Commons Sitting of 11 December 1996

Preamble
The House met at half-past Nine o'clock
PRAYERS
[MADAM SPEAKER in the Chair]

Unfunded Pension Liabilities (European Union)
[Relevant document: The First Report from the Social Security Committee of Session 1996–97, on Unfunded Pension Liabilities in the European Union (HC 23).]
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Wells.]
9.34 am
Mr. Frank Field: I am grateful to you, Madam Speaker, for the opportunity that the House has of taking note of the report that the Select Committee on Social Security published a few weeks ago on unfunded pension liabilities in Europe.
Before I introduce the House to the ideas in the report, I shall make a few prefatory remarks. The first is that it is now clear that it is difficult for anyone to contribute to issues relating to Europe and expect a sensible response from some colleagues.
The report was made unanimously by the Select Committee, whose members comprise people who are sceptical about Europe and people who are pro-Europe. On this particular occasion—it is not always so—everyone came to the Committee wishing to strengthen the report rather than wreck or undermine it. It was published and issued to the House because we thought that this was a national issue in which we had an advantage over the rest of Europe, and we were motivated by a love of our country rather than by any more basic partisan motives stemming from being pro-Europe or anti-Europe.
Both those in the House who oppose Europe and those who are pro-Europe managed to seize on the report and talk about it when it was clear that neither faction had actually read it. That is a great pity, because I think that it is the shortest report that we have published.
We are aware that we move in dangerous times when we discuss dispassionately anything about Europe. But those were my motives in wishing to publish the report to the House. It was a natural feeling about one's affections for one's country; not wishing to see a real advantage be unnecessarily lost. We do not think that putting the interests of one's country first makes one a bad European. Some of us deeply resent those who argue that if one raises anything that is pro-British, one must be anti-European.
Dame Elaine Kellett-Bowman: Does the hon. Gentleman agree that, in years to come, British pensioners will be far and away the best protected
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pensioners in Europe, far ahead of the French and Germans, who are having such difficulty in funding their pensions?
Mr. Field: The Committee's approach was that, while one would expect the House to divide on party lines with regard to how well placed all British pensioners are, it is difficult to deny the fact that some British pensioners are now well placed because of the funded pension schemes that are in operation. We also took the view that, as other countries try to make adjustments so that their social security liabilities are ones that taxpayers will meet in future, people across Europe are taking to the streets to try to prevent their Governments making those adjustments.
I shall come to that in a moment, because one of our concerns is how our position may be adversely affected by Governments who cannot make the changes that they may need to make through the normal democratic process, because other ways are open to them if their electorate block them on the streets. I am grateful to the hon. Lady for that intervention.
This is not a report about funded pensions. It would be possible for the Select Committee—and we may wish to do this—to consider how a single currency could both advantageously and disadvantageously affect the extent of funded pension schemes in Britain. Yesterday evening, the National Association of Pension Funds issued a briefing on the issue to hon. Members. I am not, however, concerned with that in this debate, which is about Britain's peculiar position of having more funded pension liabilities than the whole of Europe put together.
I am glad to see the hon. Member for Stamford and Spalding (Mr. Davies). Given his facile comments about the Select Committee's report, I could not believe that he had read it.
Mr. Paul Flynn: I speak as someone who has read the report. Does my hon. Friend not believe that it is weakened by this statement in paragraph 10:
"The only sustainable long term solution is to build up the level of personal funded pensions"?
Is it not true that, uncharacteristically for my hon. Friend, the report seems to have been presented by a Committee with a closed mind?
Mr. Field: I suppose that, in one way, the Committee did have a closed mind, in that we did not believe that the politics of the 1970s, which my hon. Friend promotes, are sustainable. If I were considering the issue in the early 1970s, I would probably go down his road and say that we could introduce something such as the state earnings-related pension scheme, which could be sustainable. The plain fact is that we now have—certainly on the Government Benches and to some extent on the Labour Benches—agreement that that approach is not sustainable. It is a deceit, therefore, to say to the electorate that we can guarantee, via a state scheme, a pension level that clearly one and perhaps both major parties in the House do not believe is sustainable.
The only way in which we can guarantee the viability of such an approach and that it will not cheat future pensioners, is either to win every future election—and we have had some difficulty in winning the past four or so elections—or to abolish elections. Otherwise, there is no

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guarantee that a future Government will not undo what we might wish to have in a state earnings-related pension scheme.
When we compare like with like, we must be careful not to have a closed mind to attacking funded schemes because, as a result of action by Treasury Ministers, the pensions of people in SERPS have been halved and their pension expectations halved again. We did not have a closed mind, therefore, in suggesting that taking the state option is not a viable or sustainable possibility. We have a closed mind only to the extent that we do not believe that we should shut out what happened in the 1980s, when the consensus between the two parties for a state approach disappeared.
We further believe, with our closed mind, that the only way in which we can stop future Governments disrupting people's pension expectations is for those people to own their own capital, so that, if future Governments try that, they will be treated severely at the ballot box. In one way, therefore, my hon. Friend the Member for Newport, West (Mr. Flynn) is right. We have a closed mind. We have a closed mind to the state option, which the Committee does not believe is viable.
If we were having the debate in the early 1970s, I would probably be putting out the line that Barbara Castle and her cohorts then put out and continue to put out, although I now believe that to be dangerous nonsense.
Mr. Flynn: It is suggested not that SERPS should continue in its present form, but that it should be in a new form that will be independent and funded, which will invest some of its funds on the stock exchange, and where the money will be linked to the person paying in. I am sure that it is not beyond the wit of the next Government to devise a scheme that can survive possible Governments of a different colour. If we can sell the idea of SERPS as a good-value pension, it can continue and be unassailable to political change.
Mr. Field: My hon. Friend gives the game away because he says "funded". That is the very antithesis of what SERPS is—a pay-as-you-go scheme, where Governments of both parties have only too willingly pushed pension liabilities into the future for future taxpayers to meet. That is the reason why the report was published: to draw attention to the relative strength of the British position vis-à-vis Europe.
I am grateful to my hon. Friend for the line that he is beginning to take, but five years or more ago, there was not much support for my proposal to give people in the national insurance scheme stakeholder rights. I now believe that the debate has moved on so quickly that no one in his right mind thinks that it is safe to leave his pension funds with the state as guardian. We hear lots of talk about how dangerous it is, about Maxwell and so on, but the Maxwell theft pales into insignificance compared with what the Government have done to SERPS. They have halved it and halved it again. I am pleased therefore that my hon. Friend is talking about funded schemes; even in his constituency and even with his leadership on the issue, his electorate will not choose an option whereby we allow the Government to get their sticky fingers on our funds.
Mr. Andrew Rowe: The hon. Gentleman has, I am sure, been approached by Maurice Oldfield of
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the Pre Retirement Association, which, anxious about the unscrupulous selling of private pension schemes, has tried to evolve a system whereby, as in the National Savings system, there is some state involvement in the creation of such funded private schemes. Would the hon. Gentleman care to say anything about that?
Mr. Field: When I reintroduce a Bill for National Savings pension schemes run through the Post Office, I must approach the hon. Gentleman for a bi-partisan report on that. I do not claim that it is a new idea. Mr. Gladstone introduced the proposal, which some powerful insurance companies managed to destroy, so I do not underestimate the power of the market when it feels that it is challenged. What I am in a sense disappointed about in relation to the intervention of my hon. Friend the Member for Newport, West is that we could have agreed because, although we are talking about success here—the hon. Member for Lancaster (Dame E. Kellett-Bowman) raised the point that some pensioners are in an advantageous position—we have far too many very poor pensioners. Another Select Committee report will consider how one might deal with spreading the success that many pensioners experience to all pensioners. There I am in total agreement with my hon. Friend.
The nature of the report is simple. We have considered the extraordinary position that Great Britain is in, having more funded pension assets to meet future liabilities than the whole of Europe put together. We were concerned about how, within a new single currency arrangement, that position might be undermined. We found three possible ways in which that might occur.
First, if Governments find it difficult to balance their budgets to allow for adjustments, perhaps because of violence on the streets, they may seek to raise money by issuing bonds. We know perfectly well that Governments make those bonds more attractive by raising interest rates. Britain would not have to do that as we do not face the same unfunded liabilities as other countries, but we might be affected by higher interest rates abroad. Even if we did not join a single currency, the British economy would not be immune to the trend in interest rates elsewhere. It is not a simple matter. The single currency will affect us directly or indirectly.
Secondly, Governments can opt for what was historically considered to be the easy option. When they are faced with liabilities that they cannot meet, they can print money. We can assume that that will not happen through the new European central bank. However, the chairman of the Bundesbank has expressed his anxiety in that respect. He is fearful that when he has to share responsibility for issuing the currency affecting Germany with bankers from other countries who may take a different line on inflation—often for the simple reason that those countries have not suffered the same terrible history of inflation—the decisions will not be as strong as those taken by the Bundesbank to ensure that the currency is not devalued by printing money.
Thirdly, Britain may be asked to share the cost of other countries being less careful about meeting future pension liabilities. It was not mentioned in the report, so I mention it now. The European Community is not static. It is rightly an evolving organisation. It is quite possible that, in future, countries will acknowledge publicly what they have clearly acknowledged privately—that they have serious financial problems in meeting future pension

