Assessment of Deficits (European Community)

HC Deb 09 February 1994 vol 237 cc397-422

11.6 pm

The Financial Secretary to the Treasury (Mr. Stephen Dorrell)

I beg to move, That this House approves the Government's assessment as set out in sections 2, 4 and 5 of the Financial Statement and Budget Report for the purposes of section 5 of the European Communities (Amendment) Act 1993. It will be within the memory of many hon. Members that section 5 of the European Communities (Amendment) Act, which put the Maastricht treaty into our own domestic law, contains a provision requiring the Government to 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 article 2 of the treaty of Rome as amended by the Maastricht treaty. That is the occasion of the debate.

When the Maastricht Bill was being discussed in the other place, having been passed by this House, the Lord Advocate gave an assurance that the Government believed that, as a result of the inclusion of that provision, a debate in this House would be required before the information was submitted to the Commission in accordance with the provisions of the treaty as referred to in section 5 of the Act. That is the reason why the debate is taking place in the House this evening. It is a debate occasioned by section 5 of the Maastricht Act.

That bears no direct relationship to the question that the House is now being asked to address, however. Although the occasion is the passing of the information to Brussels under the terms of the treaty, the question that the House is being asked to address—which those on the Opposition Front Bench clearly identify in their amendment—is whether the House approves the contents of chapters 2, 4 and 5 of the Red Book tabled by my right hon. and learned Friend the Chancellor on Budget day. The Red Book has already, on more than one occasion, been considered by the House as part of the Budget debate. As the terms of the Budget have been carried repeatedly in votes in the House, I think it not unreasonable to assume that the contents of the Red Book have been approved by the House. None the less, the debate gives the House the opportunity yet again to endorse the contents of the Red Book.

Mr. Andrew Smith (Oxford, East)

As this is a new procedure, it would be helpful to the House if the Minister could explain what happens under the provisions of article 103. If the Government's motion on these sections is approved and sent to Brussels, what happens to it thereafter? Under what circumstances will we get a report back, bearing in mind the amendment tabled by some Conservative Members?

Mr. Dorrell

Information that is tabled and submitted to the Government following the debate and sent to Brussels to satisfy our treaty obligations is used by the Commission in preparing the reports that it is required to prepare under the multilateral surveillance procedures and under the assessment of excessive deficits. That is the purpose of the submission of the information; it is not, however, the question that is before the House this evening. The question before the House this evening is whether it will approve again, as it has on several occasions, the contents of the "Financial Statement and Budget Report" presented by my right hon. and learned Friend the Chancellor on Budget day.

Sir Teddy Taylor (Southend, East)

While we appreciate that paragraphs 1, 9 and 11 of article 104c do not apply to Britain, does my hon. Friend appreciate that section 7 means that the Council could give instructions to member states, including Britain, and that the recommendations shall not be made public? Paragraph 7 states: these recommendations shall not be made public". Therefore, we Could have a situation in which the Commission tells the Government to do something, keep it secret and the House will not be aware of it. Does the Minister agree that, if the Commission gives such an instruction under paragraph 7, the Government would tell Parliament what was going on?

Mr. Dorrell

My hon. Friend is usually meticulous in his use of the language. However, he has elided the concept of a recommendation contained in paragraph 7 of article 104c with the concept of an instruction. Those two words are not synonyms. I repeat the point: the House is being asked to approve a document that it has approved on many previous occasions. I commend the Government's motion to the House.

11.10 pm

Mr. Andrew Smith (Oxford, East)

Mr. Deputy Speaker—

Mr. William Cash (Stafford)

On a point of order, Mr. Deputy Speaker. The Select Committee on European Legislation considered these documents today and a severe reprimand was given to the Department and the Ministers concerned regarding the failure to perform this—

Mr. Deputy Speaker (Mr. Michael Morris)

Order. That has nothing to do with the Chair.

Mr. Smith

Looking around the Chamber, I have to say that it is a bit like old times for all of us. The fact that we are debating the motion tonight and that the House has a right to vote on what the Government submit to Brussels is the result of Labour's ingenuity and determination in successfully forcing the Government to incorporate section 5 in the European Communities (Amendment) Act. It is entirely right that the House should have the opportunity to examine and vote on submissions before they are sent to Brussels under the convergence and multilateral surveillance provisions of articles 103 and 104C.

Mr. Nicholas Budgen (Wolverhampton, South-West)

The hon. Gentleman is priding himself on the heroic posture of the Labour party during the Maastricht debate. Perhaps he would be good enough to remind hon. Members of the benefits that the Labour party obtained for itself and the nation by its attitude to the Maastricht treaty, set off against the way in which it supported the Government and made possible the imposition of the treaty on our nation.

Mr. Deputy Speaker

Order. That does not relate to the motion.

Mr. Smith

I was wondering how to work within the surveillance procedures the gains that we made in terms of local authority representation on the Committee of the Regions, the democratic right of the House to scrutinise business and, more importantly, the right to stretch the Government on the rack over their failure on the social chapter—denying the people of this country the rights that are taken for granted across the rest of Europe.

The country has a right to expect that the Government, in presenting the motion to the House, would make some effort to address the requirements of section 5 and specifically relate their submission to the goals of article 2 of the Maastricht treaty, which refers to harmonious and balanced development of economic activities, sustainable and non-inflationary growth respecting the environment, a high degree of convergence of economic performance, a high level of employment and of social protection, the raising of the standard of living and quality of life". Instead, what we have in front of us is the same tired and failed message that the Government have been trotting out since last year's Budgets.

That is a message which the country does not believe and which has demoralised the Conservative party's constituency activists—where it has any left. The Budgets broke the Conservative party's election promises on taxation to the extent that fully 69 per cent. of the population say that they will never trust the Conservatives on taxation again.

Mr. Budgen

rose—

Mr. Smith

On that point, I give way to the hon. Gentleman.

Mr. Budgen

rose—

Mr. Deputy Speaker

Order. That does not have much to do with section 5. What is good for the goose is good for the gander. Let us get back to section 5.

Mr. Smith

rose—

Mr. Deputy Speaker

Order. The hon. Gentleman may reach for the Red Book, but he knows full well that there is nothing in it about opinion polls. I know my way around that book as well as he.

Mr. Smith

There is a great deal in the Red Book about taxation, and the Government have broken their promises on that.

Mr. Budgen

Will the hon. Gentleman assist the House by explaining what the Labour party's present position is on what has been described as the multilateral surveillance procedure? We would imagine that, as part of its support for getting as quickly as possible towards a single currency, it is in favour of the subordination of the British national interest to foreign economic surveillance. Will the hon. Gentleman be good enough to explain what the Labour party's attitude to that matter is?

Mr. Smith

What the hon. Gentleman presumes to be the Labour party's policy is not. We believe that there is merit in the discussions involved in multilateral surveillance. They would provide co-operation with our European partners for the goals that the Opposition and the people of this country hold dear, which include getting back towards full employment.

Mr. Budgen

rose—

Mr. Smith

I shall not give way again to the hon. Gentleman; I have already done so twice, and I want to make some progress.

The Budgets that we are invited in effect to approve as our submission to Europe are those that brought up the level of Tory tax increases to £12.50 extra on a typical family from April. Those tax increases, as the Chancellor and Ministers admit, will check the economic recovery, and that will do nothing to rescue the people and the economy from the damage that the Budget increases will inflict.

The Budget policies failed to stimulate investment in the face of all of the representations that the Government received from industry. The Budgets leave manufacturing investment languishing at barely one-third of the level of that of Germany. Our manufacturing investment per employee is one of the lowest in the European Union. It is only one third of the level of the Netherlands, it is 46 per cent. lower than in France and 26 per cent. lower than in Germany. No wonder Britain's record on economic growth is so poor.

Whatever comfort may be taken from the present relative growth rates in Europe, what counts is the long-term growth record cancelling out the differential effect of the timing of recession and recovery in each country.

Mr. Dorrell

indicated assent.

Mr. Smith

On that important count, Britain lags badly. The Financial Secretary agrees that the long-term growth record is the important criterion. That shows that, between 1979 and 1993, the Japanese economy grew by 63 per cent. and the American economy by 35 per cent. In Europe, the Italian economy grew by 32 per cent., those of the German lander by 32 per cent., the French economy by 31 per cent. and the United Kingdom economy by only 25 per cent.

