "qualified majority". I should have referred to two thirds of the votes of its members weighted in accordance with article 148(2), excluding the votes of the representative of the Member State concerned.

Mr. Shore

I am grateful for that information, but it does not change the position much.

Here, then, is a British Minister representing a state that has offended against some economic theory that has no basis in any serious economic analysis of what is a proper and appropriate public sector borrowing requirement, but is nevertheless written into the treaty. That state is treated—to use a phrase employed by one of my hon. Friends—like a rate-capped local authority. We are talking about a massive, indeed humiliating, transfer of power and self-government to European institutions. I do not understand how any Chancellor of the Exchequer, or any shadow Chancellor, could tolerate it for a moment. One of the reasons why we shall press the matter to a vote is that this is no probing amendment, but one that goes to the heart of British politics.

Several hon. Members

rose—

Mr. Shore

It is splendid to see such energy, but I want to say a little about economic policy relating to matters other than deficits.

Mr. Spearing

On that point, if the proposals are accepted, can my right hon. Friend think of any purpose in having general elections in future? Will it matter tuppence who is the Chancellor of the Exchequer, whether it is a Conservative, Labour or even a Liberal Chancellor, because decisions will be taken elsewhere?

Mr. Shore

That is a serious question, and, in conjunction with the issues that we discussed in our debate on the previous group of amendments, it requires a serious answer. Are we to have any major controls left over the conduct of our own economic policy? I find it amazing that we should be trapped into a late-night debate on such a crucial matter, which affects the welfare, prosperity and future of our country, without even the possibility of studying Hansard between debates.

Mr. Cryer

In effect, my right hon. Friend is describing what would happen if a Labour Minister of a duly elected Government went to Brussels and returned to tell pensioners and patients of the national health service that there will have to be cuts, that there will be no investment in the national health service, and that there can be no assurance that there will be an adequate number of nurses or hospitals, because we lost the vote and the final decision was taken by other people. Can my right hon. Friend imagine a more wretched, humbling and appalling position for a Labour Chancellor to be in? Moreover, people will ask, "Weren't you part of the Labour party which agreed to the treaty as it went through Parliament?"

Mr. Shore

I do not think that we can use words too strong to condemn these provisions. We may argue among ourselves about whether we see a future wholly in Europe and so on. Some people are wildly keen federalists, and I can understand and even respect their position, but I do not understand how anyone can agree to these terms. Not only do I not understand; I have contempt for people who recommend that the British Parliament and people should have these restraints imposed on them. It is outrageous.

Other powers are also being taken away, not only control of public deficits and national debt ratios to GDP. Economic policy in general is to be taken over. After our previous debate, I am not sure how much economic policy will be left. Article 103 states: Member States shall regard their economic policies as a matter of common concern", which is perhaps not too awful a statement. But it continues: The Council shall, acting by a qualified majority on a recommendation from the Commission, formulate a draft for the broad guidelines of the economic policies of the Member States and of the Community". What is covered by that? The answer is economic policies. It presumably covers anything dealt with by the Department of Trade and Industry and what was once the Department of Energy.

Mr. Rowlands

Paragraph after paragraph of article 103 contains references to new powers being given to the Commission. The idea has been presented to us that, through subsidiarity, the Commission would be pushed out of the nooks and crannies of our lives. Is not the Commission prepared to give up those nooks and crannies because it is to gain new powers to go into every economic nook and cranny of our society? That is what article 103 is all about.

Mr. Shore

My hon. Friend is right. If I were a Brussels Commissioner, I should willingly give up powers over the nooks and crannies, the small change of regulating conditions in English zoos, for example, in exchange for the powers of control over the whole British economy.

Mr. Bill Walker

Does the right hon. Gentleman share my fear that, if we foolishly allowed this country to be committed to this aspect of this ghastly treaty, we should be encouraging the growth of a black economy, as has happened in other parts of the world? Where the economic circumstances have produced chaos, which Governments have been unable to control, the black economy has thrived. The British people are enterprising, and that would certainly be the outcome of that sort of nonsense.

Mr. Shore

The results would be extremely serious—a total loss of faith in representative government and alienation from laws and policies imposed upon the British people by alien institutions in Europe. All that would be there. People would indeed feel massively betrayed.

I shall finish with my point about the Commission and the Council. Article 103(4) says: Where it is established, under the procedure…that the economic policies of a Member State are not consistent with the broad guidelines referred to". That means, "if a nation states wishes to pursue a certain kind of policy". Nation states might still do that; there are still some differences left between political parties, and one party in power might pursue a policy marginally different from that pursued by another. If a nation state's policies are not consistent with the broad guidelines", or if they risk jeopardizing the proper functioning of economic and monetary union, the Council may, acting by a qualified majority on a recommendation from the Commission, make the necessary recommendations to the Member State concerned. The Council may, acting by a qualified majority on a proposal from the Commission, decide to make its recommendations public. There we are. The nation state will be put in the stocks and the international community will be invited to throw rotten fruit at us until we are allowed out.

Mr. Spearing

I wholeheartedly endorse my right hon. Friend's powerful argument. Is he aware that I have it on good authority that, even before the passage of the treaty, there has been a request from somewhere within the bosom of the Community for Governments to submit a programme for convergence? Various Governments have had to respond to that request.

I do not think that the request has been made public, and I do not know whether the Government intend to make their response public, but when the Financial Secretary replies tonight—or rather, when he makes what I hope will be his opening speech—perhaps he will tell us whether such a request has already been received, and if so, whether it has been made public in this country, whether the Government will respond to it, and how we are to hear about it. Surely what my right hon. Friend says may result from the treaty is already upon us: people are presupposing a request that may come afterwards.

Mr. Shore

I think that that matter will be explored again in the next debate, if we are so foolish as to rush on and try to take in stages 1, 2 and 3 of the approach to economic and monetary union, which will be the subject of the third economic debate. It would be wrong to go on to that debate without having had time to consider what has been said in the first two economic debates.

Mr. Wilkinson

Does the right hon. Gentleman agree that article 103(4), which he mentioned, contains at least an implicit risk that pressure may be put on the United Kingdom to waive its opt-out, and that our Parliament will be expected to agree before we move to stage 3 of the EMU? The article says that, if a nation's policies risk jeopardizing the proper functioning of economic and monetary union, the Council may, acting by a qualified majority on a recommendation from the Commission, make the necessary recommendations to the Member State concerned. In other words, if we are still laggards towards the end of the 1990s, notwithstanding the views of this Parliament we may come under serious pressure from the Council to move to stage 3 of the EMU.

Mr. Shore

Indeed. There are several powers—for example, those allowing criticism to be made public—which, although they fall just short of the extreme penalties in stage 3, would be greatly damaging to any country, especially in relation to markets, currencies and matters of confidence. The availability of the weapon of publicity and criticism is bound to be an important factor in stages 1 and 2, before we reach the final stage.

We have discussed today the two crucial powers of the British Parliament over the British economy that remain now that we have lost the power to control our trade and have transferred many other decisions to the European Community. I refer to the two powers that are crucial to macro-economic management—control over one's interest and exchange rate, and the power to decide one's own public sector borrowing requirement and the whole stance of one's budget. If we surrender both those powers in the middle of the night, we shall have done badly by the British people.

2.30 am

Mr. Nicholas Winterton

I am delighted to follow the right hon. Member for Bethnal Green and Stepney (Mr. Shore), who has done the Committee and the House a great service by both his speeches today. The example that the right hon. Gentleman and some of his right hon. and hon. Friends, together with my hon. Friends, have set, represents the modest safeguard that we still possess in honouring our democratic procedures in the country and the House of Commons. As the Committee knows, immense pressure has been brought to bear upon those hon. Members, of whichever party, to minimise their opposition to the unnecessary, obsolete and irrelevant treaty on which we are spending so much time. It is an immense pleasure to follow the right hon. Gentleman, whose leadership on this matter I have always respected.

I read with interest an article by one Anatole Kaletsky in The Times of 18 March. I hope that the Committee will allow me to quote briefly from that article, which follows through the argument that the right hon. Member for Bethnal Green and Stepney has presented to us—especially in the latter part of his speech, which related to economic policy. The article states: The astounding figure of £50 billion for the public sector borrowing requirement was the clearest possible reminder of how badly the economy has been managed in the past, and of what a crippling burden the whole country must bear"— at this point, the article is slightly critical of the Treasury— to keep a handful of complacent Treasury officials in their ivory tower at Great George Street. But even more alarming evidence of the Treasury's grip on the Major Government came in the budget "Red Book", showing tax revenues and economic projections for five years ahead. The right hon. Member for Bethnal Green and Stepney referred more than once to the Red Book.

The article continues: These figures reveal that Mr. Lamont's tax increases of £10.5 billion from 1995 onwards will be nowhere near sufficient to plug the gap in public finances, if the Treasury's present expectations about the economy are fulfilled. In fact, if the economy grows from 1994 onwards at the Treasury's assumed average rate of 2.75 per cent. a year, Britain will still have a Government deficit"— I believe that the right hon. Member for Bethnal Green and Stepney mentioned this— of 4.75 per cent. of GDP in the last year of the present parliament. I hope that my hon. Friends on the Front Bench will bear that in mind. Even after Mr. Lamont's new exactions, Britain would in 1996 be guilty of a 'gross fiscal error' as defined at Maastricht. Thus, if Mr. Major ever succeeded in getting his treaty ratified, Britain would face great pressure to increase taxes at that time by another £11 billion annually to meet the Maastricht criteria and fulfil Mr. Major's longing to be at 'the heart of Europe'.

Mr. William Powell (Corby)

I am grateful to my Friend for drawing to the attention of the Committee important material that has been overlooked by the Chancellor of the Exchequer. It is clear from my hon. Friend's remarks, if they are true, that the Government have embarked on an economic policy, underpinned in the Budget, that is massively out of line with what is required today. We need a policy for more vigorous growth, enabling the figures which my hon. Friend quoted to become irrelevant.

Mr. Winterton

I am not sure whether my close and hon. Friend, a Member whom I greatly admire, is trying to be helpful to me and my argument or to the occupants of the Treasury Bench. I endorse his view. If only the Chancellor realised what was going on at the grass roots his Budget would have been different because we need, above all, an expansion of the economy and the stimulation of economic growth.

I do not want to start a debate about the objectives of the Manufacturing and Construction Industries Alliance, which I launched here a few weeks ago. That alliance has the objectives that my hon. Friend the Member for Corby (Mr. Powell) outlined. But if my hon. Friend supports Maastricht—I believe he has in the past—he will not be able to achieve what he wants because, as the right hon. Member for Bethnal Green and Stepney forefully said, everything we are discussing will restrict growth and create higher unemployment, so creating a vicious circle.

As I pointed out in an intervention, a million jobs are costing the British Government £8 billion, so our present deficit could pale into insignificance, particularly when we consider a previous debate and the establishment of a European central bank, staffed and adminstered by unelected people to whom the Government of the day could not make representations.

The Minister, when replying briefly and inadequately to that debate, said that hon. Members could make their views known to the Government, and the officials of the central bank might, if the Official Report of the debate were brought to their attention, realise that there was concern. But what influence would an hon. Member here have with those officials in the European central bank whose salaries would make ours look like petty cash and who would disregard almost entirely the views of the properly elected Members of this Parliament?

Dr. Godman

I remind the hon. Gentleman of the role that the central bank will play in the scheme of things. At the start of the third stage, the monetary committee, which will play a powerful role in the disciplining of states, will be replaced by an economic and financial committee to which the central bank will have a right of appointment. the central bank will be fully involved, having membership of the successor body to the monetary committee.

Mr. Winterton

The hon. Gentleman, who has intervened several times in the debate with great effect, has made another good point. I entirely endorse every word that he uttered.

Mr. Gill

Is my hon. Friend basing his exposition on a technical understanding of the economic matters involved or on his superb common sense?

Mr. Winterton

It is interesting that we are getting absolutely no reaction from the Government Front Bench. It may be that, because I have some knowledge of manufacturing industry and what is required, throughout the debate I have adopted a practical, responsible, sensible and earthy approach to the economic difficulties which the country faces.

Mr. Cryer

As the hon. Gentleman is pursuing that analogy in his illustration of this party's position on this group of amendments—and before we reach the Single European Act in this stage of integration—may I tell him that, when a Committee upstairs was dealing with an order which allowed garments to be marked with the source of manufacture, the then Minister in the Conservative Government, Mrs. Oppenheim, said clearly that we should not at any stage suggest that the order was designed to protect manufacturing industry because the Commission would be listening to our remarks in Committee in order to take action against the order if it was a trade barrier? The order was designed only to help consumers. That was before we reached the solemn stage of dealing with this treaty. If that was the argument of Ministers 10 years ago, what position have we now reached?

Mr. Winterton

I can only agree with what the hon. Gentleman says. He enables me to mention a parliamentary question to the President of the Board of Trade which I tabled only a few days ago. Another objective of the Manufacturing and Construction Industries Alliance, which I hope will assist in the regeneration of the manufacturing base of the United Kingdom, was to get the Government to identify areas of potential for import substitution.

Sir Teddy Taylor

It is illegal.

Mr. Winterton

Indeed. My hon. Friend has immediately latched on to the unfortunate, sad, disappointing and depressing reply which I received from the President of the Board of Trade. The Minister said that the Government could not do that because it would be considered an impediment to free trade. My hon. Friend the Member for Southend, East (Sir T. Taylor) says that it could be defined as a Euro-crime.

Is it wrong that the Government, in seeking to build up our economy as part of their economic policy—this group of amendments is about economic policy and deficits—and with the intention of reducing the trade deficit and, as a result, the Government deficit on their current account, would be prevented by the European Community from identifying areas of manufacturing capacity to regenerate the manufacturing base of the United Kingdom?

I cannot believe that that should in any event be described as a Euro-crime. It would be offensive to this country, as it seeks to build up its economy, to be restricted in doing so by the European Community. The position would be made worse if we ratified the Maastricht treaty.

The overwhelming reason for the length and depth of the United Kingdom recession has been the policy—sadly, of my Government—of shadowing the deutschmark and then joining the European exchange rate mechanism. Many Conservative Members, as well as Opposition right hon. and hon. Members, urged that we should not join the ERM. The Government ignored us, and even entered at a rate that was always outrageously irresponsible and could never have been maintained. We know what happened.

2.45 am

Mr. Skinner

Will the hon. Gentleman give way?

Mr. Winterton

I am happy to give way to the hon. Member for Bolsover (Mr. Skinner), who is an immense parliamentarian, whatever people may think of his views.

Mr. Skinner

The hon. Gentleman is trying to increase my majority in Bolsover.

The hon. Gentleman said that people like himself were against entering the ERM. It was the same on this side of the House. I remember the manifesto meeting of the Labour party before the last general election. It ought to be placed on record that my right hon. Friend the Member for Chesterfield (Mr. Benn) and I moved an amendment to the Labour manifesto that we should not take part in the ERM and a Labour Government should withdraw from it. We lost that vote by 37 votes to two at a joint meeting of the shadow Cabinet and the NEC. All the marshmallows and pseudo-lefts and all the other rag, tag and bobtails went along with it. What happened? Within a few months the whole thing had collapsed. People on our Front Bench still talked about possibly returning to the ERM. It is like a dog returning to its vomit.

Mr. Winterton

I accept much of what the hon. Member for Bolsover has just said, if not the tone of it. I have a sizeable majority in Macclesfield, as he does in Bolsover. I can only say to those on the Treasury Bench that perhaps some who are considered minorities are right. It is only a pity that the Government do not listen to those with some experience and those who have been consistent in the views that they have expressed.

My hon. Friend the Financial Secretary will know that the United Kingdom was first into recession and has, overall, been much harder hit than any other OECD country. No other OECD economy has contracted over two years as Britain has done. Other economies have done so much more slowly. They are slowing down, but they are still growing. That includes one of the important markets for the United Kingdom. I refer, of course, to the United States of America. Far be it from Britain to be dominated by Europe and look to Europe for its future. I believe that Britain should look to north America and the Pacific rim, where the real wealth is being created and economic growth is a major feature.

Mr. Gill

Is it not wrong that we should do almost 60 per cent. of our trade with only 6 per cent. of the world's population and only 40 per cent. of our trade with 94 per cent. of the world's population? Would any business man regard that as a balanced debtors list? Would he not seek to expand his business and open more accounts with more people?

Mr. Winterton

As I come from a small business background, my answer to my hon. Friend, who also has a career as a successful business man, is in the affirmative. He would expect it to be in the affirmative.

Unfortunately, the Government are severely influenced by the Treasury, and far too few people in the Treasury have any real experience of industry and making money. They merely spend other people's money.

I quote from a leader published on 4 March 1993 in The Daily Telegraph, a paper not unknown to be favourable to the Government: The Government has had no coherent economic policy since Black Wednesday. It is this vacuum at the heart of Government which produces the caution and scepticism which so annoy Mr. Major. I quote that not to be helpful to my party or Treasury Ministers, but to be hopeful for the debate in the House of Commons.

I am sick and tired of the Government being totally committed to Europe and oblivious to what is going on elsewhere in the world. If they realised that there was a bigger and better world outside Europe, we should start to get some economic leadership and the British economy would begin to recover.

Mr. Wilkinson

I am sorry to interrupt my hon. Friend in full flow, but he refers to a void at the heart of British economic policy. Is not that void the great question mark over whether we will re-enter the ERM? Until the Government publicly eschew that option and say that we will not re-enter, uncertainty and lack of confidence will persist. We have been burnt once and thousands of people have been put out of work quite unnecessarily. Were that to happen again, it would be quite unforgivable.

Mr. Winterton

I entirely endorse the views of my hon. Friend, who anticipated the remarks I was about to make.

Sir Teddy Taylor

Does my hon. Friend agree that such uncertainty does not exist? Has he seen the "European Special" issued by Conservative MEPs to every constituency office, in which it is made abundantly clear that the Government intend to allow sterling to return to the ERM? So there is no doubt about it. Not only does the treaty indicate that we have to, but the MEPs' paper which is about to be published—and they are to move into central office at Smith square—makes it abundantly clear.

The Conservative manifesto said that we were going to move into the narrow band of the ERM. Does my hon. Friend agree that my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) was in danger of misleading the Committee by saying that there was some doubt? Is it not abundantly clear that we are going back into the ERM? There is no doubt about it whatsoever, and it will be another great disaster for jobs.

Mr. Winterton

As yet, I am not able to speak for the Government. I am not being immodest when I say that there are some who believe that I might make a better job on the Treasury Bench than some of those who occupy it now.

Mr. Cash

Just in case my hon. Friend should be in any doubt whatsoever about the Government's position, I hope that, in common with other hon. Members, he noted that, when my hon. Friend the Member for Southend, East (Mr. Taylor) made his point about that scurrilous piece of paper from the European People's party, the Minister nodded his head in agreement and is now nodding again, so there is no doubt that the Government intend to take us back into the exchange rate mechanism.

Mr. Winterton

Having sat through many hours of the debate today, my hon. Friend the Minister indicated that there was an option to re-enter the ERM, but, not seeking to be unfair to my hon. Friend or to my right hon. Friend the Prime Minister, let me say that they have made it clear that we will not go back into the European exchange rate mechanism until the Government believe that it is right to do so. By that, they imply that it would be in the interests of this country to do so.

Before I give way to my hon. Friend on the Front Bench, may I say to my hon. Friend the Member for Southend, East that it is absolutely scandalous that the money which the Conservative party raises has gone to produce this ridiculously nonsensical, irresponsible, irrelevant and obsolete document from the Euro-MPs who are members of the Conservative party.

Mr. Cash

The European People's party. It is nothing to do with us.

Mr. Winterton

Or the European People's party, which, I am afraid, undoubtedly receives money from the United Kingdom's contribution to the European committee. But I do not think, Mr. Lofthouse, that you wish us to go into that matter.

Several hon. Members

rose—

Mr. Winterton

Please would my hon. Friends contain themselves? I see my hon. Friend the Financial Secretary pensive and pregnant with anticipation of the question that he is going to put to me.

Mr. Dorrell

I am grateful to my hon. Friend, but, rather than have my views attributed to me and then have some of my hon. Friends say that I was indicating assent to their formulation of the Government's policy, perhaps I may be allowed to confirm what I said two or three hours ago, which is that the Government's policy in relation to the exchange rate mechanism is to return to it when we consider it to be in this country's interest to do so.

Mr. Winterton

I entirely disagree with the policy of going back in, but I hope that my hon. Friend will accept that I interpreted what he said some three hours ago fairly accurately in my response to my hon. Friend the Member for Southend, East.

Mr. Bill Walker

rose—

Mr. Winterton

I shall give way in just a moment—

Mr. Austin Mitchell

rose—

Mr. Winterton

I am delighted to give way to the hon. Member for Great Grimsby (Mr. Mitchell), a fellow officer of the all-party media group, not least because I am attracted by his tie.

Mr. Mitchell

The position that the Minister has just given us is a much closer advance to membership than the position when we came out, which was that we would not go back until the fundamental fault lines of the ERM had been repaired.

Mr. Winterton

I know that this sounds repetitive, but again I can only agree with everything that the hon. Gentleman has just said. Certainly, when we came out, it was my understanding of the Government's position that we would not go back in until the whole thing had been reviewed and restructured. We have seen it in the sort of drip, drip, drip syndrome that we have become accustomed to from this Government. We have been told that certain things will not happen, but, in case they do happen at some time in the future, we are building up the structure to enable them to happen.

Mr. Bill Walker

Does my hon. Friend, with his business background, agree with me that one of the problems of making business decisions is trying to forecast the position in six or 12 months' time? Part of the problem of decision-making, in which I have often been involved, is having to make a judgment based on what one thinks will be the future economic and political circumstances. It is particularly important when one is interested in overseas markets, something in which companies are interested. Therefore, a statement to the effect that we will go back into the ERM when the Government judge that the circumstances are right is much worse than a clear-cut statement to the effect that we will join and these are the circumstances under which we will join, clearly laid out—and we have not had that—or, alternatively, a statement to the effect that we will not join at all. Either of these allows decisions to be made.

Mr. Winterton

My hon. Friend, in yet another excellent intervention, has made a point that I trust the Treasury Bench will note. Those of us who are in business and have to take decisions for which we are accountable in every sense of the word need decisions, and I say to my hon. Friend the Financial Secretary that one of the reasons why I am strongly opposed to this protocol on the excessive deficit procedure is that a country might well need to have much more than 3 per cent. of gross domestic product as a deficit for a limited period in order to achieve a certain objective.

It is the same in business—one can borrow heavily. I advocate borrowing heavily only when one expects to get the money back with a profit that will enable one to pay back the debt. My hon. Friend's comments are extremely important.

Mr. Cash

My hon. Friend may not know that an interesting paper was prepared—it seems by Treasury officials—entitled, "Sterling in the ERM: Lessons from the September 1992 Crisis". It happened to arrive in my post in a brown envelope and is otherwise known as a leaked document. My hon. Friend may find it interesting to know that, with respect to the manner in which those things are supposed to be dealt with, the document states: The results of these discussions should be communicated by the officials concerned to Finance Ministers. Special meetings of Finance Ministers are best avoided since they attract such public attention. Secure video conference facilities would enable Finance Ministers to talk to each other without meeting. There is much more, as I shall explain to the Committee when I have an opportunity to speak. It is a remarkable inside document on what really goes on and what Ministers are up to.

Mr. Winterton

I hope that my hon. Friend will be prepared to make that document available to his colleagues and to let it lie on the Table, although perhaps the Chair would not consider it to be a state paper. It appears that it may come from some official source and it may also indicate official advice to Ministers from qualified people within a Government Department, and it is therefore relevant for it to be drawn to the attention of the Committee.

Dr. Godman

Given that we small band of men and women are engaged upon the parliamentary task of scrutinising the documents, line by line, I wonder whether the hon. Gentleman can help me. Can a member state, bedevilled by severe economic difficulties, seek a derogation from the provisions of article 104c?

Mr. Winterton

Like the hon. Gentleman, I am not a lawyer. On many occasions during the debate he has said that it would be most helpful to the deliberations of the Committee if a Law Officer, such as the Attorney-General, were here to assist us with the sort of question that he has asked me as a Government Back Bencher.

Sir Teddy Taylor

The answer is no.

3 am

Mr. Winterton

Exactly. My hon. Friend has anticipated my response. The answer to that question would be no. Any derogation would have to be granted before the treaty is ratified and signed, so the country suffering exceptional economic difficulties could not seek a derogation. I presume that under the protocol on the excessive deficit procedure, and other procedures that go with it, an explanation could be provided to that errant member country, and perhaps a less severe penalty would be imposed. I am being gracious and courteous towards the rather repressive and oppressive procedures that are laid down and that inhibit growth and the freedom of Governments to deal with the problems of their economy.

It is not in the Government's interests to emphasise that the plight of the United Kingdom is worse than that of any other country, or to point the finger of blame at the ERM. We all know that the ERM is to blame, but high interest rates to keep our exchange rates in line with those of Germany have wreaked havoc on business. As I have intimated in interventions, they also account for 1 million of the more than 3 million people who are unemployed. It is as simple as that. As we are talking also about deficits, I repeat that, in this respect, the Government's European policy is costing this country £8 billion.

Sir Teddy Taylor

My hon. Friend has obviously studied this matter very carefully. Perhaps he could clarify something that I do not understand. If a member state, under article 104c, is instructed to increase taxes very substantially because of an excessive PSBR, and if the result is more unemployment and an even greater PSBR, is that state automatically fined for following instructions?

Mr. Winterton

This is one of the points made very dramatically and forcefully by the right hon. Member for Bethnal Green and Stepney.

Sir Teddy Taylor

What is the answer?

Mr. Winterton

The answer is that I assume that such a state would be fined.

Sir Teddy Taylor

For doing what it had been told?

Mr. Winterton

Indeed—for creating a deficit even greater than the one that was the cause of its being hauled before the monitor in the first place.

Mr. Wilkinson

In the most unfortunate absence of the Attorney-General, can my hon. Friend tell us what the outcome would be if a member state were fined for not keeping within the protocol's criteria on budget deficit and national debt? Refusal to pay the fine would seem to be the sensible course. Why should the misery of the people concerned be compounded?

Mr. Winterton

If this country were to follow the example of many members of the European Community—France, Italy, Holland, Belgium and even Germany—it would ignore most of the directives and regulations that are unhelpful. Those countries accept such directives and regulations but never implement them; and by the time the Commission catches up, it is too late, and the benefit has been gained.

As my hon. Friends have said, the Government want to return to the ERM, despite its dramatically damaging cost.

Mr. Cash

I can confirm what my hon. Friend has said.

The document from which I have already quoted, which was published—"published" is the wrong word; it was written—on 23 December 1992, concludes: Sterling should re-enter the ERM when the following conditions have been met: German interest rates have come down; the Bundesbank in particular accepts the new parity as realistic…Sterling should re-enter with a narrow band. In other words, the advice that is being given includes clear commitment. My hon. Friend may find that these conclusions are of some assistance.

Mr. Winterton

My hon. Friend, not for the first time, has anticipated the point of what is almost my next sentence. The Maastricht treaty, whose ratification we are considering, will commit the United Kingdom to returning to the ERM under the second stage of European monetary union. We could be committed to doing that from 1 January next—nine or 10 months away. We would be returning to the horror of that cage—indeed, the ERM—that caused so much trouble in this country, and at least one million job losses.

The Conservative Government believe that they have an opt-out of the third stage of EMU, and can decide later whether or not to join the single currency.

Mr. Cryer

On a point of order, Mr. Lofthouse. I apologise to the hon. Gentleman, whose speech I am enjoying—he will no doubt have the opportunity to resume his speech—but I beg to move, That strangers do withdraw.

Notice being taken that strangers were present, the FIRST DEPUTY CHAIRMAN, pursuant to Standing Order No. 143 (Withdrawal of strangers from House), put forthwith the Question, That strangers do withdraw:—

The Committee proceeded to a Division—

The First Deputy Chairman of Ways and Means (Mr. Geoffrey Lofthouse)

I understand that we are having difficulty over the Doorkeepers, many of whom will be needed later in the morning. The Doors to my immediate left and my immediate right are locked, so hon. Members will have to use the other Doors.

The Committee having divided: Ayes 0, Noes 183.

Division No. 206]	[3.10 am
AYES
Nil
Tellers for the Ayes:
Mr. Bob Cryer and
Mr. Dennis Skinner.
NOES
Ainsworth, Peter (East Surrey)	Goodson-Wickes, Dr Charles
Aitken, Jonathan	Gorst, John
Alexander, Richard	Greenway, John (Ryedale)
Amess, David	Grylls, Sir Michael
Arbuthnot, James	Gummer, Rt Hon John Selwyn
Arnold, Jacques (Gravesham)	Hague, William
Arnold, Sir Thomas (Hazel Grv)	Hamilton, Rt Hon Archie (Epsom)
Atkinson, Peter (Hexham)	Hampson, Dr Keith
Baker, Nicholas (Dorset North)	Hanley, Jeremy
Baldry, Tony	Harris, David
Banks, Matthew (Southport)	Hawkins, Nick
Barnes, Harry	Hayes, Jerry
Bates, Michael	Heald, Oliver
Beresford, Sir Paul	Heathcoat-Amory, David
Booth, Hartley	Hendry, Charles
Boswell, Tim	Hill, James (Southampton Test)
Bottomley, Peter (Eltham)	Hordern, Rt Hon Sir Peter
Bowden, Andrew	Howarth, Alan (Strat'rd-on-A)
Bowis, John	Hunt, Rt Hon David (Wirral W)
Brandreth, Gyles	Hunt, Sir John (Ravensbourne)
Brazier, Julian	Hunter, Andrew
Bright, Graham	Jack, Michael
Brooke, Rt Hon Peter	Jones, Gwilym (Cardiff N)
Browning, Mrs. Angela	Jopling, Rt Hon Michael
Burt, Alistair	Kellett-Bowman, Dame Elaine
Carlisle, Kenneth (Lincoln)	Kennedy, Charles (Ross,C&S)
Carrington, Matthew	Key, Robert
Channon, Rt Hon Paul	Kilfedder, Sir James
Chapman, Sydney	Kirkhope, Timothy
Churchill, Mr	Kirkwood, Archy
Clarke, Rt Hon Kenneth (Ruclif)	Knight, Mrs Angela (Erewash)
Clifton-Brown, Geoffrey	Knight, Greg (Derby N)
Coe, Sebastian	Knox, David
Congdon, David	Kynoch, George (Kincardine)
Coombs, Simon (Swindon)	Lait, Mrs Jacqui
Cope, Rt Hon Sir John	Legg, Barry
Couchman, James	Leigh, Edward
Curry, David (Skipton & Ripon)	Lester, Jim (Broxtowe)
Davis, David (Boothferry)	Lidington, David
Davis, Terry (B'ham, H'dge H'l)	Lightbown, David
Day, Stephen	Luff, Peter
Deva, Nirj Joseph	Lyell, Rt Hon Sir Nicholas
Dorrell, Stephen	MacGregor, Rt Hon John
Douglas-Hamilton, Lord James	MacKay, Andrew
Dover, Den	Maclean, David
Duncan, Alan	McLoughlin, Patrick
Duncan-Smith, Iain	Maitland, Lady Olga
Dunn, Bob	Malone, Gerald
Elletson, Harold	Mans, Keith
Emery, Rt Hon Sir Peter	Martin, David (Portsmouth S)
Evans, Jonathan (Brecon)	Mawhinney, Dr Brian
Evans, Nigel (Ribble Valley)	Merchant, Piers
Evans, Roger (Monmouth)	Milligan, Stephen
Evennett, David	Mitchell, Andrew (Gedling)
Faber, David	Monro, Sir Hector
Fabricant, Michael	Moss, Malcolm
Fenner, Dame Peggy	Nelson, Anthony
Fishburn, Dudley	Neubert, Sir Michael
Forsyth, Michael (Stirling)	Newton, Rt Hon Tony
Forth, Eric	Nicholls, Patrick
Fox, Dr Liam (Woodspring)	Nicholson, Emma (Devon West)
Gale, Roger	Norris, Steve
Gallie, Phil	Oppenheim, Phillip
Garel-Jones, Rt Hon Tristan	Page, Richard
Gillan, Cheryl	Paice, James
Godman, Dr Norman A.	Patnick, Irvine

Pattie, Rt Hon Sir Geoffrey	Temple-Morris, Peter
Pickles, Eric	Thomason, Roy
Porter, Barry (Wirral S)	Thompson, Patrick (Norwich N)
Portillo, Rt Hon Michael	Thornton, Sir Malcolm
Powell, William (Corby)	Thurnham, Peter
Rathbone, Tim	Townsend, Cyril D. (Bexl'yh'th)
Redwood, John	Tracey, Richard
Renton, Rt Hon Tim	Trotter, Neville
Richards, Rod	Twinn, Dr Ian
Robathan, Andrew	Viggers, Peter
Roberts, Rt Hon Sir Wyn	Walden, George
Robertson, Raymond (Ab'd'n S)	Waller, Gary
Robinson, Mark (Somerton)	Wardle, Charles (Bexhill)
Rowe, Andrew (Mid Kent)	Waterson, Nigel
Ryder, Rt Hon Richard	Wells, Bowen
Sackville, Tom	Wheeler, Rt Hon Sir John
Shaw, David (Dover)	Whitney, Ray
Shepherd, Colin (Hereford)	Whittingdale, John
Smith, Tim (Beaconsfield)	Widdecombe, Ann
Spencer, Sir Derek	Willetts, David
Spicer, Sir James (W Dorset)	Wolfson, Mark
Spink, Dr Robert	Yeo, Tim
Sproat, Iain	Young, Sir George (Acton)
Stanley, Rt Hon Sir John
Stephen, Michael	Tellers for the Noes:
Stewart, Allan	Mr. Timothy Wood and
Streeter, Gary	Mr. Robert G. Hughes.
Sykes, John

Question accordingly negatived.

Dr. Godman

On a point of order, Mr. Lofthouse. Given the reduced number of doorkeepers on duty, will you confirm that if there are to be more Divisions throughout the night, the doors that remain locked are those over your right shoulder, and those over my left shoulder?

The First Deputy Chairman

Yes, I can confirm that.

Mr. Nicholas Winterton

When my contribution to the important debate on this group of amendments was interrupted some minutes ago, I was advising the Committee that the Government believe that they have an opt-out from stage 3 of European monetary union and can decide later whether or not to join the single currency. I remind the Committee that under article 109m of the treaty of Rome, the Commission or another member state can take the United Kingdom to the European Court of Justice for not behaving "in the common interest". I submit, therefore, that opt-outs are probably not worth the paper they are written on. We should not base support for the Maastricht treaty on an opt-out that is as yet untested in the European Court.

It was mentioned in an earlier debate—but this has a major bearing on Government economic policy—that under the treaty we are likely to surrender certain rights to the European central bank. They include our ability to control interest and exchange rates, to issue bank notes, control foreign reserves, and—particularly relevant to this group of amendments—to control the level of Government deficit. Government spending and policies would therefore be handed over to six unelected bankers in Germany—I am not sure yet whether the central bank will be in Bonn or Frankfurt. As the right hon. Member for Bethnal Green and Stepney made clear, they will have an eight-year tenure and can only serve one tenure. As they can serve only one tenure, the bankers will not care whether they please or displease.

We know, because we have been told, that those individuals can be removed by the European Court of Justice only on a technicality, not for getting their policies wrong. Here in the Westminster Parliament, if a Government get their policies wrong and lose the support of the people, they can be turned out after four or five years. That does not apply to these distinguished individuals, these highly remunerated individuals, these individuals who ultimately need not be accountable for their policies, whatever problems they create for the countries that comprise the European Community.

Mr. Cash

My hon. Friend may be glad to know that, referring to the central bank's governors, this remarkable document states: Since there will always be a trade-off between domestic macro-economic management and exchange rate policy, this aim is perhaps utopian. Even this extraordinary document admits that the basis on which the decisions are made is utopian: in other words, the authors do not even believe in it themselves.

Mr. Winterton

I believe that the author of "Utopia" was Sir Thomas More. There is a plaque commemorating him in Westminster Hall. Perhaps we are fortunate to be as close to Utopia in this country as we will ever be. I would not want that Utopia to be in any way diluted by a system in which all our affairs were controlled by the European central bank, whether based in Frankfurt or in Bonn.

Around such a bank, as I think we are all aware from the excellent speeches made so far, will be an immensely powerful group of people whom I have already described. For example, according to the statistics that I have before me, under Maastricht control the convertible currency reserves of all member states, which totalled £1,761 billion at the end of 1991, will inevitably become subject to fund management by the new European central bank.

Banking and currency businesses will take thousands of jobs away from an organisation not so very far from the Palace of Westminster—the City of London. Yes, this new set-up—this new central bank of Europe, or European central bank-could well deprive London and its financial centre of thousands of jobs. The City of London originally grew up around the Bank of England. As the Bank of England becomes a branch of the European central bank, perhaps rather a second-rate branch—it is all here in the treaty—so the City of London, which is important to the country and its economy, will contract. With Maastricht, we are committed to a re-run of the past three years—to a slowing and then a shrinking of our economy.

My interest in industry leads me to the subject of convergence. The requirement in the treaty for convergence is one of the most important policies affecting industry in this country, and Britain will be committed to it irrespective of the opt-outs—or whatever they were—negotiated by my right hon. Friend the Prime Minister. As the Committee will know, convergence consists of financing the industries of less well-developed European countries so that they can compete with our own. In other words—I think that this has been said before by hon. Members who are concerned about the treaty—Maastricht will set up an industrial equivalent of the common agricultural policy.

How many hon. Members who are present at this early hour of the morning are aware that many of our traditional industries have already faced severe competition from some of the new members of the European Community? I refer in particular to Portugal and Spain. The paper and board industry, with which I have been closely involved for many years, has lost not only through companies collapsing but through thousands of jobs going to Spain, in particular, and to a lesser extent to Portugal because of the assistance that those countries receive from various structural and improvement funds, to which we are the second largest contributor. We are positively contributing to transfer of jobs from the United Kingdom to other EC countries.

3.30 am

Mr. Wilkinson

My hon. Friend is making a crucial point. The British public would be horrified, and I hope that his speech will percolate through. Are there not first three EC countries with which we have a balance of payments surplus—Ireland, Spain and Greece? We no longer have one with Portugal. If the transfer of funds under the Maastricht process continues, there will not be one member of the European Community with which the United Kingdom has a balance of payments surplus.

Mr. Winterton

My hon. Friend is absolutely right, and I entirely endorse his view. If the people of this country realised what the Government were doing in their name, they would be extremely angry and would respond appropriately when the opportunity arose. It is vital that the United Kingdom does not accept the proposals.

My hon. Friend the Member for Southend, East is not in his place at the moment, but he is extremely well informed about the common agricultural policy. It is notorious for its cost and its waste. As many hon. Members are aware, it costs £1,000 a year for every four-person household in Britain. It is depleted by fraud and inefficiency, and only about 50 per cent. of every £1 reaches the farmers for whom it is intended. As I have said, the budget which is drained by the CAP is a budget to which the United Kingdom is the second biggest contributor.

I now touch on an issue to which I trust that the House will turn its attention later today if the business managers permit it. In March this year, The Guardian—a newspaper that I read although I do not always agree with it—pointed out that the United Kingdom pays France enough money for electric power to keep the equivalent of six British coal pits in operation. Six mines, in addition to those which we hope will be reprieved by the President of the Board of Trade later today, could be kept open, but we pay the money to France instead and put our miners out of work.

Convergence under the Maastricht treaty will mean the United Kingdom paying more money, hand over first, to industries in Spain, Portugal, Greece and Ireland. A number of hon. Members—no doubt including some of those facing me across the Chamber—might believe that that is a good thing. In the past year or two, I motored through Spain on my way to a holiday in Portugal. I was appalled by the number of road projects for which those countries have received funding from the European Community, making them more attractive and competitive than the United Kingdom. The people of this country do not want or support that. I believe that if they knew that it was going on to that extent they would register their firm opposition with the Government.

Mr. Charles Kennedy (Ross, Cromarty and Skye)

Will the hon. Gentleman give way?

Mr. Winterton

I am delighted to give way to the president of the Liberal Democrats, with whom, despite our many differences, I share considerable common ground.

Mr. Kennedy

I am grateful to the hon. Gentleman for giving way, but he is systematically slashing to bits those of us who are attempting to contribute to the debate before we even intervene. I do not know to which road projects he specifically referred, but I suggest that countries such as Spain may appear to have more road infrastructure projects supported by EC funding because, unlike this country, they do not systematically and persistently abuse the concept of additionality for European regional development fund cash.

Mr. Winterton

I am not sure whether I have the information readily to hand to be able to answer the hon. Gentleman's question fully, as normally I would wish to do, but I can tell him that the United Kingdom, perhaps stupidly, is one of the most honourable countries in the Community and implements any regulation or directive that the Government accept, even if they have accepted it unwillingly. We cross all the t's, dot all the i's and put full stops at the end of all the sentences. We are as communautaire, as honourable, as any country in the Community. Indeed, in my view we are considerably more honourable than most.

I am not sure what sort of response to his question the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) expected from me.

Mr. Kennedy

rose—

Mr. Winterton

I give way to the hon. Gentleman again, if he insists.

Mr. Kennedy

How could the hon. Gentleman know what kind of reply I wanted? I did not expect the reply that he gave but, equally, he will not have expected me to agree with the one that I thought that he would give. I did not want to agree with that in the first place.

Mr. Winterton

The hon. Gentleman is always most courteous and most charming, and it is difficult to disagree with him in an aggressive way. He seems to agree with the response that I actually did give him, although I could not reply to the specific question that he asked.

It has not been mentioned much in our debates that convergence is a critical cost upon the people and the industry of this country. Some people argue that, if Britain finances the development of other EC countries they will then become customers of Britain's manufacturing companies and take our goods. The falsity of that idea is shown by the trade figures to which my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) has already alluded. The only EC countries with which the United Kingdom has a favourable balance of trade are two of the three poorest nations. That does not suggest that, as the Government may say, the more money we pour into other countries and the better we make them, the more business we shall do with them. The record shows that that does not happen.

Because of my total commitment to the role of manufacturing industry in the economy of this country, I again ask the Government why, if they believe in spending money to invest in industry, they do not invest in United Kingdom industry. I ask that with a great deal of venom, and I repeat what I said earlier in my short contribution to the debate—that when I sought to concentrate the mind of a responsible Department, the Department of Trade and Industry, on areas in which we might achieve import substitution and a regeneration of sectors of this country's manufacturing base, I got from the Minister for Industry the unhelpful response that the Department could not possibly do that because it would contravene the treaty of Rome, and the Commission would come down on us like a ton of bricks. What a load of wimps they are. Is it not about time that we stood up for the interests of manufacturing industry and jobs in the United Kingdom?

My hon. Friend the Financial Secretary has been sitting on the Front Bench for rather too long. I am amazed that he has not been relieved, as I believe that merits—

Mr. Cash

Does my hon. Friend agree that one of the tragedies of the Government's policy on the trade matters to which he is referring is that we are running a multi-billion pound deficit with the European Community? We are in an absolutely ridiculous situation. We are receiving orders from unelected officials and subscribing to a Euro-framework—which, good though it may be in theory, needs to be sorted—while at the same time running that massive deficit.

Mr. Winterton

Yes, and our deficit with Europe has been increasing ever since we joined. I have long believed that the United Kingdom should look to the four corners of the world for trade and customers and should not be blinded by Europe or concentrate all its efforts on the European Community. One day, we shall learn that the European Community is only a small part of the overall trading world. We should look to north America, where the economy is growing rather faster than almost anywhere in Europe. I believe that there are rich pickings to be had if only we would turn our eyes in that direction.

I pay tribute to the Government for one or two of the measures that they introduced in the Budget—not least the increase in the moneys available under Export Credits Guarantee Department schemes and the more competitive premiums now available to industry. That will undoubtedly enable the United Kingdom to bid for very important contracts in the far east, Indonesia and elsewhere, where there are, I repeat, very rich pickings as regards employment and manufacturing.

