§ '. Before submitting the information required in implementing Article 103(3) of Title II of the Treaty on European Union signed at Maastricht on 7th February 1992, Her Majesty's Government shall report to Parliament for its approval an assessment of the medium term economic and budgetary position in relation to public investment expenditure and to the social, economic and environmental goals set out in Title II, Article 2, which report shall form the basis of any submission to the Council and Commission in pursuit of their responsibilities under Article 103 and 104c of the Treaty.'.—[Mr. Andrew Smith.]
§ Brought up, and read the First time.
§ Mr. Andrew Smith (Oxford, East)I beg to move, That the clause be read a Second time.
§ Madam Deputy Speaker (Dame Janet Fookes)With this it will be convenient to discuss also the following: New clause 12—Convergence criteria: assessment of deficits— 87
'. Before submitting the information required in implementing Article 103(3) of Title II of the Treaty on European Union signed at Maastricht on 7th February 1992, Her Majesty's Government shall report to Parliament for its approval an assessment of the medium term economic and budgetary position in relation to public investment expenditure and to the social, economic and environmental goals set out in Title II, Article 2, which report shall form the basis of any submission to the Council and Commission in pursuit of their responsibilities under Article 103 and 104c of the Treaty.'.New clause 32—Exchange rates (report)—'In implementing its obligations under Article 3a of Title II, Her Majesty's Government shall submit a report for consideration by Parliament before it initiates the action required to conduct a single exchange rate policy based on the irrevocable fixing of exchange rates; and the conclusions of Parliament on this report shall be submitted for information to the Council of Finance Ministers.'.
§
Amendment No. 3, in clause 2, page 1, line 28, after 'Parliament', insert
'and unless, pursuant to the goals set out in Article 2 of the Treaty of European Union, signed at Maastricht on 7th February 1992 the following convergence criteria have been achieved:
§ Mr. SmithThe purpose of the amendment is simple and threefold. The first is to make clear the priority that the Opposition believe should attach to article 2 of the Maastricht treaty in setting the goals of the Community in general. Secondly, it makes clear the particular relevance of the provisions to any acceptable assessment of convergence in particular. Thirdly, it makes clear the importance that we attach to accountability to this Parliament when information is given to the Commission in the co-ordination of economic policy.
As most hon. Members will by now be aware, article 2 states:
The Community shall have as its task, by establishing a common market and an economic and monetary union and by implementing the common policies or activities referred to in Articles 3 and 3a, to promote throughout the Community a 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 88 protection, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States.Those are eminently desirable goals and I hope that few hon. Members, certainly on the Opposition Benches, would disagree that Britain and the whole of Europe would be much better off if economic policy were consistently and energetically devoted to their realisation.It is also worth emphasising the extent to which article 2 of the Maastricht treaty represents a big step forward on the article 2 objectives as set out in the existing European Community treaties. The Maastricht treaty has added in as goals
sustainable … growth respecting the environment, a high degree of convergence of economic performance, a high level of employment and social protection … and economic and social cohesion".The inclusion of those objectives in the Maastricht treaty is greatly to be welcomed by democratic socialists, just as it probably explains why certain Conservative Members want to reject the treaty, including article 2.A significant part of the debate on the economic aspects of the treaty in Committee turned on how far the article 2 objectives really were the defining goals of the Community and how far they could or would in practice be overridden by other provisions such as article 3a on the co-ordination of economic policies, article 104c on excessive deficits and articles 105 to 108a on monetary policy.
The Labour party is concerned about the interpretation and implementation of those provisions. We want to see the Community work as an engine of sustainable growth to benefit the many, not as an instrument of deflation to benefit only a few. The key resolution at our party conference last year made it clear that we see the treaty as far from perfect, but at the same time regard it as the best agreement that can currently be achieved.
The answer to those who claim that article 2 does not really offer much by way of reassurance is, first, that article 2 defines the task of the Community. It sets the political and legal context in which the rest of the treaty's provisions must be applied. That central role is not something that we simply imagine; it is there in the treaty, repeated in articles 3, 3a and 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 Artice 2".Secondly—a point which came up time and again—
§ Mr. RowlandsDoes my hon. Friend understand the difference between "with a view to contributing" and the imperatives of monetarism in the rest of the clauses?
§ Mr. SmithI hear what my hon. Friend says. I simply repeat that article 2 says that those are the tasks of the treaty and the other articles refer to the importance to be attributed to those particular goals. New clause 1 seeks further to reinforce that process. I have already made it clear to the House that the Labour party is concerned about the interpretation of the economic clauses in the Bill. Later, I shall reinforce certain other concerns that we have in that respect.
§ Mr. SalmondWill the hon. Gentleman give way?
§ Mr. SmithI shall give way in a moment.
I emphasise a point that came up repeatedly in Committee, and that is that the Maastricht treaty provides a framework through which economic, political and social 89 co-operation and integration will be pursued. The use to which that framework will be put, the specific policies that member states and Community institutions will agree to, will and must depend on political will and on the balance of political power and argument in the Community as it develops and at such time as further decisions on its development are taken.
My third point in response to those who have doubts about the importance and impact of article 2 is that we have in the House the opportunity to signal, through our amendments to the Bill, how we wish on behalf of our constituents the treaty to be interpreted and how we wish its provisions to be operated.
As many hon. Members have found, the criteria for the acceptability of amendments as being in order on the Bill are limiting, but we can already claim modest successes on the economic front in forcing the acceptance of Committee stage new clause 1, now clause 3, which secures greater accountability for the Bank of England than exists at the moment; in winning Committee stage new clause 2, now clause 4, requiring a comparative assessment of the United Kingdom's economic performance; and in incorporating Committee stage amendment No. 420 on co-ordination of economic policies and the importance of ECOFIN.
Those are in addition to the notable victory on the Committee of the Regions and the acceptance of new clause 74, now clause 5. That is a measure of the effort that the Opposition have put into the Bill and the support that we have been able to win from other quarters for the amendments that we sought.
§ The Financial Secretary to the Treasury (Mr. Stephen Dorrell)As the hon. Gentleman is going through the various amendments that have been agreed to during the Bill's passage, the effect of many of which is to add a stage that allows for parliamentary consideration of different aspects of our relationship with the Community, this may be an appropriate moment for me to tell the House and the hon. Gentleman that the Government are minded to accept new clause 1 subject to a few technical manuscript amendments which are available to the House and which the hon. Gentleman has seen, the effect of which is simply to correct some drafting in the new clause in line with the corrections that are provided for in an Opposition amendment that we are due to consider later.
§ Mr. SmithI welcome the Minister's concession, which marks a further victory for Labour and for the common-sense arguments that we made for increasing accountability to Parliament in respect of the treaty's implementation. It also reinforces the view held on this side of the House that the treaty's economic provisions must work towards co-ordinated growth, not deflation or monetarism.
§ Mr. SalmondMy attempt to intervene a few seconds ago has probably been overtaken by events. I am sympathetic to new clause 1, but it struck me that if it was harmless enough the Government would accept it. The fact that they have confirms my suspicions.
§ Mr. SmithWe enter a tempting period. As the Government are accepting our amendments as fast as we can table them, we might be tempted to push through a few more and improve the Bill still further.
New clause 1 confers real benefits in respect of interpreting the way in which the treaty is implemented in 90 relation to the United Kingdom economy and to the goals for employment, growth and equity that we believe are so enormously important.
The Government's further concession is an admission of defeat. I do not believe that the Financial Secretary would accept our amendments if he believed for one moment that the Government had enough votes in the House this evening to defeat them. The Government do not have the votes, any more than they have the arguments.
§ Mr. DorrellI regret the hon. Gentleman's reception for the Government's attitude. We share with members of the Labour Front Bench, and I hope with every right hon. and hon. Member, a desire to see parliamentary scrutiny provided in every appropriate situation. We agree with the Opposition that we have an appropriate opportunity to include a new phase of parliamentary scrutiny.
§ Mr. SmithI admire the straight-faced way in which the Financial Secretary made those remarks. I look forward to the Government accepting the force of our arguments and the logic of parliamentary arithmetic in respect of amendment No. 2.
The longer the Committee stage continued, and given the Government's further concession today, the larger the proportion of the Bill that was effectively written by the Labour party rather than by the Government. Even before today's concession, Labour's word count share was 50 per cent., and the concession takes it over 50 per cent. Our victory on amendment No. 2 will take the figure higher still.
§ Mr. RowlandsHas amendment No. 3, which has some substance to it, the support of my right hon. and hon. Friends on the Front Bench?
§ Mr. SmithAs there is not to be a vote on amendment No. 3, I am not sure that I would be in order to respond.
§ Madam Deputy SpeakerOrder. I remind the hon. Gentleman that this is not a Third Reading debate. The House is considering a group of new clauses and amendments, to which the hon. Gentleman should restrict himself. They offer plenty of scope.
§ Mr. SmithI will do so, Madam Deputy Speaker.
I have considerable sympathy with the spirit behind amendment No. 3, but given that we will not vote on it, any response would be hypothetical. I have two reservations about that amendment. One is the provision that it makes for inflation to average 1.5 per cent. over three years. That could be an excessively deflationary—some would say even monetarist—target.
Also, that amendment states that an amount equivalent to 3 per cent. of Community gross domestic product would demonstrably have to be applied to social and economic cohesion. Important though they are, 3 per cent. would represent a doubling and close to a trebling of the existing proportion of Community GDP spent on the whole EC budget. That would take us to the fringes of Euro-fedralism, to which my hon. Friend is very hostile.
§ Mr. Denzil Davies (Llanelli)My hon. Friend indicated that he believed that 1.5 per cent. inflation is rather deflationary, if that is not a contradiction. As article 2 refers to non-inflationary goals, and as my hon. Friend is very keen on that article, does he not agree that 1.5 per cent. inflation is better than zero inflation?
§ Mr. SmithThat criticism is one that we apply to the treaty's convergence criteria as well as to amendment No. 3. The difficulty is in choosing specific figures and then insisting that they must apply in any one year. Of course we want non-inflationary growth, and we see no advantage in inflation. However, to argue arbitrarily that, regardless of wider economic circumstances, one could not go above inflation of 1.5 per cent. and still progress towards economic and monetary union could prove deflationary in effect.
Bearing in mind your advice, Madam Deputy Speaker, I will make my arguments in favour of new clause 1.
§ Sir Russell JohnstonGiven that the Government have accepted new clause 1, would it not be a good thing if we were all to stop talking about it?
§ Mr. SmithIn view of the extent of our deliberations, that is a tempting proposal. It provides an opportunity to quote a nice item from the diary in this morning's issue of The Guardian:
Before staggering back into the quagmire of the Maastricht debate, the House of Commons could take a lesson fom the Ursuline Sisters. They organised an international conference on Europe, based at their convent at Westgate-on-Sea, clearly conscious that it's a subject on which tempers and patience fray. The programme for the main day went: '11.15 am—Herr Karl Wimberger, Principal of Friedrich-Spee-Kolleg, Neuss, Germany, The European Dimension in Education; 12.15 pm—lunch; 1.30 pm—short walk by the sea'.Perhaps the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) is inviting the House to move as quickly as possible and to take a short walk by the sea. Nevertheless, it is important to make the arguments for new clause 1—though perhaps not at great length—and for right hon. and hon. Members to hear them and to contribute their own views. Otherwise, Government acceptance of an Opposition amendment will merely serve as a way of ending a debate, which would do a disservice to democracy, which figures so largely in concerns expressed by right hon. and hon. Members about the treaty and its implementation.My right hon. and hon. Friends and some Conservative Members expressed anxiety about the convergence criteria, and fear that the provisions in respect of deficits are open to unduly restrictive interpretation. There is no doubt in my mind that the inclusion in the treaty of particular reference values—the ratio of public debt to GDP and the ratio of Government deficit to GDP—goes beyond the sort of framework provisions appropriate to the treaty. It is an attempt to introduce a specific policy and one redolent of particular economic theories prevailing, although not generally accepted, at the time when the treaty was drawn up.
There is no doubt in my mind that, in so far as the balance of Government income and expenditure is a matter of Community interest, it would have been much better for it to have been left to agreement between the member states, taking account of the changing circumstances of the Community, under the general co-ordination and provisions of article 103, rather than inserting specific targets in the treaty. From the Labour party's point of view, an inflexible interpretation of the provisions is unacceptable and must be avoided.
§ Mr. Austin Mitchell (Great Grimsby)Surely my hon. Friend is implying that if we have this position we should oppose these criteria. The national executive said that convergence has to be in real terms—a real convergence of the power, strength and productivity of economies. As these entirely fallacious deflationary convergence criteria have been written into the treaty—and as my hon. Friend wants to interpret them—how can we interpret what is quite specific? Should not we reject it because it is so specific?
§ Mr. SmithThe case that I am making is that the interests of the people we represent—and, indeed, of Europe as a whole—demand a flexible interpretation of these provisions. As my hon. Friend is well aware, and as I have already quoted, the Labour party's policy, decided by conference, was that the treaty is far from perfect but is the best agreement currently achievable.
It is in that spirit that we have made it clear that we have no wish to wreck the Maastricht process. That does not stop us from expressing apprehension about those parts of the treaty which cause us particular concern, and this is one such part. That is why I underline that we are concerned that there should not be an inflexible, mechanistic, rigid interpretation of these provisions.
We can call in aid, of course, the wording of the treaty, which states in article 104c that in assessing deficits
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.Of course, in the present circumstances, it would be sheer folly to attempt rigidly to enforce a year-on-year limit of 3 per cent. on Government deficits.I think that my hon. Friends accept that it is quite reasonable to seek to contain the scale of the average Government deficit across the economic cycle. If debt repayments are not to eat into the resources available for other public expenditure, a sustainable relationship between Government debt and economic growth is essential over the medium term. That is quite different from saying that in any one year the deficit must be kept to 3 per cent. That would completely ignore the important dual role that a sustainable deficit has, first, in funding investment expenditure with an economic return of benefit to the economy as a whole and, secondly, in the operation of counter-cyclical policy where one would expect, and in all probability need, the deficit to be larger in the depth of a recession than at the peak of a recovery.
Indeed, my right hon. and learned Friend the Leader of the Opposition said in his speech in Paris on 15 January,
It would also … 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 three per cent. rule must exclude all 93 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.
§ Dr. Roger Berry (Kingswood)I am in sympathy with that statement, but is there not a problem? My hon. Friend urges us to exercise flexibility on certain criteria. In Germany, politicians from the major parties can sell monetary union to their electorates only on condition that exactly those criteria are rigidly applied. Does that not mean that we must look at what the treaty says, not at what it might say?
My hon. Friend may wish to consider the possibility that, for the reason that I have outlined, monetary union is not politically feasible. If that is the case, ought we not to say so?
§ Mr. SmithIf it turns out not to be feasible, progress towards it will be considerably slower than the target set out in the Maastricht treaty. Indeed, the wording in the treaty provides for that to happen. I do not dispute my hon. Friend's argument that there are tensions between different member states and between different parties within member states as well as between parties in each member state in regard to the precise interpretations to be placed on the treaty.
I think that that reinforces the thrust of my argument that the issue ultimately turns on political will, arid on winning the political argument in Europe, so that progress towards economic and monetary union can be accompanied by real convergence. That was the spirit behind amendment No. 3. It should also work in favour of the high levels of employment and equity that my hon. Friends and I are so keen to achieve.
It is not as though the treaty entirely pointed towards the deflationary nightmares that my hon. Friends rightly fear. I have already reinforced the prime importance of the task that article 2 sets the Community. For example, the protocol on convergence itself must be rewritten and agreed between the member states before the provisions are given operational definition. There is scope in the Maastricht process for us to ensure, jointly with those who think similarly in the rest of Europe, that we use this process to realise the undoubted benefits of economic co-operation, and do not—by sticking mechanistically to specific criteria—commit the folly of plunging Europe more deeply into recession.