Mr. Dorrell

The proposition with which I was agreeing was that which the hon. Gentleman advanced to the House and then proceeded to ignore. That proposition is that one compares growth rates by looking across a longer period and comparing performance from similar points in the cycle. The hon. Gentleman's comparison for the United Kingdom economy used 1979, which was the nearest thing to the peak of the cycle that the previous Government ever succeeded in creating, and 1993, which nobody could possibly regard as the peak of any economic cycle. The hon. Gentleman set out precisely the right basis for making long-term economic comparisons and proceeded immediately to ignore it.

Mr. Smith

I fear that, however long a period we take, the Financial Secretary will be disappointed, because Britain has such a poor performance on long-term growth, as a direct result of the low figures on manufacturing investment per employee, which I have just pointed out.

However, that is not the only difficulty that the Government face. We have a large balance of payments deficit for this stage of the economic cycle. The Financial Secretary made the important point that it is necessary to compare appropriate points of the economic cycle. He could not dispute that, for this stage of the economic cycle, the balance of payments deficit that Britain is running is depressingly large and, what is more, is set to get worse.

Mr. Dorrell

The hon. Gentleman is wrong again. He just asserted that the balance of payments deficit is getting worse. It is not. It is getting better.

Mr. Smith

I said that it was set to get worse. Time will be the test of who is right on that. As I am sure that the Financial Secretary is well aware, many commentators predict, a few years down the road, a terrible problem with the balance of payments deficit as a result of the Government's failure to improve Britain's industrial competitiveness.

Accompanying the balance of payments deficit is the most serious failure of all—the failure to tackle the mass unemployment which drains individuals of hope and the country of the wealth that their energies and talents would create if they were employed. Mass unemployment floods into the public sector borrowing requirement. The Government's record could not be presented to Brussels as one which promoted, in the words of article 2 of the treaty, "a high level of employment". Even as unemployment, on the Government's figures, has started to turn down, levels of employment have fallen even further.

Mr. Cash

The hon. Gentleman referred to western Germany, but did not refer to Germany as a whole. Does he agree that one of the reasons why it is necessary to refer to western Germany, rather than the whole of Germany, is that the whole of the report—every statistic in it—omits to include the whole of Germany? It leaves out the eastern part of Germany, which reduces the value of the report substantially. It means that we have nothing more than a shambles on our hands, and no means of judging whether the convergence criteria have been reached throughout Europe as a whole.

Mr. Smith

The hon. Gentleman said it. He can recognise a shambles over there when he sees one. I was referring to the western lander for the precise reason that, if one compares the period from 1979 to 1993, there is no meaningful comparison that one can make for that period that would include the eastern lander. Of course the statistics will have to reflect fully the position in eastern parts of Germany and include it with the whole. I only wish that the Government made the same determined effort to invest in worn-out infrastructure in depressed parts of Britain as the Germans have made in methodically setting about restoring the eastern part of Germany.

I was saying how badly the Government's proposals failed to address the corrosive, serious effect of unemployment in our nation and that levels of employment had fallen even further. Under the social goals to which the Government are supposed to relate their report to the EC, article 2 refers, as I have said, to a high level of social protection.

It is important to ask what social protection there is for those who have seen even basic employment rights taken away, wages councils abolished, sick pay, invalidity benefit and unemployment benefit cut and, tonight in the House, rights to premium pay defeated. This is not so much social protection as social intimidation. It is the exact opposite of the social partnership in the workplace between the community, employers and government at all levels that we need to see for sustained economic success and for the social solidarity referred to in article 2.

In a report which purports, as section 5 and article 2 do, to deal with social solidarity, the Government might have been expected to say something about crime and fraud, both international and domestic. Their poor record has seen crime rocket by 124 per cent. since 1979. British people are the most likely in Europe to be the victims of burglary.

Even the Tories cannot pretend that that has nothing to do with the deepening social divisions in Britain and the fragmentation of social cohesion resulting from their free market theories, which leave far too many people looking after number one. That opens the way for the illicit drugs industry and allows far too many people to be tempted to make more in crime—as they can—than from legitimate employment, with far too little prospect of being caught and convicted.

People are deeply worried about social fragmentation, unfairness and division. There can be little doubt that Britain is deeply divided. As Labour Members have been saying for a long time and as the Institute for Fiscal Studies showed yesterday, Conservative tax policies have thrown fairness out of the window. Middle and lower-income Britain is paying a high price for the failures of the 1980s. The Financial Secretary dubbed it the yuppie revolution but, as he said last year, it was "built on sand". As a result of the Government's tax policies, the top 1 per cent. of income earners have received 30 per cent. of the income tax cuts since 1979, but are paying only 4 per cent. of the tax rises being imposed.

Mr. Dorrell

The hon. Gentleman might also like to refer to the fact that the top 10 per cent. of taxpayers are now producing 45 per cent. of the yield of income tax, whereas when Dennis Healey left office they were producing Only 35 per cent.

Mr. Smith

I notice that the Financial Secretary did not challenge my case, which concerned the fairness and the unfairness of the top I per cent. receiving 30 per cent. of income tax cuts but paying only 4 per cent. of the rises.

In place of Conservative promises before the election not to extend value added tax and to achieve year-on-year cuts in taxation, people are faced with the unfairness of VAT on domestic fuel and the prospect of year-on-year tax increases. Page 23 of the Budget report that we are invited to approve tonight shows year-on-year increases in the share of national income going on taxation, rising to 38.5 per cent.—a higher tax take than in any year of any Labour government, which destroys once and for all Conservative claims to be a party of low taxation.

The Conservatives have added to the indirect tax burden. A typical family on average earnings pays 13 per cent. of its earnings on indirect tax, compared to 11.3 per cent. in 1978–79. The Conservatives have also added to the direct tax burden so that that same family pays 21.9 per cent. of its earnings in direct tax, compared with 20.9 per cent. in 1978–79.

Mr. Andrew Rowe (Mid-Kent)

The implication of the picture that the hon. Gentleman is painting is that mainland Europe's success in social cohesion, taxation policy and so forth has a direct, lasting and beneficial effect on unemployment. Will he confirm that the unemployment record of most of the countries of mainland Europe compares very unfavourably with the record in this country?

Mr. Smith

If the hon. Gentleman studies the period that I was examining—I think that the Financial Secretary believes that it is right to study a long period of time—works out how many periods of growth and recession there were during that time and their extent and compares them with the record of each of those other countries, he will realise what an abysmal record the Government have. They have diminished the opportunities and prosperity of the people of this country.

The tax burdens that I mentioned are the effects of the Government's incompetence at managing the economy, which is matched in scale only by the extent of their broken election promises. Their failures make Britain weaker, more demoralised and more divided.

Conservative Members too are certainly demoralised, and no wonder. On 22 January the Financial Secretary gave a keynote speech, which was intended, I dare say, to propel left-wing Conservatism into the next century. So replete was it with references to social obligation, the importance of public service and the rejection of jingoism that it could not, by any stretch of the imagination, have been given at last year's flag-waving Conservative conference. It did not register so much as an attack upon the Labour party as, perhaps, a putative application for membership. [Interruption.] For the benefit of the Financial Secretary, I repeat: not so much an attack on the Labour party as a putative application for membership.

It is quite clear that the people whom the Financial Secretary had in his sights when he made that speech were very much closer to home. Let me give an illustration. The Financial Secretary said: Patriotism—like freedom—is a much-abused concept. The Conservative is well aware of the dangers and rejects the exaggerated histrionics of flag-waving nationalists. They offer symbols in place of substance—a cheap imitation of the real thing. I wonder to whom that could have been referring. [Interruption.] hear someone ask "Where is he?" Where indeed?

But it gets better. Whom could the hon. Gentleman have had in mind when he said: Furthermore, the Conservative will reject a narrow, inward-looking view of patriotism. Love of country does not imply hostility to foreigners. Let him tell that to the Chief Secretary and to the noble Lord Tebbit.

Mr. Giles Radice (Durham, North)

Does my hon. Friend agree that it ill behoves those of us with foreign names to make cheap jibes about foreigners?

Mr. Smith

My hon. Friend has said it and, as usual, he is right.

The Financial Secretary went on to say: European institutions do not represent a threat to our national identity or our national interests. It is difficult to imagine those words escaping from the mouth of the Chief Secretary, even in an unguarded moment.

It is abundantly clear that, in the House and in the country, there are real divisions between the right and the left of the Conservative party. The former says that, with the long-term weakness of the economy, we should cut public services further so that we may move towards a more balanced budget and return to cutting taxes on the very rich. The latter says that, with the economic failures we face, the Government need to raise taxes so that they may inflict a bit less damage on public services.