Mr. Stephen Day (Cheadle)

My hon. Friend and I were heavily involved in trying to secure for British Aerospace the deal that it has recently secured with Taiwan Aerospace. My hon. Friend knows the great importance of British Aerospace both to our constituents and to the United Kingdom in general. He will also, I believe, have received from British Aerospace—I shall be surprised if he has not—a letter asking Parliament to ratify the Maastricht treaty immediately because the company feels that it is of major importance to it. Will my hon. Friend address that point, as he gives me the impression that he believes that there is some conflict of interest—a belief which British Aerospace, one of the major employers, does not seem to share?

Mr. Winterton

My hon. Friend tempts me to start my speech again, but I know that you, Mr. Lofthouse, would not wish me to go back over the brief comments that I have made so far. If my hon. Friend had read one of those distinguished, more serious newspapers on Sunday—I refer to The Sunday Telegraph, although I believe that the story also appeared elsewhere—he would be aware that a certain amount of disinformation and misinformation is being peddled—[Interruption.] I shall come to inward investment in a moment. A great deal of disinformation is being peddled about the support of industry for the Maastricht treaty. The Institute of Directors, which is surely fairly representative of big business, is strongly opposed to the Maastrich treaty, for a number of the reasons that I have spelt out to the Committee during my speech.

I know from my knowledge of many members of the CBI that they, too, oppose Maastricht, as do many small business men. But with the political patronage available to Government, certain people who head major companies and who in the past, by tradition, have automatically been rewarded with honours, have done what they perceive is expected of them. I refer without malice, for example, to the chairman of ICI, who was a signatory with other leading business men—the Arnold Weinstocks of this world, the leaders of British Aerospace and others. I am not sure that they are committed to Maastricht in a meaningful way. Indeed, I am not sure that any of them have read the Maastricht treaty, together with or separately from the Single Act and the treaty of Rome, although all three must be read to understand the position fully.

Mr. Wilkinson

Is it not a fact that major aerospace companies, such as British Aerospace, have collaborated over the years with European and other partners, as Boeing co-operates with the Japanese, the Italians and many others, on purely commercial and technical grounds? They find the partners who best suit their commercial and technical requirements. It has nothing to do with Maastricht.

3.45 am

Mr. Winterton

I agree absolutely with my hon. Friend who, speaking from the heart and the head—because few in the Committee know as much about certain sectors of industry, including aerospace, as he does—puts it in a nutshell.

My hon. Friend the Member for Cheadle (Mr. Day) drew my attention to certain senior executives of British Aerospace. I could introduce him to many executives who take a totally contrary view over the ratification of Maastricht. But does our ratification of it make the slightest difference to the excellent arrangement that British Aerospace has entered into with the Taiwan Aircraft Corporation in a joint venture for the design, manufacture, marketing and sale of their regional jet aircraft? It does not.

As I anticipate a third partner for British Aerospace in that joint venture, does my hon. Friend the Member for Cheadle believe that if that partner does not come from the European Community, that third partner's participation will be affected by whether or not we ratify the Maastricht treaty? Being a close neighbour to my constituency, I am sure he will reply that it will have no bearing whatever.

Dr. Godman

The hon. Gentleman referred to our shrinking manufacturing base. He will be aware of industries which utilise wide-ranging skills. For them, we are almost at the point of no return. For example, P & O recently ordered two cruise liners, not from a United Kingdom yard but from German and Italian yards. Not one British merchant yard bid for those two lucrative contracts. The European Commission is denying our warship yards the right to bid competitively for such merchant contracts, and I fear that, within 10 years, we may not possess the skills to enable us to build such advanced vessels.

Mr. Winterton

The hon. Gentleman has drawn that and similar matters to the attention of hon. Members on previous occasions. He raises a valid and important point. Sadly, the Government—this applies to Governments of both parties—have sold our manufacturing base short and have failed to support it in various forums. The sort of matter which the hon. Member for Greenock and Port Glasgow has drawn to my attention is valid because, once that skill has left our shores, it will never be replaced. As the hon. Gentleman is from that part of the country, he knows that that skill has been a huge earner of money for the United Kingdom and a huge employer of labour in the past.

Mr. Cash

I do not wish in any way to preempt anything that my hon. Friend may say in his excellent speech. I refer to the Confederation of British Industry, the Institute of Directors and, indeed, the Federation of Small Businesses. The Federation of Small Businesses has not been mentioned in this debate—I addressed its annual conference in Bournemouth recently. About 60,000 members have endorsed the call that I and many others have made for a referendum. Does my hon. Friend agree that the absolutely extraordinary report of the Confederation of British Industry demonstrates that there are no substantial grounds whatever for these continual smears and allegations that failure to ratify the Maastricht treaty will affect inward investment into the United Kingdom in any material way?

The Confederation of British Industry sent the report to Members of Parliament and peers. The report gave a totally misleading impression, which is remarkable. Does my hon. Friend agree that the report sets out what will happen if we do not ratify the Maastricht treaty? For example, a major computer manufacturer in the United States says: A United Kingdom decision to stay out of the ERM would not affect our decision on United Kingdom investment. In so far as possible, UK policies on Maastricht, a two-tier Europe and withdrawal from the EC and investment decisions would not be affected. That is typical.

Mr. Winterton

I am happy to answer by saying yes and yes to my hon. Friend's questions. I believe that the Confederation of British Industry received a nod and a wink and that the specific briefing document was sent out at the request of certain political friends, who may have been in Government. Subsequent to the issue of the report, many members of the CBI have said that they do not agree with many of the comments in it.

My hon. Friend the Member for Stafford (Mr. Cash) has anticipated another area to which I wish to refer—Maastricht and the single market. That is important with regard to our economic policy and has a direct bearing on the Government's deficit. It is not said often enough or forcefully enough that Maastricht has next to nothing to do with the single market.

At one time, we were repeatedly told that the single market could not come into force unless the treaty was ratified. Maastricht has not been ratified, and the single market has been with us since 1 January. The single market has been with us since 1 January, even though—dare I say it—Germany has not ratified the treaty because of a technicality. I am not sure when Germany will ratify the treaty. The point that we will remain in the single market even if we do not ratify the treaty should be made time and again to our trading partners, especially those outside the European Community.

I suspect that those well-informed gentlemen in the top echelons of Centrepoint—I refer to the CBI—have deliberately misunderstood this, believing that the single market will collapse and our membership of the single market will end if we do not ratify the treaty.

Sir Ivan Lawrence

My hon. Friend is making a most impressive speech, and is using some material which is obviously well informed. He made the point before about British business men. They believe that signing up for Maastricht will save their businesses. They believe, because they have been told it and they have not read the treaty and do not understand anything about what it means, that they would have to leave the Common Market if the treaty was not ratified. They are told that time and time again.

I was in Copenhagan last week. People there who said no in the referendum because they believed that it was not in the interests of Denmark to sign up to Maastricht are now being told left, right and centre that, if the treaty is not ratified, they will be out of the European Economic Community and all their businesses will collapse. Whoever one asks says exactly the same thing—that they will be left out of Europe if they do not sign up. Something has to be done to bring an element of honesty back into government and business so that that particular myth is killed.

My hon. Friend may be coming shortly to the views of the chief executive of Jardine Matheson, who wrote a letter to the The Times and telephoned around leading business men. He found that most of them believed that the future was not in the signing of Maastricht.

Mr. Winterton

Representations have been made to me by Jardine Matheson, but as my hon. and learned Friend has given the information to the House, I know that you would say that I was being repetitive, Mr. Lofthouse, if I repeated it to the Committee. My hon. and learned Friend's request for honesty should be answered by the Government and the CBI and all the other organisations which have peddled inaccurate and biased information, for whatever reason.

Before I come to the next issue, I return to the Budget. Again, it is relevant to economic policy and the deficit. The deficit is particularly relevant to the matter that I wish to raise. The Government have decided to extend value added tax to heat and light. I wonder why they chose to do that. Was it to reduce the deficit? That was the explanation provided by the Chancellor and other Ministers. Perhaps, Mr. Lofthouse, you will say that I am being too suspicious. Perhaps I am not trusting enough of my colleagues on the Treasury Bench. Did they extend VAT to bring the tax structure and the base of value added tax in Britain more in line with the rest of the EC?

I wonder what further measures my right hon. Friend the Chancellor will announce to the House in the years that lie ahead. He has extended VAT to heat and light. I did not support that, and I will not support it unless he provides certain assurances to me that the vulnerable groups, whom we all know about, are fully and adequately covered.

Mr. Barry Porter (Wirral, South)

I can think of better things to do at 4 o'clock in the morning. I would not mind if we were discussing what is before the Committee, but in the past half hour I have heard a broad onslaught on the treaty of Rome, the Single European Act and the general wickedness of the European Community. It is not possible for you to bring the speeches into order, Mr. Lofthouse, so that they deal with the Maastricht treaty and nothing else?

The First Deputy Chairman

Order. That is a matter for the Chair. However, on occasions my patience has become somewhat exhausted because the hon. Member for Macclesfield (Mr. Winterton) has ventured into industrial policy, whereas the amendments deal with economic policy. If the hon. Gentleman would bear that in mind, I would be extremely grateful.

Mr. Winterton

Of course I fully accept the view that you have just expressed, Mr. Lofthouse, and as a member of the Chairmen's Panel I accept without question the ruling of the occupant of the Chair. You have always been impeccably fair whenever I have taken part in any debate in the Chamber. However, if industrial policy and the importance of manufacturing are not inextricably entwined with economic policy, I do not know—

The First Deputy Chairman

Order. As the hon. Gentleman is fully aware, there has been a separate debate on industrial policy.

4 am

Mr. Winterton

Sadly, on that occasion I did not succeed in catching your eye because, yet again, the Government sought to short-circuit debate in the House on a vital constitutional issue and I was unable to make a speech. I do not wish to get out of order, Mr. Lofthouse, or to tempt you to rise to your feet again, but the issues that I have touched upon are relevant to economic policies and deficits.

If my hon. Friend the Member for Wirral, South (Mr. Porter) doubts my reference to value added tax on heat and light, he will know that the Chancellor apparently introduced that policy to reduce the Government deficit. He may have done it partly for that reason, but I am suspicious that he has done it to bring the base of taxation in Britain closer to that of the European Community and I am strongly opposed to that.

Once again, I am referring to the deficit and my hon. Friend the Member for Wirral, South is tempting me, provoking me and forcing me to go further. Having introduced that measure, we are putting a number of vulnerable groups into grave financial difficulty. As a result, the Government will have further to increase the deficit in order to increase the pension and raise by the appropriate amount state income-related benefits and income support.

Mr. Bill Walker

Is not my hon. Friend saying that the redeeming feature was that it was our Chancellor who took the decision to adjust the deficit or do whatever he wished with it? The amendments are about whether or not the House, the Chancellor or any future Chancellor will have the opportunity to do just that. That is what the debate is all about.

Mr. Winterton

My hon. Friend is correct in that we wish the House to have the authority to decide economic policy in all the areas that I said would be handed over to the European central bank, for example, if the Maastricht treaty is ratified, and inevitably other measures that are in the pipeline would follow.

Let me now move on to Maastricht—[Interruption.] Perhaps my hon. Friends are inexperienced in theatrical delivery and did not take account of the pause. I was about to move on to Maastricht and inward investment, which is closely tied up with economic policy.

Inward investment into Britain comes from a number of sources such as the United States and Japan. As my hon. Friend the Minister is inclined to talk, lecture and ram down our throats in economic and other debates in the House, we have been an extremely successful recipient of inward investment. This has been a notable ingredient of our economic success, particularly during the 1980s.

I would like to give a number of reasons for that investment. I pay tribute to the United Kingdom Government, a Conservative Government, for their sympathetic and positive attitude to inward investment. Also, dare I say it—and in no way seeking to upset the nationalists, who are not here, although we have with us the president of the Liberal Democrat party—the English language is one of the reasons why we get inward investment. English is especially important for the Japanese whose second language it is. Another reason is the culture of this country.

Sir Ivan Lawrence

My hon. Friend and the Committee might like to know that two weeks ago I asked a Japanese ambassador if our not signing Maastricht would mean the withdrawal of the Japanese investment in Toyota, which is just outside my constituency. He said that, provided that not signing Maastricht did not mean that Britain would come out of the European Community, there would certainly be no withdrawal of investment, thereby making two points. The first was that their investment is in Britain because we are in the European Community. The second and sinister point, which links up to the point that I made when last I intervened in my hon. Friend's speech, was that there is still the idea going round that if we do not sign Maastricht we will be out of the European Community. That idea must be killed.

Mr. Winterton

My hon. and learned Friend makes the point extremely well, so much so that if ever I need a lawyer he will certainly be my man because he expresses the case so positively, so forcefully and so accurately.

Sir Trevor Skeet

Perhaps I can endorse what has just been said, in alignment with my hon. Friend's own speech. Mr. George, the incoming Governor of the Bank of England, is reported as follows in the Financial Times of 3 March 1993: He told a seminar organised by British Invisibles, the export promotion body for services, that the City's position depended on the completion of the single market rather than monetary integration. That, I think, is conclusive.

Mr. Winterton

I can only say that I am eternally grateful to my hon. Friend the Member for Bedfordshire, North (Sir T. Skeet), whose knowledge of industry and certain sectors important to our economy is well respected. The point that he has made is a good one—and far be it from me to argue with the future Governor of the Bank of England. I entirely endorse the view that he has expressed.

Another reason why this country is so attractive for inward investment—I pay tribute to many hon. Members on the Opposition Benches, not necessarily on the Government Benches—is that we have a highly trained and highly productive work force. Given the opportunity to work, they work, and work very well. I suspect that my hon. and learned Friend the Member for Burton (Sir I. Lawrence) may seek to intervene again because I have had this out of the mouths of business men from Japan. They believe that our work force are even better than their work force, and they are very happy to come here for that reason. They are skilled, they are hard-working, they are committed—

Mr. Day

And released from the shackles of socialism.

Mr. Winterton

I will not enter into a party political debate, even though I am tempted to do so, because on this I am sure that I carry both sides of the Committee with me.

Again, they want to come to this country because of our strategic position and because we have a relatively good and improving infrastructure and communications.

I make this challenge on economic policy: think of the improvements created for industry and industrial efficiency, if only the Government would spend the £3 billion that we contribute to the European Community on this country's infrastructure. Think how many tens of thousands, or perhaps hundreds of thousands, it would put back to work, especially in the hard-pressed construction and allied industries.

Our membership of the European Community and the single market is important, but the ratification of Maastricht is of no importance.

Mr. Barry Porter

What are we doing here then?

Mr. Winterton

My hon. Friend is tempting me again. What is the Committee doing spending so much time on this confounded, irrelevant and unnecessary debate on the Maastricht treaty and the Eruopean Communities (Amendment) Bill? He also has the good sense to come from the north-west of England, albeit from the other side of what was the county of Cheshire, on the Wirral, and if only he would make the strong representations to the Government that I have suggested, perhaps this whole charade and farce would be brought to an end.

For all the reasons that I have described, the United Kingdom is recognised as a centre for inward investment by the Japanese. My hon. and learned Friend the Member for Burton referred to the huge investment by Toyota close to his constituency.

Dr. Godman

rose—

Mr. Winterton

Yet again, I am happy to give way to an informed Opposition Member.

Dr. Godman

The Japanese are not the only investors who are ready to acknowledge the high qualities displayed by our work forces. I met senior directors of IBM recently, in the immediate aftermath of the bad news that they recently had to announce. They assured me that the plant at Spango valley in Greenock was among the best in IBM worldwide, and that it would always receive the support of the headquarters in America. They spoke very highly of the work force on the lower Clyde.

Mr. Winterton

The hon. Gentleman never misses an opportunity to advance the interests of his constituency and the interests and success of Scotland, which is such a vital part of the United Kingdom. I can only entirely agree with him.

Mr. Bill Walker

IBM had been in Scotland for a long time.

Mr. Winterton

My hon. Friend the Member for Tayside, North (Mr. Walker) agrees with the hon. Member for Greenock and Port Glasgow.

For all the reasons that I have given, the United Kingdom is recognised by the Japanese as a free-trading nation, with a distinguished and long tradition and an open attitude to world trade, which is epitomised by the City of London. For that reason, one is so saddened that the City has joined—for whatever reasons—the disinformation about business being almost entirely in favour of the ratification of the Maastricht treaty.

Our country attracts inward investment, but the same is not true of our major European Community partners, in particular France and Germany, for reasons that are well known to Conservative Members. It is unlikely, however, that inward investment will return in the immediate future to the levels of the 1980s, which were a build-up from a very low base of inward investment.

Japan is a very powerful country. Bearing in mind the strictures of my hon. Friend the Minister in the previous debate—if you will allow me about 15 seconds, Mr. Lofthouse—about the importance of an independent bank, the most economically successful country in the world has been, and still is, Japan, which has a central bank—the Bank of Japan—which is extremely dependent. It is not independent but extremely accountable to the Japanese Government. All the nonsense that Ministers talk about the vital role of an independent European central bank is similar to much of what they say.

Sadly, the Japanese now have a shortage of capital, and that is likely to continue for some time. They have had to withdraw some of their overseas investments and to cut back their banking and securities operations. Indeed, even those in the United Kingdom have had to be reduced. However, Japan is still a major investor in this country. As my hon. and learned Friend the Member for Burton has said, it has absolutely no intention of withdrawing its huge investment. Indeed, that investment will be added to. The only stipulated important criterion is that the United Kingdom should stay in the European Community. No Conservative Member suggests for one moment that we should come out.

Sir Teddy Taylor

What?

4.15 am

Mr. Winterton

I have never been able to speak with confidence on behalf of my hon. Friend the Member for Southend, East, although one of his luncheon clubs, at his suggestion, has asked me to speak in his constituency. I am very happy to have accepted the invitation, and I look forward to visiting Southend, East, where I know I shall come across a very large number of people who believe that Maastricht is a total waste of time and should be shelved for good—if not, as some of my hon. Friends might say, just for the foreseeable future.

Sir Teddy Taylor

We want a credible case for staying in the EC. No such argument has been heard by the people to whom my hon. Friend refers. What we are facing up to now is nonsense, and what has happened under the Single European Act and the treaty of Rome has turned out to be a disaster for Britain and for democracy.

The First Deputy Chairman

Order. This group of amendments is not about coming out of the EC.

Mr. Winterton

Nor is it about going to speak in Southend, East, but I wanted to mention that visit in passing.

The fact that these amendments are not about coming out of the EC is important from the point of view of reassuring those countries that make considerable and important investments in the United Kingdom. Neither the United States nor Japan, despite their domestic difficulties, has withdrawn manufacturing businesses from this country. I only wish that our Government had as positive an attitude towards manufacturing as have many overseas investors. It is unlikely that either the United States or Japan will ever remove any manufacturing capacity from the United Kingdom. The very good reason, which will appeal to Conservative Members and—I say to the hon. Member for Liverpool, Walton (Mr. Kilfoyle)—to Opposition Members, I believe, is that their businesses here are highly profitable. Professor Williams' report to the CBI confirms this: most of the investment has already been made, and substantial follow-on investment from Japan is still to come but may be delayed because of the financial squeeze in that country.

Mr. Bill Walker

Does my hon. Friend agree that part of the deficit problem that the United Kingdom faces is accounted for by the fact that, for decades, we have been reducing substantially our ability to generate sufficient wealth to meet the expenditure that the Government have undertaken and added to? This situation has been brought about in part by the fact that the Japanese have been able to sell to the United Kingdom goods worth more than £7,000 million, whereas, as the most recent figures show, we sell goods worth just over £2,000 million to Japan. The Japanese have been able to penetrate the United Kingdom market and the market in the rest of the European Community. Thus Japan, which is not a member of the Community, has improved its deficit situation.

Mr. Winterton

I can only say that my hon. Friend the Member for Tayside, North makes an interesting and valid point. He has said that the Japanese are prepared to invest here because of the huge market to which that gives them access—perhaps the European Community has not had as much access to the Japanese market as the Japanese have had to the European market. It is to this country that the Japanese have wanted to come to locate their manufacturing.

The report of Professor Williams to the CBI continues in a manner that is relevant to our debate. It states: Only a small number would see this"— the non-ratification of the Maastricht treaty— as having any major effect on their investment those that come to this country with inward investment— provided it did not lead to withdrawal or exclusion from the single market. It is for that reason that I have grave concerns about the briefing document put out by the CBI to which my hon. Friend the Member for Stafford referred.

The argument so often advanced by Ministers of a two-speed Europe that will be to the disadvantage of the United Kingdom as we would no longer be at the heart of Europe is specious. Under the second and third stages to the run-up to the European central bank—the heart of Maastricht—countries will be able to unify their economies completely only when they have satisfied four convergent criteria. The latest date for the start of the European central bank is 1999, but it could start with only two member states as its members.

Mr. Michael Spicer

I appreciate that the debate is not about coming out of the Common Market, but does my hon. Friend accept that there is no single EEC country with a higher standard of living per capita income than any single country of the European Free Trade Association, including Austria and Finland—except Luxembourg? Does not that show that there is some sort of life to be had on the margins of Europe?

Mr. Winterton

My hon. Friend is correct to draw the Committee's attention to the fact that being a member of Europe is not necessarily a recipe for a successful and good-quality life. However, the currency and economy of Austria are quite closely linked to the deutschmark. I say that as one who has a skiing holiday there every year, as well as many friends there—we have a home quite close to the German border. Perhaps the Austrians gain some benefit from their German bedfellow—the German republic. My hon. Friend made a valid point in respect of the other EFTA countries, not least Sweden—although, like most other countries, Sweden currently has an economic problem.

It could be that, initially, only two member states will be members of the European central bank. It is likely that, thereafter, for a time there may be five, then there could be seven or 10. We could have a five-speed Europe, a seven-speed Europe or a 10-speed Europe. Therefore, to talk about a two-speed Europe is specious and dishonest.

The United Kingdom cannot be excluded from the single market or any decision about the future of the single market. Whatever happens to Maastricht, our participation in, and membership of, the single market—and that of our partners in Europe and the single market—is a matter of international law. To say that we could be damaged arid that our membership of the Community and our involvement in the single market would be affected is nonsense.

Secondly, after Germany, we are the largest single contributor to the EC budget. I fully support the expansion of the European Community—if it was merely a trading unit and a free trade area, which is what most of our people voted for in the early 1970s. I note that the Opposition's main spokesman in the debate, the hon. Member for Newcastle upon Tyne, East (Mr. Brown), nods in assent. He believes what I believe, that a majority of our people thought that that was what they were voting for in the 1975 referendum. I am surprised that the Opposition are not now in favour of a referendum, because when they were in government they passed legislation for the 1975 referendum. The people of this country know rather more than the Government are prepared to give them credit for, although at that time they thought that they were joining a trading partnership. However, there was far more to it in the small print of the treaty of Rome.

I have said that we are the second largest contributor to the EC budget. We are also running a massive trade deficit with our EC partners. I have made many speeches all over the country outlining my reasons for opposing the Maastricht treaty and any further step along the path to a federal, centralist state. I repeat what I said in those speeches: that the countries of mainland Europe need us far more than we need them, for the financial reasons that I have spelt out.

Mr. Day

Will my hon. Friend give way?

Mr. Winterton

I am happy to give way once more before I sit down.

Mr. Day

My hon. Friend said why he thinks that the Maastricht treaty is a threat, especially to industry. He also said that he was totally opposed to a centralised, bureaucratic Europe, as are most hon. Members and certainly Conservative Members. Why does he think that Europe has developed in that way? Why is Britain reactive rather than proactive? Could it be because Britain has never been positive about its membership of Europe and gives the impression of having one foot in and one foot out? Some of my hon. Friends give the impression that they do not want to have even one foot in.

The First Deputy Chairman

Order. We are departing from the subject of the debate, which is economic policy.

Mr. Winterton

I hope that you will not blame me, Mr. Lofthouse, for my hon. Friend's intervention. That would be unfair and I have the greatest admiration for you in the Chair. My hon. Friend tempts me to say that I would rather have one foot in the grave than two. Some people, and especially the members of the Government, wish that I had both feet in the grave, but they will have to do better than they have been doing so far to bring that about. You have been extremely patient, Mr. Lofthouse, and tolerant of my brief contribution to the debate on these important amendments.

My right hon. Friend the Prime Minister has said that we will remain at the heart of Europe. Even without Maastricht, Europe wants us and our influence is greatly appreciated. Wherever I have travelled in Europe as a holidaymaker rather than as a Member of Parliament or with Select Committees or other groups, I have found that the people of the country that we are visiting are always immensely impressed by the United Kingdom and its parliamentary system. Does my hon. Friend the Member for Cheadle not believe that this country's culture is slightly different from those of France, Germany, Belgium and Holland?

Mr. Charles Kennedy

Of course it is.

Mr. Winterton

For that reason—

The Chairman

Order. As the hon. Gentleman knows, we have had a debate on culture.

Mr. Winterton

You, Mr. Lofthouse, were of course right to call me to order.

The United Kingdom has a unique, positive and responsible contribution to make to the European Community. We have done so and can continue to do so—and we do not need the Maastricht treaty to enable us to do it.

Dr. Godman

On a point of order, Mr. Lofthouse. I have been sitting in the Chamber since 9.30 pm, and it occurs to me that the central heating has been switched off, because it is very cold. I wonder whether the temperature is below a tolerable level. It has certainly cooled down quite dramatically—which is purely coincidental with the forceful and brilliant speech of the hon. Member for Macclesfield (Mr. Winterton) lasting upwards of an hour.

The First Deputy Chairman

I noticed that some heat had been generated over the past couple of hours, but as to the temperature in the Chamber, those responsible will no doubt have taken note.

4.30 am

Mr. Winnick

It is scandalous that we should be debating these matters at 4.30 am. There was no justification for the Government to proceed after 10 o'clock, and they could not have carried the business motion without the support of the Liberal Democrats. The Jopling report, which will be debated in due course, argues that the House should rarely sit later than 10 pm.

To debate these vital constitutional questions, whether one is for or against them, in the early hours of the morning is quite wrong. It makes a mockery of the Government's commitment to proper and adequate debate. Clearly, they want—so far as they are able—to get most of the economic issues out of the way. I have registered my protest.

The hon. Member for Macclesfield (Mr. Winterton) gave us an overview of the amendments and new clauses under consideration. I say straight away that I am not in favour of the Maastricht treaty. I will remain in order and address immediately article 104c and related matters, but I do not want to give the impression that, if it were not for article 104c, I would favour the treaty. I am against it. I am against the transfer of sovereignty in such a way.

I am not in favour of Britain leaving the European Community, whatever the pros and cons. After 20 years of membership, I think that it has become accepted that there would be many more problems and headaches in leaving the Community than remaining in it. Since the 1975 referendum, I have never argued that we should leave it. There is no question in my mind but that we should remain a member of the Community.

Dr. Godman

Does my hon. Friend agree that, whether one is pro-Community or a critic of it, because there is no promise of a referendum, each and every right hon. and hon. Member owes it to his or her constituents to scrutinise the Bill in as tough-minded and rigorous a way as possible? Surely that is the case.

Mr. Winnick

That is certainly the case. I live in the real world, and I am under no illusion but that the Government will get their way one way or another and that the Bill will be passed in due course. However, the problem will not go away for the Government, or even for my party. Given that there is such a division of opinion and dissatisfaction in the country, the treaty will remain an issue of great controversy. It is sheer nonsense to imagine that it will no longer remain so once Parliament approves the Bill. The debate will continue. I certainly will not change my mind as a result of the Bill's passage; it would be very odd if I did.

I have said that I would remain opposed to the treaty even without article 104c, but I am even more opposed to the deflationary flavour that characterises so much of it—and, in particular, characterises the article, the clauses and the amendments that we are now discussing. I hope that every hon. Member—not just those who are present now—will read article 104c, if they have not already done so. It uses two and a quarter columns to set out the way in which member states should avoid excessive Government deficits, and goes on to explain the procedures that will be involved when a member state is considered to have exceeded the permitted deficit. We know the related protocol, which clearly states that the deficit should be no more than 3 per cent. of GDP.

Earlier, I asked the Library to check the present position. The Library responded in the efficient and courteous way in which it usually deals with Members' queries. I am informed that a United Kingdom deficit of 8.2 per cent. is forecast for 1993. Achieving the convergence required by the 3 per cent. figure would require a £33 billion cut in public spending, unless taxes were increased.

Unlike some Conservative Members, I have little confidence in the Government's commitment to public spending. Over the years, they have carried out a number of cuts with which Opposition Members have strongly disagreed. But if there was ever an incentive for a Conservative Government with no great love of public expenditure to make further reductions in basic services, surely it is article 104c of the Maastricht treaty. Let me point out to Opposition Front Benchers in particular that, however critical we were of the Government's cuts in public spending, as long as convergence was being secured the Government would have an alibi.

It is not just a question of when the treaty will come into force. The emphasis will be on trying to achieve economic convergence before it comes into force, and before the third stage. That is part of the emphasis in article 104c. It does not merely refer to economic and monetary union as such; measures will need to be taken, and member states will be encouraged to take those measures before the third stage is reached, whether or not the United Kingdom decides to go ahead with EMU in 1996.

I know that those on the Opposition Front Bench will say, "We are not committed to the 3 per cent. figure." That may well be so, and I shall listen carefully to what my hon. Friend the Member for Oxford, East (Mr. Smith) has to say; but the treaty is the treaty, and no remarks from either Front Bench can change its nature. Article 104c directly contradicts all that the labour movement has fought: and campaigned for ever since it came into existence, and I find it inconceivable that we could support a treaty that contains such an article. It is of course true that, if a member state exceeds the 3 per cent. limit, there is no immediate fine or punishment. It is not part of my case that stern disciplinary measures will be taken at once if a member state goes over the limit. I concede that point, but article 104c outlines the steps that will be taken to ensure that a member state is kept in line.

The requirements will mean that a member state must go to the Commission and the Council and explain precisely what is being done to reduce the deficit. That is a very humiliating experience for an independent country. If we believe that certain measures are necessary in our overall interest, but the Commission decides that they are creating a deficit above the permitted level, we shall have to explain our position. Do those who support the treaty believe that we should have to do that?

When we have a Labour Government, do we want Labour Ministers to go first to the Commission and then to the Council of Ministers to explain, as far as they can, why the deficit has gone above the permitted limit and what action is to be taken? Is that the role of an independent country? Those who argue that the treaty is not as bad as we paint it must explain how and why they support such a measure.

Mr. Betts

I do not understand why such a scenario should concern my hon. Friend. Is he objecting to countries in the European Community trying to work together on economic policy and to one country discussing with others why it is pursuing certain policies, what its objectives are and how they match those of the whole Community? I see nothing wrong with such a process.

Mr. Winnick

I should have been surprised by my hon. Friend's response even if the proposal were not so deflationary. Why should we have to defend and justify our position in the way he outlined? Why should a country which has retained its independence for so many centuries have to virtually grovel and explain why it was necessary to exceed the permitted limit? Have we reached a stage where the practices and policies of the other member states are so superior to ours, and our practices of parliamentary government and democracy so inferior, that we have to do what my hon. Friend suggests?

Mr. Cash

Does the hon. Gentleman agree that, basically, we are being put through this humiliating and absurd procedure because it is within the framework of what is intended to be a united states of Europe? Are not people literally deceiving themselves and the British public continuously, in the belief that we shall somehow gain some advantage from the miserable negotiation that led to the pathetic treaty? The European People's party, to which my party is now apparently married, is the prime advocate of a united states of Europe. That is the truth of what is happening.

Mr. Winnick

I entirely agree, and no one should think otherwise. The other countries involved in the negotiations found it odd that the British dislike the word "federal", so they decided to humour us by leaving it out. Anyone who believes that the process is not leading to a federal Europe lives in a dream world. The hon. Gentleman is absolutely right. I would have more respect for those who are in favour of the treaty if they would say so openly. However much I disagree with the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), he at least knows where he stands. He is for a federal Europe.

The right hon. Gentleman supports the article because he believes that it is a necessary ingredient in securing the sort of federal arrangements that he wants. Indeed, when he was challenged by my hon. Friend the Member for Newham, South (Mr. Spearing) to say whether a single currency would mean a single Government, the right hon. Gentleman nodded. He was perfectly happy with that idea. He would argue that he is a deeply patriotic individual, and I have no reason to say otherwise; we all know about his military service during the war. He believes that the treaty is the best way in which Britain's role in Europe can be set. But I fundamentally disagree with the right hon. Gentleman. I do not want us to be part and parcel of a federal Europe. The hon. Member for Stafford (Mr. Cash) could not be more right; all the preconditions are there for the road that will ultimately be taken.

4.45 am

Dr. Godman

My hon. Friend said that a country, a member state, could be forced to grovel at a meeting of the Council. May I point out to him that it is not a country but a Government that would be in that position. If a Government are criticised and censured in public during an election year, the Council's intervention could have a decisive effect on the outcome of the election. The Council could play an important role in censuring Governments in public under article 104c(8), especially in an election year. The Council is an extremely exclusive club; is that criticism likely to be administered during an election year?

Mr. Winnick

It is possible to argue that if, during the 18 months leading up to a general election, a Government decided to adopt certain measures that might help them to be re-elected, and that involved more public spending, what my hon. Friend suggests could happen.

However, when I said that a country could be in a humiliating position, with its Ministers having to grovel, I meant, of course, that those Ministers and that Government would represent the people of this country. I do not believe that there is any mandate for us so to abandon our economic sovereignty in the manner outlined in the articles.

I am working on the assumption that Governments would be reluctant to raise taxation anything like enough to cover a deficit such as the present United Kingdom deficit, and that would mean not less unemployment but more. I have great respect for my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts). He and I usually agree, but this is one issue on which we disagree. None the less, I know that my hon. Friend is no less committed than I to trying to end, or at least substantially to reduce, the curse of mass unemployment, I shall refer to my hon. Friend's maiden speech now, and I hope I am not embarrasing him by doing so, because this is the second time that I have mentioned that speech; the other was at a party meeting.

In that speech, my hon. Friend said that he was entering the House at the age of 42—an age at which so many of his constituents were not only unemployed, but had probably given up hope of ever being able to work again. My hon. Friend is fortunate, as we all are, to be able to continue in employment. But if we in the Labour party are not concerned about unemployment, what could we possibly be concerned about? I do not question the commitment of our Front-Bench spokesmen to ending or substantially reducing mass unemployment, but how can we argue with any real conviction in favour of measures to try to reduce unemployment and end the curse affecting so many people in Britain and throughout the European Community while at the same time agreeing to measures that would involve a substantial cut in public spending? I do not understand it.

I have already said that Britain is likely to have a deficit of 8.2 per cent. To get anywhere near the 3 per cent. limit, we should need billions and billions of pounds' less of public spending. That is why I believe that we should be very critical indeed.

My right hon. Friend the Member for Chesterfield (Mr. Benn) argued that, if people have no recourse, as they may not if the treaty is ratified, they may riot. I do not know whether they will riot or not; circumstances differ. [HON. MEMBERS: "Nonsense."] What I do know is that, if the House of Commons loses its authority on such fundamental issues, it will be perfectly understandable if people conclude that voting makes very little difference and that the House of Commons makes little difference.

At the moment, when people are dissatisfied, they write to their Member of Parliament. Of course, they work on the assumption that, especially if their Member of Parliament is an Opposition Member, not much will come of it, but at least they know that we will do our utmost and that, ultimately, if the Government who are in office want to act, they can do so: power resides here in the House of Commons. It will not reside here if the treaty comes into force.

Mr. Bill Walker

The hon. Gentleman has been in the House some time. He will have witnessed the feeling among hon. Members on both sides of the House who represent peripheral parts of the United Kingdom, especially Northern Ireland and Scotland, that the House does not fully understand the aspirations of the people in those parts of the United Kingdom. The hon. Gentleman should consider what implications there would be for the unity of the United Kingdom if those people felt that Parliament had no purpose because it had lost all control of finances. Does the hon. Gentleman really believe that that would not lead to some kind of unrest outside?

Mr. Winnick

The hon. Gentleman is right to suggest that people already feel that Whitehall, the Government and the rest are rather remote from their ordinary lives. One of the purposes of writing to a Member of Parliament is that that Member of Parliament then writes to the Minister: there is a reply setting the position out in detail, which one sends on to one's constituents. In other cases, of course, one brings the battle to the House.

I do not want to be provoked, but I am rather concerned because my hon. Friend the Member for Liverpool, Walton (Mr. Kilfoyle) said a moment ago from a seated position that I was talking nonsense. If I am talking nonsense and my hon. Friend is disagreeing that such powers will be taken away, perhaps my hon. Friend would care to intervene and explain why he thinks I am talking nonsense. Has he read article 104c? Why does he conclude that my thesis—that the House and therefore the country would lose tremendous economic power that would be transferred elsewhere—is wrong?

Mr. Peter Kilfoyle (Liverpool, Walton)

The utter nonsense to which I was referring was the suggestion that there would be riots in the street over Maastricht. I have no evidence of that, and neither has anyone else in the Committee. That is the utter nonsense to which my hon. Friend refers.

Mr. Winnick

I am glad that I provoked my hon. Friend into intervening. He misunderstood me. [Interruption.] I do not know what sarcastic comment my hon. Friend wishes to make, but perhaps he will be courteous enough to listen to my reply. I hope that we can conduct this debate in a courteous manner. I have respect for my hon. Friend, as I had respect for his predecessor, with whom I also sometimes disagreed.

It is not part of my argument that people will riot over what we are debating, and if I did not make my position clear, I apologise. I am simply saying—my right hon. Friend the Member for Chesterfield said it with greater emphasis—that, if the treaty comes into force and power is transferred, as it will be, and people find that the House of Commons cannot deal with issues, a certain situation may arise. We must consider what view people will take if there is much concern over mass unemployment and so on. I do not want rioting to occur.

I have always defended some of the scenes that take place in this Chamber. People often ask why there is so much noise at Prime Minister's Question Time and on other big occasions. Far better, I say, that the outlet for the noise should be here than on the streets. When there is controversy—over, say, the poll tax—the divide is great, there will be scenes that some people do not like but which do not bother me. But I assure my hon. Friend that I am not suggesting that people are rioting or even that they are writing letters about what we are debating. I am pleased to have resolved any misunderstanding that may have existed.

Mr. Cash

Is the hon. Gentleman aware that we could be in grave danger of underestimating the consequences of what might happen if this massive arrangement for convergence were brought into effect? Already people in France are rioting over the lamb question, and there is the fishing situation. Difficulties have arisen in Italy and there are problems in Rostock and Frankfurt. The problems in Russia are getting more worrying, and there is Bosnia, Kosovo and so on.

All will be exacerbated by an implosion of the arrangements for economic and monetary union, which will disintegrate just as the exchange rate mechanism has disintegrated. With voluntary euthanasia by national parliaments and, as the hon. Gentleman says, without any means of redress, people will have no base point to which to refer. They will not be able to vote people out, and they will certainly not be able to turn out the bankers.

The First Deputy Chairman

Order. Perhaps we can have more about finance and less about riots.

Mr. Winnick

Rather than pursue a course of action that will not help to resolve the problems of Europe, we should be spending our time, at Community level, dealing with the problems of Europe, inside and outside the European Community.

Mr. Nicholas Winterton

Does the hon. Gentleman agree that, if people lose the ability to influence matters and decisions close to them, affecting their everyday lives, because of the inability of this place, through its economic policies, to respond to people's aspirations and expectations, then in due course, following the build-up of frustration, the sort of situation to which reference has been made—of people going on to the streets—could occur?

While the hon. Gentleman may not be receiving letters about the treaty, I am receiving at least a dozen a day, 99.9 per cent. in favour of the anti-Maastricht stance that I have taken. They come not just from my constituency but from all parts of Britain.

Mr. Winnick

Those are valid points, which go to the core of the article and the protocol which we are debating. What are the roles and functions of the House of Commons? Certainly, it is an outlet for grievances. It is a way in which constituents can express their concerns and we can echo those concerns, as we do daily at every opportunity.

Above all else, the function of the House of Commons is the supply of money. All the battles which took place for the supremacy of the House of Commons against the sovereign and so on were, to a large extent, involved in that issue. If the treaty goes ahead and steps are taken before the third stage—whether we go for economic convergence or not—what will be the function of the House of Commons? However much we may wish to pursue policies—even if the Government of the day take the view that such policies are desirable—if the Government know that they will go over the spending limit and, in so doing, be brought before the Commission and the Council, it is clear that they must take the view that they cannot do what they may wish to do and what they may consider desirable.

Although we are debating the deficit and so on, the core of the matter is the future of the House of Commons and Parliament. I do not wish to say that the House of Commons will have no functions and will virtually close down if the treaty is ratified. To exaggerate the position would be bad enough.

If the powers to decide how the money is spent, what polices are pursued and so on are removed, what are we left with? Effectively, we will be left with the same powers as those of an existing county council. That would be a great disservice not only to ourselves—after all, we are but the servants of our constituents—but to the people of the United Kingdom who, over centuries, struggled to obtain the sort of parliamentary democracy which we have and which I greatly value. I hope that other hon. Members also value it.

As my remarks were not meant to be lengthy, I shall conclude with two points. Unemployment is perhaps one of the most important and crucial issues at present. The hon. Member for East Lindsey (Sir P. Tapsell) referred to the 1944 White Paper on employment. It is interesting to note the last speech of Lord Merlyn-Rees in the House of Commons, which was excellent. It was one of the best speeches he ever made. Anyone who did not listen to it should read it. He specifically referred to the need to go back to the values of the 1944 White Paper on employment and the emphasis which existed just before the war ended, and said that the curse of pre-war unemployment should not return to the United Kingdom, which it has now done.

If one takes the view that we should return to as near full employment as possible, the remarks of Labour Members and the criticisms of some Conservative Members would be of little value if policies along the lines which we are debating were pursued. Such policies would make it virtually impossible to go back to what was intended in 1944 and what was carried out for some 25 or 30 years.

Therefore, it would be wrong to look on article 104c as a technical, academic matter which is not of great importance and which we are using for mischief. The policies that we want to see to end mass unemployment, provide necessary spending on health and welfare and ensure that the people most in need in our country get their right due are related to this issue.

5 am

The Liberal spokesman, the hon. Member for Ross, Cromarty and Skye (Mr. Kennedy), obviously takes a different view. If he is so critical—as I know he is—of mass unemployment, he should recognise that he is defending a policy which would make it so much more difficult, if not impossible, to end the curse of unemployment in Britain.

I regret that we are debating the Bill at this hour. I have mentioned that before, so I shall not repeat it simply because there has been a change of occupant of the Chair. It is disgraceful that such matters should be debated at 5 o'clock in the morning. I hope that I shall not be seen as unduly critical of other hon. Members on both sides of the House—I am not criticising one side in particular—when I say that it is unfortunate that they have not taken a greater interest in the debate.

I know that Labour Members' commitment to the policies about which I have spoken is no less than mine. They have campaigned in their working and political lives no less than I have done. But in so far as they may be sympathetic to Maastricht and all that goes with it, they should recognise that so much of what they want to see done for the British people, will be undermined if the treaty goes ahead.

The hon. Member for Stafford (Mr. Cash) said in an intervention at the beginning of my speech that the treaty was a substantial step towards a federal Europe. I agreed. It is a step towards a united states of Europe. Those who are in favour of that, including Ministers, have not the honesty openly to declare what they want. In a federal Europe, we would lose even more political and economic independence than we would lose under the Maastricht treaty.

When I look back on my life, I value my working life because I have had the honour and privilege to be a Member of Parliament, however much people disagree with some of my remarks and however much I may cause upset. I hope that it will continue for many years to come. The House of Commons has achieved powers and privileges over the centuries. The House of Commons is the forum of the country. It gives me no pleasure to be in the House of Commons at a time when so much of what we have achieved over the centuries is being undermined by a treaty which I most ardently believe to be against the interests of Britain.