§ Mr. SpearingIs my hon. Friend saying that the figures clearly laid down in the treaty, which provide little scope for interpretation, are not to be taken too seriously. and should be considered in the spirit of what is feasible in time? If he is saying that, is he not devaluing international treaties, and—as he may wish to do—devaluing the rigidity or scope of EC legislation as a whole? Customarily, statute in this country has been looked at rather differently.
§ Mr. SmithI am attempting to point to those parts of the treaty that reinforce the case that we are making for a flexible interpretation of these criteria. I point again to article 104c. Paragraph 3 of that article says that
The report of the Commission shall also take into account whether the government deficit exceeds government 94 investment expenditure and take into account all other relevant factors, including the medium term economic arid budgetary position of the Member State.It is through those provisions, jointly with those in Europe who are similarly concerned about these matters, that I suggest that we can work to ensure that common sense prevails.I underline also the fact that when people say, "No, don't sign the treaty and don't be part of the process of continuing economic co-operation in anything like this form" the consequences for employment in this country, if their view prevailed, would be serious indeed.
§ Mr. Ron Leighton (Newham, North-East)What my hon. Friend seems to be saying is that the provisions of the treaty leading to the single currency are so absurd that they are unlikely to be workable in the time scale laid down. Does not my hon. Friend realise that the attempt to get there will do great damage, that it has already destroyed one socialist Government in France and that it is likely soon to destroy another socialist Government in Spain?
§ Mr. SmithMy argument is that slavish adherence to figures drawn up when a particular economic philosophy prevailed at the time that the treaty was negotiated should not be allowed to deflect European Governments, public opinion or parties within Europe from taking the path of what I believe to be economic common sense.
§ Sir Teddy TaylorAlthough what the hon. Gentleman said about article 104c is correct—that flexibility is provided for—the plain fact is that article 104c also provides that if the Commission disagrees and says, "Sorry, we don't like flexibility", it could present a report to the Council and the Council, by a majority, could tell us what to do. If the hon. Gentleman looks at page 20 of the treaty, he will see that the article also provides for the Commission to say, "We're going to make an assessment, because we think you're wrong." The Council can not only tell us what to do; it can fine us and it can stop us using the European Investment Bank. It is all there in paragraph 11 of article 104c. There is no doubt about this. Does the hon. Gentleman accept that, although there is flexibility over assessment, the Commission can refer the United Kingdom to the Council and that the Council, by a majority, can do terrible things to the United Kingdom, even though we may think that there is this flexibility?
§ Mr. SmithWhat the hon. Gentleman overlooks is the fact that these provisions are triggers for reports that have to be further discussed. They are part of an evaluation as to whether convergence has taken place sufficiently for economic and monetary union to happen. It is not a question of us having to do x, y or z. The article says that these are matters that are to be taken into account. The purpose of amendment No. 3 and new clause 1 is to set forth more clearly the concerns of this House that should prevail as this process takes place. We believe that the House, by means of this amendment and otherwise, should make it clear that we expect the British Government to interpret the application of these criteria in the light of the medium-term economic and budgetary position, in relation to both public capital investment expenditure and the laudable economic, social and environmental goals that are set out in article 2.
95 We do not believe that this assessment should simply be left to the Government. In amendment No.3 we propose that the House of Commons should have the opportunity to approve, or otherwise, the submission that the Government make to the Commission and to the European Council. Under the terms of new clause 1, that would apply not only to the assessment of the deficit criteria, which has preoccupied us so much in the debate so far, but to the co-ordination of economic policy in general.
In addition to the arguments that I have advanced relating to deficits, there is the wider, and important, principle of accountability to this House regarding economic policy. Crucial to the operation of the new clause is its reference to information supplied under article 13, paragraph 3, and the inclusion of the word "any" in the sixth line of new clause 1.
Article 103, paragraph 3, says that
In order to ensure closer co-ordination of economic policies and sustained convergence of the economic performances of the Member States, the Council shall, on the basis of reports submitted by the Commission, monitor economic developments in each of the Member States and in the Community as well as the consistency of economic policies with the broad guidelines referred to in paragraph 2, and regularly carry out an overall assessment.For the purpose of this multilateral surveillance, Member States shall forward information to the Commission about important measures taken by them in the field of their economic policy and such other information as they deem necessary.That article thereby refers to all the information that ECOFIN requires in order to co-ordinate the economic policies of member states and the requirements on member states to submit key information about the economic measures that they are taking.The inclusion, therefore, of the word "any" in new clause 1 means that all submissions to the Commission and Council, whether under the treaty requirements of general co-ordination of economic policy or under the excessive deficit procedure, would have to be based on reports taking account of the medium-term budgetary position, public investment and the article 2 goals. Those reports would need to receive the approval of this House.
§ Mr. SalmondThe hon. Gentleman lays stress on the precise wording of new clause 1. The Minister said earlier that he had prepared some drafting amendments. Does the hon. Gentleman have them? If he does, why was he so surprised that the Minister accepted the new clause? If he does not have the amendments, would this not be a good time to ask what those drafting amendments are, since he lays such stress on the precise wording of the clause? Does the hon. Gentleman have the amendments, and what are they?
§ Mr. SmithI have received a sheet of paper with Government amendments upon it. I had no indication from the Government that they intended to accept the new clause until the Financial Secretary said so. I was a little puzzled that no point of order was raised at the beginning of the debate, so I was by no means certain that the new clause would be accepted.
The effect of the drafting amendment is to change references to the treaty signed at Maastricht on 7 February to the treaties establishing the European communities. It is a technical change, which is very much in line with the amendments that my right hon. and hon. Friends and I 96 have tabled in a later grouping, to bring all references to the treaty in the Bill into line by the use of the same language. It does not alter the substance of our amendments. It certainly does not omit the word "any" in new clause 1, upon which, as the hon. Gentleman said, I place considerable weight.
Those reports would need to receive the approval of this House. Therefore, new clause 1 provides important safeguards, both over the interpretation of economic policy in the light of the treaty and over the democratic rights of this House. I hope that it will command the support of the House, which I hope will also be pleased to accept the Government's concession that they are unable to defeat either the arguments or the arithmetic and are therefore accepting that the new clause is to be part of the treaty. It will serve both the House and economic policy relating to Europe well. It will also enhance the effectiveness of that policy and, most important of all, democratic accountability.
§ Sir Teddy Taylor (Southend, East)I wish to make three general points and one in all sincerity to the Labour party. The hon. Member for Oxford, East (Mr. Smith) spoke courteously, kindly and fairly, but, as he is basing a great deal of his hope and optimism on article 104c, I hope that he will reread paragraph 11.
Although it is true that the Commission can have regard to many factors—that Britain has had a bad harvest, but is trying very hard, for example—if it comes to a different conclusion, it can put a report to the Council of Ministers and by a majority—not unanimously—the Council can instruct Britain to do all kinds of terrible things and can impose fines of an appropriate size.
We should give the Government credit for having been very clever in obtaining the exemptions set out on pages 114, 115 and 116. However, once the Commission has made a report, all kinds of terrible things can happen. Article 104c(1) states:
As long as a Member State fails to comply with a decision taken in accordance with paragraph 9"—by a majority vote—the Council may decide to apply or … intensify one … of the following measures:and
- —to require the Member State to publish additional information … before issuing bonds and securities;
- —to invite the European Investment Bank to reconsider its lending policy;
- —to require the Member State to make a non-interestbearing-deposit of an appropriate size"
to impose fines of an appropriate size.The Labour party seems to be carried away with economic union because it believes that there is an element of flexibility. I hope that Labour Members will reread the treaty and accept that, sadly, flexibility is not as great for all member states as they believe. It is certainly easier for Britain because we have won many exemptions—
§ Mr. ShoreIs the hon. Gentleman also aware that, even at stage 2, we could suffer the very damaging effect of an adverse public report on the state of the British economy, long before the penal provisions relating to excess deficits come into effect? We all know how important confidence is in currencies and markets, and such a public report rebuking a particular member state would be designed to destabilise its Government.
§ Sir Teddy TaylorThe right hon. Gentleman is right. In fairness, one must point out that the protocol on page 115 97 refers to article 104c(1) from which the Government have won an exemption. However, the Commission can persuade the majority of member states to say, "Nothing doing. It is too bad, get lost."
Secondly, I hope that people will appreciate the fact that we must understand the obligation on member states to rejoin fixed exchange rates or the exchange rate mechanism. The Government have been successful in obtaining many exemptions. What I have read corresponds with what many people in the world of banking, many lawyers, accountants and clever people think, which is that Britain has an obligation to move towards rejoining the ERM and fixed exchange rates. However, such an obligation appears to be an obligation on member states aiming at stage 3. It would be helpful if the Government would make it abundantly clear, irrespective of' their policy, whether, in their view, the treaty imposes an obligation to work towards fixed exchange rates or the ERM. We know—
§ Mr. DorrellMy hon. Friend has invited the Government to make it clear whether, in their view, there is an obligation under the treaty to work towards fixed exchange rates or membership of the ERM. The answer is no.
§ Sir Teddy TaylorThat is excellent news. I am glad that the Minister, for whom I have a high regard, has made that abundantly clear. I therefore hope that there is a possibility that the Government will accept, even if only in principle, new clause 32 which states that before the Government initiate
the action required to conduct a single exchange rate policy based on the irrevocable fixing of exchange rates",they will submit a report to Parliament, that Parliament shall discuss it and that it will then be sent to the Council of Finance Ministers.
§ Mr. DorrellThat is exactly the Government's position. That is why provision for a further Act of Parliament before we move to stage 3 of economic and monetary union was made in the original text of the Bill.
§ Sir Teddy TaylorI am well aware of what happens at stage 3, but if the Government decided to move towards fixed exchange rates or to rejoin the ERM, would they, in addition to making the helpful concession that the Minister has just announced, state clearly—as new clause 32 states—that there would be a debate in the House of Commons and that the outcome of the debate would be reported to the European Commission? It is very important that the House of Commons should have another go at discussing the ERM or fixed exchange rates before we take such a fundamental step.
I agree with the many people who believe that fixed exchange rates and the ERM amount to monstrous economic lunacy. If 12 countries agree to fix their exchange rates together, many will have to create artificial prosperity or artificial depression. Sadly, most countries in Europe are having to create artificial depression. When Britain was unofficially in the ERM, under the previous Chancellor of the Exchequer, we had to create artificial prosperity.
If the Government are to move back to fixed exchange rates, we ask that Parliament should at least have the opportunity to decide that and to express a point of view. The sending of a report to the EC would have no legislative consequence. As a gesture of good will, the Minister has 98 accepted Labour's new clause and made a very helpful and reassuring statement. It would he helpful and would reassure many people in the Conservative party and some doubters in the Labour party if the Government could simply state that, before a specific policy was made to return to the fixed exchange rates of the ERM, irrespective of whether there is any particular obligation, there would be a debate in the House and that the House would be able to reach a decision. If the Government were to agree to that, it would remove much of the misunderstanding of and lack of sympathy with the Government's position. I therefore hope that it will be possible for the Minister to say that, before we make such a move, there will be a debate in the House.
§ Mr. Quentin Davies (Stamford and Spalding)Does my hon. Friend realise that his suggestion is extraordinary because it would mean that before the Government changed their monetary or exchange rate policy there should be a public debate in the House? Does he not realise the consternation that would be caused in the markets if we debated here whether to rejoin the ERM, on what terms and so on? Does he not appreciate that the conduct of monetary policy must therefore be left in the hands of the executive branch or—better still in my view—in those of an independent central bank? Such decisions can be announced to the world only when they have effectively been taken.
§ 9 pm
§ Sir Teddy TaylorI am sorry, but I do not agree with my hon. Friend. I do not speak as a parish pump populist; I am also a director of a bank with a good record of success and profits, and a director of a big insurance company which is also successful. Bearing in mind the additional unemployment, the misery and the costs brought about by the ERM decision—regardless of the details of how we may have entered the ERM at the wrong rate or at the wrong time—I believe that the vast majority of my constituents would be horrified if the Government decided to go back in, no matter what the clever bankers may say. My hon. Friend should remember that those clever bankers in whom he seems to have such confidence are the same people who said that if we joined the ERM we would have stability and growth. In fact, we had neither stability nor growth; we had misery, extra unemployment and huge extra costs. We must remember that all the money that the Government lost when we were trying to maintain our position within the ERM will have to be paid by my hon. Friend's constituents, and by my constituents, too. Many people have lost their houses and their jobs because of that appalling situation.
No matter what the details may be of how we should work out ERM parity, and how we should make the decision, surely the House of Commons should express its opinion on such a matter of policy before the Government make that further move.
§ Mr. Quentin DaviesI fear that my hon. Friend is confusing our membership of the ERM with the regime of high interest rates that would have been necessary anyway to cope with the inflationary problem that we faced two or three years ago. High interest rates were necessary to get inflation out of the economy and to re-establish stability and the possibility of the growth that we are now beginning to enjoy again, so they would have been 99 required in any event. Our membership of the ERM created the framework that gave additional credibility to that monetary policy at that time.
§ Sir Teddy TaylorI am astonished to hear my hon. Friend say that, because 99.9 per cent. of people in Britain accept that interest rates were high in order to maintain an artificial exchange rate. If that is not true, why did interest rates come down and down the moment that the artificial exchange rate was abolished? Ministers are saying in by-election campaigns, "Isn't it wonderful that Britain has the lowest exchange rates in Europe? Isn't that great? Isn't it wonderful that we now have an outlook for growth?" —and I am sure that the Financial Secretary would say the same thing. I am delighted about all that, but we should appreciate that the reason why that is so, and why poor old Germany and France are in such a horrendous mess now, is that they are still stuck with that accursed policy and we have managed to escape from it.
We can argue about the details, but if my hon. Friend the Member for Stamford and Spalding (Mr. Davies) thinks that interest rates were high simply because we were trying to choke inflation out of the economy, I am afraid that he is wrong. The high interest rates were required largely to try to maintain the artificial exchange rates. My hon. Friend has his views, and clearly he thinks that whatever happens, it will be good. Let us hope that his continual optimism will reassure him when he considers the appalling economic situation that we face. However, I hope that he will accept that there are differing views, and that some people may think that he is not 100 per cent. right.
It would be a terrific contribution to confidence not only in the Government but in the Opposition and in sterling if only the Government would say, "Before we decide to return to fixed exchange rates we shall have another full-scale debate, a decision will be made, and that will be that." That would be terrific, in view of the clear specific undertaking that the Minister has so kindly given that we are under no obligation under the Maastricht treaty to rejoin fixed exchange rates and the ERM.
My final point is about new clause 12, and the worrying philosophy under Maastricht of aiming for noninflationary growth. I fear that that will become a deliberate policy of creating unemployment. I am afraid that all the signs are that paragraph 2 of article 3a will not encourage growth. There is no doubt that it will be a foundation not for growth but for higher unemployment. Professor Ormerod of the Henley Centre for Forecasting goes further and says that price stability is a recipe for unemployment.
The German people, understandably, are obsessed with inflation. I do not blame them for that. It must be a terrible worry for them to look back to the 1930s and see what happened to their country and their economy then. But because of that they seem to have an obsession, and the treaty sentences Britain and all the other states in the EC to follow the German policy of extremly low levels of inflation. I do not believe that low inflation is necessarily a basis for growth; unfortunately, the obsession with low inflation will create massive unemployment.
It is easy for us to cite figures on unemployment and inflation when the world is going through a particular problem, but there is no doubt that in countries such as 100 Germany, France, Italy, the Netherlands and Belgium, the impact on unemployment and on inflation has been worse than in most other countries.