The Financial Secretary and the Chancellor have referred to the quality of public services. They must mean that they want a bit less damage than their hon. Friends on the right want. Both groups contrast with the Labour party, which says, "Let's put in place the measures for economic success so that we may help to make people better off and provide them with better public services and a fairer distribution of taxes."

The sections of the Budget report that we are considering tonight offer no basis for sustainable success. They hold in prospect no means of getting Britain to pull together for jobs, no restoration of the social fabric, no end to decline. They are measures that the Government should be ashamed to send to Brussels, let alone put before the British people. They should be rejected, and we shall vote against them tonight.

11.34 pm

Mr. Bernard Jenkin (Colchester, North)

When Labour Members forced the Government to accept the amendment that led to this debate, Conservative Members had the vague idea that they meant to do something constructive with the debate on the Government's convergence plans. But they obviously just wanted an insurance policy. They know that their procedural expertise is a little lacking from time to time, so they wanted an extra opportunity to have the same old familiar, boring rant that we have heard several times already on this subject.

When one of the biggest issues in British politics—how Britain should conduct itself in the debate on European monetary union—is under discussion, it is disappointing that the hon. Member for Oxford, East (Mr. Smith) should studiously avoid saying anything of consequence on the subject. Moreover, we are united in our total perplexity at the fact that the Labour party has only just discovered that taxation can check economic recovery. It is a remarkable thing for Labour Members to learn. They obviously did not know it at the last general election.

When the hon. Member for Oxford, East talks of social protection, he means his union friends in work, rather than those who are out of work. The best social protection that any economy can offer its people is a job. We are absolutely united on the fact that we now have falling unemployment, lower unemployment than the EC average and are leading the European Community in the jobs stakes.

On social cohesion, let us look at some of the socialist Governments running other European countries. Prime Minister Balladur is having to cope with chaos and dislocation in France; Spain is suffering from more than 20 per cent. unemployment; and there is almost total chaos in Italy. If one is looking for social cohesion, one need look no further than this country as a good example of social protection, jobs and economic success.

Sir Teddy Taylor

Apart from the brilliance of Ministers, of which we are all aware, does not my hon. Friend think that Britain's splendid achievement within Europe may be because we were chucked out of the exchange rate mechanism, unlike the others?

Mr. Jenkin

My hon. Friend leads me to my next point. Part of the ingredient of our success in achieving falling unemployment is the fact that we were thrown out of the exchange rate mechanism. I use the words "thrown out" advisedly because they were used by the former Chancellor, my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont). We were then able to pursue policies that were in this country's interests and to set the economic agenda according to our domestic monetary conditions, not according to an external discipline that had become inappropriate for the circumstances in which we found ourselves. That important point is pertinent to this debate which, I remind the hon. Member for Oxford, East, is meant to be about convergence.

Why do we want convergence? What is so axiomatically good about it? Our economy has improved markedly since we made a conscious decision to let it diverge from those of our European partners. The treaty on European union contains an obligation to converge, which has been put there for political rather than economic reasons. People have a political agenda that they want to achieve in Europe and the economy is the tool with which they want to achieve it.

Amendment (a), tabled in the name of the Leader of the Opposition, talks of many supposed failings in the Government's economic policies. But if the Opposition were ever in government and took us into a single currency—their espoused policy—and did away with the opt-out which the Prime Minister attempted to negotiate at Maastricht, they would abolish the very means to deal with the problems which they think they can cope with better.

Mr. Rowe

I am grateful to my hon. Friend, who is making an intelligent and helpful speech. Does he agree that, while there are manifest short-term economic advantages in our being divergent from the present state of Europe, in the long term, political differences throw all economic advance off course? That has been demonstrated at least twice this century—between 1914 and 1918 and between 1939 and 1945. It makes a great deal of sense to have the twin track of a political and an economic agenda.

Mr. Jenkin

I agree that we need a twin-track agenda to ensure that we have a strong defence policy, coupled with clear foreign, economic and trade policies that bind us together. But it is trade that binds the interests of our nations together. The causes of both the first and second world wars were as much about protectionism as anything else.

To impose a single currency upon the diverse nations in Europe is a different proposition. In imposing a single currency, one imposes a uniform economic discipline, but the political characteristics of each of the member states are very different. They have their own priorities, geographical characteristics and trading partners. France tends to trade with French-speaking countries, Britain tends to trade with English-speaking countries. A single currency does not automatically lead to the cohesion of Europe.

Mr. Iain Duncan Smith (Chingford)

Will my hon. Friend consider convergence in relation to a single currency? We do not necessarily have to pursue convergence. We could allow countries that naturally converge to do so and adopt a multi-speed approach to the concept of a single currency, rather than following the politically dominated, forced agenda, which is essentially part of the treaty.

Mr. Jenkin

My hon. Friend is right, and he directs me to the subject that I wanted to raise: the definition of convergence. Many of my hon. Friends think that convergence means having less than 3 per cent. public sector deficit and less than 60 per cent. public debt ratio, low inflation and low long-term interest rates. Those are not articles of convergence, but four objectives that politicians have decided it would be interesting to achieve.

Mr. Duncan Smith

A wish list.

Mr. Jenkin

Yes, my hon. Friend is absolutely right—it is a wish list.

Convergence under a single currency would require imposing the same monetary policy and the same interest rates regardless of the circumstances in each of the member states. In the United States, where there is a single currency, there is a single interest rate, and a single financial, fiscal and monetary discipline. But that does not solve the problems of economic divergence in the United States. When the motor industry in Chicago and Detroit is booming, oil in Texas can be bust and silicon chips booming in California. One has to have massive fiscal transfers to pay for the discrepancies between the different parts of the economic unit.

The United Kingdom has a single currecy, but a widely divergent economic performance. We must pay for wide disparities in public expenditure—which is 18 per cent. per head higher in Scotland and 41 per cent. higher in Northern Ireland—to maintain a cohesive economic unit. [HON. MEMBERS: "Why?"] Because we care about our country, that's why. How much more would we have to pay in taxes to maintain cohesion and convergence between all the various member states of the Community, given all the economic differences between them?

Mr. Ian Taylor (Esher)

My hon. Friend is becoming so obsessed with the prospect of a single currency—to which Maastricht does not commit this country—that he forgets that the Maastricht convergence criteria actually constitute rather good Tory principles of public finance management. In the event that other countries observe them better than we do, given that the European Community is a single capital market, there will be fairly massive transfers that will not benefit this country.

Mr. Jenkin

First, the treaty on European union obliges us to converge in the run-up to a single currency. Secondly, if it is virtuous to have a 3 per cent. public sector deficit ratio, why have we not had one for the past few years? The Maastricht treaty was negotiated at the end of 1991.

The answer is that this country decided that it was politically expedient—and, indeed, beneficial to its economy—to run rather a large deficit. We decided to make that political choice. We would like to run a balanced budget; we would like to run a surplus. But it is for the House and the Government—both accountable to the British people—to decide what is best; it is not for the European Commission, in its wisdom, to decide when and how we should apply the convergence criteria.

If we are talking about convergence, I urge my hon. Friend the Member for Esher (Mr. Taylor) to read the treaty. It is about multilateral surveillance; it is about being told off by the Commission, not when we in this House think action is inappropriate but when the Commission thinks it is. My hon. Friend is committed to the idea of convergence and a single currency for a political reason; his is a political objective. I am as internationalist as he is, but we choose to achieve our aims in different ways.

Mr. Cash

My hon. Friend has mentioned the public sector borrowing requirement. Does he agree that the current £50 billion is largely a result of the fact that, because we remained in the exchange rate mechanism for an intolerably long time, the cost of social security payments and housing benefits, and a range of additional public expenditure, was heaped on the British people? Consequently, we are in the economic mess represented by the Red Book that we have before us.

Mr. Jenkin

My hon. Friend is absolutely right, but I am not prepared to go over old ground that is accepted by a great many people in the country.

Mr. Budgen

Will my hon. Friend give way?

Mr. Jenkin

I think that I must press on.

I have made my argument as clear as possible. The pursuit of convergence is a very expensive business: that is why there are structural and cohesion funds. We must pay for convergence, and it is the northern states that will have to slow down their economic growth to pay for disparities throughout the European Community.

I shall vote for the report, because I voted for the Budget; but the fact of its submission proves that monetary union is still happening. The idea that it has been stopped in its tracks by the collapse of the initial strategy must be discounted. The documents are beginning to flood out of the Commission. The strict convergence criteria were meant by some to make sure that monetary union never took place, but now the criteria turn out to be a little more malleable than we had thought. The goalposts are being moved.