Mr. Dorrell

When he moved his amendment, the right hon. Member for Bethnal Green and Stepney (Mr. Shore) made it clear that this group of amendments dealt with the other side of the coin from the group immediately before. The former group addressed the institutional arrangements that would be necessary for the conduct of monetary policy if there was a single currency in the member states and in Britain.

This group of amendments deals with the arrangements for the conduct of fiscal policy in the context of the introduction of a single currency. As I said in the last debate, it follows as night follows day that, if there is a single currency, it is necessary to have a single monetary authority. Therefore, it must follow that the authority is divorced at least to some degree from the member states of the Community.

There is unanimity among Members of all parties that, even if there is a single currency managed by a monetary authority and divorced from the member states, the fiscal side of economic policy making should remain the responsibility of member states.

The purpose of the right hon. Gentleman's amendments is to remove from the treaty the qualifications on the responsibility for fiscal policy which rests on the individual member states. Under the terms of the treaty, the main responsibility for fiscal policy, even at stage 3 of monetary union, rests with the member states. It is, however, a responsibility that is qualified both in article 104c and in the protocol that is supported by the article.

The debate on the effect of the article has proceeded on very much the same basis as the debate on the implications of introducing a single currency. It has been based on a similar leap of logic, because it has tended to concentrate on the implications for sovereignty and for the power of the House of the full effect of article 104c as it would apply if a single currency were introduced and we moved to stage 3.

It is therefore necessary to restate the proposition that Britain has given no commitment to move to stage 3 of economic and monetary union as defined in the treaty. We have given no undertaking to introduce a single currency. The House will have to address another time the question whether we would accept the full force of all the paragraphs of article 104c. It is not a question that we have to address later tonight.

Mr. Cash

Will my hon. Friend explain something that so far no Minister has sought to explain or, I believe, can explain? There is another protocol immediately adjacent to the stage 3 protocol—I am glad that the Minister is looking it up as I shall quote parts of it verbatim—that states that we shall not exercise the veto in respect of other member states' movement towards stage 3, that it will be irreversible and irrevocable and that we, as a member state, have agreed to it.

Does my hon. Friend agree that if we have agreed that we will be at the heart of Europe but that we will not prevent other member states from going ahead with stage 3 we are locking ourselves into an arrangement that necessarily presumes that we will go down that route? The decision that the protocol refers to as our so-called opt-out is no more than a fig leaf. It is a clever fig leaf, but it will not kid us.

Mr. Dorrell

I do not accept my hon. Friend's proposition. He seems to be confusing a treaty obligation set out in a protocol not to obstruct the development of monetary union on the part of other member states with a rhetorical flourish used by my right hon. Friend the Prime Minister to describe his frame of mind in approaching European policy. The frame of mind of my right hon. Friend the Prime Minister is of considerable interest and importance to me and, I would hope, to my hon. Friend, but it does not constitute a treaty obligation.

The treaty obligations are set out in the document to which my hon. Friend and I have access, and the protocol on the United Kingdom set out on pages 114–15 of the treaty states clearly: The United Kingdom shall notify the Council whether it intends to move to the third stage". It also sets out clearly in the context of that protocol what the implications would be if we decided not to move to stage 3 of monetary union.

Mr. Cash

The Minister must reply to my point about the protocol of transition to the third stage of economic and monetary union. If, as a member state, we are a high contracting party and, together with the other member states, we declare the irreversible character of the Community's movement to the third stage of economic and monetary union stating that it is irreversible and irrevocable, surely my hon. Friend is bound to admit that we as a member state have said that we would go down that route.

Mr. Dorrell

With respect to my hon. Friend, that is a rather different point. He was quoting the phrase that our right hon. Friend the Prime Minister has used about his desire to pursue a policy based on the proposition that we should be at the heart of Europe. That is a rhetorical flourish not found anywhere in the treaty.

5.15 am

As regards the question of the irreversible character of the Community's movement to the third stage of economic and monetary union by signing the new treaty provisions on economic and monetary union, the treaty provisions in this document set out a total package, and part of the package is the following protocol on the position of the United Kingdom. The protocol makes it abundantly clear, in words that do not, frankly, require a professional lawyer to interpret them, that the United Kingdom has preserved for itself a freedom to join or not to join a single currency, that decision to be made by the United Kingdom in accordance with arrangements that we make for ourselves and which are set out in the Bill which the Committee is considering.

Mr. Malcolm Chisholm (Edinburgh, Leith)

I accept what the Minister is saying about stage 3. Strictly speaking, he is saying what is stated in the words of the treaty, and I accept that because I am interested in looking in detail at the words of the treaty. The question that I want to ask him is about stage 2. Are the Government fully committed to implementing—

The Chairman

Order. The hon. Gentleman is anticipating. He specifically said that he wished to ask a question about stage 2, and the next debate is about stages 2 and 3. I imagined that he would be trying to catch my eye in the next debate. Perhaps he would like to rephrase his question.

Mr. Chisholm

I am talking about budget deficits because in stage 2 there is an undertaking to get budget deficits down, and most of article 104c actually refers to stage 2. Are the Government committed to all the parts of article 104c, apart from paragraphs 1, 9 and 11? A related question would be about the exchange rate fluctuation: are the Government committed to getting back into the ERM at the narrow bands in stage 2? That is what I am interested in.

Mr. Dorrell

The question about exchange rate fluctuations is a question on convergence criteria and the effect of convergence, which really arises in the next group of amendments. As regards the hon. Gentleman's straight question—whether we acknowledge that article 104c, with the exception of paragraphs 1, 9 and 11, applies to us in the course of the stage 2—the answer is that we do accept it. Article 104c.1 is substituted in stage 2 by the provision in article 109e.4, which is that, during the second stage of the progress to economic and monetary union as defined by the treaty, Member States shall endeavour to avoid excessive government deficits. The introduction of the word "endeavour" makes the obligation at stage 2 significantly different from the obligation in stage 3.

I want to describe percisely our obligations in stage 2. There is a lead obligation to endeavour to avoid excessive budgets deficits and during stage 2, as the hon. Gentleman quite rightly pointed out, the teeth, when it comes to making the obligations in article 104c compulsorily applicable, are drawn, because the teeth of article 104c are to be found in paragraphs 9 and 11 of the article. The other paragraphs of the article interpret the meaning of the phrase "excessive government deficits", and the obligation that we accept in stage 2 of the progress to economic and monetary union, as defined by the treaty, is an obligation to endeavour to avoid those deficits.

Mr. Winnick

As the Minister states, the appropriate paragraph reads Member States shall endeavour to avoid excessive government deficits in the transitional stage.

Is it the Government's wish, as far as possible, to bring the deficit to 3 per cent. in the period between ratification of the treaty and 1996? If so, what are the implications for public expenditure cuts?

Mr. Dorrell

I shall discuss the impact of the reference values in a moment. Government policy is in line with the treaty obligation which we wish the House to bless and which we wish to sign up to—to endeavour to avoid excessive budget deficits. I will describe how the reference values inform that commitment.

Sir Teddy Taylor

So that we may know exactly what Government policy is, if the Council makes a recommendation under paragraph 7 of article 104c, naming a time limit, would the Government endeavour to seek to achieve that budget deficit within the given time? It is important for people to know the Government's intention. We accept that they are not legally bound by paragraphs 9 and 11, but if the Council recommended that Britain do something specific with the budget deficit within a specified time, would the Government seek to achieve it? It would be helpful if the Minister were to answer that question.

Mr. Dorrell

If the Government found themselves in receipt of an opinion issued under paragraph 7, we would seek to avoid excessive budget deficits, not primarily because of the opinion received under the paragraph but because we think that the policy commitment is sensible in its own terms, for reasons that I shall describe. I will return to that theme because it is relevant to discussion of the treaty of Maastricht and to the great majority of what a Treasury Minister spends his life doing.

I do not accept the argument advanced by the hon. Member for Walsall, North (Mr. Winnick) that a choice must be made between the delivery of social objectives and the avoidance of excessive budget deficits. The two propositions go hand in hand and, for reasons outwith the treaty of Maastricht, it is Government policy to seek to avoid excessive budget deficits.

Mr. Nicholas Winterton

I am aware that my hon. Friend has certain business experience. He has just mentioned his responsibilities at the Treasury, but may I direct my question to him as a business man? Can he not foresee a number of occasions when a business and perhaps the Government, of which he is a member, might need a budget deficit in excess of the 3 per cent. of gross domestic product specified in the treaty and the Bill; but find that they are restricted? We might rightly need that deficit for a good purpose.

Mr. Dorrell

Yes, I can envisage such circumstances, for example, in 1993–94 when we shall want to be in excess of the reference level values. To suggest that there is some automatic level beyond which we cannot under any circumstances go is a misrepresentation of the treaty, and I will deal with that when I discuss the effect of reference values within it.

In stage 2, we undertake the commitment to endeavour to avoid excessive budget deficits. We are not subject to sanctions in the forms provided for in paragraphs 9 and 11 and, therefore, it is true to say that we have accepted a treaty obligation which, to some extent, diminishes our national responsibility for fiscal policy. None the less, it remains true that responsibility for fiscal policy rests with the member state and, furthermore, in the exercise of that responsibility, the state or the United Kingdom Government and institutions cannot be liable to any sanction arising from the treaty.

If, as a matter of political choice, within the terms of the treaty and of the Bill, the Government, with the consent of the House of Commons by way of an Act of Parliament, as is provided for in the Bill, were to decide to move to the third stage of economic and monetary union, the nature of the obligations taken on with regard to excessive budget deficits would, of course, change. If we go down this road—the issue is obviously one that the House of Commons will consider when deciding whether to do so—our treaty obligation will change. It will cease to be an obligation to endeavour to avoid excessive budget deficits—as a former Whip, I am very familiar with the words "best endeavours"—and will become an obligation, set out in paragraph 1 of article 104c, to avoid excessive deficits. Furthermore, the sanctions provided for in paragraphs 9 and 11 will apply to the United Kingdom.

There is no denying that that is a clear limit, defined by the treaty, on the proposition that fiscal policy will remain the responsibility of member states. In a moment, I will explore the precise nature of that limit, but it clearly is a limit defined in a treaty. I do not, however, accept for one moment the development of that proposition put forward by hon. Members who say that because the national responsibility of member states for fiscal policy is qualified, there is no meaningful responsibility left with the member states. There is a qualification, but it is not true to say that responsibility has shifted. The qualification is defined by treaty, under which responsibility clearly remains with the member states.

Dr. Godman

May we take it that, while some of the United Kingdom's immunity against the imposition of sanctions by way of paragraph 11 survives, the United Kingdom will not sit in judgment on a state that is being examined because of its failure to adhere to these regulations? Will the United Kingdom take part in the disciplining of another member state when, or if, it loses or gives up its immunity?

Mr. Dorrell

As I said in an earlier intervention, my understanding is that when the Council is reaching decisions about those questions, it meets as the Council of Ministers, and not as any special body, and that all its members, whether or not they are in stage 3, are entitled to participate within the terms of the article. I am sure that if that information is incorrect I shall be appropriately advised so that I may inform the Committee.

Mr. Nicholas Winterton

Is not my hon. Friend accepting that if and when we go to stage 3 the Government of the United Kingdom will be put into a straitjacket—and I mean a straitjacket—as the only possible action, if we perceive a budget deficit beyond the 3 per cent., will be to raise taxation? In fact, the Government will not be able, in stage 3, to do what the Chancellor has done this year. Is this the sort of decision that my hon. Friend believes is right for the country?

Mr. Dorrell

I am about to explore the precise nature of the obligations that we would be assuming. It is the Government's objective to avoid excessive Government deficits—I hope that I share that commitment with my hon. Friend the Member for Macclesfield (Mr. Winterton).

When he introduced the debate, the right hon. Member for Bethnal Green and Stepney correctly drew attention to the fact that the provisions of article 104c do not provide for automatic application of limits, either to budget deficits or to the relationship between gross Government debt and GDP. The reference values set out in the treaty are not commitments. The treaty's commitment is to avoid an excessive budget deficit.

5.30 am

Article 104c.3 clearly sets out the consequence of a failure to fulfil a reference value. It is not to declare that an individual member state is in default of its treaty obligations. The result of an individual member state's failure to satisfy the reference values is set out in paragraph 3, where it states: If a Member State does not fulfil the requirements under one or both of these criteria, the Commission shall prepare a report. That is the beginning and the end of the precise consequences of failure to satisfy a reference value. The paragraph goes on to discuss the issues that the report prepared by the Commission has to cover if a report is occasioned by the failure of a member state to satisfy the reference criteria.

Ms Abbott

Much has been made of the specific concrete sanctions in article 104c, but long before fines and votes were encountered, would not the very fact that a negative report had been prepared and possibly published lead to the country involved starting to lose access to the capital markets and capital flows? Rather than focusing on the end of the road, would it not be better to focus on the beginning of the road, where a country that was not hitting its deficit targets would be in a position similar to those countries that receive a bad report from the International Monetary Fund? The IMF does not have to impose concrete sanctions; the minute the international capital markets are aware that a country is failing its IMF tests, capital flows, whether from multinational institutions or commercial banks, cease to enter that country. We can harp on about the sanctions to the exclusion of looking at what would happen naturally in the market if a country were perceived to be failing its tests, whether at the second or third stage.

The Chairman

That was a very long intervention.

Mr. Dorrell

The hon. Member for Hackney, North and Stoke Newington (Ms Abbott) makes a good point. The truth is that, whatever the treaty of Maastricht says, the financial markets watch the performance, not merely of member states of the Community, but every member of the United Nations. The criteria set out in the treaty are well known to any operator in the sovereign lending market.

The mistake of so much comment on the treaty obligation is to assume that, merely because the Commission is under an obligation to prepare a report, the Commission will necessarily come to the conclusion that failure to deliver one reference value constitutes an excessive budget deficit. There is no basis for that assumption.

Article 104c.3 makes it clear that, in preparing the report, the Commission has to look at the values that are measured in order to assess reference values—deficits and gross Government debt. But paragraph 3 also states that the Commission must have regard to the relationship between the deficit and Government investment, and it must also have regard—this is the key answer to my hon. Friend the Member for Macclesfield and to one of the issues raised by the right hon. Member for Bethnal Green and Stepney—to the medium term economic and budgetary position of the Member State. The hon. Member for Sheffield, Attercliffe (Mr. Betts) got that exactly right. That provision not merely allows but requires the Commission to take account of the trade cycle in assessing whether a member state is running an excessive budget deficit.

The treaty recognises that budget deficits will fluctuate according to the state of the trade cycle. The key criterion is none of this mechanistic stuff but the words "an excessive budget deficit". In assessing that, the Commission and, on the basis of its report, the Council must look at the economic position in which a country finds itself. These are guides and there is nothing automatic about the conclusions to which they lead.

Mr. Chisholm

This matter is at the heart of the debate on budget deficits and it is important to examine article 104c 3. The last two lines of that are central to the reinterpretation of this part of the treaty. My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) dealt with Government investment and said that, as it was only 2 per cent. of GDP, it was not very relevant to the argument. The key words in the article are the medium term economic and budgetary position". The Minister and my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) are interpreting those words in a Keynesian way as if they refer to cycles and mean that sometimes we can have budget deficits and sometimes we cannot. But the thrust of the treaty is anti-Keynesian and does not mean that. It merely says that a year or two will be given to get the budget deficit down to 3 per cent. and then it must be kept there. It is not about Keynesian reflation and troughs and peaks and so on.

Mr. Dorrell

I will later discuss the supposed divide between Keynesians and monetarists. I sometimes wonder which side of that argument Keynes would have been on if he were alive.

I should like to deal with another question posed by the right hon. Member for Bethnal Green and Stepney. He asked whether the decisions of the Council, which are provided for in paragraphs 9 and 11 of article 104c are appealable to any Community institution. They are appealable in the normal way under article 173 of the treaty of Rome, which states: The Court of Justice shall review the legality of acts of the Council and the Commission other than recommendations or opinions. The provisions of paragraphs 9 and 11 are neither opinions nor recommendations and are therefore subject to review on the initiative of the affected member stale.

Any hon. Member is legitimately entitled to ask why the provisions for confining the fiscal responsibility of a member state are in the treaty. I hope to give a clear answer to that question. Once again, I must ask the Committee to recognise that the provisions, when they have teeth, apply only in the context of a single-currency system. Those who will not accept under any circumstances a single currency clearly do not have a basis for engaging in the argument, because to be against a single currency means that one is against all the paraphernalia that goes with it. The provisions are part of that paraphernalia.

In the context of a single currency in the member states, every member state has a clear interest in avoiding excessive official borrowing because that would influence financial conditions in every member state. If some member states engage in such borrowing, it would lead to a distortion of capital markets and it is not difficult to see circumstances in which that distortion might lead to market turbulence which would damage the interests of every member state.

It would in a sense introduce into the single currency area decision-making process precisely the market pressures to which the hon. Member for Hackney, North and Stoke Newington referred. We do not want the position where market operators can conclude that sovereign borrowers within a single currency area have collectively become a bad risk. If we enter that world, the countries within a single currency region would collectively run a serious risk of damaging their interests as a result of market turbulence.

Mr. Bill Walker

I admire the intellectual way in which my hon. Friend is answering the debate. Is he saying that, if we accept a single currency and we cannot borrow and cannot print money, we will still have financial control?

Mr. Dorrell

If we chose—and I emphasise that point—to go for a single currency, we would have satisfied ourselves that the arrangements for managing it were adequate. We would also accept the obligation placed on ourselves—as on every other country within the single currency area—to limit official borrowing to avoid the market turbulence and damage to our collective interests that would flow if that restraint did not exist.

Mr. Shore

Is it the Minister's view that, when stage 3 is reached, it would be more damaging to Britain—if it had an excess deficit like that of the coming year—to upset the smooth running of the system, or would it be in our interests simply to accept the reasons for our excess deficit, and that it would be far too harmful to reduce it, even if that had the effect of ruffling the surface of the single currency?

Mr. Derrell

Earlier, there was some discussion of confidence in our own abilities. If we reached the conclusion—and the Government have done so—that in the circumstances of 1993–94 an 8 per cent. budget deficit was not excessive, we would have done so on our own authority. In the belief that that stood up as a rational analysis, we would be able to persuade the Commission and the Council of the truth of that. That is the importance of recognising that reference values are not absolute limits. The only result that will flow from breaking a reference value will be an obligation on the Commission to produce a report.

As to whether there is a deflationary bias, the hon. Member for Walsall, North said that the system is contrary to everything for which Labour has always campaigned. The Committee must ask what is contrary to everything for which Labour has campaigned. It is not a 3 per cent. deficit or a 6 per cent. debt to GDP—it is excessive budget deficits. Although I might want, on a partisan platform, to represent Labour as pursuing a voluntary policy of pursuing excessive deficits, I cannot believe that Labour Members want, out of their own mouths, that policy ascribed to them as being the ambition of 100 years of political activity.

Mr. Winnick

I certainly did not want to give the impression that the labour movement, or the Labour party, was started with the aim of achieving as high a deficit as possible; that has never been our position. My argument is that at times—such as the present time—a deficit far higher than 3 per cent. may well be necessary if we are to reduce mass unemployment substantially, and to implement health and welfare policies. We should not have to apologise for such a deficit; certainly, we should not have to grovel to a foreign body. I was complaining about that, rather than suggesting that a high deficit was necessary or desirable at all times.

Mr. Dorrell

Clearly we could continue to argue about the issue for some time; and no doubt we shall do so, in the context of the Finance Bill.

5.45 am

Mr. Legg

Will my hon. Friend give way?

Mr. Dorrell

No. I want to end my speech.

I am not in favour of excessive budget deficits. I favour restraint for its own sake, because I believe that it is the best way of delivering growth and improving living standards. I also recognise that, if this country opted for a single currency at some future date, a necessary part of the collective obligation of operating such a currency would be not to allow excessive official borrowing by any of the participants. For both those reasons, I do not support the amendments.

Dr. Godman

On a point of order, Mr. Morris. I do not wish to detain the Committee, but before he sat down the Minister promised that he would answer a question that I had asked him. He has not honoured that promise. I should be content if he said that he would write to me.

Mr. Dorrell

Further to that point of order, Mr. Morris. I should be grateful if I could write to the hon. Gentleman.

The Chairman

I am delighted that bonhomie has prevailed at this early hour.

Mr. Andrew Smith

I must take up the Financial Secretary's remark about being tempted to misrepresent Labour's position on deficits. I hope that, now that he has made that confession, he will take the earliest opportunity to correct a gross misrepresentation of our position that was repeated not just immediately before and during the general election, but in the Budget debate over the past few days. It was suggested that we were committed to £35 billion of extra expenditure.

I strongly agree with hon. Members on both sides of the House that it is appalling that we should debate such important matters in the middle of the night. Whatever view hon. Members may take of the treaty, the Bill or deficits, the House cannot do proper justice to such issues after more than 12 hours of debate. We know that the Liberal Democrats, as well as the Government, are responsible for this; the public will draw their own conclusions.

Mr. Michael Spicer

Far be it from me to defend the Liberal Democrats, but in casting aspersions on them the hon. Gentleman must accept that his own party polled considerably under strength in the vote concerned.

Mr. Smith

That certainly is not true. [Interrupton.] I understand that the majority was 17, and that 17 Liberals voted with the Government.

I do not think that the Minister has really addressed the points that have been raised, especially those raised by Labour Members. He seemed to be trying to convince the House that the Bill and the treaty did not need to be reinterpreted to operate satisfactorily: I wish to make the opposite case.

We have never claimed—and I would not do so now—that the treaty or the Bill was perfect. We had to judge the package as a whole, as did the Labour party conference which decided: Conference believes that the Maastricht Treaty, while not perfect, is the best agreement that can currently be achieved.

Mr. Spearing

I have made the point several times but not, I think, in public, that the very judgment to which my hon. Friend refers surely depends on our three important financial debates. Many of us will have concluded that although, as the Labour party judged, the Maastricht treaty offers the best terms available, they are not good enough. My hon. Friend and his immediate colleagues have not paid sufficient attention to that issue; if they did, they would realise that the terms are not good enough and that we should not support the treaty.

Mr. Smith

I will endeavour to convince my hon. Friend otherwise, although in view of what I know about his long-held position and the arguments that he advances in support of it, which I genuinely respect, I am not overly optimistic about my ability to do so.

Several important issues arise from the question of the deficit, as mentioned by my right hon. Friend the member for Bethnal Green and Stepney (Mr. Shore) and my hon. Friend the Member for Walsall, North (Mr. Winnick). We must make it clear that the criteria set out in the treaty are not blanket requirements but triggers, aspects of economic performance to be evaulated in determining how far the economies of the various member states have converged prior to the establishment of economic and monetary union and, in part, as one set of considerations to evaluate comparative economic performance after such a union. They are not cast in stone, and we have made it clear several times that it is not acceptable for them to be interpreted in a mechanistic or inflexible way.

As has been said, the articles applying the criteria explicity require them to take account of wider economic considerations. For example, the article on Government deficits requires the Commission to take account of the extent of Government investment expenditure. My right hon. Friend the Member for Bethnal Green and Stepney referred to that point. He began by saying that because investment expenditures were, I think, about 2 per cent. of gross domestic product, they were not too significant. However, in relation to a target within the treaty of 3 per cent. for the overall deficit, the extent of that 2 per cent. room for manoeuvre and whether or not one has it—I argue that we should—makes a considerable difference.

Mr. Shore

Perhaps the Minister could advise us on this matter. Are we talking about a 3 per cent. guideline plus the public investment programme? I believe that that is highly unlikely.

Mr. Smith

The treaty establishes a 3 per cent. guideline, but says that account must be taken of Government investment expenditure as well as the medium-term budgetary position, with which I shall deal in a moment. I suggest that there is an ambiguity, which should be exploited in the interests of flexibility.

Mr. Nicholas Winterton

The hon. Gentleman is replying to the debate rationally and reasonably. If I put a hypothetical case to him, will he consider it? If we had proceeded to stage 3—

The Chairman

Order. Interventions have been getting longer since I have been in the Chair. Interventions are traditionally very short, and I hope that this one will be short.

Mr. Winterton

I am sorry, Mr. Morris, but I had hardly got to my feet.

The Chairman

There would be little point in my intervening after the hon. Gentleman had spoken at excessive length, so I invite him to make a short intervention.

Mr. Winterton

Of course, Mr. Morris. I greatly admire your dexterity in such matters.

Bearing in mind the restrictions that are apparently laid down in the legislation, will the hon. Member for Oxford, East (Mr. Smith) tell me what action he believes that the Government would be able to take if we were at stage 3 and had a budget deficit of £50 billion, and the Commission hauled us over the coals and found our explanation unacceptable?

Mr. Andrew Smith

If a Labour Government were in office we would have implemented our proposals for growth and expanding employment, so the GDP would be high enough to bear the level of borrowing within the criteria, interpreted with flexibility appropriate to the circumstances on which we would also have insisted.

I was saying that the criteria require the wider issues to be taken into account, including the medium-term economic and budgetary position of the member state.

Ms Abbott

We are now back to the familiar line of argument from Labour Front-Bench spokesmen—that the text of the treaty does not mean what it appears to mean. If the criteria are as flexible as my hon. Friend with the collusion of Ministers, argues, when the German Bundestag ratified Maastricht last year why did it pass a specific resolution on EMU saying: The stability criteria for the move to stage 3 of EMU will be narrowly and strictly defined…the German Bundestag will oppose any attempt to evade the stability criteria that were agreed in Maastricht"? Is my hon. Friend not whistling in the wind? Does not the flexibility exist only in the imagination of Front-Bench spokesmen?

The Chairman

Order. One question is enough.

Mr. Smith

I would always be happy to take more than one question from my hon. Friend.

Dr. Godman

On a point of order, Mr. Morris. I seek your advice. Is it not the practice that interventions in Committee must be both brief and concise? I seek your advice, because I was of the opinion—

The Chairman

Order. The answer to the hon. Gentleman's question is yes.

Mr. Smith

My hon. Friend the Member for Hackney, North and Stoke Newington (Mr. Abbott) referred to the words of the treaty and suggested that I was trying to deviate from the text. The relevant part of the text says: The report of the Commission shall also take into account whether the government deficit exceeds government investment expenditure, and take into account all other relevant factors, including the medium term economic and budgetary position of the Member State. I am talking about the way in which we should argue with our colleagues in Europe that those words should interpreted.

My hon. Friend is right to say that there are people in Europe, including some people in the German Parliament, who may wish to take a different view. I suggest that we should ally ourselves with those who are pressing for a flexible interpretation, as opposed to some of the: arguments that I have heard in the debate, which would cement us into acceptance of a narrow definition which would not be in the interests of the Labour movement, or of this country.

To return to the thread of my argument, the third key point about the criteria is one about which we have not heard much in the debate so far. It is that the protocol on convergence criteria specifically requires the Council of Ministers to adopt appropriate provisions to lay down the details of the criteria, which will then replace those set out in the protocol. So the opportunity is there for member states to make it clear, as we urge the British Government to do, that the criteria should not be defined or deployed to implement monetarist policies or to inhibit economic recovery in the member states.

We have long advocated the course that the Government should advocate—the course that they should have advocated when they held the Community presidency: that convergence should include the measures for employment, industry, investment and the environment which are essential for economic recovery in this country and in the rest of Europe. There is a powerful injunction on them to do that in article 102a, which states: Member States shall conduct their economic policies with a view to contributing to the achievement of the objectives of the Community, as defined in Article 2".

6 am

Mr. Spearing

Does my hon. Friend agree that the proof of the pudding is in the eating? Earlier, I asked a question about the current request to nations to report on their convergence programme. I believe that such a request has come to Her Majesty's Government. I understand that, in that request—even before the treaty—the wide interpretation that my hon. Friend advocates has not been placed on the provisions. Should not we ascertain from the Government the request that they have received and the reply that they have given, so that we can test the proposition that my hon. Friend puts to the Committee?

Mr. Smith

My hon. Friend is right that the treaty contains a provision for a report on convergence to be submitted. It would clearly be inappropriate for the Government to submit such a report before the Bill giving effect to the treaty had been approved by the House. I am sure that if the Government have submitted one, or are working on it, the Minister will intervene to tell us the exact position. If the Bill and the treaty are implemented, such a report will presumably be submitted.

I was referring to the need for more flexible interpretation of the criteria in the interests of economic recovery not merely in this country but throughout Europe. Reference was made earlier to the comments of my right hon. and learned Friend the Leader of the Opposition. I will quote from my right hon. and learned Friend's speech in Paris on 15 January. It is important to make the Labour party's position on these issues clear, and there is no better way of doing that. My right hon. and learned Friend said in that speech: It would also, I believe, be misguided for the European Community as a whole to make the same mistake of seeking arbitrarily to curb public deficits at a time when the European economy is poised on the verge of recession. There is clearly a danger that this may occur if the fiscal deficit rules of the Maastricht Treaty are rigidly interpreted. An excessively strict application of the protocol which specifies a target of 3 per cent. for government deficits would compound the existing financial squeeze which has been caused by high interest rates in Germany. If all member states of the EC tried to satisfy the 3 per cent. target by the end of 1996, for example…the combined effect on total EC output would be a reduction of over 2 per cent. This is obviously absurd and simply not feasible for a majority of member states of the Community. I would argue very strongly that the 3 per cent. rule must exclude all deficit-funded capital investment and take full account of the state of the economic cycle in each member state and in particular trends in unemployment. The Community will need to clarify these points if it is to avoid adding a fiscal choke to the monetary grip that has already sharply reduced growth in the European economy. I put it to the Committee that there could be no clearer, firmer or more persuasive statement of the Labour party's position. We are opposed to a deflationary impact of the criteria and to an inflexible or mechanistic interpretation of them.

Mr. Hain

I warmly welcome my hon. Friend's reference to the Labour party's official policy as expounded by its leader. Is there not a difficulty in interpreting the flexibility of the convergence criteria, however? All the countries are locked together seeking to achieve the criteria required by the treaty. No country wants to achieve what is required and then find that another country is being let off the hook. The countries are forced, in a sense, to follow each other in achieving the aim. If they do not, there is no level playing field. The difficulty with establishing the criteria in the way in which the treaty establishes them is that the countries are placing pressure on each other to achieve them, and that, if some do not, others will start to complain. That is why it is difficult to interpret the criteria flexibly.

Mr. Smith

I agree with my hon. Friend. He is saying that it is important to have co-ordination for flexibility and recovery and not for inflexibility and deflation. Not just the Labour party in this country is saying that. There has been increasing support in the Commission for the view that I am putting forward. There has also been support in the European Parliament and in other members states. I will give examples. On 17 February, the Commissioner for Economic Affairs, Henning Christophersen, said in Brussels that the interpretation of the criteria involved political judgment, and a deficit of more than 3 per cent. would not necessarily infringe the criteria if this was caused by action to tackle a cyclical recession. On 23 February, the Finance Minister of Belgium was reported to have said: It is not to be ruled out that the member states will revise one of the four criteria foreseen by the Maastricht Treaty for entry to the final phase of economic and monetary union, the one relative to the maximum threshold of the budget deficit set at 3 per cent. of the national product. He was reported as saying that if the rate of growth of the economy remained next year as low as that for the present year, the threshold could be increased to allow EC states to support economic activity.

On 9 March, in relation to the European Parliament debate on unemployment and the annual economic report, Mr Christophersen said it had been established that the criteria should not be used in a mechanical way. On 12 March this year the European Parliament adopted a resolution on the annual economic report calling on the Commission and the Council to make it clear that the excessive deficit criterion defined in the Maastricht Treaty must be applied over the economic cycle and that increases in budget deficits resulting from economic recession should not in themselves lead to tax increases or public spending cuts which could damage long-term development and drive the European or national economy further into recession. I give those examples—there are others—to show how opinion in the rest of Europe, reacting to the scale of the recession, on the verge of which Europe as a whole is poised, is saying that it must be interpreted flexibly and that we need growth and not deflation.

Dr. Godman

Does my hon. Friend agree that effective implementation of article 104c depends heavily on article 109c? What is his view of the structure of the monetary committee? Is it a European Community-wide select committee, or some kind of police force which can decide to investigate the economic management of member states?

Mr. Smith

It will not be an effective police force, as it has only advisory powers, although I agree that they will be strengthened when the financial committee comes into effect, if progress is made towards economic and monetary union. But I agree with my hon. Friend that much turns on the interpretation placed on article 104c, and I have been developing that argument. I suggest that in common with the growing volume of voices in Europe calling for the flexible interpretation of the provisions, we should conclude that instead of imagining that the convergency criteria are fixed and cannot be changed, we should be arguing that they are capable of a more flexible interpretation. We must continue to stress that it is vital for economic recovery in Europe that that flexibility is secured.

Mr. Leighton

Nobody seems to be bound by those words. The Leader of the Opposition said in his speech in Paris that it could lead to a cut in overall output of more than 2.5 per cent.—in other words, it could lead to another recession—and he added that the position must be clarified. The position has not been clarified. Therefore, we should vote against the provision. My hon. Friend seems to be saying that 3 per cent. does not mean 3 per cent.—that it might mean 5 or 6 per cent. We now have 8.5 per cent. He also says that it is meaningless. It is not meaningless. He knows that we attended a meeting with a representative of Jacques Delors who said that the criteria mean something. They are provided by the Germans, who are not prepared to have their mark made into a Mickey Mouse currency. They want real guarantees for their currency.

Mr. Smith

I was not suggesting that the criteria did not mean anything. Clearly, they mean something.

No one is suggesting that any level of public deficit can be sustained indefinitely. The important question is the relation of the level of public deficit to the position in the economic cycle, how that pans out over the whole of the cycle and how it stands in relation to investment expenditure. Those matters will be clarified at the end of the day through the various Community institutions. The European Parliament will have an influence and, obviously, the Commission will have a voice. Ultimately, the determining factor will be the statements issued by the European Council.

In conjunction with our colleagues in the rest of Europe, we must take every opportunity to argue for a rational interpretation of the criteria which make some growth possible.

Mr. Cash

I can understand the hon. Gentleman's attempt to put some latter-day rationale into his argument. Does he accept that the whole object of the arrangement was to be modelled on the Bundesbank, which had a rigid, determined approach that all of this would somehow achieve price stability? The whole argument has been blown open, as happened with the exchange rate mechanism. People must acknowledge that the arrangement will not work but that somehow we must continue marching with this. Therefore, one comes up with another adaptation to it; we will be flexible. If there is such a tremendous desire to get this through, does the hon. Member for Oxford, East (Mr. Smith) recognise that we have reached the point at which we recognise that the arrangement will not work at all and that we should pack up our bags and take the whole thing back to where it came from?

Mr. Smith

No. The record of past years shows that we are in a weak position, especially when the hon. Gentleman is so contemptuous of what the Bundesbank has achieved. We do not want to emulate it in every respect, but the achievements in Germany in terms of low inflation, generally high employment, growth and living standards deserve to be examined constructively.

Mr. Denzil Davies

My hon. Friend is arguing for a flexible approach to the criteria. As Labour Members are in favour of a single currency because they believe that it is a good thing, is my hon. Friend becoming worried about such flexibility? Would it be better to be inflexible, get the pain over quickly and reach the ideal on a single currency as quickly as possible?

Mr. Smith

Inflexibility in these matters threatens to plunge us into a deep recession which I do not want to see.

How one judges the 3 per cent. depends on the period it covers. There were some references to this earlier. It is important to stress that the treaty commitment and the definitions in the treaty do not refer to the public sector borrowing requirement; they refer to the Government's lending position on the ESA definition. The ESA definition is not the same as the public sector borrowing requirement.

If one takes the record of general net lending borrowing by the Conservative Government from 1979–1991 and applies a 3 per cent. criteria, saying that the Government should have spent 3 per cent. of the gross domestic product, we would have not less but more public expenditure, to the tune of £39 billion over that period. I do not make that point to suggest that the criterion is always easy to live with, even across the medium or longer term, but to illustrate that it depends what period one takes the criterion to apply to.

Mr. Chisholm

With reference to the 1980s, surely the surplus was a result of privatisation and North sea oil. Those were unusual circumstances. The effect across Europe of the 3 per cent. criterion would be massive public expenditure cuts. Are not the two main thrusts of this monetarist treaty zero inflation and the cutting of public expenditure to make Europe have the same level of public expenditure and social provision as the rival economic powers of Japan and America?

6.15 pm

Mr. Smith

The figures that I quoted excluded privatisation receipts because the definition excludes them. I merely used them to illustrate that it depends on the period across which one takes the 3 per cent. to apply.

I argue that we should have deficit finance public expenditure, especially for investment and counter-cyclical purposes. As hon. Members have said, article 104c specifically excludes circumstances in which the excess over the reference value is exceptional and temporary. There is an argument, and we certainly must make it, that action taken to counter a recession is, of its nature, temporary, precisely because of the nature of the cyclical process.

Dr. Godman

Does my hon. Friend agree that article 104c is riddled with ambiguities? For instance, it would appear that the United Kingdom has been granted immunity from the imposition of sanctions. Yet at this moment, we do not know whether the United Kingdom Government would be able to sit in judgment on others who are deemed to have broken the rules.

Mr. Smith

My hon. Friend has made several telling contributions to the debate and uncovered areas of legal and procedural uncertainty on precisely such matters. I shall be interested to receive a copy of whatever written reply the Government send him. [Interruption.] The Minister has received a note from the Box and is in a position to give us the information now.

Mr. Dorrell

I am advised that in stage 3, the United Kingdom would take part in the assessment under article 104c, but not in the vote on sanctions if it was not a full participant in stage 3.

Mr. Smith

Thank you. I shall draw my remarks to a conclusion now, but I could not do so without referring to the amendments within the group which we on the Opposition Front Bench intend to press to a vote. In this and the preceding debate, we have emphasised how important article 2 is. We have stressed our commitment to work for its full application. I draw the attention of the Committee to new clause 57, which is extremely important in that respect and attempts to address some of the anxieties that my right hon. and hon. Friends have expressed.

New clause 57 seeks to incorporate in the Bill a requirement that—before submitting information to the Commission, either under the provisions of multilateral surveillance as in article 103(3) or under the excessive deficit requirements of article 104c, which we have spent so much time discussing, the House shall consider an assessment of the medium term economic and budgetary position in relation to the social, economic and environmental goals set out in Title II, Article 2". It further requires that this assessment shall form the basis of any submission to the Commission under these articles. There could be no clearer indication of our intention to link the implementation of the treaty and closer European co-operation to the goals of article 2.

As I have said, it is our intention to press new clause 57 to a vote. It is buttressed by our proposed new clause 2 which would set multilateral surveillance firmly in the context of economic growth, industrial investment, employment and the balance of trade and compare Britain's performance with that of other member states. We also wish to press that new clause to a vote. Amendment No. 19 and others of a similar nature which were tabled as probing amendments will not be pressed to a vote.

I urge the House to make it clear that we do not want the convergence criteria to be applied in a mechanistic or inflexible way, and to signal that we want to insist on their being interpreted to foster and not to frustrate concerted action for sustainable economic growth and jobs. The best way to do that is to vote for the two amendments.

Mr. Charles Kennedy (Ross, Cromarty and Skye)

I shall be brief. I agreed entirely with the hon. Member for Oxford, East (Mr. Smith) until his final exhortations about the two new clauses, neither of which commends itself to the Committee. They are both innocuous to the extent that one wonders whether they are a small part of an ulterior exercise. If one examines existing budgetary practice and what is likely to happen in the European Commission, it follows from what has already been agreed that both are likely to be put into practice. Apart from that, there was great good sense in what the hon. Gentleman had to say.

I wish to take a more federal viewpoint than has been heard so far in the debate, touching on what the right hon. Member for Bethnal Green and Stepney (Mr. Shore) said in moving the amendment. What he found so obnoxious in the provisions attached to this part of the Maastricht treaty was, to use the right hon. Gentleman's words, an alien body being able to impose itself on Britain or any other member state. Later in the same speech, he said that he understood and respected those who took a federal viewpoint, though he did not agree with it. That is where the right hon. Gentleman and I part company. We see Europe not as an alien body but as an entity within which we are increasingly integrated, and we want to continue down that track.

Some of the genuine difficulties that have arisen in the progress towards stages 2 and 3—economic and monetary union, a single currency and the deficits—reflect, first, the fact that the political and economic context has changed since the original Delors report and, secondly, that the world and the European Community have moved on politically since the negotiation and agreement of the Maastricht treaty.

Those who are worried about the apparent or perceived inflexibility of some of the articles would be well advised to remember that, ultimately, the European Commission and any other bodies that may flow from this part of the treaty have to be responsive to the real politics with which they are dealing.

The Government have been pointing to several decisions that have been taken in the European courts and elsewhere, which they say are representative of the new mood of subsidiarity across the Community. I have always found a mood of subsidiarity rather difficult and tricky to capture. However, the Government have a fair point in emphasising the fact that, as it is a political organisation, the institutions of the European Community, including the Commission and the central bank, must be seen to be responsive to the unit parts—the individual member states.

That is why, in political terms as well as for reasons of political muscle referred to earlier, there is cause for optimism that the kind of interpretations that some of us have been pointing to during the debate will hold sway. We all have our party axes to grind—or perhaps, our particular viewpoints to exert—in the course of this debate. It is worth looking at what we would all agree is an objective source, the Library of the House. It looked back to the original Delors proposals.

Mr. Spearing

We are not there now.

Mr. Kennedy

No, we have moved on since then.

Mr. Spearing

Yes.

Mr. Kennedy

The hon. Gentleman is quite right. The point is that, since the original Delors proposals, we have moved on, and the position is even better now than it was then, for reasons which I will outline. The original criteria were too inflexible, because they concentrated too heavily on one year's budget outturn. The briefing note from the Library goes on to say: Furthermore, in the light of the pressure exerted upon government borrowing because of the slow down in growth of a number— not just ourselves, but a number— of Member States, Commission officials have begun to place more emphasis upon the direction that debt and borrowing levels are moving rather than their absolute levels. That is an important point to enter into the record—that this is not just some kind of freeze-frame that we are looking at: it is a continuous reel, and it is therefore one which, by definition, will be more flexible than some of the most dire warnings that we have heard expressed in the course of the debate would suggest.

Mr. Spearing

I am grateful to the hon. Gentleman, because it was my sotto voce intervention to which he kindly responded. Has not the argument throughout the evening showed that while, as he says, Commission officials may have moved in that direction, things could move in the other direction, just as the climate of the European Court of Justice has moved? What the hon. Gentleman is saying confirms our fears that this arbitrary and official rigidity could move back, even on his interpretation, and still be within the terms of the treaty.

Mr. Kennedy

As is the case in so many of the debates throughout the process of this piece of legislation, from my own political standpoint, I feel that the hon. Gentleman's point could be best addressed by our being more integrated rather than less, as he would wish to argue. The whole logic of the European case is that, if we want to influence in a favourable way the outcomes and decisions taken at European level—

Mr. Spearing

By officials.

Mr. Kennedy

By officials at the moment, because all the institutions, again from a federal point of view, are not democratic enough. We are going a bit wider there, Mr. Morris, than perhaps we are allowed to in this set of arguments. My whole case would be—I will come to this in the specific context of the parts that we have been debating through the night—that, as a general rule, we are more likely to exert more influence by being more integrated, not by being more stand-offish or semidetached or whatever phrase might be appropriate to characterise the hon. Gentleman's position.

Dr. Godman

The hon. Gentleman will know that I am not altogether hostile to federalism, but I should like to ask him how the cause of federalism in the European Community is advanced by the implementation of articles 103.3, 104c and 109c. To my mind, the implementation of those articles strengthens the central institutions which have at the moment enormous power, although far from federalist in structure.

6.30 am

Mr. Kennedy

The economists who informed and advised during the Maastricht neogitations were operating against two different backgrounds. One was a set of economic theories that said that countries will try to free-ride over any economic difficulties involving their currencies, that it would be a free-for-all which would bleed the centre, and that no centralised institution can withstand that. The other argument was that one would have to have excessive centralism and downward pressure on all member states.