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liabilities—and declare it to be a new European issue that requires a European strategy. Although that would be good for many of our European colleagues, it would not be a sensible approach for Britain to take, as we might have to carry some of the costs.
Mr. Tim Rathbone: The hon. Gentleman has raised an important point. Does he accept that each member country of the European Union is protected from any requirement to meet the national debts of other countries? Britain or any other country, therefore, would be protected should another country experience the difficulties that he has just described.
Mr. Field: Article 104 of the Maastricht treaty covers that eventuality. My concern is that the convergence criteria for the single currency are inadequate. They take into account only the smallest part of public debt and exclude the largest part. As a result, Britain may end up in the extraordinary position of being the only country that could enter the single currency without having fiddled the balance sheet, but we are the most restive about it. The countries that are most keen to enter will be those that have not met even the limited convergence criteria on public debt and have behind the scenes significant public debt that does not come into the present equation. The third and most controversial recommendation of the Select Committee relates directly to the point that the hon. Gentleman made.
Before concluding, let me draw attention to two reports that have been published since the Select Committee report. The first is the briefing by the Institute of Directors on unfunded pension liability. One of the headings in that report is, "The unfunded pensions fudge". It expresses the opinion that we should not consider joining a single currency until we have examined more comprehensively the problem of public debt.
The other report—which one would not expect to be particularly sympathetic to the Select Committee report—is that produced by the Kingsdown Enquiry, which examines all aspects of the single currency much more comprehensively. I draw the attention of the House to the section on pensions and the comments of Professor John Kay. He makes a powerful case for joining a single currency and submits that monetary union would produce not only lower inflation, but more stable inflation rates.
The Select Committee does not attempt to suggest that our report should be the basis of any decision as to whether Britain enters a single currency, but says that it should be part of the debate as to what is in the national interest. Let me quote Professor John Kay. After he had set out the advantages of the single currency,
"The main risk that he saw in monetary union was that the very large government budget liabilities of unfunded state pensions schemes in other European countries could turn out to be a time bomb that would put the stability of the whole system under strain."
The Select Committee made precisely the same point. Given all the fuss that we made, hon. Members might find our conclusion inadequate.
Our conclusion was threefold. First, we recommended that the Government should publish the relevant information in the Red Book, so that we could look comprehensively at our unfunded public sector pension liabilities. Secondly, we recommended that the Government should propose to the Council of Ministers that other countries should publish similar accounts.
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Our third and most controversial recommendation relates to the comments made by the hon. Member for Lewes (Mr. Rathbone). We drew attention to article 104c of the Maastricht treaty and asked whether it would apply if countries' unfunded pension liabilities were destabilising any future single currency. Although I consider that to be a controversial recommendation, it merely asked whether we would be protected by the Maastricht treaty.
I am sorry that I have spent so long introducing a short report. That is partly because of the interest expressed by my hon. Friend the Member for Newport, West and because of our commitments in respect of the poorest pensioners in Britain and how to enable them to share the prosperity enjoyed by an increasing number of pensioners. That prosperity results from our funded pension scheme. I am sure that the House joins me in wishing to spread that success to all pensioners. However, that is not the basis of our report. The Select Committee will be producing a report on that subject, but we find it sensible to limit ourselves to manageable topics rather than taking the whole world as our canvas.
The Select Committee has made a limited contribution to an important debate about whether Britain should enter a single currency. Despite the Chancellor of the Exchequer's enthusiasm immediately to reply to our report by way of a planted question, we know that the Secretary of State for Social Security will reply before the House rises for the Christmas recess. We look forward to hearing the comments of our colleagues, the line taken by my hon. Friend the Member for Southampton, lichen (Mr. Denham) and the Minister's reply to the debate.
9.59 am
Mr. David Shaw: I thank the hon. Member for Birkenhead (Mr. Field) not only for introducing the subject but for its prominence due to the way in which the Select Committee has approached its work under his chairmanship.
I first raised the issue in a written question in 1991 because I began to sense that serious liabilities in Europe were not being included in national accounts; they were being left out. I asked the Treasury not only about unfunded pension liabilities but about the effect of French nuclear reactor decommissioning costs and liabilities which might be incurred in the repair, maintenance and rebuilding of public buildings throughout Europe.
To my way of thinking as an accountant, those categories represent three of the largest potential liabilities of any set of nation states that is contemplating a single currency and—possibly—ultimately putting national accounts together in one form, however loose or tight that form may be, under single currency arrangements. The liabilities could be truly horrendous. The French nuclear reactor decommissioning costs are estimated to be £200 billion. No one has thought how that will be dealt with in the next century when such costs come on line and no one, so far as I am aware, has made any estimate of capital building, repair and maintenance cost liabilities in Europe.
The Treasury considered the question that I asked in 1991 a little eccentric, and did not have any detailed information on the issues. I did not receive a full reply with detailed figures and estimates and it has been very difficult since then to get some figures that the House

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could discuss. In the intervening period, I was pleased that the matter was taken on board elsewhere and that estimates of liabilities were produced by the Organisation for Economic Co-operation and Development, the International Monetary Fund and ABP, the Dutch pensions fund. Some quite respectable organisations in the City are also now producing estimates. Although they range widely because they concern some very broad figures that can change in certain circumstances, a pattern is beginning to emerge.
I drew the pattern to the attention of the House on 5 June at column 573 and I am pleased that, as a result, the hon. Member for Birkenhead ensured that the Social Security Committee investigated the matter. Other members of the Committee and I also visited Brussels to talk to European Commissioners. That was especially significant because we found that the European Commission was about as advanced in its answers in 1996 as the Treasury was to the same questions in 1991. The European Commission was not very advanced in its consideration of the issue and did not welcome the fact that we were asking a series of questions. In many ways, it seemed to prefer not to be asked questions and wanted decisions to be left to the European Commissioners.
Dame Elaine Kellett-Bowman: Does my hon. Friend agree that so often when we are trying to lead the way into uncharted and difficult waters, we are castigated as being the awkward squad, when in fact we are taking a lead and trying to get Europe to behave in very much better ways, such as on pensions, as the hon. Member for Birkenhead (Mr. Field) said?
Mr. Shaw: My hon. Friend is correct. Here we are trying to get a discussion out in the open and trying to show that, as in British democracy, the issue can be tackled in open public debate. Yet the emphasis elsewhere in Europe seems to be on not having open discussion and debate as the British do. In Europe they seem to want to close the discussion down and quietly sort it out in due course if they can, but the horrendous nature of the liabilities makes that impossible. The fundamental point is that just because the liabilities are called unfunded pension liabilities does not mean that they will not become real cash liabilities at some stage in the future. They may not be real cash liabilities tomorrow, but in a few years' time they may be, and by the turn of the millennium they certainly will be.
The IMF has made some substantial estimates. I do not want to quote large chunks of its May 1996 world economic outlook, but I shall refer to one or two relevant passages. For example, it says:
"Future generations of workers will face either much higher tax burdens to maintain such levels of transfers or sharply reduced benefits levels … For the German pension plan's net asset position in 2050 to be the same as the initial net asset position in 1995, for instance, a sustainable contribution rate of 13.7 per cent. will be required each year. Assuming average contribution rates remain unchanged at just 10.3 per cent. of GDP over this period, Germany would appear to face a contribution gap of 3.4 per cent. of GDP."
My hon. Friends will realise the significance of such a gap, given that one of the Maastricht criteria requires member states' annual deficits to be within 3 per cent. of gross domestic product. One item alone—pension liabilities—could blow the German budget right through one of the Maastricht criteria from 2000 or 2004 onwards.
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The IMF report goes on to say:
"Countries such as Japan, Germany and France, however, face contribution gaps of nearly 3.5 per cent. of GDP a year. To avoid a further build up of pension debt over the next 55 years, these countries need either to permanently increase social security tax collections by roughly 3.5 per cent. of GDP or scale back benefits by a similar amount or implement a combination of tax increases and pay-out reductions of this magnitude. In countries like France, and especially Italy, where retirement often takes place at a relatively early age, raising the retirement age to 67 could completely close large contribution gaps".
In France, however, the recent French lorry drivers' blockade was settled not by raising the retirement age to 67 but by lowering it to 55. The French are under social pressures that are causing them to move in the opposite direction from that suggested by the IMF and every sensible economist in the world.
I have made some back-of-an-envelope calculations on what unfunded pension liabilities might mean in pounds. Countries such as France, Germany and Italy might face liabilities in excess of 100 per cent. of their gross domestic product and the total liability in Europe could be as high as £10,000 billion. That is an enormous liability to contemplate. The fact that it is not shown in any of the accounts that have been drawn up for the next two years in order to decide whether countries meet the Maastricht criteria represents one of the biggest fudges ever concerning the single currency. It is horrendous to contemplate such a large item being left out of national accounts and nobody having a sensible debate on it other than in the United Kingdom Parliament.
What does the liability represent? It represents past politicians' promises and weaknesses in countries such as France, Germany and Italy during the 1960s, 1970s and to a certain extent the 1980s. It would appear that even in 1996 France is still making decisions and giving people benefits that will not have to be paid for a few years, but when they are, someone will have to meet the cheque. Many hon. Members' concern is that Britain could end up meeting that cheque despite what the Maastricht treaty says. I shall return to that.
It is worrying that, having established how serious the liabilities are, the European Commission does not seem to want to get to grips with them and there appears never to have been a discussion about their impact either at the Economic and Finance Council or in the European Council. In my view, it should be taken up not only by Finance Ministers throughout Europe, but by Prime Ministers and leaders throughout Europe.
The pension position will have an enormous effect on the international competitiveness of Europe. Throughout the 1980s, we in the United Kingdom had the highest proportion of pensioners of the major economies in Europe. We had to pay for those pensioners through raising higher taxes than we might otherwise have raised on British industry, business and individuals. In the next couple of years, France will have a higher proportion of pensioners than we have and, in the next decade, Germany will have a higher proportion. Because of those countries' pay-as-you-go schemes for pensioners and because they have no substantive pension funds, they will have to raise extra taxes from industry or business or individuals to meet that pensions liability or will have to undergo enormous social change that, so far, they have shown they do not want to undergo. The consequence will be that, in the next 10 years, British industry and business will have

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a unique competitive position in relation to pension liabilities compared with France, Germany and Italy. We should not do anything to damage the opportunities that will result from that competitive position.
Article 104—the so-called no-bail-out clause—is, as was mentioned earlier, relevant and important. Article 104b states:
"A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law or public undertakings of another Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project."
In other words, there is a let-out in article 104b, because a member state has only to come up with a specific project, such as dealing with member states' unfunded pension liabilities, and immediately article 104b would not apply. The Europeans have already got a let-out which could mean that if we joined a single currency, we might have to meet their pension liabilities.
It is also inconceivable that even if article 104b were watertight—even if the no-bail-out clause were absolutely copper-bottomed—it would be applied in practice. If Germany or France or Italy started to get into severe financial difficulties as a result of past pension commitments, it is inconceivable that the European Commission would not organise some bail-out. That is like saying that Washington would not organise a bail-out of California, if California were in enormous difficulties. We cannot suddenly say to Germany, France or Italy, "Sorry you are in difficulties, but although you are a member state of the European Union we are going to have nothing to do with you." We would have to get involved. We would have no choice but to get involved whether we were inside a single currency or outside and that is the danger that we must face. Those countries will have enormous problems as their pension liabilities come due for payment in the next decade and we, in some way, will find ourselves involved in trying to sort it out.
In conclusion, I emphasise that the figures involved are very large. The liabilities are real. They may not exist today, although we have already seen the strains in the French social security system that have resulted in strikes and demonstrations on the streets in France.
Mr. Rowe: My hon. Friend is a member of the Select Committee on Social Security and he is right to point out the fact that nowhere else in Europe appears to take the matter seriously. Will he consider consulting his colleagues on the Select Committee about whether it would be possible for it to host some kind of European seminar at a level that would have an impact on the entire debate?
Mr. Shaw: My hon. Friend is correct. That would be sensible and we have discussed it in the Select Committee. We would like to invite people from member states' Parliaments to London, because we think we have a unique piece of research. We have the benefit of the City of London and an increasing number of people in the country are aware of the subject. We wish to contemplate running a seminar and my hon. Friend has raised an interesting point.
The liabilities are real money liabilities and they will have to be paid in real cash amounts to pensioners in Germany, France, Italy and other countries in the
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European Union in due course. That time is not far away. Within the next decade, the liabilities will start to build up and, by about 2010, France, Germany and Italy will be paying out a much higher level of pensions each year than they pay out currently. We do not want to become involved in meeting that liability. We have good pension funds, as my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman) pointed out earlier. We have a solid pension base with around the same total that everyone else in Europe put together has. We have some £600 billion of pension funds to protect our pensioners. Some of those pension funds are invested abroad, and some are even invested in the far east, so in many cases we will have the benefit of the young workers of the far east paying our pensions in the next 50 years. The aging populations of Germany, France and Italy, however, will not have pension funds invested elsewhere in the world. We are in a strong position and fortunately will not have to make the painful decisions that those countries will have to make. They have those painful decisions ahead of them, but they are not even having a debate about how they will meet those liabilities.
10.15 am
Sir Russell Johnston: In a way, the only surprising aspect of the Select Committee's report, which caused a considerable stooshie, is that it has come late to the subject. The hon. Member for Dover (Mr. Shaw) remarked in his speech that he raised the matter in 1991 and my noble friend Lord Taverne was the rapporteur for the Federal Trust on a pamphlet entitled "The Pension Time Bomb in Europe" two years ago. So this is not a new issue. It is also true, despite the rather harsh approach of the hon. Member for Dover, that the Governments in Germany, Italy and France are endeavouring, albeit slowly, to address the problem and have been for some years. I start on that basis.
The connection between the Select Committee's report and economic and monetary union hit the headlines with the suggestion that somehow we would end up paying for the lot, which was underlined by the hon. Member for Dover. The Chairman of the Select Committee, the hon. Member for Birkenhead (Mr. Field), was his normal patient and cautious self—not great characteristics of the hon. Member for Dover. I have no pretensions whatever to being a expert in the complex world of pensions and I am far too prudent to contemplate crossing swords with the Chairman of the Select Committee, because that would be foolish of me. I admire what he does and I read, in so far as I am able to understand them, the articles that he writes. I endeavour to do my best. All I can do is to call witnesses.
Fortunately—or perhaps unfortunately, but certainly usefully—there was a debate on this issue on 20 November in the other place. It was introduced by my noble friend Lord Taverne and it was an interesting debate. I am sure that hon. Members have read the report. Contributions were made, for example, by Lord Taverne himself, of course; by Lord Ezra, the former chairman of the National Coal Board; by Lord Barnett, the former Labour Treasury Minister; by Baroness Ramsay of Cartvale, who was a distinguished diplomat in her time and also a foreign affairs adviser to the late John Smith; and by the Government Minister, Lord Mackay of Ardbrecknish. All said the same thing and rested their case on article 104b of the Maastricht treaty.