The two documents about legislation on convergence—it is interesting to note that the treaty is giving rise to draft legislation on that already—try to define the 3 per cent. borrowing ratio and the 60 per cent. public debt ratio, because each country has a different definition of these elements. Goodness only knows how the Italians and Greeks define them. No figures for previous years' performance is offered in the documents.

Sir Ivan Lawrence (Burton)

The words have different meanings.

Mr. Jenkin

As my hon. and learned Friend says. they do. The Commission has a clear agenda and is starting to manipulate these definitions for its own purposes so that it can move back towards economic and monetary union, with all the expense that convergence implies.

Conservative Members can unite behind the agenda articulated by my right hon. Friend the Prime Minister in his article in The Economist of 20 September: All over Europe, what are people worrying about? Not to reduce the number of currencies but to increase the number of jobs. I commend that comment to the Minister.

11.51 pm

Sir Teddy Taylor (Southend, East)

The Minister is a superbly conscientious man when offering assurances to the House. I hope tonight that before he gives us any more reassurances he will reflect on some of the others that the House has been given recently.

We were told in the debates on the exchange rate mechanism that it would bring growth and stability; we all know that it brought about a shambles. Last year, we were told that the general agreement on tariffs and trade round would lead to a great reform of the common agricultural policy; now we are throwing so much money at the farmers that they are positively embarrassed by it.

Something significant is happening tonight. For the first time in our history, we are going to submit our Budget plans and forecasts to the Commission, so that the Council can look at them and in turn tell us its thoughts on what we and others are doing. It will demand a great deal of information. It will monitor economic developments in each member state, carry out regular assessments and suggest detailed rules and recommendations.

All these recommendations will be directed to what the Commission thinks is the answer to our problems—to aim at this 3 per cent. figure. I know that Britain is doing terribly well compared with the other member states, but that is because we were thrown out of the ERM. The Minister, I know, is sometimes a little suspicious of our figures, so I took the trouble to get some independent figures from the Library. The Library informs me that if Britain adopted the 3 per cent. rule here and now—the basis of the EC's proposals—income tax would be increased by 23p in the pound. If the Minister did not like that he could, alternatively, impose VAT on everything at 34 per cent.

Mr. Dorrell

I thank my hon. Friend for that research. As he will know, however, because he is an assiduous reader of the documents, a proper reading of the excessive deficit provisions of the treaty shows that they do not require the United Kingdom or any other state to secure the 3 per cent. overnight. The treaty obliges us to endeavour to avoid excessive deficits, which it defines as 3 per cent. of GDP.

The document before the House outlines how the Government, chiefly for our own domestic reasons, do intend to reduce our public sector borrowing requirement to below 3 per cent. The Red Book shows that we will achieve that objective in 1996–97. I am sure that my hon. Friend, for reasons on which we both agree, will support the Government in delivering that objective. No suggestion is made in the treaty or elsewhere that we should seek to do that overnight.

Sir Teddy Taylor

I am terribly sorry, but I have read what article 104C says about 3 per cent. These are specific aims. In fairness, Britain can receive only recommendations, strong letters and instructions, but if other member states do not do what they are told they can be fined, asked to put unlimited sums on deposit at no interest and have the facilities of the European investment bank withdrawn.

The Minister said that this does not have to be done overnight. That is perfectly true—as long as we can give a tale to the Commission and to the Council and can say, "We are terribly sorry that we are above 3 per cent. but here are our plans to reduce it."

Mr. Budgen

Not only can we be subject to such criticism and blackmail from our foreign governors but we are also likely to have great difficulty in raising money on international markets if we have been subject to an adverse report from what many people regard as people who control large sums of foreign money.

Sir Teddy Taylor

How right my hon. Friend is. Reports will be published in which the Council arid Commission will say, "We think that the Government are making a mess of things." We would know that that is untrue. We know that we have brilliant Treasury Ministers who are doing a fantastic job. I am sure that the same would apply to all Governments, but if the Commission says, "We think that the Government are heading for disaster because they are borrowing far too much money and their economic policies are crazy," what effect will that have on our stability as a nation and on how people regard us?

Mr. Peter Hardy (Wentworth)

I do not wish to use the same pejorative words as the hon. Member for Wolverhampton, South-West (Mr. Budgen), but if the EC wishes Britain to converge, is it not reasonable to expect the Commission to assist Britain to do so? Does the hon. Gentleman believe that Britain is so assisted if the Commission allows the continuation of the situation in my area, where there is enormous anxiety about the survival of probably the finest engineering steel works in Europe, if not the world?

They are likely to be taken out because the Governments of Germany and Spain are determined to subsidise their industries to destroy British competition. Does the hon. Gentleman understand that, if the Commission does not help us, the possibility of convergence is made more difficult, and the effect on public expenditure of the destruction of a successful British industry makes the situation that Britain, and presumably South Yorkshire, faces a bitter one?

Sir Teddy Taylor

I am well aware of the terrible problems facing the steel industry in south Yorkshire. Everyone is aware of the problems facing Britain. I ask the hon. Gentleman please to go and look at what the Council and the Commission have done. They have given permission for extra subsidies and the expansion of steel works in other countries on condition that we clobber ourselves. Do not blame the Government. The fact is that Europe is killing our steel industry, and the hon. Member for Wentworth (Mr. Hardy) knows that. We have seen it happening and it is getting worse. For him to blame Tories, Labour or Liberals is a load of codswallop. Our steel industry is being deliberately killed because we are allowing extra subsidies and extra capacity in certain member states.

The Minister said that we do not have to increase VAT to 30 per cent. immediately. He said that the Commission will be kind. It will say, "As long as you are going the right way we will go along with you." I ask him to look at other member states of the EC. Are they going the right way with their borrowing? Every single figure shows that the massive borrowing of EC countries, but not Britain, is getting worse almost every day.

I ask the Minister to read today's edition of that splendid newspaper The Guardian, which reports that Germany now has more than 4 million unemployed and that the total went up by 340,000 last month. What will be the impact of that increase on Germany's overspending and borrowing? The same is happening in Spain and Italy. I mentioned our excessive problem, but in Greece the figure is 15.4 per cent. It is my calculation, not the Library's, that if we had to conform to the 3 per cent. target, we should be required to increase income tax to 23s 4d in the pound, which would be difficult to maintain.

Mr. Cash

Does my hon. Friend recollect that in Spain, despite the vast amounts made available to it in the form of subsidies—including the £108 billion over the next few years that was agreed at Edinburgh in 1992 under our presidency—37 per cent. of all people under the age of 25 are unemployed? That is why Spain has a general strike. It is an indictment of the way in which the Community is going, and what is happening in Germany will happen in this country.

Sir Teddy Taylor

My hon. Friend is absolutely right. The Minister is a sensible chap and I appeal to him to consider what the EC is doing to its member states. He should not listen to the Foreign Office chaps but should examine the figures. Spain has mass unemployment despite mass aid. Costs to industry and commerce are increasing and Europe is unable to compete because of the crazy CAP and trade protection. Massive borrowing is also a factor in Europe's problems.

The House is well aware that things are going well in Britain, but what about interest rates? When considering convergence, the Minister should examine the figures for borrowing among the European member states and my hon. Friend the Member for Harrow, West (Mr. Dykes) should examine the European investment bank. The main sources of loans are the Arab countries which, sadly, do not have so much money now because of the price of oil—even the Saudis are paying their debts in instalments—and the Japanese, who are lending less. Unfortunately, the ever-increasing borrowing will soon meet non-available lending, which will have a pretty devastating effect on interest rates in Europe.

Please, will the Minister let himself be told what is happening? We tabled an amendment asking that the House of Commons be told what instructions or advice is given to member states. [Interruption.] If my hon. Friend the Member for Harrow, West cares to listen, I recommend that he read paragraph 9 on page 20 of the treaty which states that the Commission will tell the Government what it thinks they should do but that it will not tell anyone else. Communication will be secret and private. If Britain is to be told what to do, surely the Government should at least inform the House. Is that asking too much?

If the Minister has to proceed with what I believe to be another lunatic Euro-plan which will create more unemployment, misery and problems, I hope that he will at least promise to inform the House of any instructions or advice given by the EC to the Treasury. If other member states are told that fines are to be imposed and that they have to deposit money, why should not the Government tell us that, too?