I appreciate that the hon. Member for Greenock and Port Glasgow (Dr. Godman) feels that there is too much downward pressure, but the achievements of the Maastricht process, if not the happiest of halfway houses, were more of a compromise than would have been the case if one considers the original Delors package, which preceded Maastricht.

Consider our currency union within the United Kingdom. The hon. Member for Tayside, North (Mr. Walker) and I have argued about the applicability of comparing our Union with that envisaged in the Maastricht treaty. Our currency union, for which the Government, the Treasury and the Bank of England are responsible, involves tight, centralised controls, not least over local spending and borrowing. I find it inconsistent that some hon. Members will happily vote for rate capping and all sorts of other controls of local government because of the single currency demands of our currency, yet the milder proposals for union in the treaty cause them such massive offence.

Mr. Bill Walker

The hon. Gentleman is as knowledgeable as I on the objectives of the Act of Union 1707, and the treaty signed at the time. He will know that the economic, monetary and political objectives of that Union were almost identical to the objectives proposed and written into the treaty. The clauses are different, but the objectives are clearly stated and almost identical. I therefore view the treaty as a centralising process—not federal at this stage—which will create much the same circumstances as in our Union with a single currency, a single Chancellor of the Exchequer and single borrowing requirement, all controlled from the centre. The Scots have complained about that for years. I am happy with it, and the hon. Member objects to, but I am not happy for that to be done in Europe.

Mr. Kennedy

The hour is late, and we are almost getting into Scottish political theology. I agree that we have a far too centralised constitutional settlement in the United Kingdom. In trying to draw a comparison between the 1707 Act and the events surrounding it and the Maastricht treaty, the hon. Gentleman overlooks something fundamental—federalism. Whether that word is acceptable, or used in its proper context in this country—or at least in a context that will be understood by our Community partners—it is certainly used in other countries, notably Germany, essentially to mean decentralisation—and I must stress that.

Sir Teddy Taylor

rose—

Mr. Kennedy

Having lit the blue touch paper, I must give way to a Scot who represents another part of the Union.

Sir Teddy Taylor

While the hon. Member might be right in thinking that the Commission and the Council will be moderate and reasonable in applying the terms of article 104c, does he accept that the wording is such that it could be applied restrictively and oppressively? As we do not know what the Commission or the Council is doing, would not it be far safer to have wording that avoided repressive, restrictive policies, which would simply add to unemployment and misery?

Mr. Kennedy

The constitution of the old Soviet Union promised every freedom under the sun, and, in respect of Hong Kong, the Basic Law to which the Government of China have put their names guarantees all the things that all Members on both sides of the Committee would advocate. However, experience, suspicion, cynicism and canniness about the former Soviet Union, as well as the Hong Kong settlement to come, make us worry. Others may take a different view, but I do not regard those who operate at Brussels level in the same way as I regarded the old Soviet Government or as I regard the current administration of old men in China. I am more relaxed and more laid back in my interpretation of the words in this part of the article than the hon. Member for Southend, East (Sir T. Taylor).

This applies not least to paragraph 3, which provides that, if there is excessive Government expenditure, leading to an excessive deficit, other relevant factors, including the medium-term economic and budgetary position of the member state, will be taken into account. It seems to me that that is a helpful addition, rather than something about which we should be excessively suspicious or over which we should lose sleep. [Laughter.] My words are being laughed at out of context.

Underlying the economic and monetary union mechanism that is built into the treaty is the need, if we are to overcome the suspicions and hostilities that have been expressed by hon. Members on both sides of the Committee, for more building in of European institutions that are felt by the citizens they are intended to serve to be European. As has been seen in the context of other parts of the legislation—we shall return to this matter at later stages—this can be done only by providing a more democratic structure and adopting a much more federal approach. That is the means of addressing these anxieties in the same way as several of the more positive ideals and aspirations of some of us.

Mr. Wood

rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

The Committee divided: Ayes 239, Noes 29.

Division No. 207]	[6.36 am
AYES
Adley, Robert	Brazier, Julian
Ainsworth, Peter (East Surrey)	Bright, Graham
Aitken, Jonathan	Brooke, Rt Hon Peter
Alexander, Richard	Brown, M. (Brigg & Cl'thorpes)
Amess, David	Browning, Mrs. Angela
Ancram, Michael	Bruce, Ian (S Dorset)
[...]Arbuthnot, James	Burns, Simon
Arnold, Jacques (Gravesham)	Burt, Alistair
Arnold, Sir Thomas (Hazel Grv)	Butterfill, John
Ashby, David	Carlisle, Kenneth (Lincoln)
Atkinson, Peter (Hexham)	Carrington, Matthew
Baker, Nicholas (Dorset North)	Channon, Rt Hon Paul
Baldry, Tony	Chapman, Sydney
Banks, Matthew (Southport)	Churchill, Mr
Banks, Robert (Harrogate)	Clarke, Rt Hon Kenneth (Ruclif)
Bates, Michael	Clifton-Brown, Geoffrey
Batiste, Spencer	Coe, Sebastian
Beresford, Sir Paul	Colvin, Michael
Blackburn, Dr John G.	Congdon, David
Booth, Hartley	Conway, Derek
Boswell, Tim	Coombs, Anthony (Wyre For'st)
Bottomley, Peter (Eltham)	Coombs, Simon (Swindon)
Bottomley, Rt Hon Virginia	Cope, Rt Hon Sir John
Bowden, Andrew	Couchman, James
Bowis, John	Curry, David (Skipton & Ripon)
Brandreth, Gyles	Dafis, Cynog

Davis, David (Boothferry)	Lester, Jim (Broxtowe)
Day, Stephen	Lidington, David
Deva, Nirj Joseph	Lightbown, David
Devlin, Tim	Lilley, Rt Hon Peter
Dorrell, Stephen	Llwyd, Elfyn
Douglas-Hamilton, Lord James	Luff, Peter
Dover, Den	Lyell, Rt Hon Sir Nicholas
Duncan, Alan	MacGregor, Rt Hon John
Dunn, Bob	MacKay, Andrew
Durant, Sir Anthony	Maclean, David
Elletson, Harold	McLoughlin, Patrick
Emery, Rt Hon Sir Peter	Madel, David
Evans, David (Welwyn Hatfield)	Maitland, Lady Olga
Evans, Jonathan (Brecon)	Malone, Gerald
Evans, Nigel (Ribble Valley)	Mans, Keith
Evans, Roger (Monmouth)	Marland, Paul
Evennett, David	Marshall, John (Hendon S)
Faber, David	Marshall, Sir Michael (Arundel)
Fabricant, Michael	Martin, David (Portsmouth S)
Fenner, Dame Peggy	Mawhinney, Dr Brian
Field, Barry (Isle of Wight)	Mellor, Rt Hon David
Fishburn, Dudley	Merchant, Piers
Forsyth, Michael (Stirling)	Michie, Mrs Ray (Argyll Bute)
Forth, Eric	Milligan, Stephen
Foster, Don (Bath)	Mitchell, Sir David (Hants NW)
Fox, Dr Liam (Woodspring)	Monro, Sir Hector
Fox, Sir Marcus (Shipley)	Moss, Malcolm
Freeman, Roger	Needham, Richard
French, Douglas	Nelson, Anthony
Gale, Roger	Neubert, Sir Michael
Gallie, Phil	Newton, Rt Hon Tony
Garnier, Edward	Nicholls, Patrick
Gillan, Cheryl	Nicholson, David (Taunton)
Goodlad, Rt Hon Alastair	Nicholson, Emma (Devon West)
Goodson-Wickes, Dr Charles	Norris, Steve
Gorst, John	Onslow, Rt Hon Sir Cranley
Grant, Sir Anthony (Cambs SW)	Oppenheim, Phillip
Greenway, Harry (Ealing N)	Ottaway, Richard
Greenway, John (Ryedale)	Page, Richard
Grylls, Sir Michael	Paice, James
Gummer, Rt Hon John Selwyn	Patnick, Irvine
Hague, William	Patten, Rt Hon John
Hamilton, Rt Hon Archie (Epsom)	Pattie, Rt Hon Sir Geoffrey
Hamilton, Neil (Tatton)	Pickles, Eric
Hanley, Jeremy	Porter, Barry (Wirral S)
Hargreaves, Andrew	Portillo, Rt Hon Michael
Harris, David	Powell, William (Corby)
Haselhurst, Alan	Rathbone, Tim
Hawkins, Nick	Redwood, John
Heald, Oliver	Renton, Rt Hon Tim
Heathcoat-Amory, David	Richards, Rod
Hill, James (Southampton Test)	Riddick, Graham
Hogg, Rt Hon Douglas (G'tham)	Robathan, Andrew
Horam, John	Roberts, Rt Hon Sir Wyn
Hordern, Rt Hon Sir Peter	Robertson, Raymond (Ab'd'n S)
Howarth, Alan (Strat'rd-on-A)	Robinson, Mark (Somerton)
Howell, Rt Hon David (G'dford)	Rowe, Andrew (Mid Kent)
Hughes, Simon (Southwark)	Rumbold, Rt Hon Dame Angela
Hunt, Rt Hon David (Wirral W)	Ryder, Rt Hon Richard
Hunt, Sir John (Ravensbourne)	Sackville, Tom
Hunter, Andrew	Sainsbury, Rt Hon Tim
Jack, Michael	Scott, Rt Hon Nicholas
Johnson Smith, Sir Geoffrey	Shaw, David (Dover)
Johnston, Sir Russell	Shaw, Sir Giles (Pudsey)
Jones, Gwilym (Cardiff N)	Shephard, Rt Hon Gillian
Jones, Ieuan Wyn (Ynys Môn)	Shepherd, Colin (Hereford)
Jopling, Rt Hon Michael	Smith, Tim (Beaconsfield)
Kellett-Bowman, Dame Elaine	Soames, Nicholas
Kennedy, Charles (Ross,C&S)	Spencer, Sir Derek
Key, Robert	Spicer, Sir James (W Dorset)
Kilfedder, Sir James	Spink, Dr Robert
Kirkhope, Timothy	Spring, Richard
Kirkwood, Archy	Sproat, Iain
Knight, Mrs Angela (Erewash)	Stanley, Rt Hon Sir John
Knight, Greg (Derby N)	Stephen, Michael
Knox, David	Streeter, Gary
Kynoch, George (Kincardine)	Sumberg, David
Lait, Mrs Jacqui	Sykes, John
Leigh, Edward	Taylor, John M. (Solihull)
Lennox-Boyd, Mark	Temple-Morris, Peter

Thomason, Roy	Wheeler, Rt Hon Sir John
Thompson, Sir Donald (C'er V)	Whitney, Ray
Thornton, Sir Malcolm	Whittingdale, John
Thurnham, Peter	Widdecombe, Ann
Townsend, Cyril D. (Bexl'yh'th)	Wiggin, Sir Jerry
Tracey, Richard	Wigley, Dafydd
Tredinnick, David	Willetts, David
Twinn, Dr Ian	Wolfson, Mark
Vaughan, Sir Gerard	Wood, Timothy
Viggers, Peter	Yeo, Tim
Waldegrave, Rt Hon William	Young, Sir George (Acton)
Walden, George
Waller, Gary	Tellers for the Ayes:
Wardle, Charles (Bexhill)	Mr. Robert Hughes and
Waterson, Nigel	Mr. Andrew Mitchell.
Wells, Bowen
NOES
Abbott, Ms Diane	Rooney, Terry
Betts, Clive	Rowlands, Ted
Brown, N. (N'c'tle upon Tyne E)	Shore, Rt Hon Peter
Campbell-Savours, D. N.	Simpson, Alan
Chisholm, Malcolm	Skinner, Dennis
Cryer, Bob	Smith, Andrew (Oxford E)
Cunliffe, Lawrence	Smith, Llew (Blaenau Gwent)
Davies, Rt Hon Denzil (Llanelli)	Spearing, Nigel
Davis, Terry (B'ham, H'dge H'l)	Taylor, Sir Teddy (Southend, E)
Dixon, Don	Walker, Bill (N Tayside)
Foster, Rt Hon Derek	Winnick, David
Godman, Dr Norman A.	Wray, Jimmy
Gould, Bryan
Grocott, Bruce	Tellers for the Noes:
Howarth, George (Knowsley N)	Mr. Ron Leighton and
Livingstone, Ken	Mr. Peter Hain.
McMaster, Gordon

Question accordingly agreed to.

Question put accordingly, That the amendment be made:—

The Committee divided: Ayes 26, Noes 245.

Division No. 208]	[6 51 am
AYES
Abbott, Ms Diane	McAllion, John
Beggs, Roy	McMaster, Gordon
Campbell-Savours, D. N.	Rogers, Allan
Cash, William	Rooney, Terry
Chisholm, Malcolm	Rowlands, Ted
Cook, Frank (Stockton N)	Shore, Rt Hon Peter
Cryer, Bob	Simpson, Alan
Cunliffe, Lawrence	Skinner, Dennis
Davies, Rt Hon Denzil (Llanelli)	Smith, Llew (Blaenau Gwent)
Davis, Terry (B'ham, H'dge H'l)	Spearing, Nigel
Dixon, Don	Winnick, David
Godman, Dr Norman A.	Wray, Jimmy
Gould, Bryan
Howarth, George (Knowsley N)	Tellers for the Ayes
Jones, Lynne, (B'ham S O)	Mr. Peter Hain and
Livingstone, Ken	Mr. Ron Leighton
NOES
Adley, Robert	Blackburn, Dr John G.
Ainsworth, Peter (East Surrey)	Booth, Hartley
Aitken, Jonathan	Boswell, Tim
Alexander, Richard	Bottomley, Peter (Eltham)
Amess, David	Bottomley, Rt Hon Virginia
Ancram, Michael	Bowden, Andrew
Arbuthnot, James	Bowis, John
Arnold, Jacques (Gravesham)	Brandreth, Gyles
Arnold, Sir Thomas (Hazel Grv)	Brazier, Julian
Ashby, David	Bright, Graham
Atkinson, Peter (Hexham)	Brooke, Rt Hon Peter
Baker, Nicholas (Dorset North)	Brown, M. (Brigg & Cl'thorpes)
Baldry, Tony	Browning, Mrs. Angela
Banks, Matthew (Southport)	Bruce, Ian (S Dorset)
Banks, Robert (Harrogate)	Burns, Simon
Bates, Michael	Burt, Alistair
Batiste, Spencer	Butterfill, John
Bellingham, Henry	Carlisle, Kenneth (Lincoln)
Beresford, Sir Paul	Carrington, Matthew

Channon, Rt Hon Paul	Jackson, Robert (Wantage)
Chapman, Sydney	Johnson Smith, Sir Geoffrey
Churchill, Mr	Johnston, Sir Russell
Clarke, Rt Hon Kenneth (Ruclif)	Jones, Gwilym (Cardiff N)
Clifton-Brown, Geoffrey	Jones, Ieuan Wyn (Ynys Môn)
Coe, Sebastian	Jopling, Rt Hon Michael
Colvin, Michael	Kellett-Bowman, Dame Elaine
Congdon, David	Kennedy, Charles (Ross,C&S)
Conway, Derek	Key, Robert
Coombs, Anthony (Wyre For'st)	Kilfedder, Sir James
Coombs, Simon (Swindon)	Kirkhope, Timothy
Cope, Rt Hon Sir John	Kirkwood, Archy
Cormack, Patrick	Knight, Mrs Angela (Erewash)
Couchman, James	Knight, Greg (Derby N)
Curry, David (Skipton & Ripon)	Knox, David
Dafis, Cynog	Kynoch, George (Kincardine)
Davis, David (Boothferry)	Lait, Mrs Jacqui
Day, Stephen	Leigh, Edward
Deva, Nirj Joseph	Lennox-Boyd, Mark
Devlin, Tim	Lester, Jim (Broxtowe)
Dorrell, Stephen	Lidington, David
Douglas-Hamilton, Lord James	Lightbown, David
Dover, Den	Lilley, Rt Hon Peter
Duncan, Alan	Lloyd, Peter (Fareham)
Dunn, Bob	Llwyd, Elfyn
Durant, Sir Anthony	Luff, Peter
Elletson, Harold	Lyell, Rt Hon Sir Nicholas
Emery, Rt Hon Sir Peter	MacGregor, Rt Hon John
Evans, David (Welwyn Hatfield)	Maclean, David
Evans, Jonathan (Brecon)	McLoughlin, Patrick
Evans, Nigel (Ribble Valley)	Madel, David
Evans, Roger (Monmouth)	Maitland, Lady Olga
Evennett, David	Malone, Gerald
Faber, David	Mans, Keith
Fabricant, Michael	Marland, Paul
Fenner, Dame Peggy	Marshall, John (Hendon S)
Field, Barry (Isle of Wight)	Marshall, Sir Michael (Arundel)
Fishburn, Dudley	Martin, David (Portsmouth S)
Forsyth, Michael (Stirling)	Mawhinney, Dr Brian
Forth, Eric	Mellor, Rt Hon David
Foster, Don (Bath)	Merchant, Piers
Fox, Dr Liam (Woodspring)	Michie, Mrs Ray (Argyll Bute)
Fox, Sir Marcus (Shipley)	Milligan, Stephen
Freeman, Roger	Mitchell, Andrew (Gedling)
French, Douglas	Mitchell, Sir David (Hants NW)
Gale, Roger	Monro, Sir Hector
Gallie, Phil	Moss, Malcolm
Garel-Jones, Rt Hon Tristan	Needham, Richard
Garnier, Edward	Nelson, Anthony
Gillan, Cheryl	Neubert, Sir Michael
Goodlad, Rt Hon Alastair	Newton, Rt Hon Tony
Goodson-Wickes, Dr Charles	Nicholls, Patrick
Gorst, John	Nicholson, David (Taunton)
Grant, Sir Anthony (Cambs SW)	Nicholson, Emma (Devon West)
Greenway, Harry (Ealing N)	Norris, Steve
Greenway, John (Ryedale)	Onslow, Rt Hon Sir Cranley
Grylls, Sir Michael	Oppenheim, Phillip
Gummer, Rt Hon John Selwyn	Ottaway, Richard
Hague, William	Page, Richard
Hamilton, Rt Hon Archie (Epsom)	Paice, James
Hamilton, Neil (Tatton)	Patten, Rt Hon John
Hanley, Jeremy	Pattie, Rt Hon Sir Geoffrey
Hargreaves, Andrew	Pickles, Eric
Harris, David	Porter, Barry (Wirral S)
Haselhurst, Alan	Portillo, Rt Hon Michael
Hawkins, Nick	Powell, William (Corby)
Heald, Oliver	Rathbone, Tim
Heathcoat-Amory, David	Redwood, John
Hill, James (Southampton Test)	Renton, Rt Hon Tim
Hogg, Rt Hon Douglas (G'tham)	Richards, Rod
Horam, John	Riddick, Graham
Hordern, Rt Hon Sir Peter	Robathan, Andrew
Howarth, Alan (Strat'rd-on-A)	Roberts, Rt Hon Sir Wyn
Howell, Rt Hon David (G'dford)	Robertson, Raymond (Ab'd'n S)
Hughes Robert G. (Harrow W)	Robinson, Mark (Somerton)
Hughes, Simon (Southwark)	Rowe, Andrew (Mid Kent)
Hunt, Rt Hon David (Wirral W)	Rumbold, Rt Hon Dame Angela
Hunt, Sir John (Ravensbourne)	Ryder, Rt Hon Richard
Hunter, Andrew	Sackville, Tom
Jack, Michael	Sainsbury, Rt Hon Tim

Scott, Rt Hon Nicholas	Tredinnick, David
Shaw, David (Dover)	Trotter, Neville
Shaw, Sir Giles (Pudsey)	Twinn, Dr Ian
Shephard, Rt Hon Gillian	Vaughan, Sir Gerard
Shepherd, Colin (Hereford)	Viggers, Peter
Smith, Tim (Beaconsfield)	Waldegrave, Rt Hon William
Soames, Nicholas	Walden, George
Spencer, Sir Derek	Waller, Gary
Spicer, Sir James (W Dorset)	Wardle, Charles (Bexhill)
Spink, Dr Robert	Waterson, Nigel
Spring, Richard	Wells, Bowen
Sproat, Iain	Wheeler, Rt Hon Sir John
Stanley, Rt Hon Sir John	Whitney, Ray
Steen, Anthony	Widdecombe, Ann
Stephen, Michael	Wiggin, Sir Jerry
Streeter, Gary	Wigley, Dafydd
Sumberg, David	Willetts, David
Sykes, John	Wolfson, Mark
Taylor, John M. (Solihull)	Wood, Timothy
Temple-Morris, Peter	Yeo, Tim
Thomason, Roy	Young, Sir George (Acton)
Thompson, Sir Donald (C'er V)
Thornton, Sir Malcolm	Tellers for the Noes:
Thurnham, Peter	Mr. Irvine Patnick and
Townsend, Cyril D. (Bexl'yh'th)	Mr. Andrew Mackay.
Tracey, Richard

Question accordingly negatived.

Mr. Spearing

On a point of order, Mr. Morris. The Committee has now been sitting for 14 hours. Would you accept a motion to move progress?

The Chairman

Yes. I shall put that Question now.

Motion made, and Question put, That the Chairman do report progress and ask leave to sit again.

Mr. Cryer

On a point of order, Mr. Morris.

The Chairman

Order. I have accepted a point of order, and have already put the Question.

The Committee proceeded to a Division:—

Mr. Spearing

(seated and covered): On a point of order, Mr. Morris. I do not like wearing the hat, but I wish to make a serious point, and this is the only way in which I can do so. I asked permission to move to report progress, and you said that you were prepared to accept a motion. Then my hon. Friend the Member for Bradford, South (Mr. Cryer) rose on a point of order. I therefore sat down, because a point of order takes precedence. [HON. MEMBERS: "No."] I was prepared to speak, and I believe that under the Standing Orders of the House, if an occupant of the Chair accepts a motion to report progress and an hon. Member has suggested that he wishes to move it, and to speak to it—I gave you notice of my intentions, because I wished to speak to the motion—the Committee should have an opportunity to debate it, if that is necessary. I wished to speak on the Question that you put, Mr. Morris, and I think that you knew that that was my intention.

The Chairman

I am most grateful to the hon. Gentleman. He is quite right; he gave me notice that he intended to raise the point of order, and that enabled me to check on the Standing Orders and to weigh up the situation. Standing Order 34(1) says: If…the chairman, shall be of opinion that a dilatory motion is an abuse of the rules of the House, he may forthwith put the question thereupon from the chair, or he may decline to propose the question thereupon to the…committee. I decided to put the Question forthwith. It has been put. It was proposed and it was opposed. Therefore, there is a Division. Therefore, we shall proceed.

Mr. Peter Bottomley

(seated and covered): On a point of order, Mr. Morris. May I inform you that not only did those who wanted to speak after you had put the motion rise after you had done so, but we are also expecting many more hon. Members to return for a continuation of the debate, and it would be convenient for most of them to find that the debate was continuing?

The Chairman

It is not for me to anticipate who may be coming to the debate. I accepted the motion from the hon. Member for Newham, South (Mr. Spearing).

The Committee having divided: Ayes 35, Noes 244.

Division No. 209]	[7.05 am
AYES
Abbott, Ms Diane	McAvoy, Thomas
Barnes, Harry	McMaster, Gordon
Beggs, Roy	Miller, Andrew
Betts, Clive	Rogers, Allan
Campbell-Savours, D. N.	Rooney, Terry
Chisholm, Malcolm	Ross, William (E Londonderry)
Cook, Frank (Stockton N)	Rowlands, Ted
Cryer, Bob	Shore, Rt Hon Peter
Cunliffe, Lawrence	Simpson, Alan
Davies, Rt Hon Denzil (Llanelli)	Skinner, Dennis
Davis, Terry (B'ham, H'dge H'l)	Smith, Andrew (Oxford E)
Dixon, Don	Smith, Llew (Blaenau Gwent)
Flynn, Paul	Spearing, Nigel
Godman, Dr Norman A.	Winnick, David
Gould, Bryan	Wray, Jimmy
Grocott, Bruce
Hain, Peter	Tellers for the Ayes:
Howarth, George (Knowsley N)	Mr. Ron Leighton and
Jones, Lynne (B'ham S O)	Mr. Ken Livingstone.
McAllion, John
NOES
Adley, Robert	Clifton-Brown, Geoffrey
Ainsworth, Peter (East Surrey)	Coe, Sebastian
Aitken, Jonathan	Colvin, Michael
Alexander, Richard	Congdon, David
Amess, David	Conway, Derek
Ancram, Michael	Coombs, Anthony (Wyre For'st)
Arbuthnot, James	Coombs, Simon (Swindon)
Arnold, Jacques (Gravesham)	Cope, Rt Hon Sir John
Arnold, Sir Thomas (Hazel Grv)	Cormack, Patrick
Ashby, David	Couchman, James
Atkinson, Peter (Hexham)	Curry, David (Skipton & Ripon)
Baker, Nicholas (Dorset North)	Dafis, Cynog
Baldry, Tony	Davis, David (Boothferry)
Banks, Matthew (Southport)	Day, Stephen
Banks, Robert (Harrogate)	Deva, Nirj Joseph
Bates, Michael	Devlin, Tim
Batiste, Spencer	Dorrell, Stephen
Bellingham, Henry	Douglas-Hamilton, Lord James
Beresford, Sir Paul	Dover, Den
Blackburn, Dr John G.	Duncan, Alan
Booth, Hartley	Dunn, Bob
Boswell, Tim	Durant, Sir Anthony
Bottomley, Peter (Eltham)	Elletson, Harold
Bottomley, Rt Hon Virginia	Emery, Rt Hon Sir Peter
Bowden, Andrew	Evans, David (Welwyn Hatfield)
Brandreth, Gyles	Evans, Jonathan (Brecon)
Brazier, Julian	Evans, Nigel (Ribble Valley)
Bright, Graham	Evans, Roger (Monmouth)
Brooke, Rt Hon Peter	Evennett, David
Brown, M. (Brigg & Cl'thorpes)	Faber, David
Browning, Mrs. Angela	Fabricant, Michael
Bruce, Ian (S Dorset)	Fenner, Dame Peggy
Burns, Simon	Field, Barry (Isle of Wight)
Burt, Alistair	Forsyth, Michael (Stirling)
Butterfill, John	Forth, Eric
Carlisle, Kenneth (Lincoln)	Foster, Don (Bath)
Carrington, Matthew	Fox, Dr Liam (Woodspring)
Channon, Rt Hon Paul	Fox, Sir Marcus (Shipley)
Chapman, Sydney	Freeman, Roger
Churchill, Mr	French, Douglas
Clarke, Rt Hon Kenneth (Ruclif)	Gale, Roger

Gallie, Phil	Michie, Mrs Ray (Argyll Bute)
Garel-Jones, Rt Hon Tristan	Mitchell, Andrew (Gedling)
Garnier, Edward	Mitchell, Sir David (Hants NW)
Gillan, Cheryl	Monro, Sir Hector
Goodlad, Rt Hon Alastair	Moss, Malcolm
Goodson-Wickes, Dr Charles	Needham, Richard
Gorst, John	Nelson, Anthony
Grant, Sir Anthony (Cambs SW)	Neubert, Sir Michael
Greenway, Harry (Ealing N)	Newton, Rt Hon Tony
Greenway, John (Ryedale)	Nicholls, Patrick
Grylls, Sir Michael	Nicholson, David (Taunton)
Gummer, Rt Hon John Selwyn	Nicholson, Emma (Devon West)
Hague, William	Norris, Steve
Hamilton, Rt Hon Archie (Epsom)	Onslow, Rt Hon Sir Cranley
Hamilton, Neil (Tatton)	Oppenheim, Phillip
Hanley, Jeremy	Ottaway, Richard
Hannam, Sir John	Page, Richard
Hargreaves, Andrew	Paice, James
Harris, David	Patten, Rt Hon John
Haselhurst, Alan	Pattie, Rt Hon Sir Geoffrey
Hawkins, Nick	Pickles, Eric
Heald, Oliver	Porter, Barry (Wirral S)
Heathcoat-Amory, David	Portillo, Rt Hon Michael
Hendry, Charles	Powell, William (Corby)
Higgins, Rt Hon Sir Terence L.	Rathbone, Tim
Hill, James (Southampton Test)	Redwood, John
Hogg, Rt Hon Douglas (G'tham)	Renton, Rt Hon Tim
Horam, John	Richards, Rod
Hordern, Rt Hon Sir Peter	Riddick, Graham
Howarth, Alan (Strat'rd-on-A)	Robathan, Andrew
Howell, Rt Hon David (G'dford)	Roberts, Rt Hon Sir Wyn
Hughes Robert G. (Harrow W)	Robertson, Raymond (Ab'd'n S)
Hughes, Simon (Southwark)	Robinson, Mark (Somerton)
Hunt, Rt Hon David (Wirral W)	Rowe, Andrew (Mid Kent)
Hunt, Sir John (Ravensbourne)	Rumbold, Rt Hon Dame Angela
Hunter, Andrew	Ryder, Rt Hon Richard
Jack, Michael	Sackville, Tom
Jackson, Glenda (H'stead)	Sainsbury, Rt Hon Tim
Jackson, Robert (Wantage)	Scott, Rt Hon Nicholas
Johnson Smith, Sir Geoffrey	Shaw, David (Dover)
Johnston, Sir Russell	Shaw, Sir Giles (Pudsey)
Jones, Gwilym (Cardiff N)	Shepherd, Colin (Hereford)
Jones, Ieuan Wyn (Ynys Môn)	Smith, Tim (Beaconsfield)
Jopling, Rt Hon Michael	Soames, Nicholas
Kellett-Bowman, Dame Elaine	Spencer, Sir Derek
Kennedy, Charles (Ross,C&S)	Spicer, Sir James (W Dorset)
Key, Robert	Spring, Richard
Kilfedder, Sir James	Sproat, Iain
King, Rt Hon Tom	Stanley, Rt Hon Sir John
Kirkhope, Timothy	Steen, Anthony
Kirkwood, Archy	Stephen, Michael
Knight, Mrs Angela (Erewash)	Streeter, Gary
Knight, Greg (Derby N)	Sumberg, David
Knox, David	Sykes, John
Kynoch, George (Kincardine)	Taylor, John M. (Solihull)
Lait, Mrs Jacqui	Temple-Morris, Peter
Leigh, Edward	Thomason, Roy
Lennox-Boyd, Mark	Thompson, Sir Donald (C'er V)
Lidington, David	Thornton, Sir Malcolm
Lightbown, David	Thurnham, Peter
Lilley, Rt Hon Peter	Townsend, Cyril D. (Bexl'yh'th)
Lloyd, Peter (Fareham)	Tracey, Richard
Llwyd, Elfyn	Tredinnick, David
Luff, Peter	Trotter, Neville
Lyell, Rt Hon Sir Nicholas	Twinn, Dr Ian
MacGregor, Rt Hon John	Vaughan, Sir Gerard
Maclean, David	Viggers, Peter
McLoughlin, Patrick	Waldegrave, Rt Hon William
Madel, David	Walden, George
Maitland, Lady Olga	Waller, Gary
Malone, Gerald	Wardle, Charles (Bexhill)
Mans, Keith	Waterson, Nigel
Marland, Paul	Wells, Bowen
Marshall, John (Hendon S)	Wheeler, Rt Hon Sir John
Marshall, Sir Michael (Arundel)	Whitney, Ray
Martin, David (Portsmouth S)	Widdecombe, Ann
Mawhinney, Dr Brian	Wiggin, Sir Jerry
Mayhew, Rt Hon Sir Patrick	Wigley, Dafydd
Mellor, Rt Hon David	Willetts, David
Merchant, Piers	Wolfson, Mark

Wood, Timothy	Tellers for the Noes:
Yeo, Tim	Mr. Irvine Patrick and
Young, Sir George (Acton)	Mr. Andrew Mackay.

Question accordingly negatived.

Mr. Spearing

On a point of order, Mr. Morris. I wonder whether you can help the Committee and me with two specific matters. The first relates to the use of the article of headgear. There has been some comment oustide this place on the matter. I hope that you will agree that the recent incident shows a legitimate use of something on the head when an hon. Member raises a legitimate point of order during a Division. The Committee might bear that in mind when people criticise procedures which appear arcane but which have some use.

My second point relates to the Standing Order which you helpfully quoted in the exchanges. The Committee realises that any Chairman of any Committee can at any time refuse a motion to report progress when, clearly, that is not an issue on which there can be legitimate points of order. When the use of the word "abuse" is quoted from the Standing Orders, you have the option of taking it forthwith and not permitting a short debate. I am sure that you will rule that such a debate can be relatively short because any hon. Member has the power to move a closure on a debate and for the Chair to accept it, even after 10 minutes, quarter of an hour or half an hour, as the Chair supposes. I hope that you will confirm that that is trite.

My main point is the extent to which—[Interruption.] I am sure that you will accept that I have asked for three rulings so far. My fourth point relates to the use and interpretation of the word "abuse". It would be a pity if the difficulties which we have just experienced were repeated. I submit that, when the Committee has done eight hours overtime—[Interruption.] The choice to do that was in the hands of Her Majesty's Government, not the House of Commons. It is the choice of the Government, not the Committee, to keep us here.

Moreover, the debates have been of mountainous economic and national significance, which the media may not have covered. When the Government keep us here, it is not an abuse of the Committee for there to be a short debate on the Question that we report progress, because clearly the political area that has been covered in that time is great. I hope that you will be able to clarify that matter, Mr. Morris.

The Chairman

I am grateful to the hon. Gentleman. The Committee will know that he has been particularly assiduous in his attendance through the night. Headgear is a matter for the Procedure Committee. The word "abuse" is quoted in the Standing Order, so I have no choice but to use that word. When the hon. Gentleman moved his motion, the Chair had to decide one of three courses of action. The Chair could decide to refuse the motion altogether, to allow a Division only or to allow a debate and a Division. I chose the middle course.

Mr. Cryer

On a point of order, Mr. Morris. In applying the Standing Orders, the Chairman obviously uses his objective assessment. What worries me is that, as I came in and sat down on the Front Bench below the Gangway, I heard distinctly—it was not particularly inaudible—a Tory Whip tell the Liberals that my hon. Friend intended to move to report progress, that the motion would be taken immediately, and that it would be defeated and we would carry on. If that is the case, the source of information must have been yourself. Therefore, the interpretation is that you acted in collusion with the Tory Whips.

The Chairman

Order. To the best of my knowledge, the hon. Gentleman has only recently returned to the Chamber. When the hon. Member for Newham, South (Mr. Spearing) was kind enough to come to the Chair to say that he proposed to raise a point of order and move to report progress, it was my responsibility to the Committee to check the Standing Orders and the options available to me. If any hon. Member came to the Chair and asked me what the options were, I would give them guidance. I take my decision entirely on my own. Those who can recognise what interpretation I may put on it simply show their political acumen.

Mr. Bruce Grocott (The Wrekin)

On a point of order, Mr. Morris. The argument is not about any judgment that you made but about the fact that the discussion between you and my hon. Friend the Member for Newham, South (Mr. Spearing)—in which he sought clarification of what would be the response to his suggestion that the Committee should report progress—became known to Conservative Members, and in particular the Government Whips.

The issue is serious. We are well accustomed to the coalition between the Tory party and the Liberals, which worked closely through the night. [Interruption.] I know that Conservative Members are tired and overwrought, but they should listen to this. This is a matter for all Members, not just for my hon. Friend the Member for Newham, South, who raised the point. When Members seek the guidance of the Chair, it ought to be assumed that it is a private conversation in which an hon. Member seeks guidance.

I fully understand that it is not easy in the context of a crowded House to hold a private conversation, but clearly the Government Whips knew what action you were likely to take, Mr. Morris. That is not within the normal processes of the House. If it is impossible for Members to seek guidance privately from you because of the nature of the building, some machinery must be found whereby private advice can be received. It is wrong that the Government Whips knew and fully understood the decision that was made. [Interruption.] The hon. Member for Dover (Mr. Shaw) is getting excited and uses the word "stupid".

The Chairman

Order. I hope that I can help the hon. Gentleman. The Opposition Chief Whip came to see me in the early hours of this morning and sought guidance. I gave the right hon. Gentleman guidance. I have no control over what happens to the results of the guidance that I give, but the hon. Gentleman sought guidance and I was able to give it. It may well be that that guidance was not the guidance that the Government Whips thought likely, and I suspect that it was not. With respect, it is my job to give guidance on the options open to me and how I see a position.

Several hon. Members

rose—

The Chairman

Order. I hope that these are new points of order.

7.30 am

Mr. Gould

On a point of order, Mr. Morris. You kindly and correctly set out the options with which you were confronted when my hon. Friend the Member for Newham, South (Mr. Spearing) approached you with the suggestion that he might move to report progress. Hon. Members on all sides of the House understand that that is a matter for your discretion and you have explained the decision that you made. However, you also said—you elaborated that point in your last statement—that if you were approached by any hon. Member, you would discuss the options before you and the likely course—

The Chairman

Order. The hon. Gentleman may come back. I do not discuss the options; I clarify what the options are.

Mr. Gould

I am willing to use that phraseology. You clarify the options available to you.

My hon. Friend the Member for Newham, South will confirm that he was unaware of the option, choice or decision that you were likely to make.

The Chairman

The hon. Member for Newham, South did not come back and ask me.

Mr. Gould

In that case, Mr. Morris, we are again on all fours. We agree that the hon. Member who approached you with a view to moving that motion departed from his conversation with you unaware of the decision that you were likely to take. My question to you, Mr. Morris, is that when you said that any—

The Chairman

Order. All hon. Members depart from me unaware of what decision I shall make. The clarification they receive, if they so ask, is what options are available.

Mr. Gould

Nevertheless, although my hon. Friend the Member for Newham, South was left in that situation, it is a matter of record, unless one disputes the evidence of my hon. Friend the Member for Bradford, South (Mr. Cryer), that other hon. Members appeared to know what your decision was likely to be. When you said that any hon. Member could approach you to ask for a clarification of the options, are we to understand that that includes a Government Whip? Did that happen on that occasion, and was that the way in which a Government Whip appeared to know what your decision would be?

The Chairman

It is perfectly true. The Government Whip sought clarification on the Standing Order and what the options are. That was available to any hon. Member, but nobody knew what decision I was going to make. Nor did any hon. Member earlier in the morning know what decision I was going to make on the clarification I gave the Opposition Chief Whip. What hon. Members appear to judge from that is not for me. Hon. Members know that if there are three options, they have only three possible guesses, and they must make a judgment, based on the way the Committee has proceeded and the attitude I have taken, as to what I am likely to conclude. It is part of the skill of hon. Members in all parts of the House to interpret the situation.

Mr. Rowlands

On a point of order, Mr. Morris. As the Committee might come across this again, I wonder whether we might understand the criteria used to decide whether one debates a motion to report progress. Did you research the last precedent when the House sat for 14 hours and the Chairman ruled that the report progress motion should not be debated?

The Chairman

The Chair makes a judgment on the particular point at the time it arises. The precedent is in the Standing Order.

Mr. Peter Bottomley

Further to that point of order, Mr. Morris. The House heard you say that you have to act in public on the things that happen in public. The last question about the Chair refusing to accept a motion cannot be relevant, because the motion was accepted, not rejected.

The second point, Mr. Morris, is that, when the hon. Member for Newham, South (Mr. Spearing) sought to move the motion, it was accepted by the Chair. The hon. Member for Newham, South did not rise, and only after the question had been put did the hon. Member for Bradford, South (Mr. Cryer) rise. Surely these points of order are, in effect, trying to delay the proceedings, in the same way as the motion sought to delay the proceedings?

The Chairman

Order. No, they were perfectly fair points of order. If I may say so, I have checked on the rules of the House and on the Standing Orders, and I am working within the Standing Orders. I regret that some hon. Members perhaps do not fully understand the Standing Orders, but that is not the responsibility of the Chair. I have now clarified those Standing Orders. I have clarified the three options that were available to me, and I have decided on this occasion on the middle course. Next time I might decide something different, but that is a matter of judgment for the Chair. I hope, therefore, that the Committee will accept that.

Mr. Rowlands

Further to my point of order, Mr. Morris. Just as Standing Orders are vital to the House, so are precedents. It is therefore not unreasonable for an hon. Member like me to request you to discover for us when was the last time that a Chair, after 14 hours of debate, actually chose not to allow the "report progress" motion to be debated. It is a perfectly reasonable request.

The Chairman

Order. I respectfully suggest to the hon. Gentleman that my job here is to chair the Committee. He can go to the Library and ask that question. [Interruption.]

Mr. Denzil Davies

I beg to move amendment No. 81, in page 1, line 9, after "II", insert '(with the exception of those Articles and Protocols set out in Schedule [Second stage for achieving economic and monetary union.])'

The Chairman

With this, it will be convenient also to discuss the following: Amendment No. 83, in clause 1, Page 1, line 9, after 'II', insert '(other than Article 109h)'. Amendment No. 170, in clause 1, page 1, line 9, after 'II', insert '(except Article 73e on page 14 of Cm 1934)'. Amendment No. 171, in clause 1, page 1, line 9, after 'II', insert '(except Article 73f on page 14 of Cm 1934)'. Amendment No. 172, in clause 1, page 1, line 9, after 'II', insert '(except Article 73g on page 14 of Cm 1934)'. Amendment No. 196, in clause 1, page 1, line 9, after 'II', insert '(except Article 3a(2) on page 10 of Cm 1934'. Amendment No. 200, in clause 1, page 1, line 9, after 'II', insert '(except Article 73g(2) on page 14 of Cm 1934'. Amendment No. 204, in clause 1, page I, line 9, after 'II', insert '(except Article 109e(2(a)) on page 25 of Cm 1934'. Amendment No. 206, in clause 1, page 1, line 9, after 'II', insert '(except Article 109e(5) on page 25 of Cm 1934'. Amendment No. 207, in clause 1, page 1, line 9, after 'II', insert '(except Article 109(f)'. Amendment No. 210, in clause 1, page 1, line 9, after 'II', insert '(except Article 109m(1)'. Amendment No. 211, in clause 1, page 1, line 9, after 'II' insert 'except Article 109m(2)'. Amendment No. 319, in clause 1, page I, line 9, after 'II', insert '(except Article 3a (3) on page 10 of Cm. 1934).'. Amendment No. 333, in clause 1, page 1, line 9, after 'II', insert '(except paragraph 5 of Article 109e on page 25 of Cm. 1934)'. Amendment No. 363, in clause 1, page 1, line 9, after 'II', insert 'except Article 3(a) Paragraph 3 as referred to in Article G on page 10 of Command Paper number 1934'. Amendment No. 366, in clause 1, page 1, line 9, after 'II' insert 'except Article 73a as referred to in Article G on page 13 of Command Paper number 1934'. Amendment No. 367, in clause 1, page 1, line 9, after 'II', insert 'except Article 73b as referred to in Article G on page 13 of Command Paper number 1934'. Amendment No. 368, in clause 1, page 1, line 9, after 'II', insert 'except Article 73c as referred to in Article G on page 13 of Command Paper number 1934'. Amendment No. 369, in clause 1, page 1, line 9, after 'II', insert 'except Article 73D as referred to in Article G on page 14 of Command Paper number 1934'. Amendment No. 370, in clause 1, page 1, line 9, after 'II', insert 'except Article 73H as referred to in Article G on page 15 of Command Paper number 1934'. Amendment No. 380, in clause 1, page 1, line 9, after 'II', insert 'except Article 109g as referred to in Article G on page 27 of Command Paper number 1934'. Amendment No. 381, in clause 1, page 1, line 9, after 'II', insert 'except Article 109i as referred to in Article G on pages 27 and 28 of Command Paper number 1934'. Amendment No. 382, in clause 1, page 1, line 9, after 'II', insert 'except Article 1091 as referred to in Article G on pages 29 and 30 of Command Paper number 1934'. Amendment No. 409, in clause 1, page 1, line 9, after 'II', insert '(except the Protocol on the Convergence Criteria referred to in Article 109j of the Treaty establishing the European Community on page 112 of Cm 1934).'. Amendment No. 440, in clause 1, page 1, line 9, after 'II', insert '(except from "(79)" to "force" on page 58 of Cm. 1934)'. Amendment No. 51, in clause 1, page 1, line 10, after '1992', insert 'but not Article 109c in Title II thereof". Amendment No. 60, in clause 1, page 1, line 10, after '1992', insert 'but not the Protocol on the statute of the European Monetary Institute.'. Amendment No. 205, in clause 1, page 1, line 10, after '1992', insert 'except Article 109e of Title VI of Title II thereof. Amendment No. 208, in clause 1, page 1, line 10, after '1992', insert 'but not Article 109j of Title VI of Title II thereof'. Amendment No. 209, in clause 1, page 1, line 10, after '1992', insert 'but not Article 109k(1) of Title VI of Title II thereof'. Amendment No. 225, in clause 1, page 1, line 10, after '1992', insert 'but not the Protocol on the Transition to the Third Stage of Economic and Monetary Union'. Amendment No. 400, in clause 1, page 1, line 13, after 'Community', insert 'with the exception of the Protocol on certain provisions relating to the United Kingdom of Great Britain and Northern Ireland on pages 114 to 116 of Cm 1934.'. Amendment No. 444, in clause 2, page 1, line 19, after 'intends', insert 'not'. Amendment No. 35, in clause 2, page 1, line 23, at end add ';but in circumstances where convergence in economic performance as establshed in Article 109 has been achieved and where other major member states have decided to move to the third stage, the proposal for the United Kingdom to do so shall be placed before Parliament for affirmation.'. Amendment No. 42, in clause 2, page 1, line 23, at end add 'and the decision in principle so to move has first been approved by a separate Act of Parliament'. Amendment No. 420, in clause 2, page 1, line 23, at end add 'and unless Her Majesty's Government has reported to Parliament on its proposals for the co-ordination of economic policies, its role in the European Council of Finance Ministers (ECOFIN) in pursuit of the objectives of Article 2 as provided for in Articles 103 and 102a, and the work of the European Monetary Institute in preparation for Economic and Monetry Union.'. Amendment No. 39, in clause 2, page 1, line 23, at end add '(2) As from the beginning of the year 1993 the Secretary of State shall—

1. (a) not less often than once in every six months, lay before Parliament a report stating what, if any, steps are being taken by the United Kingdom with a view to moving to the third stage, and
2. (b) seek Parliamentary approval for any such steps as are being, or are proposed to be, taken with that objective in view.'.