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The hon. Member for Dover put a good argument when he said that if California were going bust, it could not be ignored in Washington. I take that point, but there is a difference to draw. I shall not keep the House long, but I want to approach the issue in two ways.
The European Commission has been referred to at length. It so happens that I have in my hand, hot from the press, a press release issued by the Commission this morning. It is not particularly long and the Commission clearly intended to make a contribution to the debate, so hon. Members may be interested to hear what it says. It refers to the claim in the Select Committee report
"that UK taxpayers could face increased bills to meet the pension fund liabilities of other EU member states. This was a serious misrepresentation of the intentions of the European Union."
Miss Kate Hoey: Most of us, if not all of us, have not seen the press release. Does the hon. Gentleman have a special hotline to the European Commission?
Sir Russell Johnston: Would that I had. A kindly person brought the press release to me in an envelope while I was sitting innocently here minding my own business.
The press release continues:
"It is written in the Treaty on European Union (Article 104b) that Member States will not be responsible for each other's liabilities in EMU. There will be no common fiscal policy, so the UK could not be called upon, under a single currency, to pay for the possible profligacy of any other country."
Mr. David Shaw: Will the hon. Gentleman give way on that point?
Sir Russell Johnston: If the hon. Gentleman does not mind, it would be easier if I finished quoting the press release. It is not very long. I will certainly give way after that. It continues:
"Nor is there any possibility of this issue having an effect on interest rates. If a Member State borrowed heavily to fund its pension liabilities, thereby forcing a rise in European interest rates, it could be faced with heavy fines."
That refers to the stability pact. It continues:
"This is because all Member States which participate in Stage III of EMU will be required to keep their public sector deficits at less than 3 per cent. of GDP. This will put a clear limit on the total amount of borrowing permissible by governments. It is this commitment to avoid excessive deficits which will be underpinned by the Stability Pact to be further discussed in Dublin. The Pact is intended to act as a form of mutual self-discipline backed by heavy fines. European governments are increasingly aware of the future problems they may face unless pension funding arrangements are addressed. That is why, regardless of the Maastricht Treaty and the moves towards EMU, many European governments have embarked on strenuous efforts to overhaul their public finances."
Mr. Shaw: Does the hon. Gentleman concede that, as a minimum, the issue puts into question the ability of Governments to come within their annual deficit requirement of 3 per cent. under the Maastricht criteria? Does he also accept that paragraph 1 of article 104b ends with the words:
"without prejudice to mutual financial guarantees for the joint execution of a specific project"?
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A specific project could be to share out Europe's pension liabilities.
Sir Russell Johnston: It is difficult for me to interpret the phrase, "a specific project", but I should have thought that pensions were more than a specific project; it is a massive area of policy. The words, "a specific project" suggest something of manageable size rather than the enormous problem that we are facing.
Mr. Bill Walker rose—
Sir Russell Johnston: Before I give way to the hon. Gentleman, I should like to add that we all know that we are talking not about present debt but about projected debt if we are operating on the basis of pay-as-you-go. Unless the Germans, the Italians and the French reform their systems in the meantime, 10 years hence they will be faced with an unbearable amount of money to pay. The hon. Member for Dover and the Chairman of the Select Committee have properly asked whether the Governments of those countries have the guts and the political determination to take such action in the face of undoubted unrest. There is nothing extraordinary about people protesting if their benefits are cut. I hope that the Governments will take action, but there is no certainty about it. So far as I can tell from all the evidence, including that from the Commission, the fear expressed by the Select Committee is not accepted by the European Union.
Mr. Walker: I thank the hon. Gentleman for his usual courtesy in giving way. Does he accept that the article that has been referred to is a fact of life? It exists and has been agreed. The hon. Gentleman is proposing something that has not yet been agreed in defence of his position. We can address only the known—not hopes and aspirations, but reality.
Sir Russell Johnston: In European matters, it is always difficult to separate the reality from the aspiration in the simple way that the hon. Gentleman has just done. There is always an element of aspiration. The social chapter, about which some hon. Members get so furious, is composed largely of aspiration rather than reality. However, I must not lead myself away in that direction.
There is nothing further that I wish to say. What I had intended to say in conclusion I have already said in response to the hon. Member for Dover. There is a very big and real problem. It can be solved, but it will be hard. People are entitled to question whether the necessary political rigour exists. The problem is certainly fully recognised. As we know, considerable efforts are already in train in Germany and, notably, in Italy.
Mr. John Butcher: I am grateful to the hon. Gentleman for giving way because I know that he is about to conclude. I should like to ask him about political will, set against what is currently asserted perhaps by some public relations person at the Commission. A huge row is going on between France and Germany on the extent of the rigour to apply on the convergence criteria and the pact. The French want a political approach with majority voting in the bank, while the Germans want a mechanical approach that would be totally impartial and utterly ruthless. They are falling out

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over that central issue. How can a press release from the Commission make any assertion in those circumstances? I suspect that we are being expected to base an argument on the word of a junior official. This House, more than any other institution in Europe, should not depend on such arguments.
Sir Russell Johnston: If I attempted to answer all the issues raised by the hon. Gentleman, I should delay the House far too long. I shall say only that to describe the on-going discussion between France and Germany, which progressed the other day in Nuremberg, as a "huge row" is typical of the way in which our European debates are conducted. With respect to the hon. Gentleman, I am aware that others want in and I will terminate.
10.28 am
Mr. Quentin Davies: One of the great values of parliamentary debate is that it provides us with a wonderful opportunity to expose nonsense for what it is. In that spirit, I greatly welcome this morning's debate.
As the prospects of monetary union and of our being a part of it advance, it is only natural, given the strong emotions that exist on the subject, that its opponents should clutch at ever weaker straws. We have today a very weak straw indeed. I do not in any way resile from, or apologise for, the comments that I have made on the Select Committee report, which I have seen. I hope that, by the time I have sat down, the hon. Member for Birkenhead (Mr. Field) and other colleagues will understand why I held it to be entirely justified to make those remarks.
It is true that the level of unfunded pension liabilities on the continent—except in Holland—is higher than the level of unfunded pension liabilities in this country in the national insurance scheme and in public sector superannuation schemes. That is perfectly true—there is no question about that. I am happy to acknowledge also that nothing could be more disastrous than any suggestion that anybody should borrow now to pay pensions. On the whole, the pension debate in this country and on the continent has proceeded on the basis of a potential choice between funding pension liabilities and pay-as-you-go schemes. The idea that one might borrow to pay current pensions introduces an entirely third model—one that is horrific in its financial irresponsibility.
The third option is not to fund nor to pay as you go, but to disfund—to accumulate continuing financial liabilities to meet current pensions so that one places a bigger burden on future generations to pay back the money that one is paying out in pensions now plus interest, plus future pensions. Clearly, that is a horrific scenario. The only thing is that no one has ever suggested it, for precisely the reasons that I have set out. This is a windmill at which some colleagues are choosing to tilt in the best Cervantean tradition—it is an enemy that does not exist. The windmill might look like a fearsome animal advancing on us, but it does not exist. It is a figment of the imagination of some colleagues in the House.
Mr. David Shaw: Surely the report from the IMF, which has been prepared by IMF staff, is not a figment of anyone's imagination. There have been numerous reports, including reports from the OECD and that on the Dutch
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pension fund. A lot of people outside accept that this is not "nonsense", as my hon. Friend puts it, but a real situation that we must face. All three major parties in the House seem to accept that, and it is only my hon. Friend who seems to disagree.
Mr. Davies: I am sorry to have to inflict this on the House, but I must briefly recapitulate what I have said. There are two perfectly responsible and classic methods of approaching the payment of pensions. One is the pay-as-you-go system, the other is funding—or placing certain amounts of money aside from current income and investing those moneys in assets that are expected to yield a future return in the hope that that future return will meet pensions when they need to be paid. That is perfectly clear, and the argument in this country ever since Lloyd George at the beginning of the century, and on the continent since Bismarck, has been between those two systems.
What has been suggested this morning is that there might be a third system, under which we do neither of those things but simply borrow money and accumulate debt when we need to pay pensions. That is not saving for future pension liabilities—it is dissaving—and there is no question but that it would have horrific economic consequences. However, it is such a mad idea that no one has seriously suggested it. Nor do I believe for a moment that anyone would, or needs to, suggest it.
Another element of unreality in the picture that has been painted this morning is that, although it is true that there have been, and remain, substantial unfunded pension liabilities on the continent, that has in fact been the case for many years. It has been the case in all of the countries of the present EU since 1945 and, in many of them, for longer. It is also true that, for a long time, very little was done to match actuarially the potential liabilities of the pension schemes on the continent to the power of the economy to generate the resources to do so. If we had had this debate 10 years ago, it would have been a good deal more pertinent than having it today.
I have listened in vain for any speaker this morning to mention that the past few years have been characterised by the unfunded pension liabilities on the continent being reduced by a reduction in the benefit system. Germany has increased the pensionable age from 65 to 67, but no one has mentioned that. Anyone who knows the first thing about pensions knows that increasing the retirement age by two years has an enormous actuarial effect on the solvency of the scheme. It is odd that that salient fact has not come up. No one has mentioned that, in the past few months, Belgium has followed suit. It is also odd, and perhaps significant, that this has not come up in the debate this morning. No one has mentioned that Italy, after—naturally and understandably—tremendous political controversy for several years, has completely got rid of the scala mobile, the indexation of Italian pensions. Again, no one who knows the first thing about pensions would dispute for a second that removing indexation has an enormous and positive effect on the actuarial solvency of any scheme. It is funny that that salient fact has never come up either.
Paris is not far away and, when Eurostar is working—I believe that it is again—colleagues can go there in less than three hours. I am going there tonight, although not unfortunately by Eurostar. Does the House know what our colleagues in the Assemblée Nationale have been