Article 103 of the treaty states that economic policy is now of common concern. I therefore appreciate the fact that the control by the House of economic policy is being taken away, bit by bit. It is disappearing, as is our control of other matters that we used to decide for ourselves. We should at least have the right to be told what is happening. The Minister should reflect on the 250,000 people who lost their jobs because of the criminal decision to join the exchange rate mechanism and on the fact that the Government told us that the treaty would bring growth and stability. Despite the additional transfer of power and the mad 3 per cent. policy, which can never work across Europe, I hope that he will tell the House when he receives secret advice on a bit of paper from the Council or the Commission.

Is it wrong to say that we should be told what is happening? That is all that the amendment asks. As the Foreign Secretary, who is someone who wants to tell everyone everything, is sitting on the Front Bench, I hope that we shall be given the assurance that, when the private secret letters come he will tell the House, so that not only the Labour party and the Conservative party but, most important, the people of Britain know what is going on.

12.4 am

Mr. Mike Gapes (Ilford, South)

I had not intended to speak in the debate, because I did not want to intrude on the private grief of the Conservatives. However, having heard some of what Conservative Members have said, I felt that it might be helpful if someone made a contribution that at least drew attention to the reality of what is happening in Europe rather than to the peculiar obsession of the anti-European wing of the Conservative party.

European economies are becoming more integrated every day. Multinational companies are buying plants in other countries, in some cases with the support of those countries' Governments and in other cases against their wishes. That integration will continue regardless of whether this country is in the exchange rate mechanism, and regardless of whether there is a single European currency.

As that process continues, we in this country can be bystanders or we can be part of trying to shape the structures, organisations and institutions of the Europe that is being created. Unfortunately, our Government have chosen to be bystanders and to opt out of that process, but we shall still have the opportunity over the next decade to take our place in influencing those decisions. If we examine what the Maastricht treaty really says we realise that, regardless of whether the timetable is kept to, it is possible and even likely that by 1999 a substantial minority, perhaps even a majority, of the member countries will go forward to establish some kind of single currency.

Many people will say, "That does not matter to us. We are not influenced by it, and they can do it if they want. We want a two-speed Europe." But if our economy is to be dominated by the largest country in the European Union, with its power, its strength and its deutschmark zone, which will influence the policies of BMW and the other companies that want to invest and to build export markets outside the European Union, and if we say that we do not want any influence on that process, we should have to be strong enough outside on our own.

Mr. Jenkin

rose—

Mr. Duncan Smith

rose—

Mr. Gapes

I shall give way in a minute.

We should have to be strong enough to resist those pressures. Our economy is already very weak, which is why our Government seem prepared to accept investment from anywhere, regardless of its long-term technological and industrial consequences, even if it is used to purchase the last remnants of the British motor vehicle industry.

The logic of the position of those who want to opt out and stay out is that we shall become, on the one hand, a kind of subcontractor, producing on the periphery of the European economy—the deutschmark economy—and, on the other, a kind of amusement park for American and Japanese tourists. That is the logic of the Government's policies, which will leave us with no manufacturing base or jobs and no industrial future. We must face that reality.

Mr. Jenkin

Although our economy is substantially smaller than that of western Germany, let alone that of the united Germany, we are not left behind by Germany. On the contrary, the Bundesbank does 60 per cent. of its bond trading and 90 per cent. of its foreign exchange dealing in London. We need be no more left behind if we stay outside the single currency than Hong Kong is left behind by China.

Mr. Gapes

That is an interesting parallel. Hong Kong is about to be unified with China in 1997 and lose its unique position. Germany has just gone through the most traumatic process of unification. It has also taken huge numbers of German refugees from central and eastern Europe and refugees from the former Soviet Union. Also, it has been recently reported that the east German economy is growing. The east German employment rate is no longer the major problem. The major problem it faces is the adjustment to the west German economy and to the process of the west European economy.

I suspect that in five or 10 years' time, the 80 million-strong Germany will be a powerful, united economy. No other former Warsaw pact or former COMECON country is in anywhere near the same shape, despite the fact that they have not had the serious problems with which the German economy has had to deal.

The basic position of that German economy is far stronger than the British economy. If we had had to take 5 million or 6 million people from Hong Kong and had had to deal with unification with a backward economy which had been run down over many years, the British economy would not have been able to cope. The Germans are having great difficulty, but I have no doubt that, in future, they will emerge in a much better position than Britain, France or any other west European country could possibly have managed.

Mr. Duncan Smith

Will the hon. Gentleman give way?

Mr. Gapes

In a moment, but not now. It is a myth to say—

Mr. Duncan Smith

Will the hon. Gentleman give way?

Mr. Gapes

No, not yet. The hon. Gentleman may be my neighbour, but I am not giving way.

It is a myth to say that the German economy is falling apart and that it is in terrible trouble. It has difficulties with unification, but it is coming through it.

In 1999, the German economy will be the motor force behind some sort of single European currency. When I spoke a few weeks ago to five Christian Democrat Members of Parliament—from the sister party of the British Conservatives in the European People's party—they told me and my hon. Friend the Member for Gateshead (Ms Quin) that the policies of the British Labour party were much closer to their policies than those of their supposed friends in the Conservative party. [Interruption.] They said that they believed that they could work with us in government, but that they would have great difficulties working with the British Conservatives.

A few days ago, I met some French politicians, led by Giscard D'Estaing, who were meeting members of the Select Committee on Foreign Affairs. They made it clear that the French, including the Gaullists, the socialists and UDF members, saw moves towards economic and monetary union and a single currency as going ahead. That is despite the referendum in France. They attributed the narrowness of that result to the unpopularity of President Mitterrand and the domestic unpopularity of that Government.

If the Dutch are moving that way, if the Germans continue to move that way, and if the French, across the political spectrum and including the Conservative party's supposed allies in the European People's party and the majority of its Gaullist friends, move that way, where is Britain? It is nowhere. It is sitting on the sideline. [HON. MEMBERS: "It is here."] Yes, it may be here but why is it not over there in Europe as well?

I shall conclude—[Interruption.] I shall not conclude, but I shall make two more points.

The British Conservative party is in a complete shambles. To preserve the pretence of unity, it has a drafting committee for a European election manifesto; it brings forward the sublime and the ridiculous and puts them on the same committee. It will be interesting to see what kind of manifesto the committee comes up with. Will it be the same manifesto as that of the European People's party—a manifesto that talks about federalism and a single currency? Will the British Conservatives be able to launch their European campaign saying proudly, "We and our European partners all agree on these objectives"? We must wait and see.

We in the Labour party know that, with our allies and partners in the party of European socialists and with those in many of the Christian Democrat parties in Europe who also believe in jobs, investment, social justice and the social chapter, we will be able to create the kind of Europe that provides employment and social justice for our people and for the people of the rest of Europe and contributes to peace, security and justice in the world.

12.15 am

Mr. John Biffen (Shropshire, North)

I congratulate the hon. Member for Ilford, South (Mr. Gapes) most warmly. He gave us a superb exposition of the Labour's future view of the Community. I was grateful to the hon. Gentleman for conveying to us fraternal greetings from the European People's party—although a little disconcerted that the Foreign Secretary left his place on the Front Bench shortly afterwards.

The hon. Gentleman has focused sharply on a philosophical divide. It is a genuine divide, and it is an irritating divide, because it does not follow the normal fault lines of party politics. Conservative Members had the opportunity to study the faces of the hon. Gentleman's hon. Friends as he made his speech, and they did not give the impression of unanimous glee.

Mr. Radice

I did.

Mr. Biffen

Of course, I almost felt that my hon. Friend.—I say hon. Friend because he is my pair—was the author of this advanced document of Euro-socialism.

One one side of the divide, which is a genuine one, are those who think of politics as a mechanical process and who are attracted by the whole proposal of convergence, because they see it following what is to them unmistakeably a predetermined path—albeit not in iron terms—with all the resources of Government being dedicated to making it come about. On the other side are those who are, by contrast, evolutionary in their approach to political problems and above all to European problems, who, by their lights, are no less communautaire than their opponents.

I think that I take a more Tory view of life. These are great ambitions, and they are ambitions much more realistically undertaken without any clear view of the timing of the objectives. One is perfectly entitled also to ask whether the objectives of uniformity and convergence are a proven success. There is a case to be made for European economies with a degree of diversity. At times, when one is coming out of a recession, a strong economy often helps by being a lead economy. I adopt a neutral approach to that question, therefore.

I do, however, observe that the European Community is an intensely diverse organisation. The nation states of Europe have a profound history, which is stronger than economics, and that diversity will be intensified by the enlargement of the Community to which hon. Members on both sides of the House are committed.