New clause 56—Convergence for economic and monetary union: reporting fulfilment— 'In complying with the requirement to submit information under Article 103(3), Her Majesty's Government shall report annually to Parliament on the extent of its fulfilment of the criteria set out in Article 109j, and shall include within its reports a statement on the implementation of a programme to improve economic performance, including measures for investment and employment measures to realise the objectives of Article 2.'. Amendment No. 82, new schedule:— 'SECOND STAGE FOR ACHIEVING ECONOMIC AND MONETARY UNION

1. (1) Article 109e.
1144
2. (2) Article 109f
3. (3) Protocol on the Statute of the European Monetary Institute.'.

Mr. Davies

The amendment mentions "Schedule". In this case the word "Schedule" refers to the second stage of economic and monetary union.

The Second Deputy Chairman of Ways and Means (Dame Janet Fookes)

Order. I wish to hear what the hon. Gentleman has to say, but it is impossible if there is too much noise. Will those who are leaving please go quickly and quietly?

Mr. Davies

Amendment No. 81 seeks to strike out the whole of the second stage of economic and monetary union, including the European monetary institute and the protocol related to it. Perhaps I may respectfully remind the Committee that this group of amendments deals with the transitional arrangements, with the second stage and the third stage, so it covers the whole of the process towards the final act of a single currency, if that should happen. Amendment No. 409 seeks to exclude the protocol on the convergence criteria which have to be achieved before a member state can enter stage 3. Amendments Nos. 38 and 381 deal with the balance of payments crisis and the power given to the Commission, within those stages, to control and supervise any action taken by a nation state in respect of that balance of payments crisis.

Although chapter 4 of the treaty of union on page 25 is headed "Transitional Provisions", it deals in the main with the second stage and then with the third stage.

Before I discuss those, perhaps I could clarify the legal position. I should like the Financial Secretary to answer some questions. Despite the fact that he has been up all night, he is bright-eyed and bushy-tailed, and I am sure that he will courteously seek to answer questions on the literal interpretation of the text, which is not easy to understand. I give him warning that I shall have to ask such questions.

I am glad to see the Attorney-General here. During most of the debates he has kept a watching brief. We have not had the benefit of his words, but he has looked wise, as Attorneys-General are apparently supposed to do. I shall try to set out the legal position as I understand it. Some of the amendments may be desirable from the Government's point of view, but they may not be necessary—to use the language of the Foreign Secretary or of the Attorney-General.

Stage 2 of economic and monetary union imposes treaty obligations on us. We have not acquired an opt-in or an opt-out to stage 2, which is a treaty obligation. We are not supposed to refer to the gentlemen in the Box, and I do not know whether they are Foreign Office legal advisers, but I see that they agree with me. I am not sure whether that is worrying.

To return to the Attorney-General's helpful intervention on amendment No. 27, when he said in so many words—I should have thought that it was a fairly simple legal point—that if one has a treaty obligation, one must incorporate it into domestic law. The corollary is that, if one has no treaty obligation, one has nothing to incorporate into domestic law.

According to the Government, amendment No. 27 did not create a treaty obligation, so nothing was put into domestic law; thus, it did not really matter what one put into that law.

Stage 3 does not involve any treaty obligations. The Financial Secretary did not say so in so many words, but I am not criticising him. He does not have the courage of the Minister of State, who rushes into the legal arguments with great enthusiasm. Therefore, any amendments to stage 3 are not fundamental to the treaty. I mention that to Members on the Labour Front Bench, so that if they wish to be courageous on this occasion and to vote on an amendment relating to stage 3, they need not worry, because the treaty will be fine and can still be ratified. I think that the Attorney-General will confirm that that is correct. I want my hon. Friends on the Front Bench to be careful not to vote on stage 2 because it might badly hurt the treaty, which apparently the official Labour party supports.

First, I will deal with stage 2. On page 25, the first paragraph of article 109e states: The second stage for achieving economic and monetary union shall begin on 1 January 1994. There is not much time. The treaty may or may not be ratified by then—who knows? No one knows what will happen in the Danish referendum, or in this House and the other place.

Even if the treaty is ratified by 1 August—let us give the Government some hope—there is not much time for the Financial Secretary, the Foreign Office and the Treasury to get their tackle in order, as we shall be straight into stage 2 of economic and monetary union, which is obligatory. We cannot plead the opt-out or the opt-in.

Article 109e continues by stating that even "Before that date"—presumably the date when every country has ratified—and the second stage "each Member State shall" do certain things. In paragraph 2(a) we are told that each member state shall adopt multiannual programmes. I suppose I know what multiannual programmes are—lots of programmes in one year, I take it. As this is Treasury stuff, I hope that the Financial Secretary will be able to tell us whether we are to embark on these multiannual programmes in the middle of this year. These are very important programmes.

7.45 am

Mr. Rowlands

I see that the Financial Secretary is shaking his head, but the achievement of economic and monetary union must be the purpose of a multiannual programme.

Mr. Davies

I hope that the Financial Secretary was not indicating dissent. We do not know who is watching these debates. We do not know whether the Commission has a magic eye. We have heard in previous debates that member states must be careful, that they are not supposed to interfere with the Commission. Others may say what they like, but Ministers have to be careful. I hope that we shall be told that these multiannual programmes are starting. Otherwise, after the treaty has been ratified, the Government will be breaking one of the first articles. That would be a bad start.

Mr. George Howarth (Knowsley, North)

Which one?

Mr. Davies

I shall try to answer my hon. Friend's question, and the Financial Secretary will no doubt provide clarification. In fact, it seems that he is going to do so now.

Mr. Dorrell

The Red Book is a multiannual programme. It was laid before the House on Budget day.

Mr. Davies

That is a multiannual programme, not just an annual programme?

Mr. Dorrell

Yes. A multiannual programme is one that publishes plans in respect of more than one year.

Mr. Davies

Now the Minister tells us. The Chancellor did not tell us, did he? I wondered why he was putting three Finance Bills into one, and three Budgets into one. They cover three years.

Mr. Spearing

Is my right hon. Friend aware that the words "multiannual programme" are used frequently by the European Community? The EC does not do this in relation to just one general matter of public expenditure, to which I think the Financial Secretary referred, but in relation to programme after programme, sometimes for five or six years ahead. It therefore commits expenditure well ahead of the annual budget. That is the way in which not only the multiannual programme but the whole budget commitment works, irrespective of future economic developments. This practice of our friends and neighbours across the channel has not been a major feature of the United Kingdom until recently.

Mr. Livingstone

Cannot the Government give us an explanation? What is the difference between this multiannual programme, about which they seem so happy, and the old five-year plans of Comrade Stalin, which they regarded as an appalling abuse of human rights which led to dictatorship? How can the Government prevent the multiannual programme from becoming a panoply of Stalinism and repression? What is the difference? Is there a difference?

Mr. Davies

My hon. Friend asks a very important question and no doubt the Financial Secretary will answer it. He has certainly given us a new name for the Red Book. "Multiannual programme" sounds much better.

Dr. Godman

I should like to offer a concrete example of the imposition of a multiannual programme by the European Community, not by a national Government. The programme to which I refer concerns the size of the United Kingdom fishing fleet. Several years ago the European Community instructed the United Kingdom Government to reduce the size of its fishing fleet, over a period of three years, by about 20 per cent. in terms of horse power and gross registered tonnage. That instruction came from the European Commission by way of a multiannual programme.

Mr. Davies

I am grateful to my hon. Friend, who is diligent and understands such matters.

Sir Teddy Taylor

Is not the hon. Member for Greenock and Port Glasgow (Dr. Godman) being a little unfair? Does he not appreciate that the European Community multiannual programmes have huge advantages in terms of flexibility over our programmes? The commitments in the Edinburgh budget are worth millions of pounds more than the available resources. A European Community multiannual programme commits a country to spending far more money than it has. If we apply that principle to our resources, expenditure and budget, we can do extremely well. The method was used in 1988 when, because of a multiannual programme and working on a metric year of 10 months, it was possible to spend 20 per cent. more. I hope that the hon. Gentleman will not allow himself to throw out the possible advantages of the much greater degree of flexibility afforded by the EC's multiannual programmes, under which one can spend far more than one has, and nobody seems to complain.

Mr. Davies

Does my hon. Friend the Member for Newham, South (Mr. Spearing) wish to amplify the argument?

Mr. Spearing

The recent exchanges show the value of Committee procedure. Does my right hon. Friend agree that the introduction of commitments ahead of the raising of taxation strikes at the root of the financial power of the house over any Government who determine expenditure year on year? Making a commitment too far ahead—particularly in respect of the European Community—means that money is committed ahead of the economic circumstances and taxation at the time, which means that control over the Executive of the day is lost.

Mr. Davies

My hon. Friend is correct. I know something of the subject because, years ago, I used to have some ministerial responsibility—if that is not stretching it a bit—over the EEC budget. The Treasury was hard on the EEC budget and did not like the spending commitments whereby money was spent in one year and rolled over to the next, because the Treasury could not control the process. The Treasury was, rightly, austere.

No doubt in the laxer financial climate that prevails under the present Government—who create public sector borrowing requirements of up to £50 billion and more—the Treasury has been worn down. I am sure that the Financial Secretary can tell us.

Mr. Dorrell

The right hon. Gentleman is performing a remarkable feat: apparently he is signing up all his right hon. and hon. Friends to the sternest and strictest interpretation of the principle of annuality, which has historically been ascribed to Her Majesty's Treasury. That is something for which the Treasury is usually more criticised in the House than praised. Are we to take it that out of the window will go support for year-end flexibility and for taking a longer-term perspective? A multiannual programme is simply a commitment to look at an economic programme over more than one calendar year—in every other debate in which the subject has arisen in the House that policy has been accepted by both sides of the House as a good thing.

Mr. Davies

The Financial Secretary is perhaps making too much of the matter. I was saying that my hon. Friend the Member for Newham, South and the hon. Member for Southend, East (Sir T. Taylor) have argued that the way in which the EC has developed is different from the way in which the Treasury used to do things when I was a Treasury Minister. I was merely making a neutral statement. Perhaps Treasury Ministers then were pedantic, old-fashioned or wrong—but the Treasury always used to argue strongly against the idea of a carry-over. Obviously it is somethimes necessary to adopt the carry-over policy when dealing with large projects, such as those relating to defence.

However, payments and commitments were constantly being made in relation to the Eurpoean budget and it was sometimes difficult to follow what was happening and to maintain control. The Treasury was sensible to do so then, but we now live in times of laxer control over public expenditure—as was made obvious by the figures that the Chancellor gave us a few weeks ago.

Mr. Tim Renton (Mid-Sussex)

I think that the right hon. Gentleman is suffering from a slight shortage of memory. He was in the Treasury when the Chancellor, now Lord Healey, introduced his Budget in 1975 or 1976. In that, as in today's Red Book, there was a carry-forward of anticipated expenditure for a number of years ahead. That led to an expected PSBR of many billions of pounds and caused great concern to those of us in opposition at that time. No doubt at that time the right hon. Gentleman defended the multiannual PSBR, the deficit on planned Government expenditure that was shown up in the Red Book. At heart, the right hon. Gentleman is a sensible man and knows that Governments enter into expenditure programmes that will run for some years. The multiannual programme is simply a forecast of the likely outturn over future years. The right hon. Gentleman must remember that from his years at the Treasury. The Treasury may have been lax in those days, too, when, as far as I remember, he was one of its more spendthrift members.

Mr. Davies

We certainly had many Budgets; it was a kind of multibudget era. But we had only one PSBR each year and we carried very few things forward. The Financial Secretary says that multiannual means carrying forward or rolling forward. At least he has explained what is meant by multiannual programmes.

Mr. Rowlands

The multiannual programme in this article has the specific purpose of achieving economic and monetary union. Does my right hon. Friend agree that one of the major purposes of the Red Book was to achieve economic and monetary union?

Mr. Davies

My hon. Friend is right. I was coming to that issue, because the Red Book is intended to ensure the lasting convergence—not just a one-off convergence—that is necessary for the achievement of economic and monetary union.

The Financial Secretary got into some difficulty, which may have been due to the lateness of the hour, when he was asked by my hon. Friend the Member for Oxford, East (Mr. Smith) what the Prime Minister meant when he told The Irish Times that he was in favour of economic and monetary union as it would put us at the heart of Europe and all that. The Financial Secretary wriggled. He said, "Ah, well, of course there are all kinds of economic and monetary union." He nods, but perhaps he is tired. He did not mention the hard ecu, but it was the sort of 13th currency that the Treasury and some guy in the City dreamt up to try to get out of this nonsense. It was a rather clever idea, but, unfortunately, nobody bought it.

There may be all sorts of economic and monetary unions, but this one cannot be interpreted flexibly, whatever else has been interpreted in that way. The Financial Secretary shakes his head again. What other economic and monetary union can it be? If I were debating some other economic and monetary union I should be called to order. I am debating this one. In effect, it is monetary union because I do not know what economic union means. Monetary union is quite clear. We are told that the Red Book is intended to ensure the lasting convergence that is necessary for the achievement of economic and monetary union.

Mrs. Teresa Gorman (Billericay)

I congratulate the right hon. Gentleman on elucidating an issue that seems to have been missed by every hon. Member and certainly by the media. It is that propositions in the Bill have already been adopted into the practices of our budgeting structure. Another little item in the Budget caused some consternation and bamboozlement. It was VAT on fuel. That is the adoption of the concept of harmonisation of VAT because most member states have VAT on fuel and we will have a great deal more put on it before we see the end of that impost.

8 am

Mr. Davies

I had better be careful not to go down that particular road.

The Financial Secretary is studying the text of the treaty carefully, for which I am grateful. The Attorney-General has left—frankly, I do not blame him.

The multiannual programme must have regard to price stability. We are back to that again. The Government are doing all right with price stability at the moment, at 1.5 per cent. or 2 per cent., or 3 per cent. depending on whether it is the underlying rate. Perhaps next year, when the subsequent multiannual programme is published, the Financial Secretary will not be doing so well with price stability. I suspect that the pass has been sold and the Prime Minister realises that the British economic system needs inflation. We will return to that debate another time.

Article 109e states that the multiannual programme exists for the achievement of economic and monetary union, in particular with regard to sound public finances". That is a bit of a joke, with a £50 billion PSBR at 8.2 per cent. of GDP. That particular multiannual programme does not come anywhere near "sound public finances".

I do not think that next year's multiannual programme will do so, either. Will it be different, or does the current programme apply for three years? We have been given some Mickey Mouse figures that are supposed to allow forecasting of the PSBR for next year and the year after. I seem to remember that it was difficult to forecast on Friday the PSBR for Monday, let alone for three years ahead.

Sadly, whatever the Financial Secretary may say about his rolling programmes and the sophistication of public expenditure control—or the lack of it these days—the Government are not doing very well. There will be real problems. My hon. Friend the Member for Oxford, East mentioned flexibility. There is little flexibility in the treaty's provisions. The figure must fall and continue to fall to about 3.5 per cent. before too long—and that requirement must be observed because it is a treaty obligation. It is not an opt-out or opt-in. It must be done now, or at least when the treaty is ratified.

The Government claim that they will meet that obligation. They say, "We are all in favour of bringing down the PSBR. We will have a balanced budget." The figure must fall to 3 per cent. because the stage 2 obligation is to bring it as close to 3 per cent. as they can.

Paragraph 3 states that many of the provisions shall apply from the beginning of the second stage. It is suggested that there is a cut-off point between stages 2 and 3, when we can sit back as though nothing happened at stage 2. The Financial Secretary offered an explanation earlier. Apparently, the House is to be given a marvellous choice—unlike the Messina conference, the British people and the House will have a marvellous choice, some time in the future, on whether they want to take a decision, unfettered and uncluttered by anything that has gone before, to go for a single currency and—dare I say it?—economic and monetary union.

It will not be like that, because stage 2 runs into stage 3—and the transitional provisions run into stage 2. It used to be said of nuclear strategy that it was a seamless web. When Ministers found themselves in difficulty over the nuclear deterrent—I am sure that the right hon. Member for Mid-Sussex (Mr. Renton), as a former Chief Whip and Foreign Office Minister remembers this—the stock phrase was "a seamless web". Well, this is almost a seamless web. By the time we get to stage 3, the web will have spun all around us by stage 2. But I see that the former Chief Whip is itching to intervene.

Mr. Renton

The right hon. Gentleman has egged me on to my feet.

In my interesting days as Chief Whip, or Patronage Secretary, I cannot recall hearing either the Labour party or the Conservative party described as a seamless web. It strikes me as an extraordinarily inapt description. I should have thought that both our parties were more like spiders' webs, full of little traps from which hon. Members appear. Does the right hon. Gentleman regard his party as a seamless web in regard to the issue of the Maastricht treaty? Far from it, I should have thought.

Mr. Davies

The right hon. Gentleman is not on his best form this morning—or perhaps I did not explain properly. I was using the phrase "seamless web" to describe the whole process of the deterrent, from the little shells that nearly blew up Germany to the big ones that blew up the world. The right hon. Gentleman was a disarmament Minister, but I remember being on a television programme with him during the Reykjavik summit: he had not a clue what was going on and nor had I. I am not sure that the right hon. Gentleman learnt very much in the Foreign Office.

Dr. Godman

My right hon. Friend quoted paragraph 3, which states that paragraphs 1, 9, 11 and 14 of article 104c are excluded from the second stage. Does he agree that some powerful sanctions still exist—for example, in paragraph 8 of article 104c—which can be levied against a recalcitrant member state? Cannot a Council censure such a state in public? That could be disastrous, in an election year, for the governing party that is being so censured.

Mr. Davies

Indeed. I was coming to article 104c. My hon. Friend is right: some of the more draconian paragraphs are excluded until stage 3 is reached—paragraphs 1, 9, 11 and 14. Paragraph 3, however, states: If a Member State does not fulfil the requirements under one or both of these criteria"— the ratio criteria, which we have debated— the Commission shall prepare a report. That is pretty fierce in itself. The report of the Commission shall also take into account whether the government deficit exceeds government investment expenditure and take into account all other relevant factors". That is the starting point. Then, as my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) pointed out, if the nation state fails to do certain things, the Commission can publish the report. Under paragraph 12, it is held in terrorem over the head of the member state.

No member state—least of all a member state like Britain, which will probably have a balance of payments problem and whose currency will be rather wobbly—will want to incur such international opprobrium, with all the attendant effects on the international markets, the pound or interest rates. The report would be like an IMF report—the right hon. Member for Mid-Sussex can tease me about that again if he likes. We know the effect that the IMF can have on a nation's status in the currency and financial markets.

Paragraph 4 of chapter 4 states: In the second stage, Member States shall endeavour to avoid excessive government deficits. The Financial Secretary does not even look up. The word used is "endeavour", but the whole area encompasses pressure on the member state to ensure that it avoids excessive deficits.

Mr. Rowlands

Before my right hon. Friend deals with paragraph 4 of article 109e, let us consider the second part of paragraph 3, which lists a series of articles that will apply from the beginning of stage 3. At the beginning of his speech, my right hon. Friend mentioned the formula used by the Law Officers and the Foreign Secretary. They identified the articles and amendments that were necessary and those which were only desirable. They said that one category created rights and obligations. Is it my right hon. Friend's understanding that some of the articles listed in the second part of paragraph 3, relating to stage 3, are not necessary and, therefore, do not create rights and obligations at this stage and are thus only desirable? If so, could not some easily be knocked out of the Bill without preventing ratification?

Mr. Davies

That follows on from what I have tried to argue. The second part of paragraph 3 deals with articles which will apply from the beginning of stage 3. It could be knocked out without affecting ratification of the treaty. That must be right and I am sure that the Financial Secretary agrees.

Mr. Cash

In the same spirit of scrutiny, does the right hon. Gentleman agree that it would be as well to remember that we are talking about a legal requirement? The requirement for member states to "endeavour" to avoid excessive Government deficits under paragraph 4 of article 190e is, to all intents and purposes, no different from the requirement under the so-called opt-out in article 104c, of which much has been made, that member states "shall" avoid excessive Government deficits. The important point is that, if member states do not avoid such deficits, they will be up before the beak.

Mr. Davies

That is right. As the hon. Gentleman knows, the phrase "shall endeavour to avoid" appears in many contractual documents: "the party of the third part shall endeavour to avoid". If it can be shown that the party of the third part has not endeavoured to avoid, damages, fines, or whatever the document specifies, follow. However, we shall endeavour. Every day, the Financial Secretary "endeavours to avoid" at the Treasury. We heard that the Belgian Government had been endeavouring to avoid, although they did not manage it and lost a Prime Minister. They will try again because they will have to. Everyone is endeavouring to avoid.

I disagree with my hon. Friend the Member for Oxford, East, who appears to think that there is flexibility and that we do not have to worry. Everyone will be endeavouring to avoid and will endeavour to reach the 3 per cent. target as fast as they can, especially, and paradoxically, as the economic situation in Europe gets worse. It will drive member states towards economic and monetary union faster because that will be regarded as the panacea—get there quickly and everything will be all right. I suspect that it will work in a different direction.

The Financial Secretary is endeavouring. There will be another Red Book next year and he will ensure that the Commission does not come down on him like a ton of bricks. He will be a good boy and do the best he can.

Mr. Legg

I was interested in the right hon. Gentleman's comments about nation states in Europe wishing to go faster, even though economic circumstances were against them. I recently had a meeting with Pedro Perez, the socialist Economics Minister of Spain, where there is an unemployment rate of 20 per cent. He said that Spain had a convergence programme to get its public sector borrowing requirement down to 1 per cent. He saw the solution to Spain's unemployment problem as the driving down of the deficit. The right hon. Gentleman has hit on a very good point.

Mr. Davies

I wish to move on, but I agree that Governments will try to reach the 3 per cent. target as quickly as they can because they will be under pressure. Now that the ERM has failed to deliver economic and monetary union, because it could not traverse the chasm in one leap—it tried to do it in two leaps but fell down—there will be pressure to arrive at a common currency in another way, like a big bang, and everyone will have to converge as fast as they can. I think that that is what will happen, but it is a matter of opinion.

I shall now move on.

Mr. Hain

In support of that important point, may I remind my right hon. Friend of the statement by the Economics Commissioner, Mr. Henning Christophersen? My right hon. Friend may recall that a few weeks ago there was much speculation about the "impossibilist" convergence criteria. Countries were finding them difficult to meet; in fact, virtually no country was meeting them. Mr. Christophersen quickly jumped in to say that that did not mean that Europe was not still on course: We are not talking about a delay in the general process. We are talking about a common time frame. That was an important confirmation from the EC Commissioner.

Mr. Livingstone

And on the same point, does my right hon. Friend—

The Second Deputy Chairman

Order. We cannot have one intervention upon another.

8.15 am

Mr. Davies

I agree with my hon. Friend the Member for Neath (Mr. Hain). I, too, saw Mr. Christophersen's statement. It was rather a diplomatic statement, because I gather that different views were expressed at the meeting and the Commissioner may have been trying to straddle those different views. I believe that in general there will be an effort to get the process over with as quickly as possible.

Mr. Livingstone

One the same point, in view of what the hon. Member for Milton Keynes, South-West (Mr. Legg) has just said about the attitude of the Spanish Government, does not a clearer idea of what is likely to happen emerge from the first stage of the French election results? The French Government, also misguided, have striven to prepare the French economy for the criteria and have followed every stricture on monetary policy that comes out of Brussels, to try to make France the premier nation in terms of preparation for monetary union. The result has been the destruction of popular support for that Government and their elimination from Parliament. The results have been devastating, the worst showing by any French Government this century, and that is because that Government have complied so faithfully with the criteria. After the best part of a decade and a half in the first stage of the transition towards monetary union—that is what the exchange rate mechanism was all about—popular support has been destroyed, because the scale oaf f pain involved is not sustainable in a democracy.

Mr. Davies

It will be interesting to see what happens in France and whether the Gaullists will try to break the orthodoxy. I should be surprised if they did. I think that the Governments of Europe are all locked into it and that after a while they will not worry too much about their people. Perhaps I am digressing now, but I believe that there is a kind of political class that likes to latch on to that orthodoxy. I should be surprised if the Gaullists did otherwise, but I may be wrong.

May I now move on?

Mr. Gould

May I delay my right hon. Friend for a moment longer? Bearing in mind the powerful point made by the hon. Member for Milton Keynes, South-West about the Spanish experience, the even more powerful point made by my hon. Friend the Member for Brent, East (Mr. Livingstone) about the fate of the French socialist Government, and the fact that one of the few positive arguments for supporting the treaty ever advanced by our hon. Friends is that we must maintain and establish solidarity with our European socialist colleagues, does not my right hon. Friend think that it would be advisable for our hon. Friends at least to note the fate of the French socialist Government and the likely fate of the Spanish socialist Government? Even in terms of the most cynical electoral calculation, would not it be prudent to pause for a moment before blundering forward along the same course?

Mr. Davies

I agree. Indeed, about 30 of us recently went through the Aye Lobby to ask for a pause, but unfortunately I do not know where the rest of the Labour party was. Perhaps other Labour Members were in bed, or perhaps they did not want to pause—that must be the conclusion to draw. I agree that what my hon. Friend has described is a serious matter, not only for the so-called democratic left in Europe but for orthodox parties of the right, too. We are taking economics out of politics, which is a dangerous thing to do. No doubt we can return to that debate.

Article 109e (5) which deals with the Bank of England, says: During the second stage, each Member State shall, as appropriate, start the process leading to the independence of its central bank in accordance with Article 108. That is a legal obligation. The second stage starts on 1 January 1994 and goes on and on until we reach a third stage. Presumably, if we do not reach a third stage, we shall remain in the second stage.

My hon. Friend the Member for Oxford, East questioned the Financial Secretry once or twice on this matter and the Financial Secretary was not entirely clear about it. I think that he said, and I have heard other Ministers say, that we do not have to do anything about the Bank of England until the third stage—until we have opted in, if we decide to opt in. That is as it may be, but something has to be done by a member state, as my hon. Friend the Member for Oxford, East pointed out, to start the process leading to the independence of its central bank". What is meant by the independence of its central bank is that the statute governing that central bank must be as nearly identical as possible to the statute governing the European central bank, which is also independent. It makes sense that they should be mirror images, like the German länder banks and the Bundesbank. The process has to be started.

The Bank of England Act 1946 did not nationalise the Bank of England. I heard Lord Jay making a number of speeches explaining that Act quite clearly. It merely enabled the Treasury to issue directives to compel the Bank of England to obey. Apart from once, over prices and incomes policy, when those at the Bank went off and paid themselves a lot of money, I do not think that the Bank has ever been threatened or issued with a directive. We were contemplating one in those days, but, in the end, it did not have to happen. So now there are directives held in reserve. If the Governor refuses to put on his top hat, get in his car and come down to No. 10 Downing street and give his advice on interest rates, a directive will be issued.

The Bank of England Act will have to be substantially changed or repealed. The power to issue directives against the Bank of England will have to go. I should be surprised if that could be done by order. I do not see how it can be done except by repealing the Act.

Mr. Dorrell

rose—

Mr. Davies

I see that the Financial Secretary is ready to intervene. How does he envisage starting the process, which he will have to do in stage 2?

Mr. Dorrell

This country has no obligation under the treaty to move to stage 3. That is a choice which we have left until later. Furthermore, clause 2 provides that we would not be able to exercise our option of moving to stage 2 without a further piece of legislation going through the House. Clearly, as part of that legislative process, we should have to provide for an independent central bank which satisfied the terms of the treaty—if we chose to go to a single currency. We should have to provide arrangements for the Bank of England which satisfied the treaty, if we chose to exercise our option under our protocol. But if we choose not to exercise our option in order to join a single currency, we are under no obligation under the treaty to change the arrangements for the Bank of England.

Mr. Davies

Is the Financial Secretary saying that he does not start the process under stage 2 until just before the Queen signs the Act?

Mr. Cash

It is idiotic.

Mr. Dorrell

My hon. Friend the Member for Stafford (Mr. Cash) says that it is idiotic. As a statute is required to go through the House to make the changes to the Bank of England that are necessary to satisfy the requirements of the treaty, it seems to me not unreasonable to assume that the House would wish to consider the arrangements for the Bank of England at the same time as it made the choice whether to adopt a single currency. It would put the two things together. [Interruption.] With respect to my hon. Friend the Member for Stafford, it is not beyond the wit of man to fix a date on which a measure comes into force somewhat after the date of Royal Assent.

Mr. Davies

The Government will do the two at more or less the same time. We have not been told that before, so now we can move on. Of course, it means that the Government do not believe in an independent Bank of England. The present British set-up is excellent; the Governor gives his advice, and the Prime Minister and Chancellor decide. The French have had a similar system for years, although I do not think that they bother to consult the Governor, who is told of the decision, whatever it is, after it has been taken. By that means, the French have done well—better than the Germans—on inflation. We note with interest that the Government are not rushing to create the great independent central bank, which we shall have to accept if we go for the idea.

Mr. Gould

My right hon. Friend is perhaps being too generous to the Financial Secretary, who said that no step need be taken towards the establishment of an independent central bank unless and until the preconditions for the implementation of stage 3 are acted on. Yet that is contradicted by the words that my right hon. Friend quoted. They provide that under stage 2—the question whether we ever get to stage 3 is irrelevant—each member state shall—it is a mandatory use of language—start the process, leading to the establishment of the independent central bank. So my right hon. Friend was right to ask what steps the Government contemplate to fulfil that obligation. It has nothing to do with stage 3. We may never reach that stage, but that mandatory obligation would be in force as we proceeded through stage 2.

Mr. Davies

I am prepared to give the Financial Secretary the benefit of the doubt. I think he was saying that, for a magical moment, we shall be in stage 2, and then—whoosh—into stage 3. If he was not saying that, my hon. Friend the Member for Dagenham (Mr. Gould) is right.

Mr. Rowlands

If the Financial Secretary believes that this is the right process—that we can legislate for stage 3 when we come to the second piece of legislation—why are we putting so many articles into our domestic legislation now? If that formula is available in that case, why is it not available for other articles in stage 3, so that we can legislate for that stage when we decide to go into it?

Mr. Davies

My hon. Friend makes a good point, which has not so far been answered, except that what the Government are doing is tidy and makes the draftsmen happy. Of course, doing it this way avoids a terrible row, since our European colleagues will not have to accuse us of dragging our feet.

Mr. Legg

Should there be a prolonged period in stage 2 for the United Kingdom, and we have the provision stating that we shall start the process, will the decision to start the process be wholly in our hands? If Britain does not take that step in accordance with the treaty, other parties may apply pressure to get that part of the treaty enforced.

Mr. Davies

From a practical point of view, the answer is yes, something will have to be done. But it will all be done after the treaty has been ratified by joining the ERM—a subject to which I shall return.

Mr. Andrew Smith

The Government want to face in both directions simultaneously. They want to be able to say that the second stage can stretch ahead indefinitely, with the rest of Europe perhaps in stage 3, just as our proceedings today are actually taking place on Wednesday in parliamentary terms, even though Thursday Committees may soon start sitting. On the other hand, we must put every condition in place so that the Government can satisfy other European countries—and some of the Financial Secretary's other friends—that we will be in a position to satisfy the requirements of the treaty. The Government do not want to say which course of action they will take.

8.30 am

Mr. Davies

I will not be tempted too far. All the geniuses are on the Government Front Bench.

I shall refer to another institution. The number of institutions established by the European Community is amazing. There are institutions for all sorts of purposes. Article 109f provides for the European Monetary Institute. The Government's involvement must start at the beginning. The institution must be set up and the Government must be part of it immediately at the start of stage 2—which is 1 January, if everything goes all right. Basically, the EMI will be the shadow central bank. It will take over from the Committee of Governors, which already exists.

The process is clear: we have an obligation under the treaty, and we will obviously take a full part in the EMI. The statute of the EMI is set out in page 104 of the treaty. There are only one or two points to which I should refer. Paragraph 1.3 in article 1 of the protocol says: The Committee of Governors and the European Monetary Co-operation Fund (EMCF) shall be dissolved. All assets and liabilities of the EMCF shall pass automatically to the EMI. I do not know what the European monetary co-operation fund is. Perhaps the Financial Secretary could tell us what assets the fund has at present, what its liabilities are and what percentage of the assets—or perhaps more importantly, the liabilities—Her Majesty's Government own or for which money is owed. All the assets and liabilities will go to the EMI. Presumably, the fund passes out to the joint ownership of the British Government to some extent and comes under the ownership of the EMI, which then becomes the central bank. I hope that the Financial Secretary can clarify that matter.

In article 2, we are told the objectives of the EMI: The EMI shall contribute to the realization of the conditions necessary for the transition to the third stage of Economic and Monetary Union". It is not any old economic and monetary union, but the one provided for in the treaty. The Financial Secretary does not know whether we want to join that union.

An institution will be set up, perhaps on 1 January 1994. Its job will be to prepare the way for the central bank. The British Government will have to play their full part. Whatever money or effort it costs, and whether the Financial Secretary likes it or not, the Government will be part of an enterprise which will drive the countries of Europe towards a central bank, a single currency and economic and monetary union.

The article says that the EMI will make preparations required for the establishment of the European System of Central Banks (ESCB), and for the conduct of a single monetary policy"— the Government will be playing a full part at the heart of the institution in Europe— and the creation of a single currency in the third stage. The Financial Secretary or the governors will also oversee the development of the ecu, which will presumably be the single currency.

Mr. Rowlands

The hard ecu.

Mr. Davies

We lost the hard ecu somewhere along the way. I do not know what happened to it. Given the balance of payments deficit and the PSBR, we cannot talk about hard currencies. So to propose a hard ecu is perhaps not a good idea for the Government.

Mr. Legg

A marshmallow ecu.

Mr. Davies

A marshmallow ecu, the hon. Gentleman says.

Article 3 of the protocol says: The EMI shall act in accordance with the objectives and principles stated in Article 2 of the Statute of the ESCB. Then we are told what its primary tasks will be. I will not go through them all.

Mr. Hain

My right hon. Friend mentioned that the EMI would have to act in accordance with the objectives and principles stated in article 2 of the ESCB statute. If my right hon. Friend turns to page 90, he will find that the treaty lays down that the EMI will be directed to achieve price stability in a determined, laser-like fashion, in accordance with article 3a. So we have come full circle. Although supposedly we are not yet in stage 3 and the House will take a free decision to enter it, in practice we are lining ourselves up lock, stock and barrel to worship at the shrine of price stability at all costs and without prejudice to anything else.

Mr. Davies

That is right. As I said at the beginning of my speech, price stability appears in paragraph 2 of the transitional provisions. It appears right through the treaty. As the Financial Secretary accepted in another debate, price stability is close to zero inflation, if not zero inflation. That is what it is all about. We are told in paragraph 4.1 of the protocol that the EMI will normally be consulted by the national monetary authorities before they take decisions on the course of monetary policy in the context of the common framework for ex ante co-ordination. That means that, even under stage 2, the British Government will no longer be free to set their own monetary targets and determine how they control monetary policy. The EMI will be able to come to the Government and say, "We want to look at your monetary targets. How do you do it?" The job of the EMI is to create a common monetary policy for when stage 3 arrives. It will be ready to take over with the M3, M4, M10 or whatever totem pole of monetarism is in fashion when we reach the first stage of EMU.

Mr. Spearing

My right hon. Friend will agree with me that we have dealt with profound issues in the last two debates. Our problem is in describing them to those who are not habitually interested in international banking matters. Does he agree that what he has just described amounts to saying that, in stage 3, we are invited to enter a series of financial and economic straitjackets? However, in stage 2 we are not in the jackets, but we have to act as if we are.

Therefore, when we reach stage 2, we shall be told by whatever Government are in power that we can easily move to stage 3, because we shall not have to act any differently. That is perhaps a rather crude analogy. Is it not approximately the position in which the treaty and the matters referred to by my hon. Friend the Member for Neath (Mr. Hain) put us? Therefore, when the time comes for choice, it will be easier superficially for the Government or any Administration to say that we should enter stage 3 so that we can influence future events.

Mr. Davies

I quoted the last sentence of paragraph 4.1 of the protocol, but, as my hon. Friend has said, some of the sentences are stronger and bolder. One of them talks about strengthening the co-ordination of the monetary policies of the Member States with the aim of ensuring price stability; Another states that regular consultations must be held on the use of monetary policy instruments". I would not want to stretch the point, but that is getting pretty close to interest rates which are part of monetary control. Towards the end, there is a requirement to supervise the technical preparation of ECU bank notes". I do not know whether that means painting the name on them, but perhaps in Birmingham where they used to print pound notes they will be printing ecus.

The British Government are tied in by treaty obligations to do all those things, yet they have to pretend that, one day in the distant future, a pristine, unfettered, uncluttered decision will be taken to go in or to stay out. The Government are not credible when they say that; we are in pretty deep, and if we do not have the courage to cut this Gordian knot and say that it is all nonsense, we shall not have the courage to do it in five or six years' time, when we are all sitting nicely on our EMIs and other institutions, rushing back and forth from Brussels for splendid meetings. I do not believe that it will happen like that.

Mr. Chisholm

Is it not also the case that all the references to monetary policy must include exchange rate policy? Does not that give the lie to the idea that Ministers are peddling, in order to gain the votes of Conservative Back Benchers, that they will retain the freedom to set the exchange rate during stage 2? Is it not the case that we shall not be able to have a floating exchange rate and that that will be controlled, or at least influenced, by the EMI?

Mr. Davies

Indeed. I shall return to the interesting subject of the ERM. My hon. Friend is quite right.

Article 6.1n, on the European Monetary Institute, talks about a Council regulation 1969/88 establishing a single facility providing medium-term financial assistance for Member States' balance of payments. I see the Financial Secretary's eyes lighting up at the chance to get some money out of the Commission to help to cover the Government's huge balance of payments deficit. It was £17 billion this year, and if we have the recovery that the Government want, it will be £20 billion and will continue to rise.

It sounds a bit like the IMF, which was formed to help member states with balance of payments problems. That was its primary task, although I do not know whether that is still the case.

The EMI and the Commission will help out member states with their balance of payments problems, but there will be no free lunch. There will be a multiannual programme which will set out where the cuts should be made and how many hospitals and schools should be closed and whether there should be cuts in social security and welfare payments, which is what they are trying to do in Belgium and Germany, and facing some problems. Taxes will not be cut, as that would not be right, but it will be possible to cut public expenditure. If we want help with the balance of payments, we are going to have to pay the Danegeld.

Article 7 refers rather innocuously to other tasks: Once a year, the EMI shall address a report"— we shall have plenty of institutions and reports going back and forth all the time— to the Council on the state of the preparations for the third stage. That means the state of the preparations of member states, I assume, for the third stage. The report will go to the Council and it will say that the British Government have done nothing at all, apart from issuing a funny little book with a red cover and calling it a multiannual report. It will say that the Financial Secretary is sitting on his backside in the Treasury, doing nothing. And there will be terrible trouble.

But that will not happen, will it? Her Majesty's Treasury is a very law-abiding, responsible and proficient organisation, and we shall be doing our best at the heart of Europe, not like those Italians, dragging their feet, and those terrible Spaniards. We are northern people, Anglo-Saxons, we abide by the law, we do things right, our word is our bond.

Mr. Enright

We are not all Anglo-Saxons; some are Celts.

8.45 am

Mr. Davies

Yes, indeed, some of us are Celts. I was being respectful to my English colleagues who are in a majority in this House.

Nevertheless, we are Anglo-Saxon people, and we have those qualities that Anglo-Saxons are supposed to have, and that means that we will abide by the law. So we will be preparing it, working at it, doing all the things, getting the convergence going; and the report, no doubt, will be quite a good one in that sense. We will get lots of marks for effort. Maybe we will not always get our sums right, and sometimes the figures will be far out, say, on the public sector borrowing requirement, but at least we will be working hard at it, and that again will be the reality.

Article 7 goes on to say, These reports shall include an assessment of the progress towards convergence…and cover in particular the adaptation of monetary policy instruments"— back to those monetary policy instruments again; they love them— and the preparation of the procedures necessary for carrying out a single monetary policy in the third stage"— so there will have to be preparation of procedures ready for the third stage— as well as the statutory requirement to be fulfilled for national central banks"— oh yes, missed that— as well as the statutory requirements to be fulfilled for national central banks to become an integral part of the ESCB. The Financial Secretary has not seen that, has he? It is on page 106. He has it.

Mr. Cash

The right hon. Gentleman will recall that section 4 of the Bank of England Act 1946 is the exclusive basis upon which the Chancellor of the Exchequer and therefore the voters of this country are able to give directions to the Governor of the Bank of England. The provision that the hon. Gentleman has just mentioned, in article 7.1 and article 8 of the protocol—which I do not want to pre-empt but which deals with whether the Governor of the Bank of England, in that EMI, can seek or take instructions from the Treasury—blows the whole thing wide open. Not only have they to set up this bank, but they will have to repeal section 4 to make sense of it.