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discussing in the past few months? Has anyone in the Chamber bothered to find out? They have been introducing a funded pension scheme in France. It is odd that we are talking about this subject, but that that fact has not been mentioned. Of course, that scheme will help meet only future liabilities, but the point is that we are getting ourselves steamed up into great excitement, despondency and alarm and we are trying to generate a great sense of panic that this appalling thing, monetary union, will come upon us and destroy human life as we know it on the planet and that one of the effects that it will have is that no one will be able to meet their pension liabilities, but without actually confronting the facts before us.
We fail to notice that, in so far as there has been a problem with unfunded liabilities on the continent, it has existed for a long time. It is curious that no one in the Chamber thought to mention that this morning. The last few years have been characterised by a systematic, effective and—I think—courageous attempt on the part of our continental neighbours to address the problem. No one who has taken part in this debate has wanted to give them credit for that.
Mr. Frank Field rose—
Mr. Davies: Perhaps the hon. Member for Birkenhead, having been prompted by me, will now do so.
Mr. Field: One hopes that a large number of people will be watching this debate elsewhere. In looking at the nature of the speeches from hon. Members of all parties, they will have noticed that the only person who has got steamed up about anything has been the hon. Member for Stamford and Spalding (Mr. Davies). The longer he goes on, the more he will be convincing people outside that there is a large problem—even if people are rather late in the day in coming to it. Some of them, who may have a little expertise, will know that the plans to which the hon. Gentleman has referred are merely proposals and have yet to be passed by the countries' Parliaments.
Mr. Davies: I am reassured and even more confident in the line that I have been taking in the debate by the fact that the hon. Gentleman, to whom I was delighted to give way, chose to make disparaging remarks about my style, and did not in any way challenge the substance of what I have been saying.
There is a further element of unreality about the debate. We have heard this morning from my hon. Friend the Member for Dover (Mr. Shaw), who is an hon. Friend in every sense of the term. He is a very old friend of mine, and I am pleased to be sitting beside him this morning. He quoted article 104b of the Maastricht treaty, which I shall quote again. It says:
"The Community shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project. A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law or public undertakings of another Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project."
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Even if anyone had ever suggested—which absolutely nobody has—that either the Union or any individual member state should be responsible for another member state's pension liabilities, that possibility would be excluded by the article. My hon. Friend the Member for Dover said that there was a let-out in the reference to
"the joint execution of a specific project"
but he cannot be that naive; he has been in business for many years and knows about such things. The fact is that the reference is to infrastructural projects for which individual member states have given specific guarantees; for example, if a bridge were to be built across the Rhine, public sector authorities on either side might agree to guarantee the financing.
When article 104b was drafted, it had to take account of the fact that member states would clearly be liable for specific guarantees that they had given for specific projects but, quite apart from the fact that pensions are not a project, it is absolutely clear that no such guarantees have ever been, or ever could be, given for other member states' pension liabilities. To suggest otherwise was a piece of special pleading that went rather further than the normal parliamentary licence that we allow ourselves when highly controversial matters are under discussion.
A further element of unreality in the debate was the suggestion that the convergence criteria in the Maastricht treaty are somehow wanting because they do not encompass the pension liabilities that exist in various member states. Evidently, I must take two minutes of the House's time to explain to certain hon. Members why the fiscal convergence criteria are included as criteria for monetary union.
If a member state were to default on its financial liabilities—if, for example the British Government defaulted on a gilt issue or the German Government on a Bund issue—that would clearly trigger a systemic financial crisis, because many investors, both private and, more especially, institutional, such as banks and insurance companies, hold that debt. If the debt had to be written off, those institutions would have to write off a portion of their capital and that would greatly reduce demand in the economy as a whole, producing a recessionary crisis. That is what is known as a systemic financial crisis.
A default by the various pension funds on the continent of Europe would not trigger a systemic financial crisis, because they have not issued any such debt. Nobody outside this wonderful House of Commons of ours has ever dreamt up the possibility of going down the road of pension schemes paying out their pensions by raising current debt in the markets. There is therefore no reason to protect ourselves from such an eventuality in the criteria for monetary union.
What would those pension funds do if they could not pay their pensions? They have two choices. [Interruption.] I can see that the hon. Member for Vauxhall (Miss Hoey) does not like being told all these things. I am well aware of her strong emotions on the subject and that she thought that she had found a wonderful way of torpedoing monetary union, but I have to tell her that it will not work.
Miss Hoey: Look at the time.
Mr. Davies: I am afraid that I have every intention of finishing my speech.
Pension funds that could not meet their liabilities could either increase their contributions or cut their benefits. In the past few years, they have chosen the sensible way of substantially cutting their benefits. If there is any problem, it is less of a problem than it was a few years ago when, curiously, we heard nothing from the Euro-sceptics on the matter.
I cannot sit down without raising the most fundamental point about pensions, which was not raised either in our debate this morning or in the Select Committee's report: any pensions scheme, whether funded or not, involves a wager on the future. If one funds a pensions scheme, one accumulates financial assets or claims, equities, bonds and so forth. If the issuers of those bonds or the firms in which one holds an interest through the equity do not perform and generate a return and cannot service their debt or pay dividends, it does not matter how much the scheme is funded or what the actuarial surplus is, because the real resources will not be there in the future to meet the expectations of the pensioners.
Both pay-as-you-go and funding involve a wager on the future. The only reason known to economics for preferring funding is, so the theory goes, that it will involve an increase in the savings ratio, because of the money that is set aside from current income against future liabilities, and that that will provide the possibility for greater investment, which will enhance the economy's capacity to generate more resources, so output and the wherewithal to meet the real resource claims of pensioners will be increased.
That is a fine argument, and I happen to accept it, but it is based on certain assumptions about the return on investment and the efficiency of markets. Most importantly, it is based on the assumption that the compulsory savings levied from the population in enforced pension contributions—which I believe are a good idea—will involve an additional savings effort out of current income and will not simply displace savings that would otherwise have been made elsewhere. If savings are simply displaced, there will be no increase in the aggregate savings ratio as a result of funding pensions.
All the countries that we have been talking about—most notably, France, Germany, Belgium and Italy—have much higher savings ratios than we do at present, even though they have a lesser element of funding in their pensions. Therefore, considering the real economic backing for future pensions, one could legitimately draw the conclusion that the unfunded pensioners in those countries are better assured of getting a real return from their pensions than the funded pensioners in this country, where the savings ratio is, sadly, a great deal less.
I am sorry, and quite surprised, to have had to remind the House of a few elementary economic principles. I had to do so not because I am sure that hon. Members are genuinely ignorant of such matters or have set out in bad faith to exclude material facts and arguments from their presentation of the case this morning—I would never accuse any colleague of doing that—but because of the strong emotions, which I respect and entirely sympathise with, that are generated by the prospects of monetary
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union and those, I fear, have the capacity to distort the judgment of even the most intelligent, well-informed and well-intentioned people.
10.48 am
Mr. John Denham: There is insufficient time to respond in detail to the arguments that have been made, so I shall make only a few brief points. My hon. Friend the Member for Birkenhead (Mr. Field), the Chairman of the Select Committee on Social Security, said that there had been a number of misconceptions about his report, but the debate has made it clear that many issues are involved.
The debate is in part about United Kingdom pensions policy, in part about European pensions policy, in part about monetary union, in part about the alleged conspiracy of perfidious foreigners to steal our pension funds, tax our citizens and do numerous other unspeakable things in the name of the European Union, and in part about funded and unfunded schemes.
It would be wrong to draw the conclusion from the report that the United Kingdom is in a strong position overall on pensions. It is true that our unfunded liabilities for pay-as-you-go pensions are less and that that gives us advantages. It is equally clear that our citizens cannot, in general, look forward to high standards of pensions, and not necessarily to standards comparable with those of other European countries. In cutting the state pay-as-you-go element, the Government have failed to ensure that people can build up adequate funded schemes.
The hon. Member for Stamford and Spalding (Mr. Davies) was right to say that all pension schemes are pay-as-you-go at the moment of delivery, whether the payments are made from funded schemes or from taxation. In the United Kingdom, the cost of future pensions will be reduced by the simple expedient of giving people inadequate pensions, and not through any other means. I and my party advocate moving towards funded pensions.
Paragraph 12 of the Social Security Select Committee report suggests that changing demographic structures will require
"a substantial increase in national resources devoted to the pension system, unless further cuts were made in pension benefit levels and entitlement."
However, that applies to a funded system equally as well as to an unfunded one. An aging population means that a funded system must enable people to have a greater call on the resources of a future society. It would be a mistake to believe that we have resolved that problem.
The European elements of the report are important. The crux of the Select Committee's argument is that, in some way, the British taxpayer will end up paying for unfunded pension liabilities. It is clear that many European countries will have to make some adjustment because of demographic changes. Countries may have to raise taxes and contributions, cut benefits and raise retirement ages; they may have to introduce, over time, new elements into the funding of their schemes; they may have to use a combination of all those measures. Many hon. Members have contended that none of those options is possible, that it is impossible for our partner countries in the European Union to adjust to demographic changes, and that the UK will inevitably end up bearing the consequences. I do not share the Select Committee's pessimism.

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First, I am not convinced that adjustment to change is impossible in other European countries. It is undoubtedly difficult, but I do not believe that it is impossible. The level of sustainable payments into pension systems varies enormously in Europe, according to different histories, political choices and cultural patterns. Levels of contribution that seem unsustainable to us have historically been sustained for many years in other European countries without great difficulty. Adjustment to change, although by no means easy, is not impossible.
Secondly, I am not convinced that there are not safeguards in the Maastricht treaty and in the current economic and monetary union negotiations, especially the stability pact, to prevent the burden of an unwillingness to change in Europe being passed to the United Kingdom. Thirdly, it is a bit rich for some representatives of such a fiscally imprudent Government, who have doubled public debt in the six years since the Prime Minister came into office, to lecture other European countries on their alleged fiscal imprudence. That does not sit well with the factual record of the past six years.
Finally, and this point is recognised in the Select Committee report, although buried in it, there is the mistaken assumption that isolation from monetary union isolates us from the consequences of integrated monetary markets in Europe and of the actions of other European countries. That is an illusion. It is the integration of markets that may bring across knock-on effects, not the monetary union process itself.
This debate has been an hors d'oeuvre to the two-day debate that starts this afternoon. The Select Committee has done us a favour in raising the issue but, as hon. Members will have gathered, I do not entirely share the pessimism of its conclusions.
10.53 am
The Parliamentary Under-Secretary of State for Social Security (Mr. Oliver Heald): The Select Committee's report is more than an appetiser; it is an important contribution to the debate about unfunded pension liabilities in the European Union. We have had a good debate, which was opened with his customary panache by the hon. Member for Birkenhead (Mr. Field). There were thought-provoking speeches by my hon. Friends the Members for Dover (Mr. Shaw) and for Stamford and Spalding (Mr. Davies), and excellent interventions from my hon. Friends the Members for North Tayside (Mr. Walker), for Lancaster (Dame E. Kellett-Bowman), and for Coventry, South-West (Mr. Butcher). The hon. Members for Inverness, Nairn and Lochaber (Sir R. Johnston) and for Southampton, Itchen (Mr. Denham) also spoke.
The issue of huge and increasing pension liabilities, especially unfunded or pay-as-you-go liabilities, is serious. In the 1940s, when the retirement age for men in Britain was fixed at 65, life expectancy for men was 63; today it is 74 and set to rise to 78 by 2030. The population over state pension age is set to rise from 10 million to 14 million in 2030. Those changes are mirrored, to a greater or lesser extent, across Europe.
In 1979, the Government had to consider the long-term sustainability of the British system and decided to develop a strategy which was affordable, yet met the expectations
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of people in retirement. The key to that has been encouraging individuals to make greater provision for themselves by introducing greater flexibility and choice for those choosing a pension. We allowed people to contract out of the state earnings-related pension scheme in different ways. We introduced personal pensions and have made a series of changes in the Pensions Act 1995. The effect has been that two thirds of employees have opted out of SERPS; more than 20 million people have rights in occupational schemes and more than 5 million hold appropriate personal pensions.
We also took steps, as has been mentioned, to make pensions more affordable. Taken together, those steps have defused the effect of the demographic time bomb in Britain. The result is that we have £600 billion invested in private pension funds on behalf of present and future British pensioners. That is not only more than in any other European Union country but more than in all the other member states put together. That means that we can face the future without imposing a huge tax burden on our economy and that our economy is strengthened by an immense injection of savings and more investment. That point was well made by my hon. Friend the Member for Dover.
The Organisation for Economic Co-operation and Development report, which was mentioned by my hon. Friend the Member for Dover, estimated that the net present value of the liabilities of unfunded pension schemes in France is 98 per cent. of GDP; 113 per cent. in Italy; and 139 per cent. in Germany. In Britain, it is only 19 per cent. My hon. Friend also mentioned the International Monetary Fund report, which suggests that countries such as Germany and France would either have to raise social security tax collections or reduce pension liabilities by about 3.5 per cent. of GDP a year—a huge task. We are better placed than our European partners. Although I acknowledge, as my hon. Friend the Member for Stamford and Spalding said, that our European partners are beginning to heed our example and that several countries, such as France, Italy Portugal and Spain, are beginning to encourage private pensions to supplement pay-as-you-go, much more needs to be done.
There have been suggestions in this debate and elsewhere that in the event of our joining economic and monetary union, the UK might have to pay for other member states' pensions, directly or indirectly, through higher interest rates or higher inflation. There is no question of the Government agreeing to pay other countries' unfunded pensions. We have no intention of using the assets that we have so carefully built up over many years to bail out other countries that have been slower to recognise what will happen and take the necessary action. There will be no common pensions policy under this Government, but I cannot give the same assurance if, heaven forbid, the Labour party were to come to power. The Labour leader has said that he would go along with whatever was pressed by other member states to avoid ever being isolated in Europe. The Select Committee may be right to say that we would face such pressures. The importance of avoiding any extension of majority voting and of maintaining our veto is immense.
Mr. Denis MacShane: It says here.
Mr. Heald: It does say that here, but the hon. Gentleman will be pleased to learn that I wrote it.