We could help the country if we adopted a policy that took all factors into account and faced the need to stimulate employment to the maximum possible level, while trying to keep inflation relatively low. At present, the Government are in a terrible financial mess, not because they are silly and nasty people but because they face horribly high unemployment. The costs of 3 million unemployed, apart from the misery and degradation for the people involved, are horrendous for the Government, who are having to borrow vast sums simply to meet those costs.
We need an economic policy that concentrates on increasing employment and reducing unemployment. I am genuinely terrified that if we go for the policy set out clearly in the Maastricht treaty—making the control of inflation the basic sole end of economic policy—we shall head into a period of high and rising unemployment. That will not be good for the people of Britain, for the happiness of families or for the Government as they try to control borrowing.
My remarks are not intended as an attack on Tory or Labour. The Front Benches of both parties think that, by and large, the Maastricht deal is good. Labour Members could be deluding themselves into believing that Maastricht will provide flexibility. That will not be the case. I hope that great thought will be given to the Maastricht obsession with controlling inflation and that the spirit of new clause 12 will be considered by the Government before they make final decisions.
I am glad that the House has been given an opportunity to examine my new clause 32. I have had the pleasure of having two proposals considered on Report, though I appreciate that we shall not vote on the issue. It would remove a great deal of fear in Britain about unemployment if the Government said, "Before we return to the absurd ERM policy, we shall have a rethink and discuss the matter again."
Putting aside detailed notes that I have been given, I conclude by reminding hon. Members of what is happening in politics. I am not seeking to score points when I say that the Government are unpopular just now. That is a well-known fact and there is no point hiding it.
§ Dame Elaine Kellett-BowmanThanks to you.
§ Sir Teddy TaylorThe hon. Lady is entitled to her view. I hope that she will also accept that—no thanks to me —the Opposition are not terribly popular either, even though a number of people may vote for them as a means of protesting against the Government.
People are saying that they are not happy with what the major parties are doing economically or with their policies to resolve the present terrible problems of unemployment, misery and lack of growth. It would be tragic if both Front Benches decided to go ahead with a policy based on obsession with inflation. That would not solve the basic problem of unemployment. I hope that the Government will give the clear commitment for which I ask, which is to have a rethink and debate of the ERM and reconsider the whole issue surrounding the principle of non-inflationary growth.
§ Mr. Denzil DaviesI shall speak to amendment No. 3, which has been grouped with new clause 1, which the 101 Government have accepted. I regret that amendment No. 3 will not be called for a Division and obviously we must accept the decision of Madam Speaker on that. It would have been interesting, had it been selected for a vote, to see the attitude of my hon. Friend the Member for Oxford, East (Mr. Smith) who, speaking from the Opposition Front Bench, said he would be coming along with us in spirit.
Before dealing with the amendment in some detail, I echo the concluding remarks of the hon. Member for Southend, East (Sir T. Taylor). There is great danger now from a coalition of an entrenched economic policy in western Europe. In political terms, I suspect that it will do more damage to the parties on the left than to those on the right. Indeed, the damage is already in evidence, with some tragic consequences for all to see, in Spain, in France, in Germany even and perhaps in Italy. That entrenched coalition of economic policy is extremely dangerous and may lead to considerable upheavals in the not too distant future.
Amendment No. 3 was tabled in response to some debates in Committee when several of my hon. Friends chided those of us who are described as Euro-sceptics by saying that article 2 of title II of the treaty was a splendid article. They said that when we made all our speeches about doom and gloom, and excessive deficits, we should read article 2. Time and again, my hon. Friend the Member for Oxford, East has hinged his economic arguments on the wording of article 2.
When some of us spoke of the difficulty of achieving sustainable and non-inflationary growth we were criticised and asked what was wrong with those aims. Of course, there is nothing wrong with them. When we said that the treaty said nothing about unemployment, we were told that article 2 mentioned high levels of unemployment, as if the two were somehow similar. As a result, we were stung into making our response and tried to draft some figures in amendment No. 3. I do not believe that we should have figures entrenched in the treaty, but some already are and it is only right that we should put some flesh on the bare bones of article 2, which sets out the laudable aims with which I think we all agree.
On Second Reading my right hon. Friend the Member for Islwyn (Mr. Kinnock), who was then leader of the Opposition, rightly spoke about real convergence. When politicians or philosophers use the word "real" one has to be careful. We all know what we mean by real convergence. Apparently, for the Labour party, real convergence does not mean monetary or financial convergence, but the convergence of real things such as employment rates and regional disparities, which we want to remove. Those are matters of real convergence, which we understand.
Amendment No. 3 is an attempt—perhaps a clumsy one—to put figures on the bones of real convergence. The figures that we have chosen are fairly generous, as I shall try to show. They are not extremely arbitrary or completely unobtainable. They are obtainable if we believe in real convergence and are concerned with the goals and tasks set out in article 2.
Article 2 contains the phrase "sustainable and non-inflationary growth", which must be accompanied by a high level of employment. My hon. Friend the Member for Oxford, East said that he was with us in spirit, but did not like the figure of 1.5 per cent. inflation, which he said was deflationary. As I tried to explain, that was an 102 interesting statement. Our amendment does not take the figure of 1.5 per cent. in isolation. It seeks 1.5 per cent. inflation, 3 per cent. growth and a 5 per cent. level of unemployment—that package is not and cannot he deflationary.
The Financial Secretary has previously said that he is also in favour of sustainable and non-inflationary growth. When he was asked to name the country in western Europe that had achieved that goal over the past few years, he said that possibly Germany had. Perhaps it has, just about, but if one considers other indicators, there are problems in Germany. But let us have sustainable and non-inflationary growth—some of us believe that western capitals can probably never achieve growth and non-inflation. My hon. Friend the Member for Oxford, East interprets and reinterprets those words in different ways. To me, non-inflation means no inflation. The only measure of inflation that we have is the consumer price index or the retail prices index. Presumably, non-inflation means zero in terms of the retail prices index or the consumer price index. Therefore, non-inflationary growth means no inflation and growth. It does not mean zero growth, but zero inflation plus growth.
We were generous and did not include 0 per cent. inflation in the amendment, but 1.5 per cent. We thought that we should give the Community a chance of obtaining the 1.5 per cent. goal. At the same time, it is fair to expect some growth, and 3 per cent. growth with 1.5 per cent. inflation is not fantastic either. To believe in noninflationary growth it is necessary to believe in such figures. We are asking for that along with a 5 per cent. rate of unemployment. We are not asking for full employment; just 95 per cent. employment.
It is quite significant that the treaty does not talk about percentages of unemployment. The phrase high employment is really a monetarist term. As we tried to point out previously, it is a coded phrase. Anyone can agree on high levels of employment of 60 or 70 per cent. That represents 30 per cent. unemployment, but some people would say that it was a high level of employment. It all depends where we start.
The Labour party argument is that 5 per cent. unemployment or 95 per cent. employment is a high level. We do not expect to get back to full employment—those days are gone for a long time—but I should have thought that we would all agree that a level of 5 per cent. unemployment and 1.5 per cent. inflation and 3 per cent. growth would represent sustainable and non-inflationary growth.
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The amendment proposes that Britain shall not join a single currency or monetary union unless those factors have been achieved. Unless those indicators of real convergence were attained, we would not wish to join in a single currency or, by definition, economic and monetary union. I would hope that was Labour party policy.
I was rather disappointed that my hon. Friend the Member for Oxford, East said that he was with us in spirit. I should have thought that he was with us in every word, every decimal point and every indicator in the amendment. Perhaps he is, but he is not allowed to say so.
I now turn to the phrase "economic and social cohesion". It can mean many things, but again it is fairly clear to Opposition Members. It is having levels of unemployment, levels of growth and per capita income 103 levels in different countries of western Europe which are more or less similar before we move towards a single, common currency.
We are concerned because we are in an extraordinary position. We shall have economic but not political union as there will be no central Government. I am not arguing for one and we shall return to the question of federalism, but there will be no central Government to adjust the consequences on the regions of a single currency. Therefore, we in the Labour party have to make sure that those criteria have been met before we enter the single currency. There will be no central Government, as we have in the United Kingdom, to create a mechanism to redress the problems caused by the centralisation of currency and a single currency.
We know what economic and social cohesion means. We are all in favour of it. The amendment seeks to set out certain figures. It states:
no Community region will have experienced an average GDP per capita income of less than 65 per cent. of the Community average over the latest preceding three years".That figure of 65 per cent. is pretty low; it is lower than some of us would have liked, but again we were trying to be helpful and to bring the Government Front Bench, if not the Financial Secretary, along with us. I think that the Financial Secretary is beyond the pale on these matters. He is a secret monetarist and believes in non-inflationary growth.I do not know what the figures are for Greece and parts of Portugal; they are probably lower. Even in Mid Glamorgan the figure is only 70 per cent. at the moment. So 65 per cent. is perhaps too generous. But, in the spirit of compromise, that is what was put down.
We go on to say that for the United Kingdom the per capita income should not be less than 80 per cent., which I think is fair. The figure for Wales is 77 or 78 per cent. We are the poorest region in Britain. In Northern Ireland it is less than that. In the Republic of Ireland it is below 70 per cent. What we are saying here is that until at least the poorest regions of the United Kingdom are up to 80 per cent. of the Community average—Britain is now 90 per cent. of the average—no Government, no responsible Government and certainly no Government of the left should sign up to a single currency with all its consequences for the constituencies represented by my hon. Friends and certainly those in south Wales and in the old industrial parts of the United Kingdom. So again the figures are fairly reasonable.
We go on to mention unemployment and to allow a band of plus or minus 2 per cent. in respect of the regions. That is again perhaps too generous, but at least it shows what we would wish before signing up to a single currency.
My hon. Friend the Member for Neath (Mr. Hain) had a bit of fun with this. When we come to the budget, he tried to call us federalists. It is a terrible way to describe us. We are not federalists at all, and I do not think that he is. I have never believed that this is a federalist treaty. It is not, nor will it develop in that way. It is a treaty for institutions and will be dominated by them, but that is perhaps another argument and another debate.
The point that we are making here is that the Community budget, which is a convergence budget, excluding the common agricultural policy—because the CAP is not redistributive; it can be, but it is not, as regards the different regions—should be equivalent to only 3 per cent. of the Community gross domestic product. The CAP 104 takes about 1 per cent. If we add 3 per cent. to that, we are talking of a Community budget of 4 and possibly 5 per cent. Sir Donald McDougall, who has been quoted at length in the House, said in the 1970s, even before the accession to the treaty of Rome of Spain, Portugal and Greece, that it was necessary to have a Community budget of 7 per cent. of GDP to counteract the centralising forces caused by the structure of the Community. There was nothing federalist about that, nor is there about this. We' are saying that member states should agree that the Germans and the French should pay a lot more.
§ Mr. DorrellI am listening carefully to the right hon. Gentleman. Will he clarify the position so that there is no doubt? Is he arguing that he would support a Community budget which was measured at 3 per cent. of Community GDP, the purpose of that expenditure being a wealth transfer from one member state in the Community to another? Is that a Community budget that he would support?
§ Mr. DaviesYes. If we are moving towards economic and monetary union and if we are asked to accept the excessive deficits criteria and all the deflation and monetarism in this treaty, one must have it. It is not a question of whether I agree with it. I should have thought that everybody would agree with it. There we are, the hon. Gentleman is a secret mcnetarist. He is a hard man. He wants non-inflationary growth.
Yes, that is what we are saying. We should not move down that road, but, if we are to do so, it can only be done with this kind of contribution coming from countries such as France, Germany, Denmark and the richer countries of the European Community.
§ Mr. Bill WalkerWill the right hon. Gentleman draw the attention of my hon. Friend on the Treasury Bench to the fact that we have operated a single currency and a single bank in the United Kingdom for nearly 300 years? That has required vast transfers of money and a mass movement of people from the poorer areas to the wealthier areas. The evidence is plain for anyone who wants to see it.
§ Mr. DaviesIndeed; that is the history of the 1930s and of the post-war period. Much as we may dislike the dominance of England, at least the safety valve that England offered the people of Scotland and south Wales existed—the cultures were not too different. The middle classes and the better educated professional classes may be able to move around Europe, but this sort of safety valve will not exist for people who work in factories and who live in poorer areas. Such a safety valve can exist only when there is a single Government of a homogenous country with a language and culture that are not too disparate.
I should like to turn the Financial Secretary's question round: is he saying that the Government would not make sure that the budget was of this size before moving to economic and monetary union?
§ Mr. DorrellI can certainly tell the House—the Government have done so on many occasions—that the Government do not regard the European Community budget as a kind of international social security budget. We support the development of a single market within the EC, because we see it as a most effective way of allowing 105 rich and poor areas of the Community to enhance their living standards by the creation of wealth in a competitive market.
§ Mr. DaviesWe have a single market in the United Kingdom; there has been such a market including England and Scotland for 300 years, and including Wales for longer. There is no restriction on movement or on the type of goods that can be sold. That does not mean that we do not need a regional policy. Is the Minister really saying that in a single market such as the United Kingdom we do not need any way of redressing the balance as between the centre and the periphery? I hope not. Now the centre is moving further away—as is the periphery, by definition. That will certainly affect constituencies such as mine, others in Wales, and others west of the line drawn through the middle of Britain.
§ Mr. DorrellThe right hon. Gentleman might like to speculate about the reasons for the simultaneous reduction, over the past 10 years, in total Government expenditure on regional policy and the reduction in the gap in living standards between Wales and Scotland on the one hand and England on the other.
§ Mr. DaviesNot so. I know that the gap between Wales and the south-east of England has increased. Wales is now the poorest region. Whereas in 1979 we were fourth or fifth poorest, now we are bottom of the British league. In future, the Thames corridor—the area around Tower Hamlets down to docklands—because it looks towards Europe, will he further developed. With the advent of the channel tunnel, the single currency and the single market, the south-east of England will gravitate towards Europe, but the rest of Britain will suffer unless there are effective mechanisms for the transfer of income and wealth.
§ Mr. MarlowIs it worth the right hon. Gentleman's while asking the Minister whether he thinks that, despite our spending less on regional policy in the United Kingdom, and standards of living and prosperity having come closer together, it is right to support the cohesion fund in the European Community?
§ Mr. DaviesThe cohesion fund was part of the Danegeld—perhaps Spanish geld would be a more suitable term—that had to be paid to the Prime Minister of Spain.
§ Mr. ShoreThe Financial Secretary seems to be ruling out for economic and monetary union any large transfers via regional policy. The clear implication is that he does envisage a mass movement of people right across the European continent, including hundreds of thousands of English, Scottish, Welsh and Irish people moving to the central areas of Europe in order to find work.
§ Mr. DaviesI am not sure what the Financial Secretary meant or how he intended to ameliorate the effects of a union towards the centre. Where there is union between different parts of any country, a government of the centre has to use strong mechanisms to try to redress the problems. In this case there will not be a government but just a few institutions which will not be democratic. Every country understands that. It happens in the United States and in every civilised country. I thought that the Financial Secretary would have accepted that.
§ Mr. Bill WalkerMy hon. Friend the Financial Secretary and I are not far apart, but perhaps we are not 106 putting our views in the same way. Does the right hon. Member for Llanelli (Mr. Davies) agree that in Scotland, for example, under the Goschen-Barnett formula, spending per capita is far greater? That is one of the main reasons why there has been a substantial narrowing of the differences between various parts of Scotland and the rest of the United Kingdom.
§ Mr. DaviesRegional transfers do not solve all regional problems, but they can ameliorate them. They are the only means governments have of ameliorating the centralising tendency.