Let me come to what is perhaps a more pedestrian view. The present view—the Delors view and the view of that great roll call of political parties to which the hon. Member for Ilford, South subjected us, which I respect as part of a dirigiste tradition that is well established on the continent—is that convergence is something to be brought about by Government involvement, which cannot be left to itself to happen; that is a rather sort of Gladstonian liberal view no longer shared by the hon. Member for Inverness, Nairn and Lochaber (Sir R. Johnston), but still held in affection by myself.

The European Commission looks at the situation and asks who will provide the resources to give real impetus to the process on the time scale of convergence. Recently, the general view was that it would be the Federal Republic of Germany. We can only observe that the federal republic—the united Germany—is in immense difficulty.

I say that without any trace of satisfaction. A Germany in turmoil is a danger for Europe. If we look at the priorities that confront German domestic politicians today, will German resources be used in the Mediterranean or to the east. Those resources must go to the east partly because there are economic opportunities there, but, above all, the political situation there is so fragile that that must be the first call on German interests.

What will happen? There will be a redistribution of the obligation and the privilege to help to finance this great politically contrived enterprise. We shall move more into the role of a contributor. The hon. Member for Wentworth (Mr. Hardy) spoke warmly about the advantage that he hoped his constituency would get from this system. That is what we all hope and believe. However, the likelihood of Britain being a recipient of largesse from Greece or Portugal can be put to one side.

I shall conclude on this point. It is a technical point, but it runs to the heart of the difference. It is one of measurement. If politicians are given access to resources, the ability to measure equitably so that the judgment will be respected by the population at large is crucial.

There is no prospect of resources in western Europe being equitably assessed and managed. We view the statistical basis on which we work with some unease. Certainly, Sir Claus Moser, who is possibly in a position to make these judgments, has his anxieties about the quality of our statistics. But we should think of Greek and Portuguese statistics and those that will greet us from the east.

If we look at the protocol governing these matters in the Community documents, we see that the Commission will be charged with putting together the information on which decisions will be taken. One cannot go to the European people, who will justifiably be uneasy, on the basis of central allocations, basically because they do not trust other people's figures. It may seem a modest and technical point in this Chamber, but hon. Members should listen to the litany of disbelief in their constitutions about the equitable way in which Community resources are being distributed.

If we go down this semi-mechanical route, we will be storing immense trouble if there cannot be as much evident justice about European budgeting as there is about national budgeting. It is against that background that one could well have a growing disillusion, which, far from fostering European partnership, will do the reverse.

12.23 am

Mr. William Cash (Stafford)

Following that speech will be difficult. My right hon. Friend the Member for Shropshire, North (Mr. Biffen) referred to the precise point that Labour Members have completely missed—that the convergence criteria are deflationary; they are intended to be deflationary, and therefore will increase unemployment. It is no consolation to hon. Members on both sides of the House to know that the level of unemployment in Europe has risen to 17 million. The European Commission admitted last August that economic and monetary union is bound to increase unemployment significantly throughout Europe. Why on earth should we go through the charade of a debate such as this on the convergence criteria when everybody knows that they cannot work, and that they must not be allowed to work? It escapes me completely.

As I pointed out earlier, the statistics themselves are riddled with holes. They do not include eastern Germany as part of the statistical base for the convergence criteria as devised.

Mr. Andrew Smith

The hon. Gentleman is evidently opposed to the convergence process, and convinced that the figures are deeply flawed. He and his hon. Friends have made strong arguments that Britain should not be taking part. Will he take the opportunity tonight not to collaborate with the submission of the information, by not voting for the Government motion?

Mr. Cash

I have made it perfectly clear to the Whip that I have not the slightest intention of voting for the motion. I would not dream of doing so. I think that it is absolute rubbish, and the House should not pay the slightest attention to this ridiculous report.

I will go further. I was deeply concerned to hear the speech made by my right hon. Friend the Foreign Secretary at Johns Hopkins university on 29 November last year. My right hon. Friend stated that, whatever one's view on the steps to be taken after stage 2 of economic and monetary union, everyone was agreed on the importance of better economic co-ordination and greater convergence in the European economies.

The plain fact is that it is not going to work, and it will induce unemployment. I will simply conclude on this point: what satisfaction can it give the people of this country to engage in a policy which is guaranteed to throw our people out of jobs?

12.27 am

Mr. Dorrell

It is always a pleasure to listen to my hon. Friend the Member for Stafford (Mr. Cash). The problem for the House this evening is the one to which I drew attention in my opening remarks. The motion asks the House to approve again a document that it has approved many times before, and to approve the contents of the Red Book because of a clause that was written into the European Communities (Amendment) Act 1993, which dealt with the Maastricht treaty.

The question for the House was whether we should endorse the contents of the Red Book. The hon. Member for Oxford, East (Mr. Smith) sought to address that question in his speech, but, as my hon. Friend the member for Colchester, North (Mr. Jenkin) rightly said, the result was a boring rant and familiar claptrap.

The hon. Gentleman alleged that the plan set out in the Budget presented no prospects of growth, jobs or improving living standards. He was apparently blind to the fact that unemployment has fallen during the past 12 months, and that the growth rate during the same period has been 2 per cent. There are clear prospects of growth being sustained. That is the view not just of the Government, but of almost all independent commentators.

Mr. Jenkin

Does my hon. Friend also accept that the improvement in our economic performance has come about by our diverging from our European partners on a number of key measures, not least the exchange rate?

Mr. Dorrell

One of the key thinks which has been made possible the economic recovery, and which will continue to underwrite it, is the fact that we have inflation under better control in Britain today than for 25 years. The choice which the Government made to insist on facing down the inflationary pressures which were present in the British economy at the end of the 1980s was one of the key factors which has made recovery possible. I did agree with my hon. Friend's characterisation of the speech of the hon. Member for Oxford, East.

The House then had a real treat from the hon. Member for Ilford, South (Mr. Gapes), who displayed a hitherto unsuspected skill in the art of dispassionate and forensic analysis of the position in which the different countries of Europe have found themselves. He offered us, I suspect, the speech of a graduate of the Prescott school of rhetoric. The whole House enjoyed his speech, even if we were, with great respect to him, not much the wiser when he sat down.

On the other hand, the majority of my hon. Friends who spoke recognised a sterile debate when they saw one. They understood that the House had already approved the document several times. There is not a great deal of point in reciting yet again familiar arguments from the two sides of the House. That is why I so much welcomed the speech of my right hon. Friend the Member for Shropshire, North (Mr. Biffen). He presented a view around which all Conservative Members can unite—the proposition that the proper way in which to see institutions and policies develop is to insist on an evolutionary approach to politics.

The view expressed by my right hon. Friend was one of the key arguments that I advanced in the speech which the hon. Member for Oxford, East (Mr. Smith) was kind enough to quote in extenso. It was the reason why my right hon. Friend the Prime Minister insisted at Maastricht that we should not sign up to an artificial timetable for economic and monetary union, and that if, at any stage in the future, we chose to join a European single currency, that was a decision that should be made at the time when it was to be put into effect, based on the circumstances prevailing at that time.

I suggest to my right hon. Friend the Member for Shropshire, North that that corresponds precisely with the evolutionary approach to such problems that he says—I agree with him—we should adopt.

My right hon. Friend also stressed—again, I agree with him—that, in deciding whether we should proceed with a particular form of evolution, we should take account of what Alan Clark would describe as the actualite. Part of that actualitd in the evolution of European politics, as my right hon. Friend rightly said, is the current position in the German economy which is the result of reunification.

Another thing that he might have mentioned, but did not, is the result of the possible enlargement of the Community. All those factors should be taken into account in the way in which the Community evolves. That is precisely why my right hon. Friend the Prime Minister insisted at Maastricht that we should not commit ourselves to a long-term plan for the Community which built in no flexibility to allow it to react to events as they evolved.

Mr. Andrew Smith

Will the Financial Secretary confirm that, under the provisions of the Maastricht treaty and the European Communities (Amendment) Act 1993, the Government are obliged to notify the Community that they do not intend to proceed to stage 3 before the Community proceeds to stage 3? Have the Goverment yet given notification that they do not intend to move to stage 3? If not, when does the Financial Secretary anticipate that it will be communicated to the Community?

Mr. Dorrell

No communication of that nature has yet been given to the Community. If it is given, it will be given at the time—

Mr. Smith

If.

Mr. Dorrell

As we have made clear from the beginning, we are anxious to keep the option open, observing precisely the principle that my right hon. Friend the Member for Shropshire, North expounded.