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My right hon. and learned Friend the Chancellor of the Exchequer has said that we shall be bolstered in our determination to resist any pressures to help finance other countries' unfunded pensions liabilities by articles 104b and 104c of the Maastricht treaty. The no-bail-out clause and the excessive deficit rules will make a difference in helping us to deter members of a euro zone from funding pension liabilities through excessive borrowing. The real protection that Britain and its pension scheme members have for the future is a Government determined to stand up for British interests and ensure that what we have built is not destroyed by others. So member states across Europe which face the difficulties of crystallisation of pension liabilities will have to deal with them by raising taxes, raising contribution rates, reducing the value of pension entitlements or cutting other spending programmes.
I welcome the attention—
Mr. Deputy Speaker (Mr. Michael Morris): Order. We now move to the next debate.

World Trade and the Environment
[Relevant documents: The Fourth Report from the Environment Committee of Session 1995–96, on World Trade and the Environment (HC 149-1), and the Government's response thereto (Cm 3445).]
11 am
Mr. Andrew F. Bennett: I am pleased to have the chance to debate briefly the report of the Environment Select Committee on world trade and the environment. It is appropriate that we should debate this subject this week because the conference on world trade is taking place in Singapore. I thank my colleagues on the Committee for all their work on the inquiry. I thank our specialist advisers, James Cameron and Steve Woolcock, the Clerks, who always worked extremely hard, and our specialist assistant, Caroline Hand, who gave us a great deal of help in marshalling the material for the report.
I shall briefly set the scene. Put perhaps rather crudely, there are two views about world trade. One is that the more trade there is and the fewer tariff restrictions exist, on the whole the world gets richer and, as it does so, gains the will and the resources to tackle environmental problems and issues. The alternative view is that the world has such acute environmental problems that if trade goes on expanding, it will make the situation worse and worse, and that environmentally the world is heading for disaster. Those are two crude exaggerations of the position and the truth lies somewhere in between. It was part of our inquiry to find out exactly where the truth lies in the balance between environmental and trade issues.
All good Select Committee reports are dependent to a large extent on the quality of the evidence submitted. I was delighted with the quality of the evidence that we received. To most of us who were aware of their campaigning roles, it was no surprise that the evidence from Oxfam, the World Wide Fund for Nature and Friends of the Earth put the environmental concerns very strongly. I was particularly grateful to the Brazilian ambassador and politicians in Singapore, Malaysia and Thailand for expressing their concerns. In this short debate, I do not want to set out the way in which they set out their concerns because they did it politely and courteously. I shall summarise crudely what they said and the point that is continually put by people in the less-developed world. I am not quoting them. I am giving the general view that comes from those countries.
Britain, Europe, Japan, the United States and the other developed countries have raided the world's carbon stores. They have burnt masses of coal, oil and natural gas. They are still wasting energy and releasing a great deal of carbon dioxide into the atmosphere which is contributing to global warming. They have polluted vast areas of coniferous forests with acid rain. They have felled most of the world's temperate hardwoods. They have expelled large amounts of chlorofluorocarbons into the atmosphere and dumped a great deal of horrendous waste into lakes, rivers and seas. They have hunted many animals such as wolves and wild boar into extinction in some countries. Partly as a result of all that, the developed countries now enjoy a high standard of living. Now those countries are trying, under the guise of environmental protection, to stop emerging nations catching up.
I oversimplify, but it is important in understanding issues about trade and the environment that we understand how strongly people in the developing world feel that we

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have wasted much of the world's inheritance. We may have achieved higher standards of living as a result of it, but we are now trying to stop them doing the very same things.
The World Trade Organisation conference in Singapore is firmly committed to cutting down the barriers to trade. A strong group of people is campaigning there to make sure that the conference is not diverted into any other areas. The developing countries in particular but others too are keen that it should concentrate on removing trade barriers and not on anything else. Other people rightly say that free trade is perfectly all right, but we must consider employment issues, including the employment of child labour, and issues of cruelty, particularly the trapping of animals for furs, and we must consider the economic balance of power between the developed and the underdeveloped countries. As we say in our report and as Oxfam, Friends of the Earth and other people are saying, world trade must take into account environmental issues.
Our report goes on to examine, rather uncomfortably, the fact that the WTO, through the general agreement on tariffs and trade, has developed into a pretty powerful organisation, but the environmental organisations that have been established within the world are much weaker and cannot have the same input into discussions. I shall not go into that in great detail, but we should like to see a more effective input of environmental issues into world trade mechanisms for taking policy forward and for resolving disputes.
The next issue considered in the report is sustainable development. We set out, mainly by illustrations, some of the difficult issues around how far it was a good idea for a country such as Bangladesh to produce large numbers of frogs' legs for the European and American market; how far prawns, shrimps and exotic vegetables could be grown in the third world and flown to Europe and the United States; and how far that trade made those countries richer or undermined their traditional farming methods.
The next issue that I wish to highlight is the relationship between the multilateral environmental agreements and trade. Such agreements include the Montreal protocol on phasing out entirely from the world the use of CFCs that damage the ozone layer. Of all the agreements worldwide, the Montreal protocol is probably working better than most, although many people suggest that there is still an illegal trade in CFCs and probably some manufacture in eastern Europe. I ask the Minister to comment on that.
The Convention on International Trade in Endangered Species of wild flora and fauna appears to have some good aims, but we have some reservations about how easily it is enforced. We were lucky enough to go out to Heathrow and see the convention being effectively enforced on behalf of the British Government. One or two holidaymakers were caught who had gone to exotic places in the world and brought back souvenirs, not understanding how much damage they were doing. I hope that we can do more to warn tourists before they go abroad. The way in which containers are shuttled around the world means that if we are to make CITES work, there will have to be more inspection and sampling of containers. The Basle convention on hazardous waste is a good convention. The developed countries should not dump their hazardous waste on less-developed countries, but there needs to be some refinement of the process. In
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particular, there are concerns about whether scrap metal should come within the convention and whether developing countries can buy scrap metal from developed countries.
If those three agreements are working reasonably well, we have to look at how to develop new ones. An issue that always causes me concern is domestically prohibited goods. If something cannot be sold in Britain, it is totally wrong that it can be exported. A long time ago, when I visited one of the drug companies, I was horrified to see that two lines of drugs were being produced—one for sale in Britain and the other for sale in other parts of the world where quality control was not quite so stringent. We have to have an agreement on goods that cannot be sold in this country being sold to other countries and the sooner that is covered by a proper convention, the better.
I turn now to the question of a forestry convention. All environmental groups are, rightly, concerned about the way in which the rain forests and especially the best woods within them are disappearing. As I pointed out earlier, our record on forest destruction is not good. Everyone has to do their part if we are to persuade others to look after their forests—to manage them instead of simply felling them. I want a new agreement on sustainable forestry and, again, the sooner the better.
We must make sure that the commitments relating to biodiversity that emerged from the Rio conference are made to work. There is a trade-off between biodiversity and intellectual property rights and it is important that we get that right. The issue must be developed further.
On the question of eco-labelling, some of the people the Committee met outside the United Kingdom and one or two of those who gave evidence in the United Kingdom argued vigorously that eco-labelling is really a tariff barrier in disguise and that the developed world is using eco-labelling of various sorts to keep third-world goods out. I am an enthusiastic supporter of eco-labelling—when they are purchasing a product, the general public should know whether it is environmentally appropriate.
I do understand, however, the feelings expressed by paper producers about the fact that the requirement for tissues—especially toilet tissues—under the present eco-labelling scheme involves the use of a considerable amount of recycled paper. In western Europe, it is relatively easy to obtain large amounts of newspaper and other material to recycle; however, paper producers in Canada, Brazil or other countries that specialise in paper manufacturing might not have access to such a large supply of paper for recycling. It is not environmentally beneficial for producers in those countries to have to buy up waste paper from Europe and elsewhere and transport it to their production plants, simply so as to meet eco-labelling requirements for a certain proportion of recycled material.
I am also concerned that some third-world countries might find that the cost of getting their products through the eco-labelling certification process will make it difficult for them to enter overseas markets. That is why it is important that the European eco-labelling system works so as to ensure that there is only one accreditation system covering the whole European market, instead of having different labels in every country.
In addition, the eco-labelling system should increasingly become a worldwide one. In Thailand, we learnt of discussions in progress on developing their own