§ Mr. SpearingI am grateful to my right hon. Friend for the examples that he has given of the difficulties that might occur even if there were regional transfers. There may not be regional transfers, but even if there were, does he agree that the social and economic difference between Llanelli and London is much smaller than the similar geographical distance between London and Lille? If the centralising movement persists, there will be more difficulty between London and Lille than there has been between Llanelli and London.
§ Madam Deputy SpeakerOrder. I hope that the debate will not become so wide that it includes general regional policy. The amendments are specific.
§ Mr. DaviesI accept what you say, Madam Deputy Speaker. Economic and social cohesion is only one aspect of the amendment. I will shortly bring my remarks to a close. In the amendment we have listed the three main aspirations, goals or tasks contained in article 2—sustainable, non-inflationary growth, a high level of employment, and economic and social cohesion. Those are matters on which my right hon. and hon. Friends can agree. They are in article 2.
Before the United Kingdom considers adhering to a single currency and everything that that involves, those three matters should be dealt with. There may be an argument about the figures in the amendment, but we think that they are reasonable and sensible. If we had sustainable, non-inflationary growth, 95 per cent. employment, and economic and social cohesion we could consider rationally whether we wanted to sign up to a single currency. Until we reach that point, I do not believe that we can have a sensible debate. We owe that to our constituents, who remember what happened with the gold standard in the 1930s. Nothing changes in these matters. We are moving back to the thinking of the 1930s.
Europe has 17 million unemployed. Its growth rate is lower than that of Japan and America and far lower than that of the countries of the far east. Even without the Maastricht treaty, I cannot see how western Europe can perform as well; with the treaty it has not got a hope of doing so. That is why we hope to have the support of the Front Bench at least in word, if not in a vote. I hope that it will agree that the amendment is in accord with Labour party policy so that we may be united.
§ Mr. LeightonAs my right hon. Friend the Member for Llanelli (Mr. Davies) has said, we are considering the convergence criteria of the treaty, which are appalling, certainly for a party of the left. They would cause great 107 damage. In an intervention, I said that they had already destroyed the socialist Government of France. Soon they may destroy the socialist Government of Spain.
There has been no detailed discussion of those criteria in the House. No one has said how wonderful they are, and the advocates of the treaty do not seek to justify them. The Opposition Front-Bench spokesmen said in effect that they did not need to take any notice of them, and seemed to be rather shame-faced about the criteria. If the Government had proposed these convergence criteria in domestic politics, our Front-Bench spokesmen would have recognised them for the monetarist nonsense they are and would have opposed them. However, the prefix "Euro" confers almost a religious sense that a proposal has to be accepted.
People have been silent about the criteria and only my right hon. Friend the Member for Llanelli has sought to debate them. However, they have been debated in the European Parliament, because the European Committee on Economic and Monetary Affairs and Industrial Policy has written to the Select Committee on Employment of which I am a member. That committee wrote to us because of "continuously rising unemployment" and a
wish to inform the wider public of what is at stake if allowed to continue".The committee said that it had been consulted by the Council of Ministers about the attainment of the progressive convergence of economic policies and performance during stage 1 of economic and monetary union, the ERM. It looked at how the ERM was faring not only in this country but in the rest of the Community. It said:considering that the unemployment situation in the Community is becoming dramatic, with a rate of 11 per cent., or 17 million unemployed in 1993".The situation is getting worse, because quite soon 20 million people in the Community will be unemployed. It continued:considering that these official figures seriously underestimate the real unemployment situation in the Community, as many Member States have programmes that delay or restrict registration".That means that, under stage 1 of the ERM, there are 20 million unemployed in the Community. Western Europe is the world's unemployed black spot. The committee says that the Communityrisks sliding into recession, with growth forecasts being continually revised downward, most recently to 0.8 per cent. in 1993.Matters have got worse since the committee told us that, because, under the ERM, western Europe faces zero growth.The committee says that
an average growth rate of 2.5 per cent. is necessary just to stabilise unemployment;".Unless that growth is attained, we cannot reduce unemployment, but it says that, even if that growth rate could be attained, it would take until 1996 to reduce unemployment to its 1990 level of 8.3 per cent.Let us examine what happened at the Edinburgh conference. The committee says:
considering that the Edinburgh growth package is already incorporated in the Commission's growth forecasts, so that, without any additional measures, growth will continue to falter, and unemployment will continue to rise alarmingly.The committee's letter then says: 108considering that Japan and the USA have already taken substantial steps to boost recovery".But what of the EC? It then touches upon a point made by my right hon. Friend the Member for Llanelli. It says:considering that the Community budget is so limited in size that it cannot serve to deliver the necessary growth stimulus".The Community is doing nothing.The letter then says:
considering Community industry is confronted with a continuing deterioration in competitiveness, due to relatively and absolutely high real interest rates, which cause European currencies to appreciate vis-a-vis our main competitors; according to the Annual Economic Report, the nominal effective exchange rates appreciated 10 percentage points between 1989 and 1992, causing a substantial loss of competitiveness to Community producers both in domestic and world markets, and consequently a continuous loss of market share over these years".In other words, the high interest rates demanded by the ERM are crippling the European Community.The committee's letter goes on to note with concern that the globalisation of world trade requires monetary co-operation at a world level, so even if the ERM were to work, that would not be enough. It says:
considering that extremely high real interest rates, combined with imminent recession, threaten to cause a deindustrialization of Europe, because it is difficult to find industrial investment that promises a return of more than 6 or 7 per cent.".The committee is talking about the deindustrialisation of the whole continent because the European economy is being suffocated and strangled by the ERM.The committee says:
considering that inflation is relatively low, and that the rate of capacity utilisation is now below 80 per cent., meaning that stimulation of the economy by lower interest rates or by other means might be absorbed without much immediate risk of inflation".That is what should be done, but the ERM and the European Community treaty forbid that. The committee goes on to ask the Commission and the Council to recognise that unemployment and zero growth are a serious threat to the economic, social and political stability of the Community. That means that the convergence criteria, the ERM and stage 1 are crippling the Community, according to the Economic Committee of the European Parliament writing to the Select Committee on Employment.That committee asks the Commission to draw up criteria for what it calls real convergence criteria. That means that the present convergence criteria are not real ones but only monetary criteria. They do not deal with wealth, output, labour costs, productivity, growth or investment. If the House agreed to the amendment spoken to by my right hon. Friend the Member for Llanelli, we would get real convergence.
The committee's letter asks
Commission and Council to take urgent steps to enable interest rates to come down to levels comparable with those of our main competitors; considers this necessary not only to reduce the costs of private borrowing and of public debt, but also to stop the deterioration in our international competitiveness … Asks ommission and Council to consider reaching agreement with the US and Japanese authorities on 'target zones' for currency parities of the Dollar, Yen and ECU or DM in order to bring more monetary stability, fairer competition and better economic and monetary co-ordination between the major economic powers".This shows that the ERM does not bring currency stability, because it does not bring stability to currencies outside Europe.109 The committee then talks about the excessive deficit criteria defined in the Maastricht treaty. It says 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.But that is exactly what is happening.9.45 pm
The committee sent us an explanatory memorandum which states:
Governments are sticking to a narrow conception of the route to fulfilment of the convergence criteria of EMU, which could have been achieved in the high growth environment of the late eighties, but in the present environment of economic stagnation serves only to reinforce deflation, aggravate public finance problems and therefore threaten the goal of EMU. Changed circumstances demand a change in policy.That is what we want—a change in policy. We want a change along the lines of the amendment of my right hon. Friend the Member for Llanelli. We know that we are not getting that, but a committee of the European Parliament tells us that that is necessary.The central bank has one aim which is price stability. On that, the committee says:
Economic policy solely directed at monetary stability at a time of stagnating growth and accelerating unemployment reinforces the economic downturn and increases unemployment still further … unemployment will grow further, revenues will go down, unemployment-related expenditure will go up, increasing the discrepancy with the core EMU variables (3 per cent. budget deficit and 60 per cent. Government debt).The committee goes on:The least we can ask of our governments is that they should not make things worse.But that is exactly what is happening as a result of stage 1 of economic and monetary union.Here is something for us to think about. The committee says:
Paradoxically, Germany with its relatively high inflation rate has the lowest real interest rate in Europe … As a consequence of the monetary policy in the EMS framework, many Member States have lower inflation but consequently higher real interest-rates than the EMS-anchor currency, the Deutsch-Mark. France, for example, with a much healthier economic situation than Germany, has a prohibitive real interest rate of 7.7 per cent., while Germany has 4.6 per cent. The implication is clear: to have a lower inflation rate than Germany is no longer an advantage, and this perverse effect of monetary orthodoxy on the price of capital in Europe should provide food for thought for Europe's governments and economists.The committee is telling us that it is not wise to have a lower inflation rate than Germany because that means that real interest rates are higher.The committee says:
the French Franc is at serious risk … not because the French Franc is not healthy, but because French industry would not survive the suffocating high interest rates.That is what Mr. Beregovoy found. He supported the policy of the strong franc and the orthodox monetary policies and it lost him the election. I hope that some hon. Members will think about those things.I come to the last point—an opinion of another committee on regional policy and regional planning. It says:
It could reasonably be asked if the hardnecked insistence by the Commission and the official position of the Council to continue the policies prescribed by the convergence criteria required for the realization of EMU is the right policy.The committee is asking that question of us.
§ Mr. David Winnick (Walsall, North)Like other hon. Members, I have listened with much interest to what my hon. Friend has been saying and quoting from the economic committee of the European Parliament. Its criticisms are valid, but I find it puzzling that while it makes a valid criticism of the treaty, convergence and the rest, time and again we are told that we should be supporting the Maastricht treaty. MEPs find it difficult to understand our criticisms. Why are they so keen on a treaty when their own economic committee rightly makes legitimate and valid criticisms of the whole nonsense and poisonous set-up that would result if the treaty is ratified?
§ Mr. LeightonI suppose that the committees still support the treaty, but they are debating the real convergence criteria and getting down to the detail—which is something that we have not done. The committees are saying that the ERM, with the high interest rates that it brings, is suffocating and strangling the western Europe economy, bringing rising mass unemployment and zero growth. They are learning from experience and saying that is not the way forward.
The committee adds:
It could be reasonably asked if the hardnecked insistence by the Commission and the official position of the Council to continue the policies prescribed by the convergence criteria required for the realisation of EMU is the right policy.That question ought to be asked. I do not know whether my right hon. and hon. Friends on the Front Bench are asking it. It seems that they are not, and that they are going along with all this uncritically. The people of western Europe, however, are beginning to question the right way forward.The committee goes on:
The great problems created by German Unification are a striking demonstration of economic realities and not just a theoretical case study of what is likely to happen if no structural measures are enacted.It is saying that here is a laboratory experiment of monetary union. The idea seems to be that one can embrace monetary union without worrying about real convergence and examining productivity, labour and wage costs. The committee examined the situation in Germany and found that, at a stroke, the whole of east Germany's industry had been wiped out. All the east German workers are on strike. Our attention is being drawn to those matters.The committee asks the Commission and the Council
to recognise that the ERM discipline required for EMU necessitates greater economic sacrifices from the more peripheral economies.It is saying that Wales, Scotland and other peripheral areas will suffer—that monetary union helps the strong and efficient, but that the weak will go to the wall.
§ Mr. WinnickI am grateful to my hon. Friend for allowing me to intervene again. If the European Parliament's economic committee is so critical, rightly, why are the majority of MEPs—unfortunately, Labour as well as Tory—almost begging the House to support a treaty that, apart from undermining the basic role of the House of Commons, would cause so much harm and injury to the British people? What possible logic is there in MEPs backing such a treaty?
§ Mr. LeightonThere seems to be hardly any logic in that, but I suppose that my hon. Friend's question should 111 be put to the MEPs. I hope that they will pay some attention to the committee's words. It asks the Commission and the Council
to recognise that unemployment and zero growth are a serious threat to the economic, social and political stability of the Community".The ERM has brought zero growth, stagnation, and rising mass unemployment, and the committee points out that that puts at risk the Community's stability. That is the point to which present policies have brought western Europe.The committee also asked the Commission
to draw up criteria for real convergence in the EC.That recognises that, at present, we have monetarist criteria, not the criteria for real convergence. The only mention of that was made by my right hon. Friend the Member for Llanelli.Appalling damage is being done by the convergence criteria, and by stage 1 of economic and monetary union. We have escaped for the moment; we have been able to secure a more competitive pound and to reduce interest rates by 4 per cent., and I am told that as a result the economy is looking up. Given, however, that the criteria have brought mass unemployment, stagnation and zero growth to western Europe, I do not see how we can possibly vote for them.
§ Mr. Austin MitchellI support the new clause and amendments. The Government have accepted new clause 1, subject to a certain amount of re-wording. My hon. Friend the Member for Oxford, East (Mr. Smith) commented on the triumph and the victory that we had achieved, with the Government quaking in fear of our votes. It must be said, however, that none of the reports received by Parliament or any other institution is of much use against the wording of the treaty.
That wording is quite specific, especially in regard to the deficit and convergence questions that form the stuff of the amendments. The treaty spells out economic policies and strategies that are bound to be deeply deflationary, and particularly damaging to this country—to the weaker, more peripheral economy that will suffer most from the deflationary processes. The reason is clear. Those who have launched the drive for unity in Europe have found that, as they cannot gain support from the people in referendums and cannot secure agreement from Governments—that becomes a horse-trading procedure —the only possible route is via monetary union.
The logic is simple: monetary union leads inevitably to a single Government. That process started with the exchange rate mechanism and is continuing with economic and monetary union, which is the core of this treaty. Central banks, however, will agree to that being the driving, motive force—the dynamic of union—only if it is done on their terms. Those terms, being the terms of central bankers, are deflationary; that is why deflationary proposals are written into the machinery of convergence. The criteria relating to low inflation, public-sector deficit and the ratio of debt to gross national product are the criteria that central bankers want, and the criteria that amendment No. 3 seeks to relax. The central bankers want them to be included because their approach is monetarist.
§ Mr. ShoreIt is worth recalling that it was the central bankers' committee, under the chairmanship of Mr. 112 Delors, that wrote the whole draft of economic and monetary union. This is indeed a bankers' charter. The most extraordinary thing of all is that it should have been presided over by a self-proclaimed socialist French former Minister. I find that amazing.
§ Mr. MitchellI do not find the outcome amazing, given the central bankers, but I find it amazing that the process should have been presided over by a socialist, whose party has now reaped the inevitable reward of the consequences of those policies.
The terms set out in the treaty are simply not acceptable to the Labour party, or to anyone who believes in the policies advocated by the Opposition. We have made clear our reservations about the ERM, and our opposition to EMU, in a series of documents passed by the Labour party conference, starting with "Meet the Challenge, Make the Change". We also made our stance clear in a successor document, whose name I forget: such documents became a bit like Chinese meals at one time, as the policy was modified continually. It was also set out in a statement by the national executive in October 1991. This was before Group 4 took over as the custodian of Labour party policy and allowed it to wander off to Brussels—before it was clause 4 rather than Group 4 policy.
That statement made it clear that monetary union was possible only on two firm bases. Those bases are, first, a convergence in the strength, power, industrial might, productivity, investment, and dynamics of the economies and, secondly, a fairly massive machinery for redistribution. I do not refer to a minimal distribution. Amendment No. 3 contains moderate and cautious proposals. Its redistribution proposals are far more modest than those suggested by the McDougall committee in 1970, which recommended that 7.5 per cent. of Europe's gross domestic product should be redistributed if there was to be monetary and economic union. The proposed proportion—
§ It being Ten o'clock, the debate stood adjourned.
§ Motion made, and Question put forthwith, pursuant to Standing Order No. 14 (Exempted business)
§ That, at this day's sitting, the European Communities (Amendment) Bill may be proceeded with, though opposed, until any hour.—[Mr. Andrew Mitchell.]