Mr. Davies

I do not know about that, but certainly article 8 mentions—it is the same article about independence as we find in the central bank protocol—

Mr. Dorrell

I think that there is a fundamental misunderstanding. The first sentence of article 8 reads: The members of the Council of the EMI"— the national central bank governors— who are the representatives of their institutions shall, with respect to their activities, act according [to] their own responsibilities. That means according to their existing responsibilities as defined by their existing national law. [HON. MEMBERS: "Read on."] The article then goes on: In exercising the powers and performing the tasks and duties conferred upon them by this Treaty and this Statute, the Council of the EMI may not seek or take any instructions from Community institutions or bodies or governments of Member States. The key point about the second sentence of article 8 is that it is the Council of the EMI as an institution which is not allowed to take instructions. The members of the Council, acting as individual members of the Council, do so on their own responsibility. [HON. MEMBERS: "Come on."] That is what that article means. It is no good hon. Members saying, "Come on"; that is the meaning of the article. I concede that the article is not the model of clarity of other articles in the treaty, which is why I intervened at an early stage to enable the House to proceed on the basis of a correct understanding of it.

Mr. Davies

I paid the Financial Secretary a compliment earlier this morning, saying that—unlike the Minister of State, Foreign Office—he does not rush in to give legal opinions on the hoof. [Interruption.] I hope that he did not ask the legal advisers at the Foreign Office—or did he? I hope that he did not ask the Treasury Solicitor, either.

Mr. Gould

I hope that I shall not embarrass the Financial Secretary, or anyone else, by revealing that, a long time ago, I taught him international and constitutional law. I disclaim all responsibility for what he has just said.

Mr. Davies

Some of us do not consider international and constitutional law to be law. As far as some of us are concerned, looking at the words is the law.

The Financial Secretary has an acute mind, and as he read on he started to wobble and to worry a bit. For a start, the article is headed "Independence", and a judge would be quite impressed with that.

Mr. Spearing

Does my right hon. Friend agree that it will not be international and constitutional law, but law as interpreted by the European Court of Justice, in respect of the treaty, which is quite a different matter? Is it not probable that that court may say that it is true that one must not influence that body, as a body, and that that also means that one must not try to influence its members, because in so doing one is trying to influence the body. Although I would not say that that is my interpretation, or that of the court, surely it is just as logical and likely as the interpretation given by the Financial Secretary.

Mr. Davies

The way that I read the article is that, when exercising their duties, whoever sits on the Council—presumably it will be the Governor of the Bank of England—will be subject to the Bank of England Act 1946. However, in exercising duties as a member of the EMI, the Governor must not take any instructions from anyone.

Mr. Dorrell

indicated dissent.

Mr. Davies

The Financial Secretary shakes his head, but that is a perfectly reasonable interpretation of what may not be an easy article. I suggest that, within the context of both the EMI and the central bank, and the thrust of the independence of those institutions, the European Court might he more likely to accept my interpretation than that of the Financial Secretary.

Mr. Dorrell

I concede that, even if I had been privy to the advice of my former tutor, I think that I would have had some difficulty in interpreting the article on my own. The interpretation that I placed on the two sentences that I quoted is given extra authority when I tell the House that the first sentence of the article is lifted directly from the present terms of reference of the Committee of Governors of the central banks. As far as I know, no one argues that, when acting as members of that committee, they are required to be independent of their national accountability mechanisms.

Mr. Davies

Maybe not—perhaps it is a looser institution and the article is referring to something more precise, but it is still headed "Independence". However I do not want to labour the point.

Mr. Legg

In saying that, because certain phraseology is taken from previous legislation and treaties, it must have the same interpretation as before, the Treasury has misinterpreted some areas of the treaty. The Government Front-Bench spokesman seemed to miss the point: that the phrases have been lifted and put into the Maastricht treaty in a different context, which adds a different interpretation and weight to the words involved.

Mr. Davies

I am sure that that is right.

Mr. Bill Walker

The right hon. Gentleman might cast his eye a little further down the page. The presidency of the EMI is a full-time job for three years. That must have an impact on the decisions of the EMI.

Mr. Davies

As I read the provision, there are different spheres of responsibility. It may be that the two circles will occasionally cross, creating something of a problem. So far as I can see, in the exercise of the duties in respect of the EMI, which may very well be different from those relating to the Bank of England, the Governor will be independent.

Mr. Hain

I should like to direct my right hon. Friend's attention to two sentences that the Financial Secretary was very reluctant to read out. These are identical to the wording of article 7 on page 91, which specifically details the independence criteria governing the European central bank. I should think that the court will take note of that.

Mr. Davies

The Financial Secretary shakes his head again, but my reading is the same as that of my hon. Friend.

Article 23 provides—hooray, hooray—for the liquidation of the EMI. Unfortunately, the institution appears again in another form—the more powerful central bank. I am sorry to come back to the question of assets and liabilities, but I must do so. All the assets and liabilities of the EMI will automatically pass to the central bank. They started with the Co-ordinating Committee of European Governors, then went to the EMI, and are now to go to the European central bank. Article 29 of the bank's statute deals with the capital subscription—the weighting of voting of shareholders. I suppose that one can subscribe to things other than shares.

I do not understand this article, and I should not criticise the Financial Secretary for failing to understand it. It says: Each national central bank shall be assigned a weighting in this key which shall be equal to the sum of: —50 per cent. of the share of its respective Member State in the population of the Community in the penultimate year preceding the establishment if the ESCB: —50 per cent. of the share of its respective Member State in the gross domestic product at market prices of the Community as recorded in the last five years preceding the penultimate year before the establishment of the ESCB". As if that were not enough, the percentages have to be rounded up to the nearest multiple of 0.05 percentage points. That is an exam question in itself.

Presumably some of the value of these assets that have been transferred twice is ours. How does this work out in terms of ownership? Presumably the bank is the owner. There is nothing in this provision about 24 votes for the larger states and 11 votes for the smaller states. There is nothing about weighted voting. Perhaps the Financial Secretary, when he intervenes, will try to explain the meaning of article 29. What will the United Kingdom own, if we own anything, in the European central bank? Will it have those assets which belonged to it initially, passed through all the institutions? Will we have one third, one tenth, one fifth of the assets?

Mr. Rowlands

Article 29 has been puzzling me for some time. Unlike our vote on the Council, which is a simple matter to work out, it is almost impossible to work out the article 29 formula, which changes according to one's economic performance. Will the Financial Secretary tell us what percentage of the total number of members or votes on the new ECB—were we establishing it today—we would have based on our current economic and GDP performance?

9 am

Mr. Davies

I am sure that the Financial Secretary has heard the question.

Article 109f.2 states that the EMI shall co-ordinate monetary policy, aim at price stability and monitor the function of the EMS. The article also states: For the preparation of the third stage, the EMI shall:—prepare the instruments of monetary policy.

Paragraph 4 of the article on page 26 states: The EMI, acting by a majority of two thirds of the members of its Council, may carry out three functions. Presumably, on that basis, each member has one vote.

Mr. Livingstone

Are not the votes weighted to reflect the GDP? Per head of population, the German vote will be worth twice the vote of Great Britain.

Mr. Davies

Even Luxembourg may not do too badly in terms of number of votes.

Paragraph 4 states: The EMI, acting by a majority of two thirds of the members of its Council, may: —formulate opinions or recommendations on the overall orientation of monetary policy"— we have had that policy before, but not in that form— and exchange rate policy". Another sphere has been opened up. We are dealing not only with monetary policy, but with exchange rate policy—I suppose that we cannot have one without the other.

The EMI must act on a majority of two thirds. I do not know whether the Chancellor of the Exchequer will be able to sit on the Governor to ensure that he votes, or whether the article on independence will be applied. I do not know where the references to the exchange rate policy leave a British Government who are not really part of the ERM. While we are, presumably, part of the EMS, we are not part of the ERM. The monetary system is nonsense; it is the ERM that is important.

Mr. Dorrell

The easiest way of responding to the right hon. Gentleman is to refer him to article 3 of the protocol of the EMI. It clearly states: The EMI shall carry out the tasks and functions conferred upon it by the Treaty and this Statute without prejudice to the responsibility of the competent authorities for the conduct of the monetary policy within the respective Member States. Monetary responsibility remains the responsibility of the member states during the time that the EMI is operating.

Mr. Davies

The Chancellor will be able to sit on the Governor and tell him what to do.

Mr. Gould

Article 109j provides that the duties laid on the EMI by the statute—the words quoted by the Financial Secretary—include the responsibilities of monitoring performance on exchange rates and monetary matters as laid down by our membership of the ERM.

Mr. Davies

Even if the Governor puts up his hand to vote in the way that the Chancellor wants, if two thirds vote the other way, we shall be outvoted. It is qualified majority voting and they can formulate opinions and make recommendations. It states: The EMI, acting by a majority of two thirds of the…members may…formulate…recommendations on the overall orientation of monetary policy and exchange rate policy as well as on related measures in each Member State. It will be able to pronounce on exchange rate policy on a two thirds vote, and that might be contrary to the wishes of the Governor who would, according to the Financial Secretary, take his instructions from the Chancellor.

Sir Russell Johnston (Inverness, Nairn and Lochaber)

Does the right hon. Gentleman think that it would be rather good if we needed a two thirds majority in this country in order to make such decisions?

Mr. Davies

What decisions where?

Sir Russell Johnston

The decisions that the right hon. Gentleman has just read out. A two thirds majority is required to set in train those various propositions. He criticised that, and I said that it would be rather nice if that was necessary in this country.

Mr. Davies

Some measures need a two-thirds majority, and others need a simple majority. One cannot give a blanket answer about that. I am not criticising it: I am just reading it out. Euro-enthusiasts have very thin skin. When one reads out the treaty, they say that one is criticising it, and when it is read out again, they say, "Well, it doesn't mean that at all." When it is read out again, they say that it is not there at all. It is like the sub-atomic particles, quarks or whatever they are called, that are seen only when one looks for them. Apparently they are all over this treaty.

Mr. Roger Knapman (Stroud)

Does the right hon. Gentleman agree that the best majority would be by a referendum on this whole wretched treaty? Bearing in mind that, tonight and every night, the Liberals will maintain the balance of power, if they really want a referendum they could obtain one.

Mr. Davies

That is a good point.

Mr. Livingstone

Has my right hon. Friend seen the statement reported on the tapes, that the Liberal democrats have decided to make progress on this? They are outraged by the time that it is taking, and have given undertakings to the Tory Whips that the votes will be delivered day by day to ensure that the treaty is carried? Those are the people who will hawk themselves around Newbury saying that they are there to defend local people when they are propping up the Government and the treaty.

Mr. Davies

That does not surprise me at all. I have been in Parliament longer than my hon. Friend, and I know what to expect from the Liberal party in these matters.

Article 109h deals with balance of payments, and I suppose that it gives some hope to the Financial Secretary of some money to sort out the huge balance of payments deficit. Obviously, strings will be attached. Article 109j deals with convergence conditions. Curiously—or perhaps not curiously—those conditions are set out in the part that deals with the second stage. I suppose that that has to be done like that, so that one knows what they are to get to the third stage. I shall not ask the Financial Secretary for a legal opinion, because I do not think that I am on a good legal point.

I am a little worried that all the convergence criteria are in a second stage, which imposes on us a treaty obligation. I do not want to press that too far, but all four criteria are in the second stage, which says that we must do this and that. There seems to be an obligation on us to achieve a high degree of price stability in stage 2. Is there such an obligation? [HON. MEMBERS: "Yes."] The people's court says yes. I do not know what the lawyers will say.

Mr. Dorrell

One of the earlier, over-arching articles commits us to the achievement of price stability as the condition precedent—in the Government's view and based on our experience over a long period—to the achievement of the growth and social objectives that we all share.

Mr. Davies

I know that the Financial Secretary is keen on price stability. That is a good thing. When he began answering, he gave me the impression that there was a treaty obligation.

Mr. Dorrell

Article 2, which has been much quoted in our discussions, states: The Community shall have as its task…by implementing the common policies or activities referred to in Articles 3 and 3a, to promote throughout the Community…sustainable and non-inflationary growth".

Mr. Davies

That is so, but the Financial Secretary is missing his best point, which is not the flabby language of article 2 but the precise language of article 109j. The Financial Secretary was right the first time. Perhaps he is a little worried now about what he said.

Mr. Dorrell

indicated dissent.

Mr. Davies

He is not. We will move on to the article's other provisions, which include the achievement of a high degree of price stability". That is a good thing, but its achievement is an obligation. Yes? No?

Mr. Dorrell

I quoted where there is an obligation. In the context of article 109j—as I said when I addressed the House in January—the achievement of a high degree of price stability is one of the convergence criteria that are not precise treaty obligations. They are conditions precedent on the establishment of a single currency. They are the trap through which a candidate member of the single currency has to pass before it is entitled to join under the terms of the treaty.

Mr. Davies

I do not deny that, but perhaps the Financial Secretary's initial reaction was the better one. Paragraph 1 states also that the report that the EMI make shall also examine the achievement of a high degree of sustainable convergence"— we had the list before fulfilment by each Member State of the following criteria". That certainly imposes an obligation to fulful certain criteria in stage 2.

Mr. Rowlands

Presumably, although there is an obligation of some kind on member states, the Government and the Treasury would tender almost a nil return to the Commission and the EMI, because none of those conditions should apply or be enforced unless we decide to go to stage 3. Is the alternative interpretation of the paragraph that we will not have such an opportunity, but will be reported on whether we like it or not?

Mr. Davies

It applies anyway. Whether or not we ever decide to go to a single currency, stage 2 places on the British Government the obligation to do everything they can to achieve zero inflation or something close to it.

Mr. Dorrell

No.

Mr. Davies

Is the Financial Secretary saying that I am wrong?

Mr. Dorrell

I heard the right hon. Gentleman say that article 109j places such an obligation on the United Kingdom. That statement was incorrect, which is why I said, "No."

Mr. Davies

Then on whom does it place that obligation? Nobody?

Hon. Members

Answer.

Mr. Dorrell

I was waiting for the right hon. Gentleman to resume his place, to—

Mr. Davies

Consult the Foreign Secretary's former tutor?

Mr. Dorrell

The right hon. Gentleman asked on whom the obligation in article 109j would be imposed. The obligation is contained in the first sentence of paragraph 1: The Commission and the EMI shall report to the Council on the progress made in the fulfilment by the Member States of their obligations regarding the achievement of economic and monetary union. Those obligations are not imposed by the article but arise way outside it. Article 109j is concerned with the obligation placed on the Commission and the EMI to report to the Council on the achievement or otherwise of convergence criteria by candidate members of the single currency.

Mr. Davies

It is a bit like the article on independence. Article 109j states: The Commission and the EMI shall report to the Council on the progress made in the fulfilment by the Member States of their obligations". "Their" does not refer to the Commission and the EMI, or to the Council; it refers to the member states. The article goes on: regarding the achievement of economic and monetary union. Those obligations are imposed on the member states by treaty under stage 2.

Mr. Dorrell

rose—

9.15 am

Mr. Davies

I am sorry; I will not give way to the Financial Secretary again. Perhaps he should get the Attorney-General or someone to give him some better advice.

The criteria are the achievement of a high degree of price stability…the sustainability of the government financial position; this will be apparent from having achieved a budgetary position without a deficit that is excessive as determined in accordance with Article 104c". That means getting the deficit down to 3 per cent. It doers not mean anything else: that is the obligation imposed on us. My hon. Friend the Member for Oxford, East (Mr. Smith) can wriggle and hope for flexibility as much as he likes—I do not mean that in a pejorative sense.

This is the criterion that I was really coming to: the observance of the normal fluctuation margins provided for by the Exchange Rate Mechanism of the European Monetary System, for at least two years, without devaluing against the currency of any other Member State". I was a bit dubious when I heard about the opinion given to Conservative Members by someone of the name of Howe; I have not read it, but it sounded a bit political, like the judgments of the European Court. Having read this, however, I am beginning to have second thoughts. Perhaps I did the right hon. Member for Mid-Sussex (Mr. Renton) an injustice.

Mr. Betts

Paragraph 1 of article 109j merely refers to the production of reports. It is paragraph 2 that deals with their assessment, and may start to lead on to obligations for Britain. Paragraph 1 of the protocol on the opt-out, further back in the treaty, specifically says: The United Kingdom shall notify the Council whether it intends to move to the third stage before the Council makes its assessment under article 109j(2) of this Treaty". There seem to be no obligations on the United Kingdom under article 109j, bearing in mind that protocol.

Mr. Davies

Article 109j places an obligation on the Commission and the EMI, quite rightly, to make a report to the Council; but that report is about the fulfilment of the member states' obligation, which is to meet those four criteria.

Mr. Legg

We are facing a misunderstanding. Britain has not opted out of economic and monetary union: that is the central point. Our opt-out relates to stage 3; we have a commitment to economic and monetary union. We are in stage 2. Article 109j concerns the obligations of member states during stage 2, from which we have no opt-out because we are committed to economic and monetary union. As the right hon. Gentleman said earlier in his speech, this is a seamless garment.

Mr. Davies

I do not think much of this, but the convergence criteria outlined in article 3 on page 112 spell out the position with regard to the exchange rate mechanism. It states: the Member State shall not have devalued its currency's bilateral central rate against any other Member State's currency on its own initiative for the same period. That is close to an obligation.

Article 109m on page 30 is the last article on the transitional arrangements. It states: Until the beginning of the third stage, each Member State shall treat its exchange rate policy as a matter of common interest. That presupposes that member states have an exchange rate policy. One does not have to have one; one could let it float. Perhaps it is an exchange rate policy not to have an exchange rate policy. The article presupposes an exchange rate policy which, I should have thought, would be a matter of common interest. If there is a commonality of interest, we are all part of the ERM. Whether there is a specific legal obligation, whether it is all a bit vague or whether we can be taken to the court is academic. Once the treaty is ratified, and once we are into stage 2, the movement will be such that it will not be long before, I am sorry to say, we are back in the old ERM.

The Financial Secretary was very clear about it—clearer than other Ministers; or perhaps I have not listened to them all. He was clear about what would happen when the time was right or ripe: "There is no doubt that we have to get back to the heart of Europe, boys; we cannot be in the second division."

Mr. Cash

I do not know whether the right hon. Gentleman was in the Chamber in the middle of the night when I revealed the document which had been leaked to me and which is entitled "Sterling in the ERM: Lessons from the September 1992 Crisis". It clearly contains advice given to Ministers. It concludes that sterling should re-enter the ERM when certain conditions have been met, and states: Sterling should re-enter with a narrow band. That is the advice that is being given, and, what is more, it looks like the advice that is being taken, because we have heard the Financial Secretary pretty well endorse it.

Mr. Davies

I have no reason to doubt the authenticity of the hon. Gentleman's document.

Things have changed at the Treasury since I was there. We used to have tight control of public expenditure, we did not carry expenditure from year to year and we were against the ERM. We did not join, because we thought that it was nonsense. Now, it has all changed. I have no doubt that the Government will get the rate right this time, until it is proved to be wrong. There will be a crisis in Germany or something will happen in Thailand or the Balkans and the system will be blown off course because of fundamental problems and so on. We shall be back in the ERM because the trend is to be in it.

I am sorry for the Prime Minister. He did a good job in negotiating, but he should have had the courage of his convictions at the time and vetoed the wretched thing.

Mr. Michael Spicer

It is always a great privilege and pleasure to follow the right hon. Member for Llanelli (Mr. Davies). I have had great respect for him since the 1970s. I opposed him when he was taking through the development land tax. It was a terrible tax, but I shall not go into that. He did his best and put up a good show. I think that the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was also there. It was an unpleasant experience in some ways, but not because of the right hon. Member for Llanelli, who did the best that he could have done on that occasion.

I was especially impressed, as I believe the rest of the Committee was, by the way in which the right hon. Member for Llanelli developed his speech. It is enormously important that we consider the text of the treaty. I am sure that people come up to the right hon. Gentleman, as they do to me, and say, "Look, this is all a bit of a bore. It does not matter much. The French will change their Government, the Germans do not like it, and the British public do not like it either. It will not really happen." The right hon. Gentleman raised some important points, which I shall try to follow up later, but it was by going through the provisions line by line, interspersed with humour, as he has done for the past two hours, that he made it clear that we are dealing with what, if it is passed, will be the law of the land. It is therefore enormously important that we are given answers to some of the specific questions that he asked.

I am grateful that you have called me at this point, Dame Janet, not only because I have been waiting 16 hours to make my small contribution but because the group of amendments under consideration focuses upon the essence of the entire treaty. The movement towards monetary union, and towards the single currency which lies at the end of that movement, must be the essence of what we have been debating for the 16 or 17 previous sittings of the Committee.

At the root of our debates has been the question whether the treaty and the Bill represent a move towards a federal unitary state of Europe. That question has lain behind most of our debates and most hon. Members, in so far as they have been prepared to move outside the strictures of their whipping systems, have taken their stand according to their view on that basic question.

There are certainly some right hon. and hon. Members who believe in a federal state of Europe. They are few, but they put their case honestly and everybody has respect for them. Some other hon. Members have tended to shy away from confronting the issue. But many hon. Members have had to take a view on whether the treaty is a move towards a federal state of Europe. I take the view that I do precisely because of the aspect of the treaty which is now under consideration—the move towards a single currency.

There are two reasons for my view. First, the logic behind a single currency must be a federal state of Europe, not only because we are in the process of handing over control of our coinage and banking system, and of the cost of money and rates of interest, and are making the associated institutional changes, but because of what such a system would inevitably lead to. Some people say that it would inevitably mean higher unemployment throughout the union. My hon. Friend the Member for East Lindsey (Sir P. Tapsell) made that point many hours ago—in what I believe is theoretically still the same parliamentary day. I happen to agree with my hon. Friend about that, but even if he is wrong, the system inevitably means that there will be pockets of severe deprivation which would not have existed without the single currency, if only because there will in effect be a single pricing mechanism, but there will not be a single wage structure.

Countries with low wages and high prices, paying Greek wages but German prices, will be extremely deprived. Unless the whole thing is to burst asunder and unless there are to be revolutions and revolts in Greece, there will have to be a compensatory central authority and a central taxation and expenditure authority. There will have to be everything that goes with a unitary federal state. That is one reason for believing that monetary union leading to a single currency will result in a federal state.

There is a second reason, which is the coincidence of that fact with the legal environment that is building up relentlessly—Lord Denning has called it "the tidal wave" of European law coming in. The combination of those two facts makes the treaty of Maastricht special and different from the amendments to the treaty of Rome that have come before it, and lethal if one is concerned about a move towards a unitary federal state of Europe, at least at this moment in our history.

9.30 am

Let me pursue the point about the law. First, I reiterate that, when people talk about the treaty not mattering, they are ignoring the fact that we are creating law and that some of that law is very specific. When people say, "The Germans will never allow a single currency to come about," they simply fly in the face of the appropriate articles, such as article 109j(4), which states: If by the end of 1997 the date for the beginning of the third stage has not been set, the third stage shall start on 1 January 1999. That will be the law of the land; there is no messing about it. The first point to make about the law is that it will be there and will have to be complied with.

What brought the whole matter sharply into focus for me was the fact that we not only face the inevitability of a federal process arising out of the moves towards a single currency, but, in setting up that single currency, we shall move from a situation where the law may just be reversible by national Parliaments to a position where it is not. One moves, by terms of the treaty, into the world of the irrevocable. The word "irrevocable" is there in the treaty. Until then, there is at least legal debate to be had. It is true that some lawyers say that we have already passed the point of no return in terms of our sovereignty and point to the Merchant Shipping Act 1988. They say that they tried to set that law against a Commission-based law and lost—and, therefore, that we have passed the point of no return. I personally agree with the other lawyers who say that we have not yet reached the point—quite—where the British Parliament cannot unwind the legislation that has brought us to where we are at the moment.

Dr. Godman

I have listened carefully to the hon. Gentleman. May I point out that it is a curious system of federalism where all the power goes to the centre? He cited the example of the Merchant Shipping Act, which was changed because of a decision by the European Court of Justice. Surely that decision taken by the judges in Luxembourg demonstrated in a plain, stark way the fact that that court has become a supreme court for all the legal systems of the 12 member states. We now have a situation,. under article 177 of the treaty of Rome, whereby in England even magistates courts have referred decisions to the European Court of Justice for a ruling. There is a growing acceptance of the power of that supreme court.

Mr. Spicer

That is correct, and about 15 hours ago we debated that subject, when my hon. Friend the Member for Chingford (Mr. Duncan-Smith) made a telling speech in which he quoted cases to substantiate that point. Had I been able to intervene then, I would have referred to a number of other cases—

The Chairman

Order. We discussed those cases earlier. We do not want to discuss them again now.

Mr. Spicer

The only point that I would make in response to that intervention—

The Chairman

Order. The hon. Member does not have to respond, especially as I nearly called the hon. Member for Greenock and Port Glasgow (Dr. Godman) to order for raising the issue of the court of justice.

Mr. Spicer

The combination of the law, which is becoming all pervasive, and the fact that, with the single currency, that law involves the use of the concept of the irrevocable makes certain the move towards federalism if the treaty is passed.

Sir Trevor Skeet

Article 3a deals with the irrevocable fixing of exchange rates. That is excluded by the protocol, but if we enter stage 3, which is anticipated, the trigger is set and we are caught by it.

Mr. Spicer

My hon. Friend underlines the point. It is important to be clear about the meaning of "irrevocable." It means a coach and horses being driven through the fundamental principle guiding and governing the British House of Commons, that no one Parliament can bind another Parliament. We do not have a written constitution, but we have what we thought were inalienable conventions.

It seems impossible for us to maintain the sovereignty of Parliament in that sense if, from now on, a Parliament will bind irrevocably—which means for ever—all other Parliaments. We shall have abolished the sovereignty of our Parliament. The combination of the logic of what is being done on the road towards a single currency and the law arising out of the creation of that single currency is moving us inevitably towards a loss of sovereignty.

I do not understand the concept of pooling sovereignty. One either has or does not have sovereignty. Somebody must be at the top and through the Maastricht treaty, and in particular the aspect of the single currency, we move from the point at which we have sovereignty to a point at which we do not have it.

One can take a view about whether that is good or bad, but that is what will happen. That makes Maastricht different from other amendments to the treaty of Rome. People may say, "You voted for the Single European Act" and so on, but we are now moving into a fundamentally different area by establishing this irrevocable fixing of exchange rates, the single currency.

Mr. Bill Walker

The Committee has heard me many times draw attention to the objectives of the 1707 Act and compare the situation created by that measure with what is happening now. This Parliament was established as a result of that Act, which required the conditions to be for ever, which is much the same as irrevocable. I have been emphasising that from the beginning. A single currency and the remaining measures will make all the difference. We created this place and we know precisely what we have. We shall be creating that in Europe.

Mr. Spicer

My hon. Friend makes a good point which he has made previously. It bears repeating because it is appropriate.

If the Government were participating in the debate, their answer would be that it may be what I have said it is, but it is irrelevant because we have the opt-out. With regard to the question of the opt-out, I shall refer to some points made by the right hon. Member for Llanelli. His concept of the seamless web is absolutely fundamental in this context. He raised many points in the context of the seamless web, but he raised a specific point which is valuable. I hope that the Government will examine carefully the text of the right hon. Gentleman's speech because it is valuable.

We have not had an answer to a specific question asked by the right hon. Gentleman—it is important that we get an answer because it is a specific point and the hon. Member for Dagenham (Mr. Gould) underlined it. The right hon. Member for Llanelli raised the matter of the wording in article 109e(5): During the second stage, each Member State shall, as appropriate, start the process leading to the independence of its central bank, in accordance with Article 108". The Financial Secretary said that that does not mean what it looks like: it means that the legislation which is required to move towards an independent bank will be introduced only if the decision is made to move to a single currency. My right hon. Friend the Financial Secretary said that that would be the only sensible thing to do: there is no point in setting up an independent bank if we do not move towards the single currency for which it is appropriate.

That is a fair point and I agree with it. However, as the hon. Member for Dagenham said, that is not what the law will say. If the treaty is passed, the law will say what article 109e(5) says. I have scoured through the appropriate protocol, but I cannot see any reference to an opt-out on 109e(5). I can see references to opting out on 109e(4), but there is no reference to 109(e)5, which suggests that we have not in any way allowed for opting out of those words which will become the law of the land. The Government are under a great obligation specifically to answer the question: if we opt out of the single currency, will we not have to set up significant institutions immediately?

The right hon. Member for Llanelli played for a while with and was amusing when he talked about notes being passed backwards and forwards within the Treasury. This matter of the bank is crucial. It will change the whole process by which monetary policy has been conducted in the United Kingdom for hundreds of years. We are talking about something that is absolutely fundamental.

Dr. Godman

With regard to article 109e(5) becoming the law of the land, could that be achieved without the intervention of the court of justice making a decision? I am not going out of order, Mr. Morris, because I am referring to article 19, which spells out the relationship between the EMI and the court of justice. Article 19 says: The acts or omissions of the EMI shall be open to review or interpretation by the Court of Justice". Before article 109e(5) can become the law of the land, a ruling from the European Court of Justice will be required.

Mr. Spicer

My hon. Friend the Member for Milton Keynes, South-West (Mr. Legg) is an expert, so I shall give way to him.

Mr. Legg

The specific article to which my hon. Friend refers will become part of the supreme law of the European union. If the United Kingdom does not comply with the supreme law of the European union, that matter can be taken to the European Court. My hon. Friend may also be aware that at present European central banks in France and Spain in particular are moving towards independence. It is not beyond the realms of fantasy to believe that some of our partners in Europe may take us to the European Court to make us start the process of taking our bank to independence because of the additional credibility that they would see that lending to EMU.

Mr. Spicer

My hon. Friend has answered the point more elegantly that I would have done. I was going to make the same point that here we have the law and the question is whether we comply with it. If we did not comply with it, we would be subject to being taken to the court, which would then adjudicate whether we had applied the law. If we had not, it would insist that we did. To my mind—I am not a lawyer—the words are straightforward. If they can be interpreted differently, I shall be reassured.

I want to believe in the opt-outs. I find it difficult to believe in them.

9.45 am

Mr. Knapman

Whether or not we are lawyers—it turns out that we are not—would not it beggar belief that any nation would go through the pain of convergence and then not proceed to a single currency?

Mr. Spicer

That is the other point. The question about what credibility one attaches to the opt-out is partly, as we have discussed today or tonight, or wherever we are, one of running through the text and illustrating that the text shows how stage 2 legally moves smoothly into stage 3. That is a valuable thing to have established. The Government will have to show us what are the legal cut-off points and how we can contain the opt-out in a meaningful way. We need to hear much more about that because an interesting question has been opened up and we need hard answers.

My hon. Friend the Member for Stroud (Mr. Knapman) has raised the psychology of the whole thing. If one has signed up to the establishment of various convergence conditions—clearly there is some argument to be had yet about how legally binding those converging conditions are—under stage 2, whether or not it is legally binding, one has an obligation. In the Treasury things will be moving in a direction which will lead to pain, as my hon. Friend says. One is involved directly or indirectly in the establishment of many institutions.

The EMI is a transitory institution. It has powers attached to it in stage 2 which we have had detailed for us. We then move to institutions which are not transitory but permanent. We have been involved in setting them up. Undoubtedly, officials will go backwards and forwards and get more and more involved and excited in their construction and their management.

I need to be persuaded that in a few years, having set up the institutions and been a party to many of them and legally bound into the processes that lead up to stage 3, we can cut ourselves from it. If the treaty is passed, I shall certainly be one of those who argue for the opt-out to be maintained because that will be the best that I shall be able to achieve at that time. But it worries me that I may be told then that the pass has been sold.

The Government will say, "Where were you in 1992–93 when all these things were being discussed?" As it happens I was here. One of the reasons why I am speaking tonight is that the Whips will not be able to come to me and say, "Spicer, you should have worked it out three or four years ago when all these things were being discussed. It was important then that you should have got your thoughts sorted out." I have tried to sort out my thoughts now because I want to anticipate that situation. I do not say that I will not argue like mad in two or three years' time, but at least they will not be able to say of me that I did not think it out at this stage.

Mr. Knapman

My hon. Friend referred to officials and civil servants. Will we need more of them because it will be a complicated policy, or fewer of them because we shall no longer be running our own policy? Does my hon. Friend envisage any significant effect on the numbers of civil servants as a result of the passing of the treaty?

Mr. Spicer

The term "ratchet effect" has been used throughout the debate and that analogy is appropriate to any growth of administration. I suspect that we shall have more officials here and in Europe.

In conclusion, the amendments are absolutely central to what Britain and its constitution will become in the future. We may be setting up an inexorable process. The words "acquis communautaire" appear as one of the objectives of the treaty. It means a ratchet effect. When a process has been established, one can only move forward.

In my view, through the treaty, monetary union and the move towards a single currency we are making the jump towards a loss of sovereignty. We are crossing the Rubicon. The only issue is whether the opt-out that we have established is foolproof. Great doubts have arisen and many coherent points have been made. If the Government are to give any credibility to the concept of the opt-out, it is essential that they can demonstrate clearly how we can retain that opt-out and really believe in it.

Mr. Betts

The issues that we have been debating throughout the night—the central bank, economic policy and now the moves towards economic and monetary union—are at the heart of the treaty. I agree with hon. Members who spoke during the night and made the point forcefully about the hours that we are spending in debate, with many of us having been up throughout the night. It is not the proper way to give these issues the serious and necessary consideration that they merit.

Parliamentary sovereignty has been mentioned many times, but, given the fact that the House has not debated these matters in prime time, those words stick in the throat rather than trip off the tongue. I believe that the House has done neither itself nor the people we represent any service.

In the past, I have been given lectures by irate Liberal Democrats about the process of open government, access to information and the public being able to see what happens, yet they choose to debate these matters when the vast majority of the public we represent are in bed, as are most of the media who might report matters to them. In future, I will take no more lectures from Liberal Members. Although they are all absent, presumably they will at least do us the courtesy of reading Hansard. When Liberals refer to these issues in future, I shall simply ask them what they did on 24 March 1993 at 10 pm.

The Chairman

Order. I called the hon. Gentleman to speak on amendment No. 81, and not to give us a general lecture about parliamentary procedure, so I hope that he will now address the amendment.

Mr. Betts

Thank you, Mr. Morris.

Of the hon. Members who have spoken on these issues and throughout the debates on the treaty, a few have made it clear that they are in favour of Maastricht completely and absolutely and many have made it clear that they are against the treaty absolutely and completely. Some of us, however, do not fall neatly into those categories, and we must in the end decide how we vote on particular amendments, recognising that we have reservations about elements of the treaty. I share some of the reservations eloquently expressed by my right hon. Friend the Member for Llanelli (Mr. Davies) when he introduced his amendments and in previous debates by my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) and others. I want to raise some of the very questions that have been raised. We have not always had adequate answers from the Government to those questions. In particular, the legal advice has been not just inadequate but almost non-existent.

I also recognise that there are parts of the treaty, particularly in the detailed areas that we are now discussing on economic and monetary union, which are open to interpretation. I do not know what the interpretation of the European Court of Justice may be or how the Council of Ministers will interpret these things when it debates some of its powers, so I must come to my own best judgment.

One of our problems in debating specific amendments is that we are debating a treaty which has been negotiated by the Government. It is a treaty which Parliament can discuss, debate and question; but we cannot select bits and pieces from the treaty and decide which we will vote for and which not. In the end, we must decide whether we are prepared to accept the treaty as it is, in total. That involves compromises—just as the original negotiation of the treaty must have involved compromises—for those of us who have to form a view on it now. While some of us may have instinctive sympathy with some of the amendments in isolation, we recognise that we must judge them in the light of their total effect on the treaty, and we must decide whether voting for them here would mean that the treaty could not be ratified and where that would leave the country's economy, its monetary policy and all the other issues that we are now dealing with.

One of my concerns about the whole process that we are going through, particularly as we consider these important matters of economic and monetary union, is that we are forced to debate them in this way. I should have been much happier if we could have debated these issues before the Government negotiated Maastricht. We could have had a public debate about the way we wanted to go and the Government would have been aware of that before they entered into this treaty, which we have now to decide on as a whole.

There is a problem with the wider powers now contained in this treaty which are going not just to the Commission but to the Council of Ministers. That is mentioned at various stages in the sections on economic and monetary union. One of my worries about the process is that when matters go to the Council of Ministers they immediately disappear from direct scrutiny and go behind closed doors—a process which is very different from debates in this Chamber. The reaction of some hon. Members is to say that we should not have powers of that kind going into European institutions. I would argue that it may not be wrong for powers on economic and monetary union to move into the European dimension. Perhaps powers should go from this Parliament, but I want the European Parliament to play a greater role in those processes.

It has been said that hon. Members who support federalism should say so. I shall not argue that case, but there is a debate about whether some of the powers that go to Europe through the treaty will rest with the right institutions, and about whether more powers should go to the European Parliament. That debate is still to come.

10 am

The Chairman

Order. The hon. Gentleman is almost making a Second Reading speech. He must address the amendments that have been moved. He cannot give us a general Second Reading speech.

Mr. Betts

I was seeking to show that the Council of Ministers is relevant to some of the issues involved with economic and monetary union. We are debating amendments to clauses that contain references to powers going to the Council of Ministers, and I was seeking to draw that out, but I shall take your advice on the matter, Mr. Morris.

I readily accept many of my hon. Friends' criticisms of the economic and monetary policy contained in the treaty. The development of those processes and of the independent central bank are some of the key issues. I have major reservations about an independent bank and how it can operate within economic and monetary union, because that highlights some of the potential conflicts between the economic and monetary aspects of the treaty. It will cause difficulties and we must each form a view of the conflicts to determine how we shall vote on the treaty.

When considering how to approach the central bank, and how it fits into the workings of economic and monetary union, the potential alternatives—as opposed to those contained in the treaty—must be examined. If hon. Members do not like what is in the treaty, they must be prepared to argue for an alternative, which might be available.

There has been a great deal of discussion about the opt-out and I share the views of some hon. Members—who will probably decide that they cannot support the treaty—that the opt-out exists to give the Government an excuse to delay a decision until they can bring the House round to accepting stage 3 of economic and monetary union. I do not believe that it is realistic for this country to move to stage 2, which we are committed to through economic and monetary union, but not to move to stage 3. Once we accept stage 2, we cannot for ever remain the one member of the European Community which wants to remain free with a separate set of arrangements.

I therefore believe that, in ratifying the treaty, we are being asked to accept that, once we accept stage 2, stage 3 will ultimately follow. The Government will no doubt argue that there is an alternative to joining the independent central bank—stage 2, in which the Bank of England, would be separate and independent, in a nationalistic sense. To some extent, it would be independent of the rest of the European Community.

I do not believe that if every other country in the European Community is a member of the central bank, which will have the power of all the other Governments and economies behind it, one country can realistically stand aside and believe that it will be feasible for its central bank to operate independently while that country remained a member of the Community. The Government cannot ask any hon. Member to believe that that position is sustainable and they ought to deal with that problem in detail as they have not done so.

Could the Government ratify the treaty if the amendment moved by my right hon. Friend the Member for Llanelli were carried by the Committee? Everybody has had to find legal advice. I may have been hallucinating from lack of sleep, but a few hours ago I had a vision of the Attorney-Geneal crossing by the Government Front Bench. Perhaps someone will confirm that I did see the right hon. and learned Gentleman.

It is important that Members should know the implications of their voting for an amendment. Amendment No. 27 deals with the social chapter opt-out. If that amendment is accepted, we shall be refusing to ratify a protocol that provides for an opt-out. The argument is that refusing to opt out does not amount to opting in and does not, therefore, amount to agreeing to anything. Acceptance of the amendments with which we are dealing now would be a very different matter. On the opt-out, that would keep us from moving automatically to the third stage of economic and monetary union, and would prevent us, I believe, from legally ratifying the treaty. Britain would not be removed permanently from the protocol. What we would have is an obstacle to a process that would otherwise be automatic. The treaty confirms the rest of the process, so the two situations are quite different.

The reference to stage 3 in the treaty amounts to acceptance of that stage for every other member country without the opt-out. If Britain were to refuse to accept stage 3, it could not ratify the treaty. In effect, we should not be accepting the process by which every other member state was to move towards stage 3. What the opt-out provision does for Britain, in terms of stage 3, is to put it in the same position as a member state that gets a derogation under the treaty. Such member states will effectively be in the same position as Britain, but they will have to ratify the treaty, including stage 3, even though they will not move to stage 3 themselves. We cannot have a situation in which some Community members are not at stage 3 but have had to agree to the process in order to ratify the treaty, whereas Britain stands alone.

I assume that, in the end, the Attorney-General will give us some advice on these points. The matter to which I have just referred is very important. As I have indicated, a vote for the amendment, which, if carried, would prevent the treaty from being ratified, would be a vote against the treaty as a whole. That is why it is so important that we should get appropriate legal advice.

Mr. Spearing

I understand my hon. Friend's personal dilemma. In giving expression to it, he has highlighted what I might call the structural relationships of these matters. The Attorney-General has not spent much time at this sitting of the Committee. Does my hon. Friend agree that before we vote on this amendment the very important matters that he has identified should be commented upon by the Attorney-General or by the Financial Secretary following consultation with the law officers of the Foreign Office or the Law Officers of the Crown?

Mr. Betts

My right hon. Friend is absolutely right. We have a right to expect legal advice from the Attorney-General. On previous occasions, on the question of opt-outs, such advice has been forthcoming. It has been shown that legal advice given within Departments to Ministers can be questionable. I am not suggesting that it is deliberately questionable; I am simply making the point that it is important to have proper advice from the Attorney-General. This cannot be stressed too strongly.

Mr. Gould

I have been listening with interest and sympathy to the issues raised by my hon. Friend. He is clearly right to say that if the House were to vote for the amendment it would make it difficult, if not impossible, to ratify the treaty. But he has also made it clear that he disagrees with many of the treaty's provisions. Therefore, presumably he wants a treaty, but not necessarily every aspect of the Maastricht treaty. If that is his objective, there is only one way by which he can achieve it. There is no point in his voting for the treaty as he will not obtain any amendments. However, if he votes against the treaty by voting for an amendment such as the one under discussion and it is carried, and this country or any other were to refuse or be unable to ratify the treaty, it could not proceed. We should then be able to have exactly the sort of informed negotiations that my hon. Friend wants. We could conduct a new set of negotiations and, in the light of the very arguments that my hon. Friend has been advancing, produce a better treaty.

Mr. Betts

I accept some of my hon. Friend's criticisms of the treaty and agree with some of his analysis. I part company with him over his theory of what would happen if one of the amendments were carried and the Government could not ratify the treaty. My hon. Friend obviously believes that such an outcome would result in the treaty coming to a standstill while we had a separate round of negotiations to bring the treaty back into line with his views, and perhaps with mine on some issues. That begs two questions. First, if we had more of those negotiations, would they result in a more favourable treaty? Secondly, and more important, would those further negotiations take place or would the people of Britain—of whose credentials other people in Europe had always been suspicious—once again be regarded as not sufficiently pro-European, thus convincing the rest of Europe to carry on without Britain?

Mr. Gould

They cannot.

Mr. Betts

My hon. Friend says that Europe cannot carry on without us. I think that at some point the patience of other European countries may give and they may decide to construct a European Community that either has Britain attached to it in a different role, but not as a full member, or leaves Britain on one side as they carry on.

Mr. Gould

If we—or the Danes or the Germans—were the instrument by which it became impossible to ratify the treaty, I do not doubt that we would attract much odium from our European partners who would take great delight in blaming the perfidious Brits yet again. But I guarantee that, in private behind their hand, they would give an enormous sigh of relief that they had at last been let off the hook of a treaty that is manifestly unworkable and has failed to secure the support—let alone enthusiasm—of the people of Europe.

Mr. Betts

That is ultimately a matter of judgment. My hon. Friend has come to one conclusion. Having spoken to people in Europe—in the European Parliament and in our sister parties in Europe—I know that it is not the view that they express. The general view that I have received is that if Britain were not to ratify the treaty, there would be much concern among people in Europe. But they may well not express that concern by saying, "Oh dear, how can we change the treaty to accommodate all the wishes of Britain?" They might just say, "Once again, Britain has proved not to be as pro-European as we would like—perhaps it is time that we moved on without them."