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eco-labelling system. Although I hope that that would be along the best environmental lines, some of those discussions revealed that the Thais knew that eco-labelling might have trade implications and offer them an opportunity to protect their own trade.
I do not wish to take too long, because I know that other hon. Members on the Select Committee want to speak. I am also pleased to see hon. Members who are not on the Select Committee here today. I ask the Government to give us an update on the conference in Singapore. I fear that environmental issues have sunk low on the agenda, but I hope that the Minister can reassure me that that position will improve.
I press Ministers on the question of accreditation in respect of forestry. In our report, we said that we thought that the Forest Stewardship Council was a good way forward. If we are to persuade other countries—especially underdeveloped countries and countries with tropical hardwoods—to sign up to the council, we have no excuse for not trying to comply ourselves. The reluctance of the Government and the Forestry Commission to get involved in the scheme disappointed me and I hope that the Minister will be able to tell us that the Government's attitude to involvement is now more positive. I realise that it is a non-governmental scheme and I recognise all the arguments that a governmental scheme would be better, but there is no such governmental scheme. It is clear that many of Britain's do-it-yourself shops will sign up to it, so it would be a pity if the Forestry Commission and British timber products were put at a disadvantage.
In addition, will the Minister tell us what the Government are doing about domestically prohibited goods; give us an update on the Montreal and Basle conventions and on CITES; and tell us what progress is being made on eco-labelling and on making sure that it is based on sound environmental principles and does not become an alternative to tariff barriers? Finally, will he give us an update on the Government's real commitment to ensure that we do not pump more CO2 into the atmosphere? I know that the Government say that we are doing well, but it is important that the other developed countries make a considerable contribution as well.
I hope that we can have a constructive debate on this issue. I greatly enjoyed the inquiry and I shall listen to the debate this morning with considerable interest.
11.16 am
Mr. Roy Thomason: Like some of my colleagues—or, dare I suggest, all of them—I approached the inquiry by the Select Committee on the Environment with some preconceptions. First, I believed that trade is necessarily advantageous to all nations. History teaches us that a country goes through a period of prosperity when it is active in trade. The like applies to regions and, presumably, to the world as a whole. It follows that, if greater prosperity is to be generated, trade should be encouraged; and that nothing should be done to interfere with that, because that prosperity will trickle down from countries that generate wealth to poorer nations, just as, in individual countries, wealth trickles down from those who generate it to the poorest people.
Some Opposition Members have argued that wealth generation should be restricted because it benefits those who create it to a proportionately greater extent. That is now a rejected tenet, but antagonism to wealth creation
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still lurks within the Labour party. The fact is that the poor cannot be helped unless there are those who are able to give assistance. Of course, I do not deny that the state has a role in helping to protect the weakest members of society, but it is undeniable that the generation of wealth leads to improved prosperity for all.
It follows that, by the development of trade, the same can occur internationally: trade brings prosperity and wealth. Inevitably, that will not fall evenly, but the generation of international wealth will lead to a more prosperous world and help poorer countries. Much prosperity for some nations leads to benefit for all through demand for raw materials, the use of tourist facilities and, above all, industrial development. Those processes can be helped by encouraging the distribution of overseas aid, but it cannot be expected that such aid will be given at a level that would weaken the strong—that would be self-defeating. The development of world trade is, therefore, desirable in providing improving world living standards. It is also clear that living standards in less-developed countries improve dramatically with industrialisation, which is invariably trade related.
It is always comfortable to have one's prejudices confirmed and I believe that the Select Committee's inquiry confirmed the views that I have just expressed. Environmental considerations must remain important—indeed, of the essence of responsible development—even to the extent of sometimes shaping the form of world trade, but never preventing it, for to do so would be a breach of our responsibility to less-developed countries and to deny them opportunities to better the lives of their people.
My second concern—a nagging doubt—was that, in a complex commercial world where the negotiating position of less-developed countries, and companies based within them, was inevitably weaker than those of the developed world, opportunities for exploitation existed and were sometimes taken.
Mrs. Helen Jackson: I am sorry that I cannot stay for the whole debate as I have a meeting with Ministers. Does the hon. Gentleman agree that one of the issues that makes a difference in recognising whether environmental impact is sufficiently taken on board in trading regulations is the openness and availability of better researched information on environmental impact? A strand that ran throughout the investigation was the need for better environmental information on the range of projects, developments and movements taking place worldwide.
Mr. Thomason: The hon. Lady is right. There is clearly a lack of information in some less-developed countries, but that is an inevitable product of development advancement. Obviously, less-developed countries do not have the calibration equipment to measure properly air and water quality. It follows that testing mechanisms are not therefore available properly to compare the quality of their environment with that of the developed world. That, however, must be seen in perspective as part of the development process.
As I was saying, I was concerned about exploitation, by which I do not mean trying deliberately to trap a poorer country in that status indefinitely, for few in our present world would sustain such a position for long, but simply

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utilising weaker regulatory powers that must exist in such less-developed countries. That follows the points made by the hon. Member for Sheffield, Hillsborough (Mrs. Jackson) about equipment for testing and proper research. Improvements in standards might be discouraged to improve profit margins.
I am glad to say that our inquiry has led me to conclude that my fears were almost entirely, but not quite completely, groundless. Fast development in a country that may have little regulatory provision is often haphazard, uncontrolled and damaging. Sometimes it is the product of deliberate exploitation but more often, I suspect, it simply arises from the need to provide opportunities for those who previously had little. It is as much a product of a nation's internal pressures as of pressures from outside. What seems to happen is that factories are constructed with little regard to the protection of water or air quality; transport infrastructure is disregarded, with all the environmental consequences that flow from that; and the prospect of factory sites becoming contaminated is not even weighed in the balance.
Development opportunities will give a community the chance to fill empty stomachs—the environment can wait when people are starving. It was apparent to us, however, that that stage does not last long. A less-developed nation's people will soon appreciate that the quality of their life is suffering. As they move towards relatively better prosperity and, above all, education, an interest in the environment develops. It is a slow process, but it happens. The pressures often are as much external as internal, which is why the production of the Select Committee's report and the work of many international organisations and of our own and many other Governments is essential if environmental responsibility is to be encouraged to grow.
I also thought that companies might seek to take advantage of less-developed nations. There is some evidence that that takes place, but British companies can be proud of their position. We found that they generally take an extremely responsible attitude to development of plant overseas. Naturally, they must comply with local law, subject to its capacity to be enforced, but when that local law is of a lower standard than ours, they usually do much more than that. We heard and saw evidence that British companies create plant of as high a standard as they would expect to be built in this country, and operate it at standards that compare with those in the United Kingdom and other parts of the developed world. New plant in the less-developed world is often built to the latest standards, which may even be in advance of plant being operated in the developed world.
We hear too often criticism of British companies as alleged exploiters. Although there may be occasional exceptions, all our evidence showed that this is simply not the case. We should be proud of the work that British-based companies are undertaking throughout the world.
It is clear that the Government must give a higher priority to international environmental issues. That is not a criticism of what has been undertaken to date but a statement of what must be the objective for the future. If our Government, who generally have an extremely good environmental record, do not seek to lead the world,
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others cannot follow. The negotiations in Singapore, as well as past and future international discussions on trade, are the responsibility of the Department of Trade and Industry. That Department must, however, reflect the policies of the Department of the Environment in pursuing environmental objectives. This is a case where the seamless robe of government must be seen to be operating without flaw.
We must remind our alleged partners in the European Union, the United States, developed countries within the Commonwealth and others that the development of good environmental practices is not a hindrance to trade but a benefit. Ultimately, the degeneration of the environment leads to decay, as sure as cancer spreads through a body. To create long-terns prosperity and improve quality of life globally, we need good environmental conditions. Just as a healthy human body can develop better if it lives in clean conditions, so the world community will be able to flourish if it is in environmentally good form.
I do not seek to argue that we should over-regulate—perish the thought, for that could kill business. However, seeking to achieve reasonable environmental objectives throughout the world should be a fundamental aim of Government policy. I am glad that the Government broadly accept that position. I am concerned, however, that issues of employment law may divert attention from environmental aspects. Of course, certain aspects of employment law may be appropriate to be considered at international level, but the environment takes greater priority in the natural order of advancement of the less-developed countries and we should respect their agendas.
Nor should we forget that a deteriorating quality of life in one corner of our planet has a direct impact on ourselves. No country or continent can lock itself away from the rest of the world. What happens thousands of miles away affects the air that we breathe, the food that we eat and the oceans that lap our shores. The international environmental agenda must be ours; it is not just for someone else.
It has been a privilege to serve on the Environment Select Committee during this Parliament and, in particular, to be involved with the preparation of the report, which should be a significant contribution to developing the Government's position and continuing our nation's call for improved environmental standards without attacking the creation of wealth and the generation of new industry.
11.28 am
Mr. Matthew Taylor: In recent years, the interaction between trade and environment protection has generated much debate but little consensus. Yet, in theory at least, the international community is committed to both trade liberalisation and environmentally sustainable development. In principle, the pursuit of both objectives might be entirely compatible. Trade allows countries to specialise in the production of goods and services in which they are most efficient, and to maximise the return from the given use of resources, which is a movement in the direction of environmental sustainability. Furthermore, trade liberalisation can encourage the spread of environmentally friendly technology.
However, trade can also—and arguably often does—harm the environment. The benefits of lower costs through lower environmental standards go to the

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producer. The disbenefits of the environmental pollution that results fall on the entire community, and increasingly that means the global community. In other words, competitive trade can encourage producers to ignore the wider environmental costs of what they do, to maximise their own price competitiveness at the cost of everyone else.
A country that has accepted more stringent environmental controls may well find that it is undermined by competition from other countries with laxer standards and hence lower production costs. In practice, most of the evidence submitted to the Select Committee suggests that that has not happened. Higher environmental standards have been offset by the gains from greater efficiency. However, there is no doubt that Governments and industries have often resisted higher environmental standards for fear of losing competitiveness, or for fear of businesses relocating abroad to places demanding lower standards.
International market prices do not reflect the environmental costs of cutting down forests, polluting waterways, eroding soils and overfishing. We have international rules against selling products at less than they cost to produce, but environmental dumping may be rewarded in the global market economy.
To some people, such concerns still seem remote, but the environmental threats are real and, for many communities, so are the economic threats. My constituency is no exception. In the St. Austell area, for example, we have the largest site of opencast mining in Europe—not for coal, but for china clay. Thousands of clay jobs have been lost, partly through new technology and partly through increasing competition in recent years. In the clay area, there is understandably constant pressure for higher environmental standards to protect residents from dust, to protect traditional village communities from tipping coming too close and to protect what remains of the traditional landscape, flora and fauna.
Much has already been achieved in the area, to the credit of the county council and the clay companies, chiefly English China Clays, but the industry continues to warn that tougher standards could threaten its future and its competitiveness. The remaining 4,000 jobs in the industry in my community are under review again and more may be lost as new china clay deposits come on stream in Brazil. There, companies do not have to operate around existing villages—those can be swept away, if they exist at all—nor do they have to restore and revegetate the landscape after tipping waste on to it.
The fear in St. Austell is that the choice may be between protecting our environment but losing our jobs as the local industry becomes uncompetitive, and maintaining competitiveness, with the loss of our environment. I hope that it will not come to that, but in one of the poorest communities in Britain, the fear is real.
The conflict between the desire to protect the environment and the urge to increase trade will not go away. On the contrary, the combination of the growth in trade and the accumulating evidence of global environmental degradation seems likely to lead to more, and more serious, conflicts.
The World Trade Organisation committee on trade and the environment is an important first step to relieving those pressures, by incorporating environmental considerations into international trade policy, but the fear
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is that it is unbalanced in favour of trade. This week's WTO summit is the first opportunity to resolve those tensions. The purpose of our report was to influence the British and European position.
In response to our report, the Government said that they would accept many of the Committee's conclusions and recommendations, although they rejected some. There are times when I am not sure that the Select Committee went far enough. I urge the Government to reconsider their position on those issues.
My most serious concern relates to trade measures based on process and production methods. Recent general agreement on tariffs and trade panel decisions have differentiated between the environmental impact of products and the environmental impact of how they are produced—process and production methods. Countries are permitted to take trade measures—import bans, for example—against products that are harmful to the importing country's environment, so long as the same product is treated equally, whether it is produced by domestic or overseas producers. GATT panels, however, have ruled that such action is not permitted on the basis of process and production methods.
The logic of that decision is that process and production methods are highly country-specific. The same process may cause different environmental damage in different countries, depending on such factors as population density. Yet where the effects of pollution are international, such a differentiation is hard to justify. Carbon dioxide released in Asia, for example, causes just as much global warming as carbon dioxide emitted in Europe.
It is probably true that most of the serious pollution problems that we are facing arise from production processes, not the resulting products. An example is the use of energy in industry and agriculture. To combat such problems, important and effective multilateral agreements have been introduced on topics such as chlorofluorocarbons. When applied to world trade, however, such agreements are under constant threat of being undermined by current WTO rules.
Mr. Peter Bottomley: Does the hon. Gentleman agree that under the present WTO arrangements, a ban on fur from leg-hold traps, which Britain rightly imposed in 1954, would be considered an infringement of trade? Clearly, the product—fur—does no harm, but the way in which it was obtained was immensely painful to the animals.
Mr. Taylor: The same answer applies to global environmental issues as to animal rights and related issues. I shall briefly touch on that later, although the Select Committee came to the view that it was not immediate to our inquiries.
The hon. Gentleman's question demonstrates why it is vital that every opportunity is taken at Singapore to amend current WTO rules, so that we can discriminate against imported products on the basis of the way in which they are produced, through multilateral environmental agreements. Indeed, I would go further: where a threat is immediate and clear, such as the loss of an important species, we might need to allow unilateral action, under tightly specified circumstances. Nevertheless, global environmental problems are clearly best tackled through