§ The House divided: Ayes 314, Noes 279.
116| Division No. 255] | [10 pm |
| AYES | |
| Ainsworth, Peter (East Surrey) | Beith, Rt Hon A. J. |
| Aitken, Jonathan | Bellingham, Henry |
| Alexander, Richard | Beresford, Sir Paul |
| Alison, Rt Hon Michael (Selby) | Blackburn, Dr John G. |
| Allason, Rupert (Torbay) | Booth, Hartley |
| Alton, David | Boswell, Tim |
| Amess, David | Bottomley, Peter (Eltham) |
| Ancram, Michael | Bottomley, Rt Hon Virginia |
| Arbuthnot, James | Bowden, Andrew |
| Arnold, Jacques (Gravesham) | Bowis, John |
| Arnold, Sir Thomas (Hazel Grv) | Boyson, Rt Hon Sir Rhodes |
| Ashby, David | Brandreth, Gyles |
| Ashdown, Rt Hon Paddy | Brazier, Julian |
| Aspinwall, Jack | Bright, Graham |
| Atkins, Robert | Brooke, Rt Hon Peter |
| Atkinson, David (Bour'mouth E) | Brown, M. (Brigg & Cl'thorpes) |
| Atkinson, Peter (Hexham) | Browning, Mrs. Angela |
| Baker, Nicholas (Dorset North) | Bruce, Ian (S Dorset) |
| Baldry, Tony | Bruce, Malcolm (Gordon) |
| Banks, Matthew (Southport) | Burns, Simon |
| Banks, Robert (Harrogate) | Burt, Alistair |
| Bates, Michael | Butler, Peter |
| Batiste, Spencer | Butterfill, John |
| Campbell, Menzies (Fife NE) | Hargreaves, Andrew |
| Carlile, Alexander (Montgomry) | Harris, David |
| Carlisle, Kenneth (Lincoln) | Haselhurst, Alan |
| Carrington, Matthew | Hawkins, Nick |
| Channon, Rt Hon Paul | Hayes, Jerry |
| Churchill, Mr | Heald, Oliver |
| Clappison, James | Heath, Rt Hon Sir Edward |
| Clark, Dr Michael (Rochford) | Heathcoat-Amory, David |
| Clarke, Rt Hon Kenneth (Ruclif) | Hendry, Charles |
| Clifton-Brown, Geoffrey | Heseltine, Rt Hon Michael |
| Coe, Sebastian | Hicks, Robert |
| Colvin, Michael | Higgins, Rt Hon Sir Terence L. |
| Congdon, David | Hill, James (Southampton Test) |
| Conway, Derek | Hogg, Rt Hon Douglas (G'tham) |
| Coombs, Anthony (Wyre For'st) | Horam, John |
| Coombs, Simon (Swindon) | Hordern, Rt Hon Sir Peter |
| Cope, Rt Hon Sir John | Howard, Rt Hon Michael |
| Cormack, Patrick | Howarth, Alan (Strat'rd-on-A) |
| Couchman, James | Howell, Rt Hon David (G'dford) |
| Currie, Mrs Edwina (S D'by'ire) | Howell, Ralph (North Norfolk) |
| Curry, David (Skipton & Ripon) | Hughes Robert G. (Harrow W) |
| Dafis, Cynog | Hughes, Simon (Southwark) |
| Davies, Quentin (Stamford) | Hunt, Rt Hon David (Wirral W) |
| Davis, David (Boothferry) | Hunt, Sir John (Ravensbourne) |
| Day, Stephen | Hunter, Andrew |
| Deva, Nirj Joseph | Hurd, Rt Hon Douglas |
| Devlin, Tim | Jack, Michael |
| Dickens, Geoffrey | Jackson, Robert (Wantage) |
| Dicks, Terry | Johnson Smith, Sir Geoffrey |
| Dorrell, Stephen | Johnston, Sir Russell |
| Douglas-Hamilton, Lord James | Jones, Gwilym (Cardiff N) |
| Dover, Den | Jones, leuan Wyn (Ynys Môn) |
| Duncan, Alan | Jones, Nigel (Cheltenham) |
| Dunn, Bob | Jones, Robert B. (W Hertfdshr) |
| Durant, Sir Anthony | Jopling, Rt Hon Michael |
| Dykes, Hugh | Kellett-Bowman, Dame Elaine |
| Eggar, Tim | Kennedy, Charles (Ross.C&S) |
| Elletson, Harold | Key, Robert |
| Emery, Rt Hon Sir Peter | Kilfedder, Sir James |
| Evans, David (Welwyn Hatfield) | King, Rt Hon Tom |
| Evans, Jonathan (Brecon) | Kirkhope, Timothy |
| Evans, Nigel (Ribble Valley) | Kirkwood, Archy |
| Evans, Roger (Monmouth) | Knight, Mrs Angela (Erewash) |
| Evennett, David | Knight, Greg (Derby N) |
| Faber, David | Knight, Dame Jill (Bir'm E'st'n) |
| Fabricant, Michael | Knox, David |
| Fairbairn, Sir Nicholas | Kynoch, George (Kincardine) |
| Fenner, Dame Peggy | Lait, Mrs Jacqui |
| Field, Barry (Isle of Wight) | Lamont, Rt Hon Norman |
| Fishburn, Dudley | Lang, Rt Hon Ian |
| Forman, Nigel | Leigh, Edward |
| Forsyth, Michael (Stirling) | Lennox-Boyd, Mark |
| Forth, Eric | Lester, Jim (Broxtowe) |
| Foster, Don (Bath) | Lidington, David |
| Fowler, Rt Hon Sir Norman | Lilley, Rt Hon Peter |
| Fox, Dr Liam (Woodspring) | Lloyd, Peter (Fareham) |
| Fox, Sir Marcus (Shipley) | Llwyd, Elfyn |
| Freeman, Roger | Luff, Peter |
| French, Douglas | Lyell, Rt Hon Sir Nicholas |
| Fry, Peter | Lynne, Ms Liz |
| Gale, Roger | MacGregor, Rt Hon John |
| Gallie, Phil | MacKay, Andrew |
| Garel-Jones, Rt Hon Tristan | Maclean, David |
| Garnier, Edward | Maclennan, Robert |
| Gillan, Cheryl | McLoughlin, Patrick |
| Goodlad, Rt Hon Alastair | Madel, David |
| Goodson-Wickes, Dr Charles | Maitland, Lady Olga |
| Gorst, John | Major, Rt Hon John |
| Grant, Sir Anthony (Cambs SW) | Malone, Gerald |
| Greenway, Harry (Ealing N) | Mans, Keith |
| Greenway, John (Ryedale) | Marland, Paul |
| Griffiths, Peter (Portsmouth, N) | Marshall, John (Hendon S) |
| Grylls, Sir Michael | Marshall, Sir Michael (Arundel) |
| Gummer, Rt Hon John Selwyn | Martin, David (Portsmouth S) |
| Hague, William | Mawhinney, Dr Brian |
| Hamilton, Rt Hon Archie (Epsom) | Mellor, Rt Hon David |
| Hamilton, Neil (Tatton) | Merchant, Piers |
| Hampson, Dr Keith | Michie, Mrs Ray (Argyll Bute) |
| Hanley, Jeremy | Milligan, Stephen |
| Hannam, Sir John | Mills, Iain |
| Mitchell, Andrew (Gedling) | Spink, Dr Robert |
| Mitchell, Sir David (Hants NW) | Spring, Richard |
| Monro, Sir Hector | Sproat, Iain |
| Montgomery, Sir Fergus | Squire, Robin (Hornchurch) |
| Moss, Malcolm | Stanley, Rt Hon Sir John |
| Needham, Richard | Steel, Rt Hon Sir David |
| Nelson, Anthony | Steen, Anthony |
| Neubert, Sir Michael | Stephen, Michael |
| Newton, Rt Hon Tony | Stern, Michael |
| Nicholls, Patrick | Stewart, Allan |
| Nicholson, David (Taunton) | Streeter, Gary |
| Nicholson, Emma (Devon West) | Sumberg, David |
| Norris, Steve | Sykes, John |
| Onslow, Rt Hon Sir Cranley | Taylor, Ian (Esher) |
| Oppenheim, Phillip | Taylor, John M. (Solihull) |
| Ottaway, Richard | Taylor, Matthew (Truro) |
| Page, Richard | Temple-Morris, Peter |
| Paice, James | Thomason, Roy |
| Patnick, Irvine | Thompson, Sir Donald (C'er V) |
| Patten, Rt Hon John | Thompson, Patrick (Norwich N) |
| Pattie, Rt Hon Sir Geoffrey | Thornton, Sir Malcolm |
| Pawsey, James | Thurnham, Peter |
| Peacock, Mrs Elizabeth | Townsend, Cyril D. (Bexl'yh'th) |
| Pickles, Eric | Tracey, Richard |
| Porter, Barry (Wirral S) | Tredinnick, David |
| Portillo, Rt Hon Michael | Trend, Michael |
| Powell, William (Corby) | Trotter, Neville |
| Rathbone, Tim | Twinn, Dr Ian |
| Redwood, John | Tyler, Paul |
| Renton, Rt Hon Tim | Vaughan, Sir Gerard |
| Richards, Rod | Viggers, Peter |
| Riddick, Graham | Waldegrave, Rt Hon William |
| Rifkind, Rt Hon. Malcolm | Walden, George |
| Robathan, Andrew | Wallace, James |
| Roberts, Rt Hon Sir Wyn | Waller, Gary |
| Robertson, Raymond (Ab'd'n S) | Ward, John |
| Robinson, Mark (Somerton) | Wardle, Charles (Bexhill) |
| Roe, Mrs Marion (Broxbourne) | Waterson, Nigel |
| Rowe, Andrew (Mid Kent) | Watts, John |
| Rumbold, Rt Hon Dame Angela | Wells, Bowen |
| Ryder, Rt Hon Richard | Wheeler, Rt Hon Sir John |
| Sackville, Tom | Whitney, Ray |
| Sainsbury, Rt Hon Tim | Whittingdale, John |
| Scott, Rt Hon Nicholas | Widdecombe, Ann |
| Shaw, David (Dover) | Wiggin, Sir Jerry |
| Shaw, Sir Giles (Pudsey) | Wigley, Dafydd |
| Shephard, Rt Hon Gillian | Willetts, David |
| Shepherd, Colin (Hereford) | Wilshire, David |
| Shersby, Michael | Wolfson, Mark |
| Sims, Roger | Wood, Timothy |
| Smith, Sir Dudley (Warwick) | Yeo, Tim |
| Smith, Tim (Beaconsfield) | Young, Sir George (Acton) |
| Soames, Nicholas | |
| Speed, Sir Keith | Tellers for the Ayes: |
| Spencer, Sir Derek | Mr. David Lightbown and Mr. Sydney Chapman. |
| Spicer, Sir James (W Dorset) |
| NOES | |
| Abbott, Ms Diane | Betts, Clive |
| Adams, Mrs Irene | Biffen, Rt Hon John |
| Ainger, Nick | Blair, Tony |
| Ainsworth, Robert (Cov'try NE) | Blunkett, David |
| Allen, Graham | Boateng, Paul |
| Anderson, Donald (Swansea E) | Boyce, Jimmy |
| Anderson, Ms Janet (Ros'dale) | Boyes, Roland |
| Armstrong, Hilary | Bradley, Keith |
| Ashton, Joe | Bray, Dr Jeremy |
| Austin-Walker, John | Brown, Gordon (Dunfermline E) |
| Banks, Tony (Newham NW) | Brown, N. (N'c'tle upon Tyne E) |
| Barnes, Harry | Burden, Richard |
| Barron, Kevin | Byers, Stephen |
| Battle, John | Caborn, Richard |
| Bayley, Hugh | Callaghan, Jim |
| Beckett, Rt Hon Margaret | Campbell, Mrs Anne (C'bridge) |
| Bell, Stuart | Campbell, Ronnie (Blyth V) |
| Benn, Rt Hon Tony | Campbell-Savours, D. N. |
| Bennett, Andrew F. | Canavan, Dennis |
| Benton, Joe | Cann, Jamie |
| Bermingham, Gerald | Chisholm, Malcolm |
| Berry, Dr. Roger | Clapham, Michael |
| Clark, Dr David (South Shields) | Home Robertson, John |
| Clarke, Eric (Midlothian) | Hood, Jimmy |
| Clarke, Tom (Monklands W) | Hoon, Geoffrey |
| Clelland, David | Howarth, George (Knowsley N) |
| Clwyd, Mrs Ann | Howells, Dr. Kim (Pontypridd) |
| Coffey, Ann | Hoyle, Doug |
| Cohen, Harry | Hughes, Kevin (Doncaster N) |
| Connarty, Michael | Hughes, Robert (Aberdeen N) |
| Cook, Frank (Stockton N) | Hughes, Roy (Newport E) |
| Cook, Robin (Livingston) | Hume, John |
| Corbett, Robin | Hutton, John |
| Corbyn, Jeremy | Illsley, Eric |
| Corston, Ms Jean | Ingram, Adam |
| Cousins, Jim | Jackson, Glenda (H'stead) |
| Cox, Tom | Jackson, Helen (Shef'ld, H) |
| Cryer, Bob | Jamieson, David |
| Cummings, John | Janner, Greville |
| Cunliffe, Lawrence | Jones, Barry (Alyn and D'side) |
| Cunningham, Jim (Covy SE) | Jones, Lynne (B'ham S O) |
| Cunningham, Rt Hon Dr John | Jones, Martyn (Clwyd, SW) |
| Dalyell, Tarn | Jowell, Tessa |
| Darling, Alistair | Kaufman, Rt Hon Gerald |
| Davidson, Ian | Keen, Alan |
| Davies, Bryan (Oldham C'tral) | Kennedy, Jane (Lpool Brdgn) |
| Davies, Rt Hon Denzil (Llanelli) | Khabra, Piara S. |
| Davies, Ron (Caerphilly) | Kilfoyle, Peter |
| Davis, Terry (B'ham, H'dge H'l) | Kinnock, Rt Hon Neil (Islwyn) |
| Denham, John | Leighton, Ron |
| Dewar, Donald | Lestor, Joan (Eccles) |
| Dixon, Don | Lewis, Terry |
| Dobson, Frank | Litherland, Robert |
| Donohoe, Brian H. | Livingstone, Ken |
| Dowd, Jim | Lloyd, Tony (Stretford) |
| Dunnachie, Jimmy | Loyden, Eddie |
| Dunwoody, Mrs Gwyneth | McAllion, John |
| Eagle, Ms Angela | McAvoy, Thomas |
| Eastham, Ken | McCartney, Ian |
| Enright, Derek | McCrea, Rev William |
| Etherington, Bill | Macdonald, Calum |
| Evans, John (St Helens N) | McFall, John |
| Ewing, Mrs Margaret | McGrady, Eddie |
| Fatchett, Derek | McKelvey, William |
| Field, Frank (Birkenhead) | Mackinlay, Andrew |
| Fisher, Mark | McLeish, Henry |
| Flynn, Paul | McMaster, Gordon |
| Foster, Rt Hon Derek | McNamara, Kevin |
| Foulkes, George | McWilliam, John |
| Fraser, John | Madden, Max |
| Fyfe, Maria | Maginnis, Ken |
| Galbraith, Sam | Mahon, Alice |
| Galloway, George | Mallon, Seamus |
| Gapes, Mike | Mandelson, Peter |
| Garrett, John | Marek, Dr John |
| George, Bruce | Marshall, David (Shettleston) |
| Gerrard, Neil | Marshall, Jim (Leicester, S) |
| Gilbert, Rt Hon Dr John | Martin, Michael J. (Springburn) |
| Godman, Dr Norman A. | Martlew, Eric |
| Godsiff, Roger | Maxton, John |
| Golding, Mrs Llin | Meacher, Michael |
| Gould, Bryan | Michael, Alun |
| Graham, Thomas | Michie, Bill (Sheffield Heeley) |
| Grant, Bernie (Tottenham) | Milburn, Alan |
| Griffiths, Nigel (Edinburgh S) | Miller, Andrew |
| Griffiths, Win (Bridgend) | Mitchell, Austin (Gt Grimsby) |
| Grocott, Bruce | Moonie, Dr Lewis |
| Gunnell, John | Morgan, Rhodri |
| Hain, Peter | Morley, Elliot |
| Hall, Mike | Morris, Rt Hon A. (Wy'nshawe) |
| Hanson, David | Morris, Estelle (B'ham Yardley) |
| Hardy, Peter | Morris, Rt Hon J. (Aberavon) |
| Harman, Ms Harriet | Mowlam, Marjorie |
| Harvey, Nick | Mudie, George |
| Hattersley, Rt Hon Roy | Mullin, Chris |
| Henderson, Doug | Murphy, Paul |
| Hendron, Dr Joe | Oakes, Rt Hon Gordon |
| Heppell, John | O'Brien, Michael (N W'kshire) |
| Hill, Keith (Streatham) | O'Brien, William (Normanton) |
| Hinchliffe, David | O'Hara, Edward |
| Hoey, Kate | Olner, William |
| Hogg, Norman (Cumbernauld) | O'Neill, Martin |
| Orme, Rt Hon Stanley | Smith, C. (Isl'ton S & F'sbury) |
| Paisley, Rev Ian | Smith, Rt Hon John (M'kl'ds E) |
| Parry, Robert | Smith, Llew (Blaenau Gwent) |
| Patchett, Terry | Smyth, Rev Martin (Belfast S) |
| Pendry, Tom | Snape, Peter |
| Pickthall, Colin | Soley, Clive |
| Pike, Peter L. | Spearing, Nigel |
| Pope, Greg | Spellar, John |
| Powell, Ray (Ogmore) | Steinberg, Gerry |
| Prentice, Ms Bridget (Lew'm E) | Stevenson, George |
| Prentice, Gordon (Pendle) | Stott, Roger |
| Prescott, John | Strang, Dr. Gavin |
| Primarolo, Dawn | Straw, Jack |
| Purchase, Ken | Taylor, Mrs Ann (Dewsbury) |
| Quin, Ms Joyce | Taylor, Rt Hon John D. (Strgfd) |
| Randall, Stuart | Thompson, Jack (Wansbeck) |
| Raynsford, Nick | Tipping, Paddy |
| Redmond, Martin | Trimble, David |
| Reid, Dr John | Turner, Dennis |
| Richardson, Jo | Vaz, Keith |
| Robertson, George (Hamilton) | Walker, Rt Hon Sir Harold |
| Robinson, Geoffrey (Co'try NW) | Walley, Joan |
| Roche, Mrs. Barbara | Warden, Gareth (Gower) |
| Rogers, Allan | Wareing, Robert N |
| Rooker, Jeff | Watson, Mike |
| Rooney, Terry | Welsh, Andrew |
| Ross, Ernie (Dundee W) | Wicks, Malcolm |
| Ross, William (E Londonderry) | Williams, Rt Hon Alan (Sw'n W) |
| Rowlands, Ted | Williams, Alan W (Carmarthen) |
| Ruddock, Joan | Wilson, Brian |
| Salmond, Alex | Winnick, David |
| Sedgemore, Brian | Wise, Audrey |
| Sheerman, Barry | Worthington, Tony |
| Sheldon, Rt Hon Robert | Wray, Jimmy |
| Shore, Rt Hon Peter | Wright, Dr Tony |
| Short, Clare | |
| Simpson, Alan | Tellers for the Noes: |
| Skinner, Dennis | Mr. Alan Meale and Mr. Jon Owen Jones. |
| Smith, Andrew (Oxford E) |
§ Question accordingly agreed to.