Mr. Cash

Perhaps the hon. Gentleman has not noticed that the Danes have turned down the treaty in a referendum and the French only passed it by an absolute whisker—only 36 per cent. of the French electorate were in favour. We all know that the Germans are in a state of turmoil over the treaty. The people of Europe—whom the hon. Gentleman is alleging are in favour of the treaty—have gone off it. The leaders continue to believe that the grand design will work. Perhaps they do so for reasons of stubbornness, pride or because they have a grand idea that they are reincarnations of Henry of Navarre. The treaty will not work, because people do not want it. Some 73 per cent. of the British people say that they want a referendum, and I think that they should get it.

Mr. Betts

In the three countries that the hon. Gentleman mentions the situation is different. The German issue was described earlier in the debate as a technicality and no one seriously suggests that the German Government will not ratify the treaty. The Danes are to hold another referendum. From what I have heard and read, the way in which the Danish issue has been finessed leaves little to the imagination. Some of the key issues that we are concerned about are not necessarily the issues that have been addressed in Denmark.

The French have had a referendum and if the French people had not accepted the treaty we would be in a different situation. However, they did, and Britain is seen to be dragging its feet and has been viewed in the past as not being as committed to Europe as other countries are. Many of those who oppose ratification do not think that we should be in the European Community at all. By no means do I direct that comment at all those who oppose ratification.

10.15 am

Mr. David Ashby (Leicestershire, North-West)

Does the hon. Gentleman agree that the French referendum was a reflection of what happened last week in the French elections rather than a real view of Europe? The hon. Gentleman is right to say that the people of Europe are absolutely in favour of Maastricht. Votes are often a reflection of the political climate in a country rather than a view about Europe.

Mr. Betts

I am not sure that we could draw all the lessons from the French elections that people would like to draw. One of the lessons that can be drawn from them is that if the Maastricht process collapses and the good will is lost it may not be possible to return to square one in the negotiations and reconstruct a treaty within a reasonably short time. That point is made forcefully by people representing a wide range of political opinion in Europe.

There are growing forces for nationalism in Europe and they may be given succour if the treaty collapses. We saw the vote last week for Le Pen and his party and we have witnessed the growth of the Republican party in Germany. People are concerned about those things. I do not say that Maastricht is the last bastion against fascism because I do not want to go overboard, but those forces are around and no one quite knows what would happen if the Maastricht process collapses. We must sound a cautionary note about that.

Mr. Alan Simpson (Nottingham, South)

Will my hon. Friend at least acknowledge that the process may work in precisely the opposite way? There may be a gap between European parliamentary processes and the people, and that may lead to a huge sense of disbelief about the economic and political momentum into which Europe seems to be locked. My hon. Friend spoke about his dilemma in deciding whether to vote for a treaty containing huge elements with which he profoundly disagrees. Perhaps I can give my hon. Friend an analogy. Anyone who wants to join the boy scouts does not begin by locking himself into the Moonies, because it is better not to be in an institution at all than to be in one that we cannot leave. It may be healthier for my hon. Friend to make a stand and set out precisely the positive ground of the Europe that he wants to be in, rather than to be locked into a Europe that he does not want.

Mr. Betts

If we are to remove the forces of nationalism and racism in Europe, we must take the European debate to an agenda that will address the real problems of unemployment and recession. It is a matter of judgment whether acceptance of the treaty and working forward from there gives a better opportunity than either allowing the treaty to collapse or seeing Britain removed from the process while other countries continue with it.

Having studied the matter for several months, I concluded that accepting the treaty, imperfect though it is, and building on its elements will give us the best opportunity to address problems—rather than risk the whole process collapsing or Britain remaining outside European development. We run that risk if, by our voting for certain amendments, the treaty is not ratified.

It is said that Britain would be in the slow lane or second division, and that opting out of stage 3 is part of that process. If we did not ratify the treaty—to continue the motoring analogy—we would be on a B road going in a completely different direction.

I choose to approve the treaty and to vote down the amendments because I share the concerns of my hon. Friends about unemployment, growth and investment—though I arrive at a different conclusion about how they should be approached. I acknowledge that most hon. Members who raise those issues do so not in a narrow, nationalistic sense or argue that power must remain within the House. Nevertheless, some hon. Members contend that the House should retain all powers and that votes in Parliament will solve our problems, irrespective of our membership of the Community. To retain power may be politically desirable to them, but if Britain were to be independent of the Community, it could only achieve certain things in the European and international economic climate that it would confront. In this day and age, it is impossible for a country such as Britain to grapple with the massive issues and the forces of international capital. We must recognise how much we depend, as a small nation, on trade and the difficulties we would face using a separate currency. We must recognise the enormous shifts of capital and the forces of speculation.

We must question whether votes in a Parliament of a United Kingdom excluded from the Community and its processes would achieve the objectives of full employment, growth and investment that many Members who have different views on how to vote want to achieve.

Many aspects of the treaty are potentially or actually contradictory. As one reads through it, one can detect a shift in its monetary and economic approach from growth and employment to price stability being the all-important issue. I readily accept that aspects of the treaty have all the hallmarks and elements of the monetarist age of the 1980s. They were written for different times and from a different perspective, to meet a different set of problems.

I reject the notion that if price stability is achieved, everything else will fall into place and full employment will automatically occur—or that full employment would not matter very much. If we are to address the problems of the 1990s, we must turn this debate around and tackle the real problems of the economy, investment and growth. Price stability—by which is meant low inflation, because no one can argue for nil inflation—is only likely to be achieved if the real economy is put right.

People talk about the Bundesbank, how it operates and how it might be a model. It should not be argued, however, that, because it is independent, the Bundesbank has created price stability, thus making the German economy successful; more to the point, the German economy has been successful because of the investment that went into it immediately after the war. That continual increase in growth has allowed workers to enjoy regular improvements in living standards and firms to increase their profits. The pressure for price inflation has not been there.

In fact, the Bundesbank's job has been relatively easy. It has worked in harmonious conditions: until the recent problems of unification with East Germany, it could do no wrong. It strikes me as a little simplistic to use the analogy of the Bundesbank in establishing how we should develop the future of Europe.

I recognise the difficulties in the treaty. The economic and monetary sections could almost have been written by different people. The Government bear some responsibility for those problems; I do not think that it is up to Opposition Members to defend the wording of the treaty. Naturally, the Government will defend it because it is their treaty, but we shall put them on the spot in pointing out its many inadequacies.

I believe that failing to ratify the treaty would be wrong: I believe that we must remain at the heart of Europe—a phrase which has been used many times in the debate. We must, however, look at what is in the treaty—as suggested earlier by my hon. Friend the Member for Oxford, East (Mr. Smith)—and see how we can build positively on its contents in helping to set the agenda for growth, investment and employment in Europe in the 1990s. We must recognise that there are openings for interpretation in the economic and monetary aspects. We must argue as strongly as we can for the right interpretation to set the agenda for the future.

We have heard many references throughout the debate to the clauses in the Bill, and the sections of the treaty, that should have primacy. I strongly believe that we should take article 2 as the basis—not just because it appears at the beginning, although that is probably a fairly good point at which to start. Some time ago, I had an argument with my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) about whether the treaty should be read backwards or forwards; for my present purpose, I shall read it forwards.

Article 2 has been mentioned many times. It refers to harmonious and balanced development of economic activities, sustainable and non-inflationary growth respecting the environment, a high degree of convergence of economic performance, a high level of employment and of social protection, the raising of the standard of living and quality of life, and economic and social cohesion". That is the basis on which the rest of the treaty hangs, and it is linked with many other aspects of the economic and monetary criteria that are laid down.

Article 3 refers to the timetable set for economic and monetary policy. All the matters concerned are for the purposes set out in article 2. My right hon. Friend the Member for Bethnal Green and Stepney tried to suggest earlier that, ultimately, the whole policy was guided by the principles of stable prices and sound public finances; but article 3 states that, notwithstanding that guidance, the activities referred to are For the purposes set out in Article 2. When reading the economic and monetary sections of the treaty, we must keep returning to the points in article 2, and stressing those points.

I accept that, to some extent, that is a subjective reading of the treaty, but I believe that everyone who reads it has a subjective view. Because, in my view, the treaty will ultimately be ratified, it is important for us to bear those points in mind and use them as a basis for future discussion.

Mr. Gould

Those who drafted the treaty thought of my hon. Friend's point about its interpretation. They make specific reference to it in article 105, which establishes the primary objective of the European central bank: The primary objective of the ESCB shall be to maintain price stability. It goes on to say: Without prejudice to the objective of price stability, the ESCB shall support the general economic policies…laid down in Article 2. In other words, article 105 takes on board the very argument with which my hon. Friend is dealing and says that, "without prejudice" to the more general provisions in article 2, the overriding objective of price stability shall nevertheless take effect.

10.30 am

Mr. Betts

I do not demur from my hon. Friend's point, which shows the potential for conflict in the treaty and why I do not seek to defend every aspect of it. It contains contradictions, and one can interpret things in different ways. As I said earlier, one problem is that some of the economic criteria in the treaty appear to have been written in different languages and emphasise different points from the monetary criteria.

I am concerned about the independent central bank, not only because of the independence but because of article 105, which my hon. Friend the Member for Dagenham (Mr. Gould) just read, and which is the guidance given to the bank about the objectives that it will pursue. Price stability is given primacy, but there is a different emphasis in the general objectives of the treaty where it is issues such as employment and growth which are given primacy.

I was going to mention later the general principles in the protocol for the EMI in article 3 on page 104, but I shall do so now. Article 3 states, as does article 105: The EMI shall act in accordance with the objectives and principles stated in Article 2 which links back to article 2 of the main treaty through article 3a, which is for the purpose of achieving article 2. There is so much interaction in the treaty that it shows all the hallmarks of being written by a committee, or even two committees. One of the problems is that the treaty is open to different interpretations, depending on which article one selects and which aspect one emphasises to make a particular point.

Mr. Spearing

I appreciate my hon. Friend's point, which is substantially and philosophically similar to that made by our Front-Bench spokesman. The broad principles and aspirations and the humanitarian approach of the general principles of the early articles should be built on, but our argument, so ably put a little while ago in the analysis made by my right hon. Friend the Member for Llanelli, shows that the operational small print on which actions and policies are determined, reports made and disciplines ensured makes those aspirations generally difficult, if not impossible. That is why the treaty must not be ratified.

Mr. Betts

I do not necessarily agree with my hon. Friend's conclusion, as there is a different emphasis in different parts of the treaty. I would still argue that article 2 sets out the general purposes for the rest of the treaty. I would also say—

The Chairman

Order. The hon. Gentleman had a helpful intervention from the hon. Member for Newham, South (Mr. Spearing). We are dealing with amendments that cover operational points. The hon. Gentleman has hardly alluded to them, but keeps returning to article 2 and making generalised comments. He must deal specifically with the amendments.

Mr. Betts

I was trying to say that the operational points are linked to the general issues. Indeed, article 102a begins to spell out the operational points but is clearly linked to article 2. Article 102a states: Member States shall conduct their economic policies with a view to contributing to the achievement of the objectives of the Community as defined in Article 2". However, I would be the first to accept that the wording of the operational aspects can be difficult and that we shall have to deal with the issue of interpretation.

The operation of the budget deficit criteria—the avoidance of a deficit—is very much part of the move towards economic and monetary union. It is one of the key aspects of convergence, which has received a great deal of attention.

Our debates so far have shown that, although the conditions might at first be thought to be a clear and rigid set of criteria, meaning that a country has at all times to set its governmental deficit at no more than 3 per cent. of GDP, and its overall governmental debt at no more than 60 per cent. of GDP, when we start to analyse the exact wording that surrounds and conditions the criteria, we get a different point of view.

The rigid criteria refer only to the initial report that has to be produced. As has already been said, when action is to be taken on the report, account has to be taken both of the extent to which the deficit is incurred because of a need for investment and of the medium-term and budgetary policies of the Government concerned. I accept that, as was said earlier, it would have been more helpful if the nature of counter-cyclical measures had been clearly spelt out in the treaty. That has not happened, but the fact that the word "counter-cyclical" does not appear does not necessarily mean that the reference to medium-term strategies cannot allow for the need for a counter-cyclical strategy when judging whether a budget deficit is excessive as part of the process of moving towards economic and monetary union.

That is a clear example of the possibility of drawing out from the treaty views different from those that it might initially have been thought to contain. It follows that there will be a need to ensure that within Community discussions and debates such issues are interpreted in one way rather than another. Indeed, one could argue that one of the issues highlighted is the need clearly to separate out the reasons why Governments borrow money.

No one could be in favour of excessive deficits. The very nature of the word "excessive" implies that the deficit is wrong. However, I strongly argue that we should focus on the need for long-term investment. If necessary, and within the criteria, we should be able to increase Government deficits in order to borrow for long-term infrastructure investment, which would be an integral part of trying to set the agenda for the growth and development in Europe that we have already discussed. Such matters can therefore be interpreted differently from the way in which they have previously been interpreted.

I can see problems that need attention, and I shall now deal with the transitional provisions. Article 109e, for example, takes us back to an emphasis on financial policy: the Council shall, on the basis of a report from the Commission, assess the progress made with regard to economic and monetary convergence, in particular with regard to price stability and sound public finances". I readily accept that in the operational conditions governing the transitional provisions the emphasis has been shifted back to price stability and sound public finances. However, again the wording is potentially open to interpretation. The exact words are: assess the progress made with regard to economic and monetary convergence, in particular with regard to price stability and sound public finances. That is not a rigid provision. If we are in the process of accepting the treaty and then seeing where we go from there, that article allows room for interpretation, to bring in issues other than price stability and sound public finances.

I accept that for convergence it is vital to get back on the agenda the issues of growth, investment and employment which are contained in article 2, but which do not appear specifically in article 109e. For example, article 130a, which deals with regional policy, contains a specific requirement to consider ways of removing divergences in regional policy—different growth rates, employment levels and standards of living—in different parts of the Community. The treaty must be read as a whole. I would argue that, although article 109e specifically refers to price stability and sound public finances, it does not actually exclude other criteria, which could be brought into play in a reappraisal of the convergence criteria. We should like those real economic issues to be addressed. That is why it is important that hon. Members who are highly critical of the treaty should recognise that there may be other interpretations, which may even be more helpful to them in their pursuit of their objectives.

Much emphasis has been placed on article 109j, which refers to the fulfilment of conditions for eventually moving through to stage 3 of economic and monetary union. That provision is highly financial in content, referring to price stability, the Government's financial position and the exchange rate; the ERM is also mentioned. I should have been much happier with the treaty if those parts of it had also dealt with the real convergence criteria. I do not justify or defend every aspect of the treaty or claim that it is perfect, I agree that certain parts of it are deficient. In their present form, the conditions of convergence in article 109j are not the conditions that I would have chosen to include.

Ultimately, however, we have to decide whether we should abandon the whole process because of that or accept that those criteria, such as they are, are nevertheless part of a wider treaty and that, in the interpretation of those criteria set in that wider context, there will be pressures on Governments in the Community that are different from the pressures that existed—and the issues that were paramount—when the treaty was drafted. The interpretation of those criteria will be a matter of political judgment when the time comes.

Mr. Cash

Does the hon. Gentleman accept that if the treaty is to be ratified at all, it has to be ratified by 12 member states unanimously? In the light of the hon. Gentleman's thoughtful speech, let me ask him this: if there is something inherently wrong with the treaty—and he is suggesting that there is—how are we to get the 12 member states which have unanimously agreed to the treaty to agree unanimously to unravel it, especially when five or six of them have their noses deep in the subsidy trough, which is the reason why they went into the thing in the first place? If we are locked into the treaty with no right of secession, and with unanimity being required to unravel it, the whole of the hon. Gentleman's argument collapses.

Mr. Betts

The hon. Gentleman speaks of noses in the subsidy trough. I believe that the structural funds, which transfer resources to poorer members of the Community—particularly countries such as Spain—are extremely important in terms of Community funds. I do not regard the process as involving noses in the trough. I happen to consider the funds an important part of the real criteria for convergence, rather than the simple monetary criteria laid down in the treaty. Far from rubbishing and deriding that process, I should like to see the structural funds enhanced.

I do not necessarily accept all the wording in the treaty and have reservations and concerns about it, but I emphasise that certain things can be done within the European Community structure, and one of them is to increase the structural funds and try to consider points of real economic convergence that are already permissible within the treaties that we have signed under European legislation, and how we might achieve them. Political will is needed to push ahead with that if it is to be achieved.

Those who oppose the treaty's ratification hold diverse views. Some argue that ratification would lead us back to a different set of negotiations. Others would like to abandon the whole thing and not have any fresh negotiations. Some are philosophically opposed to the creation of a single currency, and I understand their view. In my view, the essential aims of the treaty—the move towards a single currency—should be supported. We should act to remove the power of the speculators in the money markets. I cannot think of any other way to do that.

I accept that there are alternatives, and it is incumbent on hon. Members who do not want to go down the Maastricht road to spell out the alternatives. We could allow the currency to float and let the speculators determine the levels, but that would not be a sensible long-term way to run an economic policy. Speculators should not determine on a day-to-day, week-to-week, month-to-month basis the value of our currency.

10.45 am

Mr. Gould

The evidence of recent events, before 16 September and currently in the case of other currencies, shows that enormous power is given to the speculators by establishing a gap between what one says one's currency is worth and what it is worth in the marketplace. Creating that stance makes it possible for the speculators to have a field day.

It is nonsense for my hon. Friend, with whose speech I substantially agree in most other respects, to say that somehow, by fixing our currencies or by eliminating the foreign exchange markets, we would remove our economies from the speculative effects of currency speculation or insulate ourselves against the factors that are reflected when there is turmoil on the foreign exchange markets.

Mr. Betts

By moving to a single currency in Europe, we would remove the speculation. Other than that, I am considering the alternatives. Free floating is one, although I do not accept it. A rigid currency, with one country trying to hold its currency at a certain value independently, is not a realistic stance. If interest rates were a problem in the ERM, they would be an enormous problem and be completely out of the control of Governments if one Government tried to fix their currency rigidly and independently. Or one could move to a managed system such as the ERM, which is a staging post in the treaty towards a single currency.

The problems that we had in the ERM were twofold. We went in at far too high a rate. The Government got that badly wrong. The ERM was not designed as a permanent set of fixed rates between different currencies. It was established as a managed system under which there could be adjustments periodically to reflect different pressures. That was not allowed to happen, so enormous cracks appeared as pressures built up.

I accept the point made by my hon. Friend the Member for Dagenham that the problem of speculation throws up differences within different economies. The problems caused by those differences must be resolved. I accept that devaluation has been a way of resolving those issues in the past. Before the election, I argued for a realignment within the exchange rate mechanism precisely because of those pressures.

In the long term, I would argue that devaluation of the currency is not the sort of policy objective which we want to follow. We should be getting back to the issue of why devaluations have been necessary. It is because of real factors in the economy which diverge between countries. If we are realistic about wanting the agenda of full employment and growth, the move towards a single currency where devaluation is not an objective or mechanism should make us start to address the issues about why economies are diverging and get joint action on a European basis to achieve the objective of full employment and growth which we want to see. I know that my hon. Friend the Member for Dagenham does not agree with that point. My argument is that the only alternative is to have free-floating exchange rates, and let them follow the real factors.

Mr. Gould

It is not that I disagree with my hon. Friend. Of course, he is absolutely right that there are real performance indicators which matter in determining the true course of our economy. I disagree with his assumption that decisions on matters such as exchange rates, interest rates and monetary policy have no impact on the real performance matters. If we get those matters endemically wrong, as we have done over a long period, and then propose to entrench those mistakes in precisely the way proposed by the treaty, any hope that we have of securing a real economic convergence will be totally undermined.

Mr. Betts

The one issue about which I have real concern is the independence of the central bank. My hon. Friend knows my views about that matter. I cannot be eclectic about it because, although I believe that it will be possible politically to interpret some of the criteria in the treaty in a way which would be favourable to my arguments, I agree that the independence of the central bank is a major worry in that regard. Eventually, it will be found to be wanting and we shall have to readdress it in a fundamental way.

Mr. Simpson

In asking for a coherent alternative, does my hon. Friend accept that the whole package of proposals which such a coherent alternative would have to encompass would not address a single variable in the economy? It would make no sense simply to focus on the exchange rate mechanism as the only lever of an economy on which to reconstruct and achieve growth towards full employment.

If we take the package as a whole in terms of moving interest rates by wielding Government decisions about borrowing powers and Government debt, and if we subscribe to the terms of convergence, we shall fall into a trap. Those are precisely the constraints—

The Chairman

Order. As I have said several times during the night, interventions should be succinct and to the point. The hon. Gentleman's intervention is probably long enough.

Mr. Knapman

On a point of order, Mr. Morris. I seek your guidance on Standing Order No. 35 which says: After a question has been proposed a Member rising in his place may claim to move, 'That the question be now put,' and, unless it shall appear to the chair that such motion is an abuse of the rules of the House, or an infringement of the rights of the minority, the question 'That the question be now put,' shall be put forthwith. I draw that to your attention because in the past couple of hours—although we have heard only three speakers—some weighty legal points have been raised by the right hon. Member for Llanelli (Mr. Davies) and some equally valid ones have been raised by my hon. Friend the Member for Worcestershire, South (Mr. Spicer)—

The Chairman

Order. Those are hypothetical points to me. I call Mr. Betts.

Mr. Knapman

Am I not entitled to finish my point of order?

The Chairman

Order. I have ruled on that point of order which the hon. Gentleman raised, and I have called Mr. Betts.

Mr. Cash

Further to that point of order, Mr. Morris. Under Standing Order No. 35 and the reference to the rights of the minority, if only three speakers have spoken in the debate, and there was any question of anyone—

The Chairman

Order. The hon. Gentleman is right that so far three people have spoken, but that has been true of many debates. At no point have I accepted a closure motion after only three people have spoken.

Mr. Knapman

Further to that point of order, Mr. Morris.

The Chairman

No, I will not take any further points of order. I call Mr. Betts.

Mr. Betts

I am doing my best to remember the point that my hon. Friend—

The Chairman

I call Mr. Betts on the amendments.

Mr. Betts

I was trying to remember the point that was made in the intervention, Mr. Morris. My hon. Friend the Member for Nottingham, South (Mr. Simpson) said that exchange rate mechanisms were not the sole weapon in the armoury.

Mr. Simpson

May I refresh my hon. Friend's memory? I simply asked him—

The Chairman

Order. If the hon. Gentleman cannot remember the intervention, it is hard luck.

Mr. Betts

As I remember it, my hon. Friend said that exchange rate mechanisms were one weapon, but they should not be the only weapon to seek convergence between countries and rectify discrepancies between them. We must accept that if we move to a common currency, we shall remove the exchange rate as a mechanism for adjusting the economic performance of various countries. We shall lose one of the weapons in our armoury. That is one of the prices that we pay for that process. I would argue that it is a price worth paying for removing speculation.

Many people have said that they are either in favour of the treaty or against it, and that is the end of the story. I am not wholeheartedly in favour of the Maastricht treaty, although I believe that the general objectives set out in article 2 take us in the right direction. We can achieve that only if we remain a full member of the European Community. That is the only way in which we can achieve the objectives of investment growth and full employment.

If we accepted amendments that meant that the Government could not ratify the treaty, we would end up outside the European Community or, at best, we would become a second-class member of the Community. The treaty is far from perfect. I have tried to show that there are conflicts within it. There are differences of emphasis in different parts of the treaty. They range from the clear acceptance in article 2 that the principles of employment are paramount, to article 105 in which, as my hon. Friends have rightly said, price stability clearly comes to the fore.

I recognise that that creates a degree of ambiguity. I have said that it is not for Opposition Members to justify or explain that. That is up to the Government. However, whatever the difficulties with the treaty, we must work to develop an agenda within the EC which gives primacy to the employment growth and investment criteria in article 2, whatever the constraints in later parts of the treaty. We should seek to resolve any potential conflicts in the treaty in favour of achieving employment growth and investment. That is why Opposition Members who are prepared to accept the treaty, imperfect as it is, have set ourselves a course that recognises some of the flaws, but also recognises that it is probably the best that we can achieve to set the agenda for growth in the 1990s which is so urgently needed.

Mr. Andrew Mitchell (Gedling)

I beg to move, That the Chairman do report Progress and ask leave to sit again.

Mr. Andrew F. Bennett (Denton and Reddish)

I understood that there was a tradition in the House that Members vote and speak in the same way. I understand that at 10 o'clock last night Liberal Democrat Members voted for us to continue our proceedings all night. They seem to have disappeared now. I should have thought that it was perfectly reasonable that if they had voted—

The Chairman

Order. The appearance or disappearance of hon. Members is certainly not a matter for the Chair. I call Mr. Bennett on a point of order.

Mr. Bennett

It is not a point of order.

The Chairman

I shall take a point of order from the hon. Member for Stafford (Mr. Cash) and then I shall come back to the hon. Gentleman.

Mr. Cash

The Liberals have gone, but there is an important amendment that they tabled which would have left out the United Kingdom protocol. It is extraordinary and outrageous that an amendment should be tabled in the name of the leader of the Liberal Democrat party and they are not even here—

11 am

The Chairman

Order. The hon. Gentleman is wearing a very bright tie this morning, but that still does not mean he can abuse the Chair by raising points of order that are totally bogus.

Mr. Bennett

rose—

The Chairman

I call the hon. Gentleman on a second point of order.

Mr. Bennett

It is not a point of order.

The Chairman

Let me clarify matters for the Committee. We are now on a debate on the motion that I report progress and ask leave to sit again. The scope of that debate, to which I am prepared to listen, is that it should be confined to whether the debate should continue. It has nothing to do with who was here in the middle of the night and who was not, or which party was here or who tabled which amendment. Before I call the hon. Member for Denton and Reddish (Mr. Bennett) to speak, are there any more points of order?

Mr. Bill Walker

On a point of order, Mr. Morris. Fortunately, you have already answered one aspect of ray point of order. Those of us who have sat through the night have admired the way in which you have handled things, and I mean that most sincerely. Will you tell the House whether the conduct of Members who move motions and then do not remain for them is borne in mind when the Chair is considering whether they should be called in future debates?

The Chairman

The Chair has many things to bear in mind in deciding who should speak. Mr. Bennett has the floor.

Mr. Bennett

I shall begin by drawing attention to the fact that last night hon. Members decided that it was a good idea for us to work from 10 o'clock at night right through until a few moments ago.

People outside the House will ask whether we are making the most logical use of our time. It seems odd that the Government should now seek to report progress rather than to continue. Most of my constituents would have found it much more logical for us to debate this issue between 10 o'clock in the morning and 5 o'clock at night rather than between 10 o'clock at night and 10 o'clock in the morning.

Mr. Cryer

Does my hon. Friend accept that reporting progress is a determination of whether these important issues that affect the entire nation should continue to be debated in the Chamber? Does my hon. Friend agree that the Government are moving progress not because they are concerned with the nation at large but because they have done a dirty deal with the Liberals and are trying to stick to it?

Mr. Bennett

I am sure that if we started talking about all the deals that have been done in the Corridors of this place, we would have a lot to debate and I also suspect that you would not be very happy about that, Mr. Morris.

I want to address the central question whether we are making sensible use of our time. I should have thought that it would have been perfectly reasonable for the Government to tell us their plans for the rest of the day. Will we have the farce that we now adjourn and do not return to this business until possibly 9 o'clock this evening; we then continue through the evening and at 10 o'clock some arrangement is made with the Liberals by which we either continue to debate crucial issues in the small hours of the morning or will we use a more sensible procedure that, having continued until 11 o'clock in the morning, we carry on?

My right hon. Friend the Member for Llanelli (Mr. Davies) asked some extremely important questions and I should like to hear some answers. It is extremely difficult to have a debate which is then interrupted and then to have to wait until possibly this evening, the small hours of the morning or Monday before we get the answers to the very important questions that my right hon. Friend posed. It is disgraceful that the Government cannot tell us specifically what they intend to do.

Dr. Godman

Is my hon. Friend aware that a number of us have been here for several hours and were hoping to speak in a continuing debate on the amendments? [Interruption.] One of my hon. Friends says that I look as though I have been here all night. It is more than a matter of asking questions; it is a keenness to take part in the debate. So the debate should continue.

Mr. Bennett

I accept that point. My central concern is that very important questions were raised on this group of amendments about the future financial position of the country and they are questions that the House should address. It is ridiculous that, instead of addressing them at an important time of day, when people can rise to logical debate, the Government want to shuffle the debate off so that once again we end up with a debate late at night when hon. Members are less likely to be able to follow the arguments that have been put forward.

I appeal to the Government to tell us now what they intend to do. Do they intend to report progress now and ask leave to sit again tomorrow, which is, of course, today—one of the farces of parliamentary procedure—so that we will reach the wind-up to the debate some time late in the evening? Or is it their intention not to move the 10 o'clock motion tonight, so that we end up with a response to the debate, which was started at half-past seven this morning by my right hon. Friend the Member for Llanelli (Mr. Davies), at some point on Monday? One of my hon. Friends says "Tuesday". That is one of the difficulties of trying to remember which day it is, particularly when we are in the farcical position where people outside think that today is Thursday but inside the House it is Wednesday.

Mr. Cryer

Would my hon. Friend also bear in mind the fact that there is really no point in having a break now because we will not have, in a debate on Thursday—which it is outside, but it is still Wednesday in here—time to have Hansard printed so that we can read the speeches of the various Members who have spoken through the night? Would not the best way to proceed be to get the Government to join in this debate by saying that they will abandon the Bill completely and allow Hansard to be printed?

Dame Elaine Kellett-Bowman (Lancaster)

On a point of order, Mr. Morris. The hon. Member is not addressing the Chair.

Mr. Cryer

On a point of order, Mr. Morris.

The Chairman

The sedentary point of order was correct: the hon. Gentleman should address the Chair, although I accept that he was getting a little carried away. I should be grateful if in future he would address the Chair.

Mr. Cryer

On a point of order, Mr. Morris. Naturally I will accept your guidance, but I was bringing matters of importance to the attention of the Committee. I should be grateful if you would tell some of the Tories, particularly the hon. Member for Lancaster (Dame E. Kellett-Bowman), not to shout from a sedentary position—something which, I am sorry to say, she does frequently.

Dame Elaine Kellett-Bowman

I was merely responding to the lamentable behaviour of the hon. Members opposite.

The Chairman

The hon. Member for Denton and Reddish had the floor.

Several hon. Members

rose—

Mr. Bennett

I have to start my speech before I can give way, but I will give way now.

Sir Trevor Skeet

I just want to raise one matter with the hon. Member. He has been sitting here all night, waiting to get into this debate. [HON. MEMBERS: "No, he has not."] We have had something of the order of 24 blocks of major amendments since we started the Maastricht debates; only three of them have been on economic affairs and all three have been discussed during the night. The debate on them has missed the newspapers. It has missed the ventilation that it should have had. It is important that those outside should know the exact position. Does the hon. Member agree?

Mr. Bennett

I very much agree. That is why I wanted to find out the Government's intentions for the rest of the day and that is what we are debating—whether we should report progress. Many people would like us to do so, but we do not want to if key economic answers are going to be given in the middle of the night. I certainly would have liked to have heard the Government's intentions for tomorrow—which is today.

My hon. Friend the Member for Bradford, South (Mr. Cryer) said that we could not read the speeches made during the debate. He said that we cannot read the most useful speech by my right hon. Friend the Member for Llanelli (Mr. Davies) because it is not in Hansard. I do not think that my hon. Friend is correct because I understand that the typescript of the spill-over session goes to the Library, once Hansard has completed it, so I think that my hon. Friend could read it there. If he did not hear that speech, I recommend it to him as it is worth while reading.

Some people outside the House feel that our speeches on Maastricht are simply filibusters, but I stress to my hon. Friend the Member for Bradford, South that, although the speech by my right hon. Friend the Member for Llanelli was long, every word was extremely important. Anyone outside this place who is under the misunderstanding that we are filibustering should take the trouble to read that speech. He would then be aware that my right hon. Friend raised important issues concerning the future economy of this country.

Mr. Cryer

Does my hon. Friend accept that, although he might be right technically that a version of Hansard is available in the Library shortly after the debate has finished, in reality every hon. Member has the right to receive Hansard and to read it.

Dame Elaine Kellett-Bowman

Order.

Mr. Cryer

The fact that one copy might be available in the Library is no substitute for the right of 651 Members to receive Hansard.

Dame Elaine Kellett-Bowman

Order.

Mr. Cryer

I should be grateful if my hon. Friend could comment on that, although I realise that there are grave difficulties because of the continuing interruptions of the hon. Member for Lancaster (Dame E. Kellett-Bowman), who seems to be behaving very badly so early in the morning.

Dame Elaine Kellett-Bowman

On a point of order, Mr. Morris. Would you please assure the rather obstreperous Member for Bradford, South (Mr. Cryer) that I am drawing perfectly proper points of order to the notice of the Chair? That includes the point of order that hon. Members are coming into the Chamber and walking upright in front of those Members who are speaking, thus breaking their eye line with the Chair.

The Chairman

The hon. Lady is quite right and I take this opportunity to point out to all hon. Members that the incidence of hon. Members interfering in the sightline between the Chair and the hon. Member who is speaking has increased and that that practice should cease. That has occurred on both sides of the Chamber, although it has happened only on one side this morning. Also, may I say that the hon. Lady looks to me to be in the peak of fitness this morning.

Mr. Austin Mitchell

On a point of order, Mr. Morris. Could you confirm that the manner of interjection by the hon. Member for Lancaster (Dame E. Kellett-Bowman) was not to raise a point of order. She did not say, "On a point of order." She yelled "Order" from a sedentary position, as if the Chairman of this Committee had turned into some kind of street yodeller on the other side of the Chamber.

The Chairman

Order. That is a bogus point of order.

Mr. Bennett

Before all those interruptions, I was trying to explain what I believe to be the central matter for the Committee. We should debate the Bill in an orderly fashion and the Government should set out what is happening clearly.

I heard the important speech of my right hon. Friend the Member for Llanelli, but I have not heard speeches from Liberal Members because their amendments were apparently not included in this group. We have also not had the opportunity to hear from my hon. Friends on the Opposition Front Bench or from the Minister.

I want to know whether the Government intend to report progress and ask leave to sit again this afternoon. We understand that there is to be a statement on coal this afternoon, as well as business questions, so the key answers to our economic debate will take place between 6 and 7 o'clock this evening and may go on past 10 o'clock. The key answers to future questions of unemployment which affect my constituency and elsewhere in the country could be debated in the small hours of the morning again. I am sure that the public will not understand that.

Mr. Hain

My hon. Friend makes a valuable point. He might want to consider the fact that we have not had from the Government any indication as to when they will close the debate on the vital issue of the economic character of Europe.

The Chairman

Order.

Mr. Hain

Until we do, we shall not know—

The Chairman

Order.

Mr. Hain

—whether the issues are being—

The Chairman

Order. The hon. Gentleman is getting into the habit of continuing his speech after I have called him to order. Let me make it quite clear to him that I decide when there should be a closure.

11.15 am

Mr. Bennett

It is very worrying that the Government have not told us what their plans are. I shall happily give way to the Minister if he is prepared to tell us what we are to do for the rest of the day. It is important that the hon. Members who move amendments be present to hear the remainder of the debate. Failure by the Government to give us some indication of their intentions will amount to extreme discourtesy to the Committee.

My hon. Friend the Member for Bradford, South (Mr. Cryer) has made a point about the availability of Hansard. It is farcical that we should have to wait 24 hours for the Official Report, as an electronic system of printing is being used. Hansard should be available to hon. Members electronically within an hour or two. [Interruption.] The hon. Member for Wirral, South (Mr. Porter) is complaining from a sedentary position. No doubt he was not here at half-past seven this morning.

Mr. Barry Porter (Wirral, South)

As you, Mr. Morris, have said, the decision about a vote is a matter for you. Actually, I believe that it is about time we had one. People in the Galleries and people outside deserve better. Maastricht has not been mentioned in the last 45 minutes.

Mr. Bennett

I shall not question the hon. Gentleman very closely about the speech of my right hon. Friend the Member for Llanelli. I am sure that if he was present for that speech he would agree that it was very important and contained many questions that demand answers from the Government. But the answers should be given at prime time in the Chamber. I hope that, in this short debate on the progress motion, the Government will tell us what is to happen.

Mrs. Gorman

rose—

Mr. Bennett

I shall give way reluctantly.

Mrs. Gorman

Members who are not here in the middle of the night are missing not only important subject matter but important speeches. The people about whom I am thinking may be in the minority in this debate, but my hon. Friend the Member for Milton Keynes, South-West (M r. Legg) has sat through 17 days of debate as he has very important material to contribute. He has not yet been called and he may be called in the middle of the night, resulting in the virtual loss of his very important speech. I hope that his material will not be wasted in that way.

Mr. Bennett

I accept that point. The hon. Member for Milton Keynes, South-West (Mr. Legg) is one of the Members who questioned my right hon. Friend the Member for Llanelli.

The next time the Government decide to report progress in the middle of the morning—

Mr. Knapman

Will the hon. Gentleman give way?

Mr. Bennett

Yes, reluctantly.

Mr. Knapman

The hon. Gentleman should be making his points to the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston). It is rumoured that there is to be an important Liberal party conference—if that is not a contradiction in terms—tomorrow. The hon. Gentleman might benefit from asking the Liberal Member whether he has been given any undertaking with regard to business later today. In that way, the matter might be speedily resolved.

Mr. Bennett

I would not dream of asking the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) what deals he has done behind closed doors. I said at the beginning of my speech that if we were to spend all our time in the Chamber debating deals done behind the scenes we should make very little progress. It was unfair of the Liberal party to vote in favour of holding a key economic debate in the middle of the night, when most of its members intended to go home. However, I am not surprised, as I have on far too many occasions witnessed their opportunism.

Will the Government please tell us how this debate is to be continued rationally? When shall we get answers to the key economic questions put by my right hon. Friend the Member for Llanelli?

Mr. Livingstone

I shall start by saying how much all of us respect the fair way in which you, Mr. Morris, have conducted business today. You look so fresh and entertaining at this time of the day, having been up through the night, that I wonder what you are on. I would not mind some of it.

The past 24 hours have been an absolute travesty. The most important decisions that will ever come before the House of Commons—which will strip the British people of their major economic rights and their ability to exercise them via the democratic will of Parliament—have been pushed through in the dead of night. It is known full well that the media has largely closed down. The exercise has been conducted for the benefit of the Government, who wish to do their sordid business with the minimum of atttention.

The Government have had the despicable and disgraceful co-operation of the Liberal Democrats, who have disappeared so far up the Tory fundament that the soles of their feet barely show at present. The Liberal Democrats will be careering round Newbury in the weeks to come, pimping and prostituting themselves as the defenders of democracy, having sat through the middle of the night and allowed the Government to push through the legislation. Captain Mannering will be popping up and down Newbury telling all and sundry—

The Chairman

Order. Newbury is not relevant to the debate.

Mr. Livingstone

I was hoping that we could continue the debate until the Newbury by-election.

We are in the midst of a debate about the European Monetary Institute, the forerunner of the central bank, and suddenly the Government want to make progress. Is that perhaps because the journalists are now reporting our business?

Mr. Cash

Is the hon. Gentleman aware that the leader of the Liberal Democrats has tabled an amendment—which should be discussed in the course of our proceedings—to take out what is described as the jewel in the crown of the British negotiations at Maastricht: the opt-out on economic and monetary union? That amendment is actually in the name of the leader—

The Chairman

Order. That matter has nothing to do with the present debate.

Mr. Livingstone

I think that the hon. Gentleman was referring to amendment No. 400, which forms part of the debate towards which we are moving—

The Chairman

That was the debate that we were having. We are now debating whether that debate should continue. We are not discussing the content of that debate.

Mr. Cash

On a point of order, Mr. Morris. How can we be precluded from discussing the content of amendments that have been selected by you when we are debating whether or not we are to be allowed to discuss the motion before us? It is almost impossible to discuss one without the other.

The Chairman

It is clear that we are debating whether to report progress, not the content of individual amendments.

Mr. Knapman

Further to that point of order, Mr. Morris. Previously, a closure motion has always been granted immediately. Therefore, will you reconsider the answer that you gave to my hon. Friend the Member for Stafford (Mr. Cash)?

The Chairman

We can discuss the amendments when we return to them. We are now debating the sole issue of whether to report progress.

Mr. Livingstone

If we report progressnow, what will we have to report? We are halfway through the debate and have not had the vital votes. The Government have not replied to most of the telling questions that have been asked. Many vital issues have been raised to which answers have not been forthcoming. What will the Government do to protect the budget deficit? It has been made clear that if we were to proceed with the treaty before such issues were resolved and the treaty were in operation today, we would now have to move into emergency session to make cuts of £19 billion. How can we report progress when we have not received an answer from the Government on how they would try to square the horrendous circle?

I assume that at some stage the Home Secretary will come to the House to make a statement on the disturbances in Yeovil which are currently taking place. People who feel betrayed are surging on to the streets to demand the resignation of their local Member of Parliament. The news is coming over on the tapes as I speak. There is rioting in Yeovil as ordinary people take to the streets with placards saying, "Paddy, you rat, we want you out".

How can we possibly stop the business until we have had a statement from the Home Secretary? All these matters should be placed before us. We have sat through a disgraceful day for British democracy and now the Government want to shuffle it to one side by closing the debate. Some hon. Members have been here all night. I confess that I was not because I popped home for five hours of shuteye. When I returned I found that in my absence we were committed to a European central bank. The legislation had been pushed through in the small hours as a result of dirty work with the Liberal Democrats who went sliding off to conduct their squalid deals. No doubt they will vote to report progress. Will we have a report on the deals with the Liberal Democrats? Will that be included in the progress report?

In this retrograde move the British people have seen the first major step towards taking away their right to determine our interest rates and the exchange rate for the pound. I was disturbed to hear some of my Front-Bench spokesmen make a fundamental error. I am sure that the Government would want to cover that up: that is why they want to make progress. When I raised the issue of the exchange rate, I was told that ECOFIN would decide the exchange rate of the ecu against the dollar and the yen. How is that determined? The exchange rate of one currency against another is determined by the balance of trade and by the interest rate, which would be set by the central bank. That would effectively determine the exchange rate of the ecu.

No one could possibly sustain an exchange rate that did not reflect the real interest rates vis-à-vis our major competitor currencies. That point has not been answered at all. The Committee is being seriously misled, I am sure inadvertently, and it is being done in the dead of night. It is ridiculous that technically it is still Wednesday, although the rest of the world is already moving on to Thursday. That is absolute nonsense.

Mr. Cash

Does the hon. Gentleman know that the Chancellor of the Exchequer has not taken any part in our proceedings on the most fundamental issue affecting the future of the British economy, monetary affairs, currency, the exchange rate mechanism and black Wednesday? The whole saga is wrapped up in the debate, but the Chancellor has not been here. A junior Minister, the Financial Secretary to the Treasury, has been deputed to discuss all those matters. The right hon. Member for Llanelli (Mr. Davies) put to him important legal points and he could not answer any of them.

Mr. Livingstone

The hon. Member for Stafford (Mr. Cash) makes a valuable point about the absence of the Chancellor, who has had a bad time lately. From black Wednesday he has had a bad run and the Budget was not well received. We cannot make progress until the Chancellor has attended to put his views. Frankly, I am sure that he does not believe in most of this old nonsense. That is why he was singing in the bath when we were forced out of the exchange rate mechanism.

Mr. Skinner

I take great exception to my hon. Friend's statement that the Chancellor of the Exchequer has had a bad time. The country has had a bad time. The Chancellor of the Exchequer has had a great time. He has been living off the hacks of the taxpayer. He has been stopping legal aid for everybody else in Britain and has been picking it up for himself because he got involved with Miss Whiplash and could not get rid of her. He is spending all that money at Threshers, at different places, and his Access card is not in credit. The country is in a mess, the wheels have dropped off the economy and what is he doing? He is singing in the bath. My hon. Friend should rephrase what he has just said.