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the negotiation of multilateral environmental agreements. International action is preferable to unilateral action, not least because it is more effective.
The issue becomes still more important in the context of the current negotiations on the framework convention on climate change, which are supposed to agree a control protocol by the end of next year. It is highly likely that such a protocol will contain trade measures, as they worked so well in the case of the Montreal protocol on ozone-depleting substances.
In that case, parties to the climate change protocol could be required to refuse to trade with non-signatories to the agreement, or at least to refuse to trade in products containing or made by processes that released such gases. As that could potentially include any product made with fossil fuels, it would provide a powerful incentive for countries to sign the climate change protocol.
If a climate change protocol contains measures allowing trade sanctions against non-signatories, it is essential that they do not become subject to challenge in the WTO, or the protocol is unlikely to be effective. It was fear of sanctions, not just growing environmental good will, that led so many to sign up to the Montreal protocol.
The hon. Member for Eltham (Mr. Bottomley) was correct to point out that animal welfare was a related issue. It is my view and that of the Committee that it should be given separate consideration by the WTO. I urge the Government to reconsider the decision not to accept that recommendation.
Many animal welfare issues entail processes—how an animal is caught, rather than what is caught. A presumption of compatibility must be firmly established between the WTO and multilateral agreements on animal welfare standards. At the same time, the topics of animal protection and welfare should be introduced into the remit of the WTO committee on trade and the environment, providing an international forum in which to discuss them further.
The WTO committee on trade and the environment is reporting to the ministerial conference this week. As I am sure the Minister is aware, the report contains almost no conclusions whatever—simply the statement that more work needs to be done. Discussions in the committee have been notably unconstructive, and it is questionable whether anything will be achieved in such a forum.
I believe that the underlying problem is that the committee is composed primarily of trade negotiators, rather than negotiators from environmental departments. The UK and the EC are among the few exceptions. As long as discussions on trade and the environment are carried out solely within a trade forum, it is unlikely that any conclusions favourable to the environment will be reached.
I hope that the Minister now accepts that a new trade round is needed, and that the environment should be one of the subjects of those negotiations. That would allow environmental protection measures to be discussed alongside trade liberalisation. That is likely to be the only way in which we can make progress, although Government support for the concept of an international panel of experts on trade and the environment,
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as proposed by the World Wide Fund for Nature, would be a positive step. I am disappointed that the Government have so far refused to take part, although other Governments have supported the proposal.
Even in the United Kingdom, environmental considerations are not always given the merit that they deserve. Let me reiterate the Select Committee's view that environmental policy objectives are not being taken fully into account in international negotiations. Trade negotiations this week are being led by the Department of Trade and Industry. The paper produced jointly by the DTI and the Foreign and Commonwealth Office, dealing with free trade and foreign policy, makes only one mention of the environment, and the Government have clearly still not placed it among their priorities for Singapore. I hope that the Minister will assure us today that environmental considerations will be a priority for British Ministers this week, as neither what the Secretary of State for the Environment said when he appeared before the Committee nor the Government's response to its report was adequate in that regard.
Perhaps the greatest block to progress, however, is the understandable fear in the developing world that environmental pressure from the developed world is simply a back-door block to competition. That fear must be recognised, and Britain has a special part to play in the overcoming of it, in two ways. First, we must understand that we have built much of our present wealth by committing enormous environmental destruction in the past. If we are to expect the developing world to behave differently, we must use some of that wealth to provide the aid that will help it to develop, and use more environmentally sustainable alternative technology. We must also remember that the 20 per cent. of the world's population in the developed world currently use 80 per cent. of the world's resources. We must accept an equally disproportionate part in reversing that excessive destruction.
In a world that is increasingly threatened by environmental degradation, we desperately need new rules and institutions to govern international trade. The Government have a chance this week to take the lead; I believe that, with our European partners, we have a real opportunity to do so, but I fear that that opportunity may yet be missed. I urge the Government not to allow that to happen. I hope that, at the end of this week, we may be able to say that Europe, and Britain in particular, has genuinely played a part in the taking of the next step.
11.41 am
Sir Irvine Patnick: To cover the report on world trade and the environment, together with the Government's response, and to distil it and make it understandable, would demand the services of a contemporary author: John Grisham springs immediately to mind. I approach the subject not only under the Whip's stricture, but suffering from the main handicap—shortage of time. There is also the need to allow others to speak, and to make the subject interesting, compressing my speech into a reasonable time while also expressing my own views.
I pay tribute to the many witnesses who appeared before the Select Committee, and to the people in foreign countries who not only answered searching questions but gave their unsolicited opinions in such a pithy manner.

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I thank all those involved in the Committee's deliberations, including the Chairman, whose views are well documented. He carried out his duty with his normal detached objectivity, and his rod of iron was replaced at times—not frequently enough—with a fleeting look of disapproval which was as effective, if not more so.
I also pay tribute, and express my gratitude, to my hon. Friend the Member for Bromsgrove (Mr. Thomason), who spent so much time on the detail of the Committee. I have admired his knowledge and the way in which he operates for a long time. He mentally kicks me under the table, as it were, to tell me, "This is the way in which we should be going, not the way in which you want to go."
Mr. Tony Banks: The hon. Gentleman needs kicking.
Sir Irvine Patnick: The hon. Gentleman is a great artisan of kicking.
I have endeavoured to break my speech into various sections. How, for instance, can Governments create a competitive advantage? During the Committee's visit to Singapore, Thailand and Malaysia, we were informed that some of the actions taken by developed countries were unhelpful to their area. The comment that sticks in my memory concerned hardwoods. The people there asked, in no uncertain manner—the way in which they asked the question, and the expression on their faces, gave it even more weight—why, now that the United Kingdom and parts of Europe had used their hardwoods, we should stop them from changing their economy by cutting down their trees because, by our standards, it was unacceptable. That is a pertinent question.
The removal of subsidies and other protectionist measures detailed in the general agreement on tariffs and trade has an escape clause in article XX(b), which allows countries to opt out of its obligation—or, in a nutshell, provides an exception
"necessary to protect human, animal or plant life or health."
When GATT was created, environmental protection was not high on the "things to do" list; nor, indeed, were many countries giving it the consideration that it deserved. Thankfully, countries now do, and the United Kingdom's first-ever audit of the environment—"This Common Inheritance"—and its yearly updates have focused on that important subject. But GATT is not the catch-all that many would have us believe; rather, it is one lever of a wider machinery, including CITES, the Convention on International Trade in Endangered Species—which regulates the wildlife trade—the Montreal protocol, which deals with substances that deplete the ozone layer, the Basle convention, which deals with the management of hazardous waste, and proposals from the European Community. All that information is now freely and readily available, so I need not spell it out in great detail.
Encouraging the spread of clean and efficient technology was one of the key issues during our visit to Singapore, where multinational companies operate to the highest European or United States standards—they do so wherever in the world the companies are situated. I was delighted to discover that. Know-how technology has also been exported, and, indeed, some British companies are developing models of co-operation that are attractive to developing companies overseas. Many of those countries constitute possible substantial markets both now and in the future.
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What those countries need is a good education system which produces a good reservoir of talent—which, in turn, produces good backgrounds in science, mathematics and technology. Many developing countries are not advanced enough in their education and training to take on and develop full industries of their own, acting instead as assembly plants for foreign countries. I pay tribute to British Aerospace, Rolls-Royce, Ford and, indeed, the university of Sheffield, which are prepared to develop and support companies and help them to plan for education and research, providing the expertise that is required. Such work is a valuable export for the United Kingdom, and we are all the beneficiaries.
Economic growth can lead to increased pollution, which is a major concern. We heard from several witnesses about that. One of the things that we noticed on our overseas travels was the fact that some trades created environmental problems. Again, some British-based companies were out there dealing with the problems created by pollution, including British water companies.
In their response, the Government picked up the points that we had made about the removal of trade restrictions and its environmental impact. In 1999, the Government will attempt to address those points in the next round of the World Trade Organisation negotiations, and I welcome that.
Many factors impact on environmental protection, one of which is competitiveness. Many companies in Britain adopt voluntary measures to improve environmental protection. Eco-labelling and purchasing policies both help the environment. If I have discovered anything, it is that it is hard to find eco-labelling when one is out shopping. People are more concerned with price, availability, quality, service and usability than with eco-labelling, and that problem should be addressed. It can place foreign manufacturers at an economic crossroads, and put the environment at a disadvantage.
Countries that do not help to protect the environment can certainly produce cheaper goods, but at the expense of the environment, and they may help to create more eco-dumping and pollution havens. I know that that concerns the WTO and the World Business Council for Sustainable Development, but I nevertheless agree with the Government and with principle 12 of the Rio declaration. I therefore urge the Government to continue to encourage industry to adopt good environmental management, and to participate in the EC eco-management and auditing scheme. I commend the Government for their clear commitment to that, as outlined in the third competition White Paper. I welcome the agreements on the vital role of the International Standard organisation.
Throughout the world, security and stability enable markets to function smoothly. As we discovered during our visits, supporting business is the largest single activity of our diplomatic posts abroad. I must pay tribute to the dedication, professionalism and commitment of the employees of British firms who were available to discuss their products at trade delegations. I was privileged to meet some of them at an exhibition in Malaysia. They are a credit not only to their companies but to this country, and we should be aware of their efforts on behalf of Britain's exports.
Many people draw attention to traffic congestion in the United Kingdom. They should see the traffic in Bangkok—if they want to see a gridlock, that is the place