§ As amended, again considered.
§ Question again proposed, That the clause be read a Second time.
§ Mr. Austin MitchellNow that the Liberals have voted again as the party of open government, to do the dirty deed in the middle of the night, we can proceed apace into the night. I was saying before the interruption—[Interruption.]
§ Madam SpeakerOrder. Will hon. Members who are holding conversations be good enough to hold them outside the Chamber? Hon. Members who are leaving will please do so now, and quickly: we have business to conduct.
§ Mr. MitchellAs I was saying—[Interruption.]
§ Madam SpeakerOrder. Hon. Members who are leaving must do so quickly and quietly.
§ Mr. MitchellI was saying earlier that the Labour party had over the years developed and refined its position on monetary union and had made it clear that monetary union could be deeply damaging.
As part of that process of developing our position on monetary union, we have made it absolutely clear that monetary union will be deeply damaging, even ruinous, for our economy unless two basic conditions are fulfilled. They are that there must be real convergence of the economy, which means convergence in terms of economic strength and power, and/or—it is not clear whether they are mutually exclusive, but it certainly needs to be 117 accompanied with—a massive system of redistribution to help the weaker economies that are bound to be damaged and drained by the process of monetary union.
The scale of that redistribution will have to be massive because while we have a single currency and a nation state, a nation state redistributes, in terms of public spending, about 40 per cent. of its gross domestic product. Europe redistributes perhaps 1 per cent. of the GDP of Europe, and that is totally inadequate as a machinery for offsetting the divergences that will develop through monetary union.
Even the McDougall committee in the 1970s recommended that the proportion of GDP should be increased to about 7.5 per cent., and that was before the entry of Spain, Portugal and Greece. So it considered that a much bigger process of redistribution had to occur if monetary union was not to be deeply damaging. If defence responsibilities are included, that figure would almost certainly be more than 10 per cent. If Spain, Portugal and Greece are included, more than 12.5 per cent. of Europe's GDP would need to be redistributed to offset the consequences of monetary union.
The Labour conference and the Labour party's national executive could have added a third condition. It could have said that, to offset the consequences of monetary union, one would need total mobility of labour within the EEC so that labour, as well as capital, could move to where the jobs were. We have not got, in any sense, the sort of mobility that would allow British workers to go to Europe to find jobs as the economy declines and is drained by monetary union.
Without those conditions, particularly the first two, it is inevitable that monetary union—the merger of two economies at different degrees of development and strength—will be ruinous for the weaker economy. It is not putting it too strongly to say that the weaker economy in that union would be ripped apart, just as if when one merges two drive rods the stronger one rips apart the weaker. We, as the weaker economy, would be ripped apart by the process.
When setting out the conditions for and reservations about monetary union, the Labour party conference and the national executive were being fairly cautious. I personally believe that monetary union itself will be more than damaging; it will ruin our economy, but be ultimately impossible. The currency is like the atmosphere around the planet—it sustains independent economic existence on that planet and cushions it from shocks from outside so they can be taken on the exchange rate, not jobs. If one drains the atmosphere, one drains away the element that cushions the planet from shocks and abrasions from outside, and the inflation or deflation of other planets—or economies.
The national executive says that monetary union is possible only on those two conditions. I say that monetary union, in itself, is impossible as there is no way of achieving it. Either one moves to monetary union quickly, which results in instant East Germany, with all the damaging consequences that have ensued, or one moves to monetary union slowly, which means moving back to the exchange rate mechanism. One has to have a convergence of currencies, which means a slow process of industrial anorexia for the weaker economy—ours. The quick process to monetary union is disastrous and immediately ruinous, the slow process is ruinous over the long term as it drains away the industrial economy. We know the 118 consequences of the exchange rate mechanism because we have been there and been through the inevitable processes in that form of convergence.
Fox hunting is described as the unspeakable in pursuit of the uneatable. Those who pursue the mirage of monetary union are the uncomprehending in pursuit of the unobtainable. I do not see how my hon. Friend the Member for Oxford, East can say, "Never mind the words, feel the spirit—feel the surge to unity." Our supporters, voters and electors—the section of society that supports the Labour party—do not have the same Euro-enthusiasm as our Front-Bench team.
By what will we ultimately be bound? We will be bound not by what my hon. Friend says is in the treaty or how he interprets it, but by the words of the treaty. In the words of the Rubaiyat, the Maastricht process writes,
That is the position that we would be in if we agreed to that union. I share my hon. Friend's hopes and enthusiasm, but it is very unlikely that they will materialise.
- "and, having writ,
- Moves on: nor all thy Piety nor Wit
- Shall lure it back to cancel half a Line,
- Nor all thy Tears wash out a Word of it."
§ Mr. Ken Livingstone (Brent, East)Did my hon. Friend see the excellent article in yesterday's edition of The Guardian? It drew parallels with the present treaty, which seems to try to replicate the period closest to ours—when we were all tied to the gold standard in the run-up to the first world war. That led to 5 per cent. of the British population emigrating because of its deflationary consequences. We are not just talking about tears; after the best part of two years of being locked into the exchange rate mechanism, the majority of people in Britain would like to emigrate if they could.
§ Mr. MitchellMy hon. Friend is perfectly right: that would be the consequence.
The general argument is clear. In the words of Aneurin Bevan, "Why look in a crystal ball when you can read the book?" The text is there and it is quite specific. That is why amendment No. 3 tries to set out more realistic terms of convergence.
The treaty is absolutely specific. The procedure for reporting on the British economy starts before we reach stage 2. According to the treaty, the reporting begins even before we reach stage 2. It starts by assessing
the progress made with regard to economic and monetary convergence, particularly with regard to price stability and sound public finances, and the progress made with the implementation of Community law concerning the internal market.It starts before stage 2 and it gets harder and tougher all the time. We end up with all the power of a rate-capped council to control its expenditure.Article 104 is quite specific, and that is why we are attempting to soften it by our amendment. It states:
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 … in order to remedy the situation … The Council may decide … to require the Member State concerned to publish additional information … to invite the European Investment Bank to reconsider its lending policy … to require the Member State to make non-interest-bearing deposits of an appropriate size with the Community".It sets out the whole process of reporting, fining and censure.We should think what the very mention of a report, the very possibility of such criticism and censure will have on 119 confidence, particularly when the Government are trying to borrow £55 billion to cover their deficit, if we are faced with the rumours of censure from Brussels. What effect will it have on markets and currency speculation? We are exposing ourselves to that possibility by accepting the obligations in the treaty.
We are facing economic difficulties—and that is the importance of amendment No. 32, which was tabled by the hon. Member for Southend, East (Sir T. Taylor). The Government are behaving schizophrenically. On one hand, they are pursuing a policy of competitive devaluation to break out of the ERM corset and the constraints that it imposed on us. That policy has been successful. The only success that the Government had was when they were forced to take up the policy of competitive devaluation. However, at the same time they are putting back the straitjacket of controls of the exchange rate mechanism. That is totally schizophrenic.
What is industry to make of the prospects for investment? Is it to seize the opportunity of competitive devaluation and expect a continuously competitive currency and on that basis it will be successful in exporting to world markets? How can it if at the same time the Government are putting back the straitjacket of all that is implied in stage 2 and the uncertainties of whether we move to stage 3? We know that that will bring us back into alignment. What is industry to make of that? Will the Government go back into the exchange rate mechanism, with all the disasters that ensued, or will we be able to remain competitive?
A Financial Times editorial last week stressed the need for an economy in a state of deficit to keep the currency continuously competitive. The Government are totally ambiguous in their proposals.
The Minister has said in writing to me and other hon. Members and again from the Front Bench today that there is no obligation in the treaty or in stage 2 to return to the exchange rate mechanism. That is true. But we must look beyond the formal provisions. The whole emphasis of the treaty and all the processes of stage 2 are about convergence. We will take part in all those processes until we give notice that we are not moving to monetary union.
I ask hon. Members to think of all the pressures that will be on us once we have signed the treaty and once we have signed up for that kind of process. It is not only the external pressures. I ask hon. Members to think of all the internal pressures, of that fifth column of Euroenthusiasts, of people in the City, who will be telling us that we must get into monetary union, we must stick by our commitment and we must go ahead, otherwise the bank will not come here, investment will not come here, all those Japanese firms that are going to invest here will not come after all, and we cannot be left behind. That will be the argument and we shall be back in the debate on which we spent so long before we eventually joined, with such disastrous consequences, the exchange rate mechanism. The argument will again be clamorous, and it will be much more high-octane and high-powered. So we will have internal division and external pressure.
§ Mr. WinnickIs my hon. Friend aware that Ministers are apparently trying to sell the treaty to their own supporters on the basis that it will not come to pass, that it is all exaggerated, that it will not really mean anything 120 and that, once Parliament approves it, that will be the end of it? Is not my hon. Friend right in emphasising that those who are responsible for the treaty will make sure that economic convergence will come and that it will be implemented precisely as stated in article 104c and elsewhere?
§ Mr. MitchellMy hon. Friend is quite right. The Government will have to move down that path, certainly down the path of stage 2, and they will have to signify at an early point on stage 3. That is not only because of what is in the treaty. As my hon. Friend said, they have opted for a policy of bamboozlement. The Prime Minister's preferred policy position is to keep all his balls in the air at any one time, and that is what they are trying to achieve in this process of bamboozlement about the treaty.
The opt-out from monetary union is the Government's figleaf. What is the point of the opt-out when the whole of the treaty is about monetary and economic union? What good does the opt-out from the central core of the treaty do? I have no doubt that, while the opt-out is there to keep the Conservative party as united as it can be—and it will not be very united in any circumstances—once the treaty is signed, the position will change, as the Prime Minister indicated just a couple of weeks ago in the first flush of success at getting the Bill through Committee, to a degree of Euro-enthusiasm, and Britain will go down that road.
It is bound to go down it by the treaty. Let us take the second paragraph of article 3a:
Concurrently with the foregoing, and as provided in this Treaty and in accordance with the timetable and the procedures set out therein, these activities shall include the irrevocable fixing of exchange rates leading to the … single currency".Those words are specific, and European law is bound by the preambles; the lawyers interpret it in the light of the preambles. We shall be vulnerable to pressure.A Government subject to that preamble, with all the qualifications in the treaty and all the impositions of the treaty, will be unable to get away as blithely as they have done with a competitive devaluation which must be sustained to keep British industry growing and to expand our industrial base so that it becomes viable again. That demands a prolonged period of sustained competitiveness which we cannot have if we are to be subjected to continuous nagging pressure from Europe to get back into the exchange rate mechanism and to go along with the other member states.
It is even worse than that. The barrister, Martin Howe, has argued lucidly and logically in a pamphlet that not only would we be vulnerable to pressure—which would be real enough because we should be out of line with everybody else and they would want us to get back and be as miserable as them, abandon our competitive advantage and abandon the benefits that we have received from it —but we should be liable to legal action at the European Court to take us back into the exchange rate mechanism unless we went there. I have not heard that argument rebutted or even challenged from the Government Front Bench. If we are to have this treaty, they have an obligation to tell us what they think of that argument.
§ Mrs. DunwoodyGive way and let the Minister answer.
§ Mr. MitchellI am happy to give way to the Minister.
§ Mr. DorrellI have said more than once in correspondence with the hon. Gentleman that the position in the treaty is made quite clear, both in the text of the statute on the European Monetary Institute, as regards stage 2, and as regards our own position under our protocol in stage 3, that unless and until a member state becomes a fully fledged member of stage 3 of economic and monetary union monetary policy remains the responsibility of the institutions of the member states. That cannot be reconciled with any implied or express obligation to join the ERM.
The position is clear: for Britain, during stage 2 and until we join stage 3, our capacity to determine our own monetary policy is safeguarded in absolute terms by the treaty.