Therefore, the basis exists on which every Conservative Member can proceed in unity. It was set out by my right hon. Friend the Member for Shropshire, North, and it was endorsed by my hon. Friend the Member for Colchester, North when he referred to the article written by my right hon. Friend the Prime Minister in The Economist, which advanced a imilar approach to the problem. That is the basis on which we shall approach the future of European economic and monetary questions.

The question for the House this evening is whether the Government's plans set out in the document represent a proper way to proceed to deliver economic recovery and improving living standards. The Government's view, as the House well knows, is that sustainable, non-inflationary growth requires us to observe key disciplines of sound money and sound public finance. We do that primarily and principally because that is the only way in which to deliver the improving living standards that are the shared ambition of every member of the Conservative party. It is on that basis that I commend the contents of the Red Book to the House and ask its support for the motion before us.

Question put:—

The House divided: Ayes 294, Noes 239.

Division No. 117]	[12.35 am
AYES
Ainsworth, Peter (East Surrey)	Dorrell, Stephen
Aitken, Jonathan	Douglas-Hamilton, Lord James
Alexander, Richard	Dover, Den
Alison, Rt Hon Michael (Selby)	Duncan, Alan
Allason, Rupert (Torbay)	Duncan-Smith, Iain
Amess, David	Dunn, Bob
Arbuthnot, James	Durant, Sir Anthony
Arnold, Jacques (Gravesham)	Dykes, Hugh
Arnold, Sir Thomas (Hazel Grv)	Eggar, Tim
Ashby, David	Elletson, Harold
Aspinwall, Jack	Evans, David (Welwyn Hatfield)
Atkins, Robert	Evans, Jonathan (Brecon)
Atkinson, David (Bour'mouth E)	Evans, Nigel (Ribble Valley)
Atkinson, Peter (Hexham)	Evans, Roger (Monmouth)
Baker, Rt Hon K. (Mole Valley)	Evennett, David
Baker, Nicholas (Dorset North)	Faber, David
Baldry, Tony	Fabricant, Michael
Banks, Matthew (Southport)	Fenner, Dame Peggy
Banks, Robert (Harrogate)	Field, Barry (Isle of Wight)
Bates, Michael	Fishburn, Dudley
Batiste, Spencer	Forsyth, Michael (Stirling)
Bellingham, Henry	Forth, Eric
Bendall, Vivian	Foster, Don (Bath)
Beresford, Sir Paul	Fox, Dr Liam (Woodspring)
Biffen, Rt Hon John	Freeman, Rt Hon Roger
Blackburn, Dr John G.	French, Douglas
Bonsor, Sir Nicholas	Fry, Sir Peter
Booth, Hartley	Gale, Roger
Bosweil, Tim	Gallie, Phil
Bottomley, Peter (Eltham)	Gardiner, Sir George
Bottomley, Rt Hon Virginia	Garel-Jones, Rt Hon Tristan
Bowden, Andrew	Garnier, Edward
Bowis, John	Gillan, Cheryl
Boyson, Rt Hon Sir Rhodes	Goodson-Wickes, Dr Charles
Brandreth, Gyles	Gorman, Mrs Teresa
Brazier, Julian	Gorst, John
Bright, Graham	Grant, Sir A. (Cambs SW)
Brooke, Rt Hon Peter	Greenway, Harry (Ealing N)
Brown, M. (Brigg &Cl'thorpes)	Greenway, John (Ryedale)
Browning, Mrs. Angela	Grylls, Sir Michael
Bruce, Ian (S Dorset)	Hague, William
Bruce, Malcolm (Gordon)	Hamilton, Rt Hon Sir Archie
Budgen, Nicholas	Hamilton, Neil (Tatton)
Burns, Simon	Hampson, Dr Keith
Burt, Alistair	Hanley, Jeremy
Butcher, John	Hannam, Sir John
Butler, Peter	Hargreaves, Andrew
Butterfill, John	Harris, David
Carlisle, Kenneth (Lincoln)	Haselhurst, Alan
Carrington, Matthew	Hawkins, Nick
Channon, Rt Hon Paul	Hayes, Jerry
Churchill, Mr	Heald, Oliver
Clappison, James	Heathcoat-Amory, David
Clarke, Rt Hon Kenneth (Ruclif)	Hendry, Charles
Clifton-Brown, Geoffrey	Hicks, Robert
Coe, Sebastian	Higgins, Rt Hon Sir Terence L.
Colvin, Michael	Hill, James (Southampton Test)
Congdon, David	Hogg, Rt Hon Douglas (G'tham)
Conway, Derek	Horam, John
Coombs, Anthony (Wyre For'st)	Hordern, Rt Hon Sir Peter
Coombs, Simon (Swindon)	Howard, Rt Hon Michael
Cope, Rt Hon Sir John	Howarth, Alan (Strat'rd-on-A)
Couchman, James	Howell, Sir Ralph (N Norfolk)
Currie, Mrs Edwina (S D'by'ire)	Hughes Robert G. (Harrow W)
Curry, David (Skipton &Ripon)	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)

Jenkin, Bernard	Richards, Rod
Jessel, Toby	Riddick, Graham
Johnson Smith, Sir Geoffrey	Rifkind, Rt Hon. Malcolm
Johnston, Sir Russell	Robathan, Andrew
Jones, Gwilym (Cardiff N)	Roberts, Rt Hon Sir Wyn
Jones, Nigel (Cheltenham)	Robertson, Raymond (Ab'd'n S)
Jones, Robert B. (W Hertfdshr)	Roe, Mrs Marion (Broxbourne)
Jopling, Rt Hon Michael	Rowe, Andrew (Mid Kent)
Kellett-Bowman, Dame Elaine	Ryder, Rt Hon Richard
Kennedy, Charles (Ross,C&S)	Sackville, Tom
Key, Robert	Sainsbury, Rt Hon Tim
King, Rt Hon Tom	Scott, Rt Hon Nicholas
Kirkhope, Timothy	Shaw, David (Dover)
Knight, Mrs Angela (Erewash)	Shaw, Sir Giles (Pudsey)
Knight, Greg (Derby N)	Shephard, Rt Hon Gillian
Knight, Dame Jill (Bir'm E'st'n)	Shepherd, Colin (Hereford)
Knox, Sir David	Shersby, Michael
Kynoch, George (Kincardine)	Sims, Roger
Lait, Mrs Jacqui	Smith, Sir Dudley (Warwick)
Lang, Rt Hon Ian	Smith, Tim (Beaconsfield)
Lawrence, Sir Ivan	Soames, Nicholas
Legg, Barry	Speed, Sir Keith
Leigh, Edward	Spicer, Michael (S Worcs)
Lennox-Boyd, Mark	Spink, Dr Robert
Lester, Jim (Broxtowe)	Spring, Richard
Lidington, David	Sproat, Iain
Lightbown, David	Squire, Robin (Hornchurch)
Lloyd, Rt Hon Peter (Fareham)	Stanley, Rt Hon Sir John
Lord, Michael	Steen, Anthony
Luff, Peter	Stephen, Michael
Lyell, Rt Hon Sir Nicholas	Stern, Michael
MacGregor, Rt Hon John	Stewart, Allan
MacKay, Andrew	Streeter, Gary
Maclean, David	Sumberg, David
McLoughlin, Patrick	Sweeney, Walter
McNair-Wilson, Sir Patrick	Sykes, John
Madel, Sir David	Taylor, Ian (Esher)
Maitland, Lady Olga	Taylor, John M. (Solihull)
Malone, Gerald	Taylor, Sir Teddy (Southend, E)
Mans, Keith	Temple-Morris, Peter
Marland, Paul	Thomason, Roy
Marshall, John (Hendon S)	Thompson, Sir Donald (C'er V)
Martin, David (Portsmouth S)	Thompson, Patrick (Norwich N)
Mates, Michael	Thornton, Sir Malcolm
Mawhinney, Rt Hon Dr Brian	Thurnham, Peter
Mellor, Rt Hon David	Townend, John (Bridlington)
Merchant, Piers	Townsend, Cyril D. (Bexl'yh'th)
Mills, Iain	Tracey, Richard
Mitchell, Andrew (Gedling)	Tredinnick, David
Mitchell, Sir David (Hants NW)	Trend, Michael
Monro, Sir Hector	Trotter, Neville
Montgomery, Sir Fergus	Twinn, Dr Ian
Moss, Malcolm	Vaughan, Sir Gerard
Needham, Richard	Viggers, Peter
Nelson, Anthony	Waldegrave, Rt Hon William
Neubert, Sir Michael	Walden, George
Newton, Rt Hon Tony	Walker, Bill (N Tayside)
Nicholls, Patrick	Wallace, James
Nicholson, David (Taunton)	Waller, Gary
Nicholson, Emma (Devon West)	Ward, John
Norris, Steve	Wardle, Charles (Bexhill)
Onslow, Rt Hon Sir Cranley	Waterson, Nigel
Oppenheim, Phillip	Watts, John
Ottaway, Richard	Wells, Bowen
Page, Richard	Whitney, Ray
Paice, James	Whittingdale, John
Patten, Rt Hon John	Widdecombe, Ann
Pattie, Rt Hon Sir Geoffrey	Wiggin, Sir Jerry
Pawsey, James	Willetts, David
Peacock, Mrs Elizabeth	Wilshire, David
Pickles, Eric	Wolfson, Mark
Porter, Barry (Wirral S)	Wood, Timothy
Portillo, Rt Hon Michael	Yeo, Tim
Powell, William (Corby)	Young, Rt Hon Sir George
Rathbone, Tim
Redwood, Rt Hon John	Tellers for the Ayes:
Rendel, David	Mr. Sydney Chapman and Mr. Irvine Patnick.
Renton, Rt Hon Tim