Mr. Livingstone

It is always refreshing to be reminded by my hon. Friend the Member for Bolsover (Mr. Skinner) of the real class analysis of these matters. I apologise for my slip into moderation. It is a complete travesty that the Chancellor has not been here to present the issues. We know from private briefings to the press that he is clearly not happy and that he thinks it was a mistake to slip into the exchange rate mechanism which, of course, is the first stage of monetary union and the core of the treaty that we have been debating. I saw the Chancellor on "The Frost Interview" on Sunday morning. I was appearing on it myself, to review the morning newspapers. The Chancellor looked much happier outside the exchange rate mechanism than he did when he was in it.

As to the consequences, there were no answers from members of either Front Bench. The real rejection of the Maastricht treaty was cast by voters in France last Sunday, who violently rejected a Government who had gone along with precisely the kind of proposals that were debated tonight.

The Chairman

Order. The hon. Gentleman is becoming too inventive. We must remain in the United Kingdom.

Mr. Livingstone

It would be good if we could, because once the treaty goes through there will not be much of the United Kingdom left.

11.30 am

Mr. Cryer

Will my hon. Friend dwell on the difficulties that would be created by stopping the proceedings now? My right hon. Friend the Member for Llanelli made an excellent speech in which he outlined the economic difficulties; and the establishment of the central bank was also debated. At this point, we need the Chancellor of the Exchequer to come to the Committee to make a response. We do not want to hear from a junior Minister who cannot say anything anyway and who is simply told to keep in line. We should continue and receive a response from the Chancellor—particularly to the debate initiated by my right hon. Friend the Member for Llanelli.

Mr. Livingstone

It was not just the economic elements of my right hon. Friend's speech that were striking, but the legal content. Once the treaty goes through, it will not be us who interpret it but judges and European judges. It is all very well Conservative Members being dragooned by their Whips to pass this and that, but they are leaving interpretation of the treaty to judges of a court over which we shall have no influence. What response has been made to that point?

It does not pay respect to the dignity with which you, Mr. Morris, have conducted these proceedings that only junior Ministers have been in attendance rather than the Chancellor of the Exchequer. The whole nation will join me in applauding the way in which you, Mr. Morris, have conducted the business of the Committee, which has been very difficult at times.

Mr. Chisholm

Having attended the debate since 6 o'clock last night, I left the Chamber for an hour to catch up with some telephone calls and letters. When I returned, I was appalled to learn that the debate was to be closed. Are the Government interested only in debating key elements of the treaty during the hours of darkness?

The Chairman

Order. The debate has not been closed.

Mr. Chisholm

We want to keep the debate going and I take it that that is the subject of my hon. Friend's remarks.

The Chairman

Order. There is no closure of the debate—just a temporary suspension. The debate will resume in due course.

Mr. Chisholm

It is strange that the Government should want to stop now that we are in the hours of daylight, when they made members of the Committee sit during the night to debate the very heart of the treaty. That was an appalling thing to do. Two important groups of amendments were dealt with by collusion with the Liberal Democrats when many right hon. and hon. Members were not present and others were half-asleep. The least that we can expect is for the Chancellor to come to the Committee to answer the crucial points made by my right hon. Friend the Member for Llanelli (Mr. Davies), who described all the actions that the Government would have to take in stage 2. The junior Minister could not give a reply. We must know what stage 2 will involve in terms of inflation, exchange rates, and so on.

Mr. Livingstone

My hon. Friend makes valid points. I am surprised that no Minister has come to the Dispatch Box to answer. Reporting progress at this stage is like a surgeon performing open-heart surgery cutting open the chest, getting his knife in the heart muscle, and then saying "Shall we stop to report progress?" We do not know what the Government are doing, where they are going, or what they will be sewing up—although clearly they sewed something up with the Liberal Democrats.

Mr. Cryer

My right hon. Friend the Member for Llanelli gave us, in addition to his great Treasury experience, the benefit of his legal knowledge. The certain way to proceed would be for the Attorney-General to come to the Committee. From experience, we cannot depend on any other Minister properly to interpret the legal position. My hon. Friend the Member for Brent, East (Mr. Livingstone) will recall that the Minister of State, the right hon. Member for Watford (Mr. Garel-Jones), gave one interpretation and the Attorney-General gave another, yet they claim that it is all so simple and straightforward. It is vital that the Attorney-General attends to respond to the points clearly made by my right hon. Friend the Member for Llanelli.

Mr. Livingstone

In particular, the Government gave no clear guidance on the point made by my right hon. Friend the Member for Llanelli about what lay in store for us in the move towards an independent central bank. Various other Opposition Members made key points. What we are now debating reverses all that was achieved in the great nationalisation of the Bank of England in 1946; it is based on an absence of serious discussion and on half-baked advice provided by junior Ministers whose words have been completely unconvincing. One of the major achievements of the post-war Labour Government has been unravelled in the middle of the night. We have had no serious debate and no honest answers. I do not think that the Government have worked it out.

Mr. Marlow

I am sorry to return to something that the hon. Gentleman said a few moments ago. He said that it was vital for the Chancellor of the Exchequer to come and respond to the debate. I do not whether the hon. Gentleman was here at the time, but my hon. Friend the Financial Secretary talked earlier about article 107, which says that Governments cannot do anything to influence the European system of central banks. The House of Commons will be able to debate issues, but the Government will not be able to say anything. Surely it is worth my right hon. Friend the Chancellor's coming here during the debate on monetary union: if he does not, the only thing that he will have left to say afterwards is goodbye, because the chance will be gone.

Mr. Livingstone

The hon. Gentleman has referred to perhaps the most serious and threatening of all the Maastricht proposals. Not only are we creating the independent European central bank that we have been discussing; not only are its appointees appointed for a single term of seven years—as there is no prospect of their being given a second term, they are free to do what they wish without accountability; but, in voting for the treaty, we waive our rights to influence them. At least the Bundesbank currently comes under pressure from politicians and the Federal Reserve Bank comes under pressure from the President. We have been asked to report progress on a proposal that we waive our rights to exercise similar restraints.

Mr. Rowlands

Is not article 108 equally significant to the sovereignty of the House? If we accept that article, we bind the future legislation of the House of Commons in regard to the statutes of the revised Bank of England. We would have to legislate in strict accordance with the statutes of the European central bank. Not only are we losing the rights of independence; we are losing the right to legislate on our bank in the way that we would wish.

Mr. Livingstone

And, even worse, Mr. Morris—

The Chairman

Even worse, yes. I anticipate the hon. Gentleman. We are not debating the sovereignty of Parliament; we are discussing whether the debate should continue and, if so, why it should continue.

Mr. Livingstone

I consider it vital for the debate to continue, Mr. Morris, so that we can continue to explore—

Mr. Cryer

On a point of order, Mr. Morris. I hate to draw your attention again to the hon. Member for Lancaster, but I understand that she is reading a newspaper. As she is very much concerned with our procedures, I thought that I should help her by informing her, through you, that that is not allowed, even in the Gallery.

The Chairman

The hon. Lady is beyond the Bar, but not in the Gallery.

Dame Elaine Kellett-Bowman

On a point of order, Mr. Morris. May I draw your attention to the lamentable lack of knowledge of the rules that has been demonstrated by the hon. Member for Bradford, South (Mr. Cryer)? Of course, I could not hear what he said, because I was outside the Chamber.

The Chairman

If the hon. Member for Bradford, South (Mr. Cryer) wishes to engage in a private conversation with the hon. Member for Lancaster (Dame E. Kellett-Bowman), I suggest that he goes and buys her a drink.

Mr. Livingstone

I hope that I can remember what I was going to say.

How can we report progress when the points that we have made have not been answered? We have had tremendous assistance from the Opposition Front Bench: I have listened to our leading spokespeople trying to explain the Government's policy, often much more clearly than Ministers and, seemingly, often with much greater agreement than can be seen on the Conservative Benches. Ultimately, however, these remain matters of opinion.

We need the Chancellor and senior Law Officers here to give definitive rulings on the Bill. What would be the impact on the Chancellor if the Bill were passed and we found that the independence of our own central bank were adversely affected? Appointees to the national central banks will serve a five-year term, but we have received no assurance that the system could not be abused politically. Could an outgoing Government stack the board with people on five-year terms so that an incoming Government would be stuck with them?

It is interesting that the hon. Member for Lancaster (Dame E. Kellett-Bowman) was reading a newspaper beyond the Bar of the House. She was most probably looking for an account of the debate, but she will not find it because the key issues were decided after the press had gone to print. They will have to compete with today's news. How much of the debate, which should be reported to the British people, will be lost because of momentous events in Russia and elsewhere in the world? The debate should be held in prime time. We should ensure—

Mr. Barry Porter

On a point of order, Mr. Morris. I am seeking some information. I am listening with great interest and some amusement to the hon. Member for Brent, East (Mr. Livingstone) and with less interest and amusement to the Cryer-Skinner axis. How long may the debate on the motion to report progress continue? It seems that some members of the Opposition are trying to prolong the debate for no particular reason.

The Chairman

That is a judgment for the Chair.

Mr. Livingstone

It is certainly no part of my plan to prolong the debate, and I make that absolutely clear. I am prepared to say what I want: I want some honest answers. I should be prepared to sit down immediately if we could see the Chancellor's happy form wandering through. We must be told what deals have been done. Is making progress something that has been agreed with the Liberal Democrats and the Welsh nationalists, who were all in the same Lobby earlier? We want to know.

Mr. Kevin Hughes (Doncaster, North)

The Chancellor will not come walking through because he is probably too busy in a Cabinet meeting, deciding how many pits to close.

Mr. Livingstone

It is extremely worrying. How will reporting progress affect the prospect for proper cross-examination of Tarzan later today when he tries to close what remains of the mining industry? I cannot remember his title—is it the President of the Board of Trade, el presidente, lord protector, or whatever he chooses to be known as? The debate must be properly concluded. It would be an insult to the British people if, after a long debate, most of which has taken place when the Galleries were empty because who will come to sit here—

The Chairman

Order. The hon. Gentleman knows the rules of the House.

Mr. Livingstone

Nobody else is here but us little mices. The reality is—

The Chairman

Order. The hon. Gentleman's little mouse was in bed, if I heard him correctly earlier.

Mr. Livingstone

Only for five hours, Mr. Morris. I feel that I could have done with another five hours.

Mr. Chisholm

Some of us have not slept at all because—I say this genuinely—we have been waiting for the Minister to reply to the debate. The group of amendments was brilliantly introduced by my right hon. Friend the Member for Llanelli (Mr. Davies), who went through the treaty in a most illuminating way. Anyone who heard his speech will agree with that. He opened up the issue of stage 2 of the treaty. We are waiting for a Minister, preferably the Chancellor, to reply to the many points that my right hon. Friend raised.

Some of us believe that the Chancellor and other members of the Government have been trying to pull the wool over their Back Benchers' eyes to gain their votes without telling them the truth about what is involved in stage 2 and how it affects exchange rate controls and other controls. As my right hon. Friend said, there is a seamless web from stage 2 to stage 3. That aspect of the debate must be dealt with. I have gone without sleep for 36 hours to wait for a reply and I shall not sleep happily until I have heard from a Treasury spokesman.

Mr. Livingstone

I seldom sleep happily when I have heard a Front-Bench Treasury spokesperson speak on any subject.

The Committee decided the way in which we should consider the legislation. Under your guidance, Mr. Morris, the various amendments were arranged into coherent groups. Some of us felt that we should simply start with one amendment and work our way through to the end and perhaps still be here in the year 2000. But you, in your wisdom, Mr. Morris, grouped the amendments. We are now being asked to break off the debate before we have been able seriously to consider the totality of what you thought should be examined together.

For instance, we have not discussed amendment No. 400 and before we report progress we should do so. We have not really discussed in any detail amendment No. 210, tabled by the hon. Member for Stafford (Mr. Cash), which would have tremendous implications for exchange rate policy. Such matters have a dramatic impact on the earlier stages of the debate. It is nonsense to try to shear the debate in half. We cannot report progress halfway through surgery; we should complete the surgery.

11.45 am

Mr. Allan Rogers (Rhondda)

My hon. Friend has been castigating the Liberal Democrats heavily for their secret deal and the way in which they have cosied up with the Government to get this important business through. It has been discussed through the night and perhaps now it will not receive the publicity that my hon. Friend says that it should. Does my hon. Friend realise that the Welsh National party took part in the deal, too—[HON. MEMBERS: "And the Scots."] Last night the Scottish nationalists voted for the closure, but the Welsh nationalists, as part of the deal that they struck three weeks ago on the Committee of the Regions, are continuing to cosy up with the Government, and they have driven through provisions of vital consequence to Wales to be discussed in the middle of the night.

Mr. Livingstone

I share my hon. Friend's worries. Those proceedings seem to show all the worst aspects of politics. Deals have been done out of sight of the public and out of sight of the Chair, in the crooks and crannies of this place—[HON. MEMBERS: "Nooks."]—I mean, the nooks and crannies—in the nooks by the crooks.

Mr. Bill Walker

I happen to think that the Government were right to move the motion and I shall tell the Committee why. Those of us who, unlike the hon. Member for Brent, East (Mr. Livingstone), have been here all night believe that we should have the opportunity to continue the debate, to which we wish to contribute, with people who are awake and listening. I wish to contribute because these matters will considerably affect Scotland and, indeed, the constitution of the United Kingdom and this unitary Parliament in a way that could lead to the break-up of the United Kingdom. With all due respect to the hon. Gentleman, he should know that the Ministers have sat through the entire debate. The right time to continue it will be when we are all a bit fresher and they have had the opportunity to recharge their batteries and the debate can be scheduled at a time when I hope that it will still catch the attention of the media.

Mr. Livingstone

The hon. Gentleman offers a sensible opinion. If we were being offered a serious debate which would start and finish at a reasonable time, that would unite the Committee. But what happens is that we do not know what will happen until 10 o'clock, and then someone may jump up to move a motion; perhaps we will debate through the night and perhaps we will not. That is not a serious way in which to conduct business. We cannot report progress when people are staggering around. Not everyone has your resilience, Mr. Morris. Many of us feel a lot more ragged at the edges, even though we may have managed to get a bit of shuteye. I dread to think about the poor people who have been up all through the night, such as some of my right hon. and hon. Friends, who are now looking quite dragged.

Mr. Bennett

My hon. Friend and I have taken up quite a bit of time this morning. Does he agree that the whole exercise could have been stopped if a Minister had told us what the Government intended to do for the rest of the day? If they intended to return to the Bill, with the Chancellor making a statement at the beginning of a debate that would end at 10 o'clock, that would be a rational way to behave. It is most objectionable—

Mr. David Davis (Boothferry)

rose in this place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

The Committee divided: Ayes 276, Noes 204.

Division No. 210]	[11.48 am
AYES
Adley, Robert	Baker, Nicholas (Dorset North)
Ainsworth, Peter (East Surrey)	Baldry, Tony
Aitken, Jonathan	Banks, Matthew (Southport)
Alexander, Richard	Banks, Robert (Harrogate)
Alison, Rt Hon Michael (Selby)	Bates, Michael
Alton, David	Batiste, Spencer
Amess, David	Bellingham, Henry
Ancram, Michael	Beresford, Sir Paul
Arbuthnot, James	Blackburn, Dr John G.
Arnold, Jacques (Gravesham)	Booth, Hartley
Ashby, David	Boswell, Tim
Ashdown, Rt Hon Paddy	Bottomley, Peter (Eltham)
Atkinson, Peter (Hexham)	Bottomley, Rt Hon Virginia

Bowden, Andrew	Hampson, Dr Keith
Brandreth, Gyles	Hanley, Jeremy
Brazier, Julian	Hannam, Sir John
Bright, Graham	Harris, David
Brooke, Rt Hon Peter	Haselhurst, Alan
Brown, M. (Brigg & Cl'thorpes)	Hawkins, Nick
Browning, Mrs. Angela	Hayes, Jerry
Bruce, Ian (S Dorset)	Heald, Oliver
Bruce, Malcolm (Gordon)	Heath, Rt Hon Sir Edward
Burns, Simon	Heathcoat-Amory, David
Burt, Alistair	Hendry, Charles
Butterfill, John	Heseltine, Rt Hon Michael
Campbell, Menzies (Fife NE)	Hicks, Robert
Carlisle, Kenneth (Lincoln)	Higgins, Rt Hon Sir Terence L.
Carrington, Matthew	Hill, James (Southampton Test)
Channon, Rt Hon Paul	Hogg, Rt Hon Douglas (G'tham)
Chapman, Sydney	Horam, John
Churchill, Mr	Hordern, Rt Hon Sir Peter
Clarke, Rt Hon Kenneth (Ruclif)	Howard, Rt Hon Michael
Clifton-Brown, Geoffrey	Howarth, Alan (Strat'rd-on-A)
Coe, Sebastian	Hughes Robert G. (Harrow W)
Congdon, David	Hughes, Simon (Southwark)
Conway, Derek	Hunt, Rt Hon David (Wirral W)
Coombs, Anthony (Wyre For'st)	Hunt, Sir John (Ravensbourne)
Coombs, Simon (Swindon)	Hunter, Andrew
Cope, Rt Hon Sir John	Jack, Michael
Cormack, Patrick	Jackson, Robert (Wantage)
Couchman, James	Johnson Smith, Sir Geoffrey
Curry, David (Skipton & Ripon)	Johnston, Sir Russell
Davis, David (Boothferry)	Jones, Gwilym (Cardiff N)
Day, Stephen	Jones, Ieuan Wyn (Ynys Môn)
Deva, Nirj Joseph	Jones, Robert B. (W Hertfdshr)
Devlin, Tim	Jopling, Rt Hon Michael
Dickens, Geoffrey	Kellett-Bowman, Dame Elaine
Dicks, Terry	Key, Robert
Dorrell, Stephen	King, Rt Hon Tom
Douglas-Hamilton, Lord James	Kirkhope, Timothy
Dover, Den	Kirkwood, Archy
Duncan, Alan	Knight, Mrs Angela (Erewash)
Duncan-Smith, Iain	Knight, Greg (Derby N)
Dunn, Bob	Knight, Dame Jill (Bir'm E'st'n)
Durant, Sir Anthony	Knox, David
Eggar, Tim	Kynoch, George (Kincardine)
Elletson, Harold	Lait, Mrs Jacqui
Emery, Rt Hon Sir Peter	Lamont, Rt Hon Norman
Evans, David (Welwyn Hatfield)	Leigh, Edward
Evans, Jonathan (Brecon)	Lennox-Boyd, Mark
Evans, Nigel (Ribble Valley)	Lester, Jim (Broxtowe)
Evans, Roger (Monmouth)	Lidington, David
Evennett, David	Lilley, Rt Hon Peter
Faber, David	Lloyd, Peter (Fareham)
Fabricant, Michael	Llwyd, Elfyn
Fenner, Dame Peggy	Lord, Michael
Field, Barry (Isle of Wight)	Luff, Peter
Fishburn, Dudley	Lyell, Rt Hon Sir Nicholas
Forsyth, Michael (Stirling)	MacGregor, Rt Hon John
Forth, Eric	MacKay, Andrew
Foster, Don (Bath)	Maclean, David
Fowler, Rt Hon Sir Norman	McLoughlin, Patrick
Fox, Dr Liam (Woodspring)	Madel, David
Fox, Sir Marcus (Shipley)	Maitland, Lady Olga
Freeman, Roger	Major, Rt Hon John
Gale, Roger	Malone, Gerald
Gallie, Phil	Mans, Keith
Garel-Jones, Rt Hon Tristan	Marland, Paul
Garnier, Edward	Marlow, Tony
Gillan, Cheryl	Marshall, John (Hendon S)
Goodlad, Rt Hon Alastair	Marshall, Sir Michael (Arundel)
Goodson-Wickes, Dr Charles	Martin, David (Portsmouth S)
Gorman, Mrs Teresa	Mates, Michael
Gorst, John	Mawhinney, Dr Brian
Grant, Sir Anthony (Cambs SW)	Mayhew, Rt Hon Sir Patrick
Greenway, Harry (Ealing N)	Mellor, Rt Hon David
Greenway, John (Ryedale)	Merchant, Piers
Griffiths, Peter (Portsmouth, N)	Michie, Mrs Ray (Argyll Bute)
Grylls, Sir Michael	Milligan, Stephen
Gummer, Rt Hon John Selwyn	Mitchell, Andrew (Gedling)
Hague, William	Mitchell, Sir David (Hants NW)
Hamilton, Rt Hon Archie (Epsom)	Monro, Sir Hector
Hamilton, Neil (Tatton)	Montgomery, Sir Fergus

Moss, Malcolm	Spink, Dr Robert
Needham, Richard	Spring, Richard
Nelson, Anthony	Sproat, Iain
Neubert, Sir Michael	Squire, Robin (Hornchurch)
Newton, Rt Hon Tony	Stanley, Rt Hon Sir John
Nicholls, Patrick	Steen, Anthony
Nicholson, David (Taunton)	Stephen, Michael
Nicholson, Emma (Devon West)	Stewart, Allan
Norris, Steve	Streeter, Gary
Onslow, Rt Hon Sir Cranley	Sumberg, David
Ottaway, Richard	Sweeney, Walter
Page, Richard	Sykes, John
Paice, James	Tapsell, Sir Peter
Patnick, Irvine	Taylor, John M. (Solihull)
Patten, Rt Hon John	Temple-Morris, Peter
Pattie, Rt Hon Sir Geoffrey	Thomason, Roy
Pawsey, James	Thompson, Sir Donald (C'er V)
Peacock, Mrs Elizabeth	Thornton, Sir Malcolm
Pickles, Eric	Thurnham, Peter
Porter, Barry (Wirral S)	Townsend, Cyril D. (Bexl'yh'th)
Portillo, Rt Hon Michael	Tracey, Richard
Powell, William (Corby)	Tredinnick, David
Rathbone, Tim	Trotter, Neville
Redwood, John	Twinn, Dr Ian
Renton, Rt Hon Tim	Tyler, Paul
Richards, Rod	Vaughan, Sir Gerard
Riddick, Graham	Waldegrave, Rt Hon William
Rifkind, Rt Hon. Malcolm	Walden, George
Robathan, Andrew	Walker, Bill (N Tayside)
Roberts, Rt Hon Sir Wyn	Waller, Gary
Robertson, Raymond (Ab'd'n S)	Wardle, Charles (Bexhill)
Robinson, Mark (Somerton)	Waterson, Nigel
Rowe, Andrew (Mid Kent)	Wells, Bowen
Rumbold, Rt Hon Dame Angela	Wheeler, Rt Hon Sir John
Ryder, Rt Hon Richard	Whitney, Ray
Sackville, Tom	Whittingdale, John
Sainsbury, Rt Hon Tim	Widdecombe, Ann
Scott, Rt Hon Nicholas	Wiggin, Sir Jerry
Shaw, David (Dover)	Wigley, Dafydd
Shaw, Sir Giles (Pudsey)	Willetts, David
Shephard, Rt Hon Gillian	Wolfson, Mark
Shepherd, Colin (Hereford)	Yeo, Tim
Shersby, Michael	Young, Sir George (Acton)
Smith, Tim (Beaconsfield)
Soames, Nicholas	Tellers for the Ayes:
Spencer, Sir Derek	Mr. David Lightbown and
Spicer, Sir James (W Dorset)	Mr. Timothy Wood.
NOES
Abbott, Ms Diane	Clapham, Michael
Adams, Mrs Irene	Clark, Dr David (South Shields)
Ainger, Nick	Clarke, Eric (Midlothian)
Ainsworth, Robert (Cov'try NE)	Clarke, Tom (Monklands W)
Allen, Graham	Clelland, David
Anderson, Donald (Swansea E)	Clwyd, Mrs Ann
Anderson, Ms Janet (Ros'dale)	Cohen, Harry
Armstrong, Hilary	Connarty, Michael
Barnes, Harry	Corbett, Robin
Barron, Kevin	Corbyn, Jeremy
Battle, John	Corston, Ms Jean
Bayley, Hugh	Cousins, Jim
Beckett, Rt Hon Margaret	Cryer, Bob
Benn, Rt Hon Tony	Cummings, John
Betts, Clive	Cunliffe, Lawrence
Blair, Tony	Cunningham, Jim (Covy SE)
Blunkett, David	Darling, Alistair
Boyce, Jimmy	Davidson, Ian
Boyes, Roland	Davies, Rt Hon Denzil (Llanelli)
Bradley, Keith	Davies, Ron (Caerphilly)
Bray, Dr Jeremy	Davis, Terry (B'ham, H'dge H'l)
Brown, Gordon (Dunfermline E)	Denham, John
Burden, Richard	Dewar, Donald
Byers, Stephen	Dixon, Don
Caborn, Richard	Dobson, Frank
Callaghan, Jim	Donohoe, Brian H.
Campbell, Mrs Anne (C'bridge)	Dowd, Jim
Campbell-Savours, D. N.	Dunwoody, Mrs Gwyneth
Canavan, Dennis	Eagle, Ms Angela
Cann, Jamie	Eastham, Ken
Chisholm, Malcolm	Enright, Derek

Etherington, Bill	Miller, Andrew
Evans, John (St Helens N)	Molyneaux, Rt Hon James
Fatchett, Derek	Moonie, Dr Lewis
Fisher, Mark	Morgan, Rhodri
Flynn, Paul	Morley, Elliot
Foster, Rt Hon Derek	Morris, Estelle (B'ham Yardley)
Foulkes, George	Morris, Rt Hon J. (Aberavon)
Fyfe, Maria	Mudie, George
Galbraith, Sam	Mullin, Chris
Galloway, George	Murphy, Paul
Garrett, John	Oakes, Rt Hon Gordon
George, Bruce	O'Brien, Michael (N W'kshire)
Gerrard, Neil	O'Brien, William (Normanton)
Godman, Dr Norman A.	O'Hara, Edward
Golding, Mrs Llin	Olner, William
Grant, Bernie (Tottenham)	O'Neill, Martin
Griffiths, Win (Bridgend)	Orme, Rt Hon Stanley
Grocott, Bruce	Parry, Robert
Gunnell, John	Pendry, Tom
Hain, Peter	Pickthall, Colin
Hall, Mike	Pike, Peter L.
Hanson, David	Pope, Greg
Harvey, Nick	Prentice, Ms Bridget (Lew'm E)
Hattersley, Rt Hon Roy	Prentice, Gordon (Pendle)
Heppell, John	Prescott, John
Hill, Keith (Streatham)	Primarolo, Dawn
Hinchliffe, David	Purchase, Ken
Hoey, Kate	Quin, Ms Joyce
Hogg, Norman (Cumbernauld)	Raynsford, Nick
Hood, Jimmy	Reid, Dr John
Hoon, Geoffrey	Roche, Mrs. Barbara
Howarth, George (Knowsley N)	Rogers, Allan
Howells, Dr. Kim (Pontypridd)	Rooney, Terry
Hoyle, Doug	Ross, Ernie (Dundee W)
Hughes, Kevin (Doncaster N)	Ross, William (E Londonderry)
Hughes, Roy (Newport E)	Rowlands, Ted
Hutton, John	Ruddock, Joan
Illsley, Eric	Sedgemore, Brian
Ingram, Adam	Sheerman, Barry
Jackson, Glenda (H'stead)	Sheldon, Rt Hon Robert
Jamieson, David	Shepherd, Richard (Aldridge)
Jones, Barry (Alyn and D'side)	Shore, Rt Hon Peter
Jones, Jon Owen (Cardiff C)	Simpson, Alan
Jones, Lynne (B'ham S O)	Skinner, Dennis
Jones, Martyn (Clwyd, SW)	Smith, Andrew (Oxford E)
Kaufman, Rt Hon Gerald	Smith, C. (Isl'ton S & F'sbury)
Kennedy, Jane (Lpool Brdgn)	Smith, Rt Hon John (M'kl'ds E)
Khabra, Piara S.	Smith, Llew (Blaenau Gwent)
Lewis, Terry	Soley, Clive
Livingstone, Ken	Steinberg, Gerry
Loyden, Eddie	Stevenson, George
McAllion, John	Stott, Roger
McAvoy, Thomas	Strang, Dr. Gavin
Macdonald, Calum	Taylor, Mrs Ann (Dewsbury)
McFall, John	Taylor, Sir Teddy (Southend, E)
McKelvey, William	Trimble, David
Mackinlay, Andrew	Turner, Dennis
McLeish, Henry	Vaz, Keith
McMaster, Gordon	Walley, Joan
McNamara, Kevin	Wardell, Gareth (Gower)
Madden, Max	Wareing, Robert N
Maginnis, Ken	Watson, Mike
Mahon, Alice	Wicks, Malcolm
Mandelson, Peter	Williams, Rt Hon Alan (Sw'n W)
Marek, Dr John	Williams, Alan W (Carmarthen)
Marshall, David (Shettleston)	Wilson, Brian
Marshall, Jim (Leicester, S)	Wray, Jimmy
Martin, Michael J. (Springburn)	Wright, Dr Tony
Martlew, Eric
Maxton, John	Tellers for the Noes:
Meale, Alan	Mr. Austin Mitchell and
Michie, Bill (Sheffield Heeley)	Mr. Andrew F. Bennett.
Milburn, Alan

Question agreed to.

Question put accordingly:—

The Committee divided: Ayes 279, Noes 202.

Division No. 211]	[12.02 pm
AYES
Adley, Robert	Fabricant, Michael
Ainsworth, Peter (East Surrey)	Fenner, Dame Peggy
Aitken, Jonathan	Field, Barry (Isle of Wight)
Alexander, Richard	Fishburn, Dudley
Alison, Rt Hon Michael (Selby)	Forsyth, Michael (Stirling)
Alton, David	Forth, Eric
Amess, David	Foster, Don (Bath)
Ancram, Michael	Fowler, Rt Hon Sir Norman
Arbuthnot, James	Fox, Dr Liam (Woodspring)
Arnold, Jacques (Gravesham)	Fox, Sir Marcus (Shipley)
Ashby, David	Freeman, Roger
Ashdown, Rt Hon Paddy	Gale, Roger
Atkinson, Peter (Hexham)	Gallie, Phil
Baker, Nicholas (Dorset North)	Gardiner, Sir George
Baldry, Tony	Garel-Jones, Rt Hon Tristan
Banks, Matthew (Southport)	Garnier, Edward
Banks, Robert (Harrogate)	Gillan, Cheryl
Bates, Michael	Goodlad, Rt Hon Alastair
Batiste, Spencer	Goodson-Wickes, Dr Charles
Bellingham, Henry	Gorman, Mrs Teresa
Beresford, Sir Paul	Gorst, John
Blackburn, Dr John G.	Grant, Sir Anthony (Cambs SW)
Booth, Hartley	Greenway, Harry (Ealing N)
Boswell, Tim	Greenway, John (Ryedale)
Bottomley, Peter (Eltham)	Griffiths, Peter (Portsmouth, N)
Bottomley, Rt Hon Virginia	Grylls, Sir Michael
Bowden, Andrew	Gummer, Rt Hon John Selwyn
Brandreth, Gyles	Hague, William
Brazier, Julian	Hamilton, Rt Hon Archie (Epsom)
Bright, Graham	Hamilton, Neil (Tatton)
Brooke, Rt Hon Peter	Hampson, Dr Keith
Brown, M. (Brigg & Cl'thorpes)	Hanley, Jeremy
Browning, Mrs. Angela	Hannam, Sir John
Bruce, Ian (S Dorset)	Harris, David
Bruce, Malcolm (Gordon)	Haselhurst, Alan
Burns, Simon	Hawkins, Nick
Burt, Alistair	Hayes, Jerry
Butterfill, John	Heald, Oliver
Campbell, Menzies (Fife NE)	Heath, Rt Hon Sir Edward
Carlisle, Kenneth (Lincoln)	Heathcoat-Amory, David
Carrington, Matthew	Hendry, Charles
Cash, William	Heseltine, Rt Hon Michael
Channon, Rt Hon Paul	Hicks, Robert
Churchill, Mr	Higgins, Rt Hon Sir Terence L.
Clarke, Rt Hon Kenneth (Ruclif)	Hill, James (Southampton Test)
Clifton-Brown, Geoffrey	Hogg, Rt Hon Douglas (G'tham)
Coe, Sebastian	Horam, John
Congdon, David	Hordern, Rt Hon Sir Peter
Conway, Derek	Howard, Rt Hon Michael
Coombs, Anthony (Wyre For'st)	Howarth, Alan (Strat'rd-on-A)
Coombs, Simon (Swindon)	Howell, Rt Hon David (G'dford)
Cope, Rt Hon Sir John	Hughes Robert G. (Harrow W)
Cormack, Patrick	Hughes, Simon (Southwark)
Couchman, James	Hunt, Rt Hon David (Wirral W)
Curry, David (Skipton & Ripon)	Hunt, Sir John (Ravensbourne)
Davis, David (Boothferry)	Hunter, Andrew
Day, Stephen	Jack, Michael
Deva, Nirj Joseph	Jackson, Robert (Wantage)
Devlin, Tim	Jessel, Toby
Dickens, Geoffrey	Johnson Smith, Sir Geoffrey
Dicks, Terry	Johnston, Sir Russell
Dorrell, Stephen	Jones, Gwilym (Cardiff N)
Douglas-Hamilton, Lord James	Jones, Robert B. (W Hertfdshr)
Dover, Den	Jopling, Rt Hon Michael
Duncan, Alan	Kellett-Bowman, Dame Elaine
Duncan-Smith, Iain	Key, Robert
Dunn, Bob	Kilfedder, Sir James
Durant, Sir Anthony	King, Rt Hon Tom
Eggar, Tim	Kirkhope, Timothy
Elletson, Harold	Kirkwood, Archy
Emery, Rt Hon Sir Peter	Knight, Mrs Angela (Erewash)
Evans, David (Welwyn Hatfield)	Knight, Greg (Derby N)
Evans, Jonathan (Brecon)	Knight, Dame Jill (Bir'm E'st'n)
Evans, Nigel (Ribble Valley)	Knox, David
Evans, Roger (Monmouth)	Kynoch, George (Kincardine)
Evennett, David	Lait, Mrs Jacqui
Faber, David	Lamont, Rt Hon Norman

Leigh, Edward	Robinson, Mark (Somerton)
Lennox-Boyd, Mark	Rowe, Andrew (Mid Kent)
Lester, Jim (Broxtowe)	Rumbold, Rt Hon Dame Angela
Lidington, David	Ryder, Rt Hon Richard
Lightbown, David	Sackville, Tom
Lilley, Rt Hon Peter	Sainsbury, Rt Hon Tim
Lloyd, Peter (Fareham)	Scott, Rt Hon Nicholas
Lord, Michael	Shaw, David (Dover)
Luff, Peter	Shaw, Sir Giles (Pudsey)
Lyell, Rt Hon Sir Nicholas	Shephard, Rt Hon Gillian
MacGregor, Rt Hon John	Shepherd, Colin (Hereford)
MacKay, Andrew	Shepherd, Richard (Aldridge)
Maclean, David	Shersby, Michael
McLoughlin, Patrick	Smith, Tim (Beaconsfield)
Madel, David	Soames, Nicholas
Maitland, Lady Olga	Spencer, Sir Derek
Major, Rt Hon John	Spicer, Sir James (W Dorset)
Malone, Gerald	Spink, Dr Robert
Mans, Keith	Spring, Richard
Marland, Paul	Sproat, Iain
Marshall, John (Hendon S)	Squire, Robin (Hornchurch)
Marshall, Sir Michael (Arundel)	Stanley, Rt Hon Sir John
Martin, David (Portsmouth S)	Steen, Anthony
Mates, Michael	Stephen, Michael
Mawhinney, Dr Brian	Stewart, Allan
Mayhew, Rt Hon Sir Patrick	Streeter, Gary
Mellor, Rt Hon David	Sumberg, David
Merchant, Piers	Sweeney, Walter
Michie, Mrs Ray (Argyll Bute)	Sykes, John
Milligan, Stephen	Tapsell, Sir Peter
Mitchell, Andrew (Gedling)	Taylor, John M. (Solihull)
Mitchell, Sir David (Hants NW)	Taylor, Sir Teddy (Southend, E)
Monro, Sir Hector	Temple-Morris, Peter
Montgomery, Sir Fergus	Thomason, Roy
Moss, Malcolm	Thompson, Sir Donald (C'er V)
Needham, Richard	Thornton, Sir Malcolm
Nelson, Anthony	Thurnham, Peter
Neubert, Sir Michael	Townsend, Cyril D. (Bexl'yh'th)
Newton, Rt Hon Tony	Tracey, Richard
Nicholls, Patrick	Tredinnick, David
Nicholson, David (Taunton)	Trotter, Neville
Norris, Steve	Twinn, Dr Ian
Onslow, Rt Hon Sir Cranley	Tyler, Paul
Ottaway, Richard	Vaughan, Sir Gerard
Page, Richard	Waldegrave, Rt Hon William
Paice, James	Walden, George
Patnick, Irvine	Walker, Bill (N Tayside)
Patten, Rt Hon John	Wallace, James
Pattie, Rt Hon Sir Geoffrey	Waller, Gary
Pawsey, James	Wardle, Charles (Bexhill)
Peacock, Mrs Elizabeth	Waterson, Nigel
Pickles, Eric	Wells, Bowen
Porter, Barry (Wirral S)	Wheeler, Rt Hon Sir John
Portillo, Rt Hon Michael	Whitney, Ray
Powell, William (Corby)	Widdecombe, Ann
Rathbone, Tim	Wiggin, Sir Jerry
Redwood, John	Willetts, David
Renton, Rt Hon Tim	Wolfson, Mark
Richards, Rod	Yeo, Tim
Riddick, Graham	Young, Sir George (Acton)
Rifkind, Rt Hon. Malcolm
Robathan, Andrew	Tellers for the Ayes:
Roberts, Rt Hon Sir Wyn	Mr. Sydney Chapman and
Robertson, Raymond (Ab'd'n S)	Mr. Timothy Wood.
NOES
Abbott, Ms Diane	Blair, Tony
Adams, Mrs Irene	Blunkett, David
Ainger, Nick	Boyce, Jimmy
Ainsworth, Robert (Cov'try NE)	Boyes, Roland
Allen, Graham	Bradley, Keith
Anderson, Donald (Swansea E)	Bray, Dr Jeremy
Anderson, Ms Janet (Ros'dale)	Brown, Gordon (Dunfermline E)
Armstrong, Hilary	Burden, Richard
Barnes, Harry	Byers, Stephen
Battle, John	Caborn, Richard
Bayley, Hugh	Callaghan, Jim
Beckett, Rt Hon Margaret	Campbell, Mrs Anne (C'bridge)
Benn, Rt Hon Tony	Campbell-Savours, D. N.
Betts, Clive	Canavan, Dennis

Cann, Jamie	Gerrard, Neil
Chisholm, Malcolm	Godman, Dr Norman A.
Clapham, Michael	Golding, Mrs Llin
Clark, Dr David (South Shields)	Grant, Bernie (Tottenham)
Clarke, Eric (Midlothian)	Griffiths, Nigel (Edinburgh S)
Clarke, Tom (Monklands W)	Griffiths, Win (Bridgend)
Clelland, David	Grocott, Bruce
Clwyd, Mrs Ann	Gunnell, John
Cohen, Harry	Hain, Peter
Connarty, Michael	Hall, Mike
Corbett, Robin	Hanson, David
Corbyn, Jeremy	Harvey, Nick
Corston, Ms Jean	Heppell, John
Cousins, Jim	Hill, Keith (Streatham)
Cryer, Bob	Hinchliffe, David
Cummings, John	Hoey, Kate
Cunliffe, Lawrence	Hogg, Norman (Cumbernauld)
Cunningham, Jim (Covy SE)	Hood, Jimmy
Darling, Alistair	Hoon, Geoffrey
Davidson, Ian	Howarth, George (Knowsley N)
Davies, Rt Hon Denzil (Llanelli)	Howells, Dr. Kim (Pontypridd)
Davies, Ron (Caerphilly)	Hoyle, Doug
Davis, Terry (B'ham, H'dge H'l)	Hughes, Kevin (Doncaster N)
Denham, John	Hughes, Roy (Newport E)
Dewar, Donald	Hutton, John
Dixon, Don	Illsley, Eric
Dobson, Frank	Ingram, Adam
Donohoe, Brian H.	Jackson, Glenda (H'stead)
Dowd, Jim	Jamieson, David
Dunwoody, Mrs Gwyneth	Jones, Barry (Alyn and D'side)
Eagle, Ms Angela	Jones, Jon Owen (Cardiff C)
Eastham, Ken	Jones, Lynne (B'ham S O)
Enright, Derek	Jones, Martyn (Clwyd, SW)
Etherington, Bill	Kaufman, Rt Hon Gerald
Evans, John (St Helens N)	Kennedy, Jane (Lpool Brdgn)
Fatchett, Derek	Khabra, Piara S.
Fisher, Mark	Lewis, Terry
Flynn, Paul	Livingstone, Ken
Foster, Rt Hon Derek	Loyden, Eddie
Foulkes, George	McAllion, John
Fyfe, Maria	McAvoy, Thomas
Galbraith, Sam	McCartney, Ian
Galloway, George	Macdonald, Calum
Gapes, Mike	McFall, John
Garrett, John	McKelvey, William
George, Bruce	Mackinlay, Andrew

McLeish, Henry	Quin, Ms Joyce
McMaster, Gordon	Raynsford, Nick
McNamara, Kevin	Reid, Dr John
Madden, Max	Roche, Mrs. Barbara
Maginnis, Ken	Rogers, Allan
Mahon, Alice	Rooney, Terry
Mandelson, Peter	Ross, Ernie (Dundee W)
Marek, Dr John	Ross, William (E Londonderry)
Marshall, David (Shettleston)	Rowlands, Ted
Marshall, Jim (Leicester, S)	Ruddock, Joan
Martin, Michael J. (Springburn)	Sedgemore, Brian
Martlew, Eric	Sheerman, Barry
Maxton, John	Sheldon, Rt Hon Robert
Meale, Alan	Shore, Rt Hon Peter
Michie, Bill (Sheffield Heeley)	Simpson, Alan
Milburn, Alan	Skinner, Dennis
Miller, Andrew	Smith, Andrew (Oxford E)
Molyneaux, Rt Hon James	Smith, C. (Isl'ton S & F'sbury)
Moonie, Dr Lewis	Smith, Rt Hon John (M'kl'ds E)
Morgan, Rhodri	Smith, Llew (Blaenau Gwent)
Morley, Elliot	Soley, Clive
Morris, Estelle (B'ham Yardley)	Steinberg, Gerry
Morris, Rt Hon J. (Aberavon)	Stevenson, George
Mudie, George	Stott, Roger
Mullin, Chris	Strang, Dr. Gavin
Murphy, Paul	Taylor, Mrs Ann (Dewsbury)
Oakes, Rt Hon Gordon	Trimble, David
O'Brien, Michael (N W'kshire)	Turner, Dennis
O'Brien, William (Normanton)	Vaz, Keith
O'Hara, Edward	Walley, Joan
Olner, William	Wardell, Gareth (Gower)
O'Neill, Martin	Wareing, Robert N
Orme, Rt Hon Stanley	Watson, Mike
Parry, Robert	Wicks, Malcolm
Pendry, Tom	Williams, Rt Hon Alan (Sw'n W)
Pickthall, Colin	Williams, Alan W (Carmarthen)
Pike, Peter L.	Wilson, Brian
Pope, Greg	Wray, Jimmy
Prentice, Ms Bridget (Lew'm E)	Wright, Dr Tony
Prentice, Gordon (Pendle)
Prescott, John	Tellers for the Noes:
Primarolo, Dawn	Mr. Austin Mitchell and
Purchase, Ken	Mr. Andrew Bennett.

Question accordingly agreed to.

Committee report Progress; to sit again tomorrow.