§ Mr. MitchellThat is certainly the Government's position, but it ignores the distinction between monetary policy of the ERM as well as in the treaty to move on to the ERM; it ignores the continual political pressure that will be brought to bear on us to be good Europeans; and it ignores the preamble. The Government do not seem to understand the workings of the European Court. Faced with a British Government who try to maintain a competitive edge for a long time, what will our competitors do? They will haul us before the European Court, and there we will be vulnerable. That court will be bound by the treaty, and by the preamble in particular.
The penchant, the inclination, of the European Court is to further union. It is not an impartial body—
§ Mrs. DunwoodyIt is neither a penchant nor an inclination. The court will be bound by the need to interpret the treaties in relation to the original treaties and subsequent treaties. They are not something that the court thought up: they are the only reason why the court exists.
§ Mr. MitchellI only wish that I had my hon. Friend's directness of mind and approach. I was skirting round the issue, using French words like "penchant". The court is an instrument of unity; it will be forced to act as I have described, and the conditions for doing so are explicitly set out in the treaty.
§ Mr. DorrellThe court is not an instrument of unity; it is an instrument for interpreting the treaty. And the treaty that it would be asked to interpret says, at article 3 of the EMI statute, that the powers of the EMI are
without prejudice to the responsibility of the competent authorities for the conduct of monetary policy within the respective Member States".So much is clear. Furthermore, the United Kingdom's protocol states that if the protocol is activated the United Kingdomshall retain its powers in the field of monetary policy according to national law".That is what the European Court would be asked to interpret. It is plain and beyond dispute.
§ Mr. MitchellThat brings us to the arguments about our being bound by the imperatives of stage 2, as set out in the treaty, even before the protocol is activated. I have already mentioned the irrevocable fixing of exchange rates, which is what the treaty is all about. That is the sort of issue that the court would take into account when interpreting the treaty.
The Government are attaching themselves to a figleaf in the hope that they can get away with all this. Politically they cannot, because the pressure will be on them to show themselves good Europeans—and there will be legal pressures to abandon the competitive advantage that we have gained by leaving the miseries of the exchange rate mechanism.
I fear that reports to Parliament are a fragile weapon compared with the power and might of the treaty, but the amendments are at least at attempt to safeguard ourselves from the deflationary pressures that lie in store for us if we accept a treaty that has deflation at its core. It is the cancer at the heart of the treaty. It is explicitly written into the text, and it would be disastrous for the people whom I represent.
I am not in politics to give powers to unaccountable central bankers or to aim at zero inflation. That has never been the objective of the Labour party, of socialists, or of anyone who wants a better society and full employment. These aims will be damaged by the deflationary techniques deployed in the treaty. It would be disastrous not only for Labour, for our people and for the parts of the country that we represent, but for Europe. The people of Europe will not be made enthusiastic about Europe by being put out of work.
§ Mr. Rupert Allason (Torbay)I am grateful for the fact that I was able to catch your eye, Madam Speaker. I failed to do so during the latter proceedings in Committee.
I support new clause 12 which I regard as the key to the issue. The hon. Member for Great Grimsby (Mr. Mitchell) said that Conservative Back Benchers were told by the Government that Maastricht was a meaningless affair because it would never happen. But Maastricht is already under way in the sense that the British public are paying for it. The hands of the European Community are in our pockets. By that, I mean that there are only two major net contributors to the Community as it exists—Germany by a large margin and ourselves; the French seem to break even, more or less. It is important that the House makes the decisions and scrutinises all future steps to economic integration.
The hon. Member for Great Grimsby has spoken eloquently about the central bankers who will be running economic integration. That is not just the first step towards federalism; it is a considerable step down the road. Yet when we examine what Maastricht means and how new clause 12 would put a brake on the less palatable aspects of Maastricht, we cannot deny that we will be passing over sovereignty in a range of areas and passing over powers from the House to faceless bureaucrats and central bankers in Europe. Above all, we will be paying for it because we will be putting money into the European cohesion fund. Our voters will be required to pay; yet they will never have an opportunity to kick out the institutions at the heart of the treaty.
In my understanding, convergence means that at some stage in future there will be economic union in which we will all be subject to the same currency. The idea that the economies of the emerging eastern bloc countries that intend to join the European union will remotely converge with our economy is fantasy. It is not beyond the bounds of possibility that Albania will apply in the not-too-distant future to join the European union. It is fantasy that the Albanian economy should be even remotely connected with our economy. Lithuania, Latvia, Estonia and some other countries are looking enviously at the European union. Who can blame them? In my judgment, my right hon. Friend the Prime Minister is right in seeking to deepen the European union and not to make it a rich men's club, which, in essence, it is in danger of becoming.
I regard the European union as the free trade club for which I campaigned in the early 1970s. If new clause 12 were accepted, it would at least give the House control over our own destiny and our own affairs. I am wildly enthusiastic about a free trade club, but I draw the line at a federal structure. If we are to talk about an integrated economy and cohesion in future, we must learn to get along together under the existing regime.
In a straightforward way, there are three criteria by which to judge whether the European Community is working. First, I should like to know whether my Devon fishermen may fish in French waters. The answer is simply that they may not. Secondly, a useful way to judge European union is to see whether a British business man operating in Europe can fly with British Airways between, say, Madrid and Rome. He cannot, and that is not a level playing field. British Airways will not be able to pick up passengers from second countries and fly them to third countries until 1997 at the earliest. That is another criterion on which European union fails. The third matter 124 is straightforward. Many business men, especially in Devon, rely on cellular telephones. It is extraordinary that cellular telephones used in England cannot be used on the continent. European-wide allocation of frequencies would make life much easier.
Those three criteria show that there is not a single market. I am an enthusiastic European and I should like to see a single market, a free trade club, but that is not on offer in the Maastricht treaty. New clause 12 will at least enable the House to curb the power of Ministers and those who will take decisions without consulting the electorate.
It is surely fantasy to believe that there can ever be a completely agreed, integrated foreign or security policy. A few years ago, there was a most blatant and obvious example of aggression in the Gulf in which the aggressor and the innocent party were perfectly obvious. Could Europe agree on a foreign policy? No, it could not. If we cannot get agreement in those circumstances, what are the chances in future?
§ Mr. WinnickDoes the hon. Gentleman not realise that those who are most enthusiastic about the treaty and who may be in a minority—I mean not those who support the Government in the Lobby but enthusiasts such as the right hon. Member for Old Bexley and Sidcup (Sir E. Heath)—believe that the treaty lays the basis for a federal Europe? When 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 said yes and was quite happy about it. Although, for obvious reasons, the word "federal" is not included in the treaty and the Government minimise the issue, the treaty is the basis for a federal Europe. Apart from anything else, it would certainly diminish and undermine the whole purpose of the House of Commons.
§ Mr. AllasonI do not often agree with the hon. Gentleman, but on this occasion I endorse what he says. A few days ago, my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) was asked about the consequences of political and economic union when he took this country into the European Community. I was surprised to hear him brush that aside and clearly say, "That was always the intention."
I fear that there is a hidden agenda. I campaigned for this country to join the European Community, and I do not regret that because it is unquestionably in our long-term interests to be able to operate within a European trading bloc. I am enthusiastic about a free trade club, but I do not subscribe to the hidden agenda of European economic and political integration.
People become vague and their words become fuzzy when they are pressed to define exactly what is meant by political integration. I want decisions made in this Parliament, which must remain sovereign. If we allow our economic future to be determined by faceless bankers in Frankfurt, we shall store up a great deal of trouble for ourselves.
§ Mrs. DunwoodyIs not what will happen exactly what happened when the fishermen felt that they had been badly treated and that no one was listening to their complaints? 125 There will be direct action rather than parliamentary action. Is that not a much greater worry than the idea that, somehow or another, we will be left behind?
§ Mr. AllasonI do not want to be drawn down that avenue because I have strong views on the rights of our fishermen to be able to operate, if not on a level playing field, at least on a level ocean with European fishermen. That illustrates the point that there is not equal enforcement. My fishermen in Devon would be pleased to comply with tying-up regulations and the controlling of catches if they believed for one moment that such regulations would be equally enforced across the rest of Europe. The difficulty for my fishermen is that they can use a pair of binoculars and see on the horizon French fishermen busy catching what they regard as their fish. That is an unacceptable view of Europe.
There are only two arguments for Maastricht. One is that there will be greater European enforcement of regulations. The second is that if we keep quiet and agree to Maastricht, the EFTA countries will be stupid enough to join in and they will then foot the bill because they will be net contributors, along with us and the Germans.
New clause 12 gives the House the opportunity to scrutinise all future decision making in relation to economic and monetary policy. If the House is to continue to command the respect of the electorate, and if the electorate is to continue to believe that it has the final say over who comes to the House and who decides taxation policy, it is essential that new clause 12 and all the amendments that limit and control the impact of the Bill are passed into law.
§ Mr. HainI found the comments of the hon. Member for Torbay (Mr. Allason) interesting because they were rather schizophrenic. He praised the free market in Europe as, almost without exception, Tory Members do, but he did not accept that the logical consequence of that is a free market in money as well. If one wants free trade and a free market for business, one needs, as a conclusion of that process, a free market in capital and money, and one ends up with monetary union, which is the agenda of the right.
I find it puzzling that many socialists have gone along with that. For me, the problem with the Maastricht treaty is not the movement towards political unification or social cohesion, but the fact that it imposes a monetarist agenda on Europe. The key is not the social chapter or measures such as additional reporting mechanisms for Parliament to scrutinise the economic developments in Europe, welcome though they are. The key is the way in which Maastricht's monetarist agenda imposes deflation on members' economies at a time when they desperately need the opposite.
The policies being developed through Maastricht are like relying on leeches to cure a fever. They impose rigid economic constraints, the most notable being restricting the public sector deficit to 3 per cent. of GDP and insisting that total public debt must not exceed 60 per cent. of GDP.
The constraints and convergence criteria are not permissive and flexible, contrary to what my hon. Friend the Member for Oxford, East (Mr. Smith) said. They are extremely rigid. Article 104c, on page 19, makes it clear that member states shall avoid breaches of those monetary and fiscal constraints. In addition, paragraph 11 of article 104c on page 20, says that punishments will be imposed. A 126 kind of European state capping will be imposed if member states do not conform to achieving the objectives. Those are all well described in the Maastricht treaty.
§ Sir Peter Hordern (Horsham)Will not that pose a considerable problem for Belgium and Italy, because, as I understand it, last year the Belgians' debt was 120 per cent. of GDP and the Italians' 105 per cent? Does the hon. Gentleman think that those two countries will slash their public expenditure in half or double their taxation in the next three years during which time they must decide whether to enter phase 3? Surely that casts doubt on the capacity of the EC to come together as suggested in the Maastricht treaty. Therefore, does not that emphasise even more the wise decision of my right hon. Friends in going for the opt out from this monetary union?
§ Mr. HainThe hon. Gentleman makes a fair point. He could point to other countries. Virtually no country in the EC at present satisfies, or is anywhere near satisfying. all the convergence criteria. However, the hon. Gentleman does not mention that virtually all of them are trying to do so and are seeking to go down that road. But consider the consequences. Europe now has massive unemployment which is threatening social stability and cohesion and causing a rise in racism. In the end, if the process is proceeded with, as Maastricht will ensure that it is, it will bring down Europe and the prospects of European unification.
If the convergence criteria are flexible, why are they framed in such clear, legally defined, specific terms in the treaty? It is illogical to argue that they could be flexible. Why should France, at huge cost to its economy, Ireland, at huge cost to its economy with extensive public expenditure cuts, Spain and Germany, with its problems resulting from the pursuit of a monetarist economic agenda, seek to conform to the terms of the treaty?
Will those countries let us off the hook? Will they let Britain stand back and interpret the convergence criteria flexibly? Of course not. They are suffering huge costs as a result of seeking to meet them and they will not allow us to escape from the stranglehold that Maastricht imposes. They will insist that we follow them down that same road. Otherwise, we cannot be part of the European monetary express train. It is in their interests to insist that we follow them; otherwise their populations will ask why they should suffer the consequences of the monetarist dogma when Britain stands free and interprets the criteria flexibly.
We know that the central driving force behind Maastricht is the competitive single market, where price, currency and interest rate stability predominate, together with tight restrictions on borrowing and debt, virtually regardless of the consequences for employment, growth and redistribution. Price stability is defined in article 3a as the overriding objective of the treaty's economic framework. It must be pursued "without prejudice" to any other objective, such as those that are stated in article 2.
It is not good enough to quote article 2 as the bible of the treaty when its provisions are overridden and swept aside by the much tighter, more specific constraints in article 3a. The policeman of this monetary regime, the independent European central bank, has its independence uncompromisingly spelt out in article 107. I shall not describe all the details of the banking regime because that would take me beyond the terms of the amendments. 127 However, when one considers the monetary constraints and the convergence criteria, the bank's role becomes crucial.
Article 107 says:
When exercising the powers and carrying out the tasks and duties conferred on them by this Treaty and the Statute of the ECB, neither the ECB, nor a national central bank, nor any members of their decision-making bodies shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body. The Community institutions and bodies and governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the ECB or of the national central banks in the performance of their tasks.Not much fudging or flexibility there.11 pm
We see a microcosm of the central bank's operation in the way that the Bundesbank currently operates. It is driving the German economy into deep recession at huge cost to industry and at massive cost to social relations—with the rise of Nazism and all the other problems that we see in Germany now.
When an independent central bank pursues price stability in a dogmatic and fanatical fashion, the consequences are the rising unemployment and deflation we see throughout Europe, yet the treaty invites us to adopt exactly that agenda and framework.
A recent worldwide academic study showed that there is no relationship between the dogmatic pursuit of price stability and zero or low inflation and economic growth and success. Economic success is due to other, structural factors. Price stability is desirable, but it should not be fanatically pursued in the way that the treaty suggests and the Government worship at every opportunity.
While the treaty sets out strict criteria for monetary stability, it sets no comparable targets for growth, full employment or resource distribution. Its monetary targets are so strict that they are imposing deflation on member state economies, with devastating effects on the weak—at the very time that they need an expanison in demand and a strategy for full employment.
The savage public spending cuts being made across Europe are driving up unemployment beyond its present level of 18 million, or 10 per cent., towards the OECD forecast—if it is to be believed, and there is nothing to rival it—of 30 million jobless or 16 per cent. unemployment by the end of the decade.
Given the social strains that unemployment at its present level has already created—most frighteningly, in Germany—imagine what might happen if, under a monetarist regime, unemployment reached the level that the OECD suggests.
The monetarist regime is caught in a time warp. It was designed in an era when monetarism was fashionable and lauded in Britain under Thatcherism, but it has run out of steam. It was never valid and the treaty's objectives and framework are completely out of date. No one in Europe seriously suggests that the convergence criteria are not deflationary. Anyone who has studied the matter universally—including members of my own Front Bench —accepts that they are. The argument is whether they can be interpreted with sufficient flexibility, but I suggest that that is not possible under the terms of the treaty.
128 If one examines the way in which Europe is evolving under the treaty, one finds that bankers and money markets are ruling the roost rather than Governments and the people. According to Warburg, the merchant bankers, the drive by member states to convince the foreign exchange markets of their financial rectitude is forcing public spending cuts of 1.25 per cent. of GDP in 1993 alone—regardless of other convergence constraints and their impact on unemployment and public spending. That is being done simply to satisfy the foreign exchange markets. The exchange rate stability that the ERM and a more rigid Maastricht treaty would require is, according to merchant bankers, bringing massive deflation.
The Maastricht treaty attempts to establish an industrial policy in article 130, but all that—like the social chapter—pales into insignificance when compared with the monetarist regime that I have sought to describe. Those consequences are not felt only in rising unemployment and deflation; poverty in the European Community has increased. In 1975, 38 million people were affected; in 1992, the figure was 53 million, and the position will continue to worsen.