NOES
Abbott, Ms Diane	Fraser, John
Adams, Mrs Irene	Fyfe, Maria
Ainger, Nick	Galloway, George
Ainsworth, Robert (Cov'try NE)	Gapes, Mike
Allen, Graham	Garrett, John
Anderson, Donald (Swansea E)	George, Bruce
Anderson, Ms Janet (Ros'dale)	Gerrard, Neil
Armstrong, Hilary	Godman, Dr Norman A.
Austin-Walker, John	Godsiff, Roger
Banks, Tony (Newham NW)	Golding, Mrs Llin
Barnes, Harry	Gordon, Mildred
Barron, Kevin	Graham, Thomas
Battle, John	Grant, Bernie (Tottenham)
Bayley, Hugh	Griffiths, Nigel (Edinburgh S)
Beckett, Rt Hon Margaret	Griffiths, Win (Bridgend)
Bell, Stuart	Grocott, Bruce
Benn, Rt Hon Tony	Gunnell, John
Bennett, Andrew F.	Hain, Peter
Benton, Joe	Hall, Mike
Bermingham, Gerald	Hanson, David
Berry, Dr. Roger	Hardy, Peter
Betts, Clive	Harman, Ms Harriet
Boateng, Paul	Henderson, Doug
Boyes, Roland	Heppell, John
Bradley, Keith	Hill, Keith (Streatham)
Brown, Gordon (Dunfermline E)	Hinchliffe, David
Brown, N. (N'c'tle upon Tyne E)	Hoey, Kate
Burden, Richard	Home Robertson, John
Byers, Stephen	Hood, Jimmy
Caborn, Richard	Hoon, Geoffrey
Callaghan, Jim	Howarth, George (Knowsley N)
Campbell, Mrs Anne (C'bridge)	Howells, Dr. Kim (Pontypridd)
Campbell-Savours, D. N.	Hoyle, Doug
Canavan, Dennis	Hughes, Kevin (Doncaster N)
Cann, Jamie	Hughes, Roy (Newport E)
Chisholm, Malcolm	Hutton, John
Clapham, Michael	Ingram, Adam
Clark, Dr David (South Shields)	Jackson, Glenda (H'stead)
Clarke, Eric (Midlothian)	Jackson, Helen (Shef'ld, H)
Clelland, David	Jamieson, David
Clwyd, Mrs Ann	Jones, Barry (Alyn and D'side)
Coffey, Ann	Jones, leuan Wyn (Ynys Môn)
Cohen, Harry	Jones, Jon Owen (Cardiff C)
Connarty, Michael	Jones, Lynne (B'ham S O)
Cook, Frank (Stockton N)	Jones, Martyn (Clwyd, SW)
Cook, Robin (Livingston)	Jowell, Tessa
Corbett, Robin	Kaufman, Rt Hon Gerald
Corbyn, Jeremy	Keen, Alan
Corston, Ms Jean	Kennedy, Jane (Lpool Brdgn)
Cousins, Jim	Khabra, Piara S.
Cox, Tom	Kilfoyle, Peter
Cryer, Bob	Kinnock, Rt Hon Neil (Islwyn)
Cummings, John	Leighton, Ron
Cunliffe, Lawrence	Lewis, Terry
Cunningham, Jim (Covy SE)	Litherland, Robert
Cunningham, Rt Hon Dr John	Livingstone, Ken
Dalyell, Tam	Lloyd, Tony (Stretford)
Darling, Alistair	Llwyd, Elfyn
Davidson, Ian	Loyden, Eddie
Davies, Rt Hon Denzil (Llanelli)	McAllion, John
Davies, Ron (Caerphilly)	McAvoy, Thomas
Davis, Terry (B'ham, H'dge H'I)	McCartney, Ian
Denham, John	Macdonald, Calum
Dewar, Donald	McFall, John
Dixon, Don	McKelvey, William
Dobson, Frank	Mackinlay, Andrew
Donohoe, Brian H.	McLeish, Henry
Dowd, Jim	McMaster, Gordon
Eagle, Ms Angela	McNamara, Kevin
Eastham, Ken	McWilliam, John
Enright, Derek	Madden, Max
Etherington, Bill	Mahon, Alice
Evans, John (St Helens N)	Mandelson, Peter
Fatchett, Derek	Marek, Dr John
Faulds, Andrew	Marshall, David (Shettleston)
Fisher, Mark	Marshall, Jim (Leicester, S)
Flynn, Paul	Martin, Michael J. (Springburn)
Foster, Rt Hon Derek	Martlew, Eric
Foulkes, George	Maxton, John

Meacher, Michael	Ross, Ernie (Dundee W)
Michael, Alun	Rowlands, Ted
Michie, Bill (Sheffield Heeley)	Ruddock, Joan
Milburn, Alan	Sedgemore, Brian
Miller, Andrew	Sheerman, Barry
Moonie, Dr Lewis	Sheldon, Rt Hon Robert
Morgan, Rhodri	Short, Clare
Morley, Elliot	Simpson, Alan
Morris, Rt Hon A. (Wy'nshawe)	Skinner, Dennis
Morris, Estelle (B'ham Yardley)	Smith, Andrew (Oxford E)
Mowlam, Marjorie	Smith, C. (Isl'ton S & F'sbury)
Mudie, George	Smith, Llew (Blaenau Gwent)
Mullin, Chris	Soley, Clive
Murphy, Paul	Spearing, Nigel
O'Brien, Michael (N W'kshire)	Spellar, John
O'Brien, William (Normanton)	Steinberg, Gerry
O'Hara, Edward	Stevenson, George
Olner, William	Stott, Roger
O'Neill, Martin	Strang, Dr. Gavin
Orme, Rt Hon Stanley	Straw, Jack
Parry, Robert	Taylor, Mrs Ann (Dewsbury)
Patchett, Terry	Tipping, Paddy
Pendry, Tom	Turner, Dennis
Pickthall, Colin	Vaz, Keith
Pike, Peter L.	Walker, Rt Hon Sir Harold
Powell, Ray (Ogmore)	Walley, Joan
Prentice, Ms Bridget (Lew'm E)	Wardell, Gareth (Gower)
Prentice, Gordon (Pendle)	Wareing, Robert N
Prescott, John	Watson, Mike
Primarolo, Dawn	Wicks, Malcolm
Purchase, Ken	Williams, Rt Hon Alan (Sw'n W)
Quin, Ms Joyce	Williams, Alan W (Carmarthen)
Radice, Giles	Wilson, Brian
Randall, Stuart	Winnick, David
Raynsford, Nick	Wise, Audrey
Redmond, Martin	Wray, Jimmy
Reid, Dr John	Wright, Dr Tony
Robertson, George (Hamilton)	Young, David (Bolton SE)
Robinson, Geoffrey (Co'try NW)
Roche, Mrs. Barbara	Tellers for the Noes:
Rogers, Allan	Mr. Eric Illsley and Mr. Alan Meale.
Rooker, Jeff
Rooney, Terry

Question accordingly agreed to.

Resolved. That this House approves the Government's assessment as set out in section 2,4 and 5 of the Financial Statement and Budget Report for the purposes of section 5 of the European Communities (Amendment) Act 1993.