I believe that the treaty puts economics before politics, finance before democracy and the interests of bankers before those of citizens, and that that will result in Europe's imploding. I think that those who are genuinely pro-Europe will not support the treaty and, in particular, will oppose its monetarist economic framework. We believe in a Europe of full employment, a Europe of social justice; a Europe in which economies are encouraged to expand rather than contracting and deflating. Maastricht is blocking that opportunity at every level.
I believe that if the process continues—as it will if the Bill is passed and Europe adopts the proposed course—these "impossibilist" economic constraints will result in Europe's self-destruction. The vision of a united Europe, a democratic Europe—a socialist Europe, from my point of view—will be impossible to achieve: the high unemployment and public spending cuts that are being generated will cause such widespread political and social instability that the whole project will fall apart.
§ Mr. DorrellThe hon. Member for Oxford, East (Mr. Smith) dwelt on article 2 of the original treaty, as revised by the Maastricht treaty. The revised article sets out the objectives of the Community, which the House has discussed repeatedly during our debates on the Bill; it defines them, for instance, as
sustainable and non-inflationary growth, a high degree of employment and of social protection, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States.The hon. Gentleman spoke of those objectives with some enthusiasm. I agree with everything that he said about their importance; that is why they are written into the treaty. As he rightly said, one of the purposes of the Community—one of the purposes of the process that started with the original treaty—was to facilitate their delivery.The hon. Gentleman went on to argue that new clause 1 would enhance the Government's accountability, particularly in the context of the achievement of the objectives defined in article 2 of the treaty of Rome. With some qualifications—I shall come to those in a moment —I am happy to accept the proposition that new clause 1 enhances accountability. I indicated earlier that the Government would not oppose the new clause.
129 It was at that point—some hours ago—that the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston) allowed himself the observation that, as hon. Members from all parties appeared to agree on the subjects that they were debating, this might be an opportunity for us to stop talking and move on to some of the other issues that might need to be explored. It was when the hon. Gentleman sat down that the disagreements started to surface: that was the point at which the hon. Member for Oxford, East began to talk about what he saw as the danger of a deflationary basis built into the Maastricht agreement.
The hon. Member for Oxford, East believed that the wider objectives set out in article 2 were in some sense jeopardised by the commitment set out in the treaty to deliver price stability and the monetary objectives that reinforce that central purpose. He described the old shibboleth that there is a choice to be made by policy makers—a long-term trade-off—between growth and inflation. That theme was picked up by several speakers, but the House will not be surprised to learn that the Government do not accept the hon. Gentleman's premise. It was developed—rather improbably—by my hon. Friend the Member for Southend, East (Sir T. Taylor). He wanted to distance himself from a definition of economic policy which saw the control of inflation—I think I quote his words accurately—as
the basic sole end of economic policy.Of course nobody believes that the control of inflation is the basic sole end of economic policy. The purpose of delivering price stability is precisely in order to facilitate the delivery of the objectives set out in article 2 of the treaty.My hon. Friend the Member for Southend, East did not feel that he could endorse what he described as the German policy of low inflation. It is common knowledge that the Germans have encountered short-term difficulties with their counter-inflationary discipline, but if we want to see the effect on the real economy and competitiveness of a superior performance in terms of monetary discipline, we need look no further than German manufacturing strength and the fact that the German economy has outperformed over a long period the rest of western Europe.
What my hon. Friend the Member for Southend, East described as an obsession with inflation is not confined to Germany. Recognition of the importance of a counterinflationary discipline as the sine qua non of the delivery of successful economic policy is increasing throughout Europe, particularly in northern Europe. I do not regard it as an obsession with inflation. I regard it as a clear commitment to deliver the building block, the foundation upon which a successful economic policy is built.
My hon. Friend the Member for Southend, East talked about the importance of expanding employment and of wider social objectives. Of course, I agree that expanding employment and raising living standards is the purpose of economic policy, but that remains so much hot air if we do not provide the foundation upon which experience demonstrates that a successful economic policy is built —namely, a sound monetary system.
The Government want successful monetary discipline and flexible labour markets that allow growth, generated on the basis of monetary discipline, to be converted into jobs. That is the mixture we commend in the Bill: a commitment to sound monetary discipline, which is the commitment that the Government give, and the avoidance 130 of new obligations that would impair the workings of the labour market and thereby impair job creation. I look forward to the support of my hon. Friend the Member for Southend, East in resisting the proposals in the social chapter, added to the treaty, which would have the effect of impeding the expansion of employment which my hon. Friend espouses and which would also have the effect of destroying jobs in the United Kingdom.
§ Mr. WinnickLeaving aside the social chapter, which we are not debating, does the Minister realise that with 17 million unemployed at present in the member states of the Community, what is required is economic expansion? Why does he believe that the much-quoted article 104c, under which member states are told that their budget deficit must not exceed the permitted limit of 3 per cent., which is spelt out in another article, will help to reduce unemployment? Will not he thereby ensure that, instead of 17 million people being unemployed, far more than 17 million will be unemployed?
§ Mr. DorrellThe hon. Gentleman misreports article 104c. It does not say that under no circumstances may a member state's budget deficit rise above 3 per cent. of GDP. It says that at stage 3, to which this country is not committed to proceeding, member states will commit themselves to avoiding excessive Government deficits—or budget deficits, in our parlance. The purpose of avoiding excessive budget deficits and maintaining monetary discipline is for exactly the reasons that I described earlier —to facilitate wealth creation and, along with wealth creation, job creation.
The right hon. Member for Llanelli (Mr. Davies) spoke to amendment No. 3.
§ Sir Teddy TaylorIn case there is any misunderstanding, what did my hon. Friend mean when he mentioned the social chapter? As far as I am aware, we are discussing only amendment No. 2, which the Foreign Secretary said will not apply the social chapter to Britain. Has there been some misunderstanding?
§ Mr. DorrellIn discussing not amendment No. 2 but new clause 1, I was simply responding to my hon. Friend's point about wanting an economic policy that leads to the expansion of employment. That is also what the Government want, which is why we are commending the combination of monetary discipline and the absence of social chapter regulations as the way to maximise growth and job creation in Britain.
The right hon. Member for Llanelli spoke to amendment No. 3, which he and some of his right hon. and hon. Friends tabled. At least some parts of amendment No. 3 define a kind of Euro-elysium, which the right hon. Gentleman espoused and which he wanted to see achieved. I should also like to see a world in which inflation over three years averaged less than 1.5 per cent. and in which growth proceeded briskly. That is a shared objective., but I disagree with the right hon. Gentleman's scepticism, which he again expressed this evening, about whether it is possible to achieve non-inflationary growth. During our previous debate on this subject, he asked me whether I could cite an example of non-inflationary growth. While he was speaking, I was looking up two examples which I think will be of interest to him and, possibly, also to the House.
131 In 1986–88, which is not ancient history, the average rate of inflation in Germany and Japan was less than 0.5 per cent. Statistically, that may not be zero, but it is certainly well within what amendment No. 3 recognises as being near price stability. During that three-year period when inflation averaged less than 0.5 per cent. in both countries, growth in Japan averaged 4.4 per cent. a year and in Germany 2.5 per cent. a year. Unemployment in Japan during that period averaged 2.7 per cent. and in Germany 6.2 per cent. That is a pretty attractive model for the type of economic development that I should like to see pursued in this country and, indeed, elsewhere in the Community.
§ Mr. Denzil DaviesDoes the hon. Gentleman agree that it is significant that he has been able to cite only one country—
§ Mr. DorrellTwo countries.
§ Mr. Davies—one country in western Europe, and then only for a period of two years?
§ Mr. DorrellI picked out two, but I suspect that I could cite not dissimilar figures in the European Community, for example, in Holland. I did not want to detain the House by giving a long list. I should have thought that the example of the recent economic performances of Germany and Japan would be sufficiently persuasive to puncture the right hon. Gentleman's proposition that non-inflationary growth cannot be delivered in a modern free economy.
I always enjoy listening to the speeches of the hon. Member for Neath (Mr. Hain) because they reassure me that the message of the right hon. Member for Chesterfield (Mr. Benn) will be carried on by another means when he has passed to another place. The hon. Member for Neath asked why, in a treaty devoted primarily to economic and especially monetary union, there were no such explicit targets for wider social objectives as there are for monetary objectives. The reason is straightforward.
The economic heart of the treaty deals with questions of monetary policy. Unemployment rates, growth rates and wider economic policy issues remain matters of national concern. During the Bill's Committee stage we discussed the fact that the purpose of the provisions for economic and monetary union is to provide an institutional framework for the operation of monetary policy on a Community basis separate from the continuing national responsibility in the rest of the economic policy sphere.
§ Mrs. DunwoodyRubbish.
§ Mr. DorrellThe hon. Lady may say that that is rubbish, but I cannot see how, on any linguistic basis, the treaty could be said to be devoted to any other purpose.
§ Mrs. DunwoodyDoes not it occur to the Minister that those who control the economy have a direct effect on rates of unemployment and of inflation? Has that unique idea occurred only to the Opposition?
§ Mr. DorrellThe point that I was making, with which the hon. Lady did not seem to agree, was that within the treaty a distinction is drawn between the operation of monetary policy and that of other aspects of economic policy.
§ Mrs. DunwoodyThat is impossible.
§ Mr. DorrellThe hon. Lady says that it is impossible, but there are numerous examples from around the world of political systems that draw precisely that distinction.
§ Mr. ShoreSurely the Minister is aware that article 103 says that economic policy shall be
a matter of common concern",and that there will be "multilateral surveillance" of how economic trends develop in all the countries. How can he possibly say that economic policy is not subject to Community rules under the treaty?
§ Mr. DorrellI am grateful to the right hon. Gentleman, because he has provided me with a basis upon which to proceed to the consideration of article 103, which is the main purpose of the new clause. The multilateral surveillance under that article is intended simply to provide a treaty framework for the discussions of economic policy that have taken place since at least 1974, in order to co-ordinate the full scope of economic policy within the Community. None the less, economic policy clearly remains the responsibility of national Governments within a widely drafted treaty commitment to co-ordination.
The point that I sought to make earlier was about a concept fundamentally different from the evolution of institutions responsible for day-to-day management on a Community basis of monetary policy, which is the purpose of the central banking arrangements set out in the treaty.
§ Mr. ShoreHow, then, does the Minister explain the reference in article 103 to qualified majority voting?
§ Mr. DorrellThe purpose of multilateral surveillance is clearly to allow the wider convergence of economic policy. That is not part of the clear path towards stage 3 and the operation of a single monetary policy provided for within the context of the bank.
Having sought to respond to the wider issues raised in the debate, I shall detain the House briefly by dealing with the terms of the new clause, which, as I have already said, the Government will not oppose. We have accepted that the House has an interest in the issues on which the new clause says that the Government should report. That interest is not in dispute. Article 103 makes it clear that we are talking about information on important measures which almost by definition is already reported to Parliament. Perhaps more important is the fact that it is reported to Parliament at the time that such decisions are made, so that Parliament can exercise its proper role of accountability and of scrutiny of the Government of the day. The new clause adds a further commitment to set reports submitted to the Commission by the Government in the context of the Government's assessment of progress towards the delivery of the objectives set out in article 2. If hon. Members wish to press that upon us, we shall not oppose them.
§ Mr. Alan Simpson (Nottingham, South)I have spoken before about the loss of economic sovereignty and political accountability that is written into the treaty. Tonight, I concentrate on the theme with which the Minister finished his comments—the terms of convergence. I especially wish to support amendment No. 3.
Just before the bank holiday, a delegation of visitors came here from Germany. As I listened to what the 133 Minister has just said, I realised that it was similar to what those visitors said to us. They said, "We know that, throughout Germany, the public believe that the treaty is unworkable and unwanted. But we have some good news for you. It is that we will not blow the gaff, break ranks or tell the public that we know it is unworkable and unwanted. In return, we expect you to do the same." The Minister said much the same. In effect, he said, "We know that the treaty is unworkable and unwanted outside, but we will not blow the gaff."
I had the temerity to ask why we should not all blow the gaff. The response was, "For goodness' sake, no. You cannot do that. If you did, we would all look fools." The sad news is that outside the House we have been rumbled. In Germany, France, the Netherlands and the United Kingdom, the public know that the treaty is unwanted and unworkable. They know that the terms of convergence offer them nothing in addressing the key issues that affect their daily lives. They know that the terms will not produce jobs, build houses and schools, invest in our infrastructure, halt crime or do anything to stop the fearful rise in nationalism, racism and fascism.
That is why my right hon. Friend the Member for Llanelli (Mr. Davies) and I have attempted to draft an amendment that would address, in a positive way, the real concerns of people in this country and throughout Europe. Amendment No. 3 is not a narrow nationalistic proposal. It is a commitment to a different vision of a people's Europe, a form of internationalism that is beggared by the treaty as a whole.
If I am asked why the treaty will be a catastrophe, I would refer the House to the table on page 14 of research paper 93/25 which sets out by how much all countries of the European Community currently fail to meet the terms of convergence. It reveals one case after another of failure, worse than the worst of the school reports I ever received, and I confess that some of them left something to be desired. The table shows that only France and Luxembourg would be in a position to proceed on the basis of convergence that the treaty requires. Even they are beginning to turn a fearful eye on the levels of unemployment and the social upheaval in their countries.
We are being asked to subscribe to what is little more than a feast of fools. Monetary convergence would not work without mass unemployment, permanent social division and reliance on a dreadful degree of racism and xenophobia. Some of the worst effects of that can be seen in Germany, France and Italy. They are also present in my county of Nottinghamshire, where last week the Nottingham Evening Post ran an extensive series of articles detailing its concern about the new activities of neo-fascist groups in the county. Their appeal is based on the fear of unemployment and poverty and on the alienation of young people.
Amendment No. 3 sets out in a modest way to offer beacons of hope around which reinvestment in people can be structured. It talks of a required rate of growth of 3 per cent., not a large figure. To achieve it, we would have to echo Japan's initiative, by which it has increased government borrowing by £75 billion to increase its rate of growth from 1.25 to 3.3 per cent., or we would have to follow the German example of borrowing for reinvestment, by transferring £ 30 billion a year for the next decade, in pursuit not of zero inflation but of social 134 stability. That is missing from the Maastricht treaty and its criteria for convergence. We would inherit a fearful legacy if we signed up to it.
We require a policy of investment in people that will not discriminate on the basis of age, and will not set men against women, young against old, French or Greeks against British. It requires a common investment policy that will not rob Peter in Paris to pay Paul in Peterborough. We are offering a set of proposals which would be modest, but which would commit us to removing regional disparities, to challenging poverty in the European Community and requiring the United Kingdom to have a regional policy which means something because it sets targets for reducing unemployment and regional inequalities in wealth.
11.30 pm
Were we to be given the right to vote on amendment No. 3, it would give the House the chance to rise as one behind a set of policies that would invest in the people of this country and the people of Europe. It would not be a bankers' charter or a bureaucrats' charter. It would start from the fears and concerns that assail every one of our constituents, if only we had the courage to listen to them. If we voted on the amendment, it would give the Labour Front-Bench team the chance to rise up and lay claim to it as the core of a socialist policy to which I know we could all subscribe.
§ Question put and agreed to.
§ Clause read a Second time.
§
Amendments made to the proposed clause: in line 1, leave out from 'of to 'Her' in line 3 and insert
'the Treaty establishing the European Community'.
§ In line 6, leave out 'Title II'.
§ In line 7, leave out 'Article' and insert 'Articles'.
§ In line 8, leave out 'out of the Treaty'.—[Mr. Dorrell.]
§ Clause, as amended, added to the Bill.