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to go. We had a police escort, but it did not help at all. Bangkok insists that it is capable of solving its traffic problems through road pricing and taxation, but I think that this is a case of, "Watch this space."
In an interview, I was once asked what was the most evocative smell that I remembered. I replied that it was that of a joiner's shop. It is possible to-or at least I was able to—differentiate between the smell of oak, pine and other timbers. Like the smell of newly cut grass, such smells stay with one.
In March this year, we visited a major DIY store—B and Q—in Wandsworth. I was impressed by the way in which the store had taken to sourcing its materials, especially timber. It outlined the aims of the Forest Stewardship Council, which sets standards for sustainability. The work done to encourage villagers in some countries to manage and log timber themselves was a most interesting aspect highlighted during our visit.
As ever, when I see timber toilet seats, I recollect being told that the shape of the toilet seat was determined by the shape of the bowler hat of the foreman in charge of the joiner's shop. That was before my time, but the story lingers that the hat determined the inner dimensions of the seat.
To continue my flashback, when I was a building contractor, we used to take out the old high-flush toilets, washbowls and cast-iron baths. On the occasions when we did not take out the bath—it was heavy—we used to panel it in and replace the brass taps with chrome ones. Sometimes we simply replaced the toilet seat with a plastic one and put hardboard flush on beautifully panelled doors. The construction industry has now gone full circle—wooden toilet seats are back, the old-style baths are now worth a fortune and brass taps are being fitted again. The final turn of the wheel means that it is possible to buy a plastic door panelling kit to attach to flush doors and make them look like panelled doors. As they say in the trade, we have seen it all before.
Many factors affect trade and the environment. Some people may disagree with me, but I believe that awareness of the environment is now a fact of life. That is to be welcomed and worked on, and I contend that the Environment Committee's report entitled "World Trade and the Environment", together with the Government's response to it, have moved the debate on. They are documents that future generations will turn to in years to come.
11.52 am
Mr. Tony Banks: I found the speech of the hon. Member for Sheffield, Hallam (Sir I. Patnick) most moving, especially his eloquent tribute to Thomas Crapper. I pay tribute to all that the hon. Gentleman did in his early days to cover up any reminder of what that honourable gentleman did.
If the hon. Gentleman thought that Bangkok's traffic was bad, we must have been in Bangkok last night when some idiot jammed his lorry in the Blackwall tunnel, causing hundreds of thousands of Londoners to be inconvenienced to such an extent that some spent three hours or more blocked in the tunnel. I should not like to think that we are going to bring that aspect of Bangkok over here.
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The hon. Member for Bromsgrove (Mr. Thomason) is wrong—there is no antagonism to wealth creation on Labour Benches, certainly not under new Labour. However, we are opposed to wealth creation based on the gross exploitation of either human or animal resources. It would be crazy if we, as politicians, did not want individuals and communities to prosper, but we think that individuals, communities and countries will prosper that much better if they operate in a framework of concern for the environment. That, after all, is what the excellent report of the Select Committee on the Environment is all about. The hon. Gentleman's accusations do not bear critical examination.
I want to talk briefly about paragraph 170 of the Select Committee's report, the one part that deals with the Convention on International Trade in Endangered Species. Before the hon. Member for Eltham (Mr. Bottomley) left the Chamber to go to a meeting, he requested that I move into my restrained mode if I was going to talk about animals. He and I work closely on animal welfare issues, but he knows—I think that the whole House knows—that I find it very difficult to be restrained when talking about the exploitation of animal resources.
The gross exploitation of animal resources is appalling. Everywhere we look, we can find evidence of the gross inhumanity that human beings exhibit towards other creatures on the planet. I accept that much of it is done illegally, but much is still done in the pursuit of legal trade.
We have seen the Chinese keeping bears in appalling conditions and tapping bile from them because they think that it has medicinal properties. People stockpile rhino horn because they think that it is an aphrodisiac. In Yemen, rhino horn is used to create dagger handles, but it is also imported into this country. Customs and Excise recently seized a large number of rhino horns and I pay tribute to that work in trying to enforce CITES regulations. I know that many Conservatives feel as strongly as I do that the Government should give extra resources to Customs and Excise, to enable it better to enforce those regulations and stamp out the appalling trade in endangered species.
When the Minister replies, will he say a little more about the Government's response to the Select Committee's report in relation to illegal trade? Paragraph 20 of the Government's response states:
"The Department of the Environment is holding a seminar in October 1996 to identify practical ways to improve enforcement efforts in the UK."
Regrettably, I did not hear much about that seminar, and it would be helpful if the Minister told us a little more about it.
A report appeared in The Guardian yesterday following the publication by the World Conservation Monitoring Centre of its red list. The list comprises animals that are now endangered. The research, based on an assessment of the 5,205 species and undertaken by a network of more than 500 scientists worldwide, revealed that 25 per cent. of mammals, 25 per cent. of reptiles, 25 per cent. of amphibians and 34 per cent. of fish are threatened with extinction. That should concern us all.
It is all very well talking about the rights of fishermen and arguing with partners inside and outside the European Union about fishing regulations, but if fishermen are

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allowed to fish stocks to extinction, they are not only doing themselves out of a job, but destroying the ecology of the sea.
The hon. Member for Hallam mentioned the problem with hardwood in Thailand. The rain forests are of course under great pressure. Some less-developed countries are asking why they should not supply markets in northern Europe and north America with the hardwood that we need and why we should be restricting their ability to develop their economies.
We have to accept that argument, but we must acknowledge that rain forests belong to the planet as a whole. If the rain forests go, we go—it is as simple as that. It will be a long way down the road. It will not be us sitting in the Chamber. But eventually we shall drive ourselves to extinction by driving other species to extinction, because we are all interrelated.
Therefore, we should tell those countries that we shall put money and resources where our liberal consciences are. We should give them the resources to enable them to avoid over-exploiting resources that belong not just to them but to the planet. If they belong to the planet, all the countries on the planet must take responsibility for preserving those resources. We cannot expect single countries to do that on their own, particularly if they are in the less-developed part of the world economy.
Another problem which concerns a number of us and on which another report was issued last week is the booming trade threatening the world shark population. Sharks may not be the most attractive creatures in the minds of many of us, although to me they are a damned sight more attractive than the average Member of Parliament, but that is the way it goes.
Shark species are being exploited to such an extent that certain shark populations are reaching the edge of extinction. That is extraordinarily worrying and it should worry all of us. The trouble is that, in many cases, sharks are not listed as an endangered species and so are not protected. The trade is not regulated. It is appalling. For example, there is a big demand for shark fin soup. Hong Kong is one of the main areas where the demand flourishes, and it extends into China and throughout south-east Asia. One knows from evidence of shark fishing in Japan that the shark is taken out of the water, its fins are cut off and then it is thrown back into the sea. A shark has to keep swimming in order to live and without its fins it cannot and it dies a horrible, lingering death.
Such exploitation makes me extraordinarily angry, because it shows no concern for other life forms. It is at that point that I lose all sympathy with and sentiment for human beings. I may go a little further than most people, but I just hope that I am around when that asteroid crashes into the earth and wipes out all life forms, as happened 65 million years ago. I would like to raise my glass of champagne to the asteroid as it comes in. Nature will then be able to start again and come up with a species that is somewhat better than human beings at living in harmony with the other creatures on this planet. Unless we do that, we shall take many species to the point of extinction and beyond. That would be a calamity not just for those species but for all of us who are left. Every time one species is extinguished, we are all diminished by that act.
Unregulated trade, trade which has no concern for animal resources, is not the sort of trade that I, and I suspect other hon. Members, or Britain want. We want
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trade and prosperity, but it must be in sympathy with other life forms, particularly the animal life forms with which we are privileged to share the planet.
12.2 pm
Ms Joan Ruddock: It is a great pleasure to follow my hon. Friend the Member for Newham, North-West (Mr. Banks), with his enormous enthusiasm for the threatened species of the planet.
The debate is welcomed by the Opposition. It is an issue that Labour has taken seriously for a considerable time.
Sir Irvine Patnick: New Labour.
Ms Ruddock: New Labour, old Labour, every Labour—we have always taken the issue seriously. Labour's trade and environment protection team published a joint paper two years ago, "Trade and the Environment", and Labour's policies were further developed in our environment document "In Trust for Tomorrow" and the more recent foreign policy document "A Fresh Start for Britain".
We have no doubt that trade and the environment are inextricably interlinked and that many developing nations have suffered severe environmental degradation as a result of inappropriate development and trade.
The Select Committee's report, on which I congratulate particularly my hon. Friend the Member for Denton and Reddish (Mr. Bennett) and all his colleagues, is complex and tackles the difficult issues with some clarity and depth. Labour agrees with much of the report. It has 24 recommendations and conclusions which I cannot possibly address in the short time available to me. However, it is particularly timely, as other hon. Members have said, because of the Singapore conference.
I refer first to the role of the United Kingdom Government. The Select Committee expressed concern that UK delegations are failing fully to reflect the Government's declared environmental policy objectives, and recommended that the Department of the Environment increase its input into international trading negotiations.
The failure fully to reflect and implement the UK's environmental policy is a problem not just encountered in international gatherings. It is a problem to which I have referred at the Dispatch Box on numerous occasions, and one to which I referred in our debate on sustainable development last week. The Government do not take the environment sufficiently seriously and have certainly not integrated it into all aspects of their policies.
I am glad to say that the Government's response to the Select Committee's report acknowledges that there is scope for improvement. But on the environment, as in areas of domestic policy, the Government find themselves facing both ways. The Department of Trade and Industry is wholly committed to free trade and we may assume that that has been its stance in Singapore but, specifically on page 27 of the document "Free Trade and Foreign Policy: a Global Vision", the Government say:
"A liberalised trade policy and a high level of protection of the environment should be mutually supporting in contributing to sustainable development."
May I ask the Minister to say what precisely that means, particularly in the context of the World Trade Organisation conference? What input has the Department

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of the Environment had into the Singapore meeting? What environmental issues has the UK put on the agenda, and what progress is deemed to be being made in respect of sustainable development at that conference?
The Labour party supports the Select Committee's view that the relationship between multilateral environmental agreements and the rules of the general agreement on tariffs and trade must be clarified. What are the UK Government doing in Singapore to resolve that vital issue?
The Select Committee highlighted the European Commission's proposals to amend article XX of GATT to make it clear that trade measures within MEAs are allowable under GATT. In particular, the Royal Society for the Protection of Birds, with its concern for biodiversity, believes that that change is essential. The Government's response to the Select Committee's report shows that they are prepared to support that, but we ask the Minister today specifically to undertake that the UK Government will actively pursue that proposed change within the EU.
We were somewhat surprised by the Government's reluctance to support the international panel of experts that the World Wide Fund for Nature is trying to establish. That project is already supported by five Governments and the European Commission. Will the Minister tell the House today whether the Government, as the Select Committee recommends, are willing to discuss the matter further with the World Wide Fund for Nature? Labour endorses that and believes the proposal to be worth while.
I further endorse the request that has already been made to the Minister on the Forest Stewardship Council. Labour again supports the Select Committee's position and urges the Government to think again and to accept that that is the only scheme in existence at present which has support, so there is no excuse for the UK not to join in something that could have valuable international implications.
All hon. Members would agree that Britain is a trading nation. Our export performance is crucial to our overall economic success. We export a higher proportion of GDP than Japan, Germany or the United States. Britain's most important market is the EU, although one might not think so judging by the behaviour of half the Government. The single market is the world's largest economy, accounting for more than one third of global trade. As such, we have a major responsibility to ensure that we do not seek all the benefits of trade while foisting all the costs of environmental damage on developing nations.
We believe that trade can benefit the environment, both through economic growth and through encouraging the use of clean technology. It is vital that developing nations have access to modern clean technology so that the environmental destruction that is associated with past industrialisation in the north can be avoided. The interest of companies in patents to protect their investments in new technologies must be balanced by reasonable arrangements for developing countries to have access to technology transfer.
Labour is committed to a system of international trade that is open, fair and sustainable and thus raises the standards of developed and developing countries alike, but countries will open their economies to trade only if
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they can be assured of reciprocal action by others. That is why international trade must be based on agreement and be policed by a system of international regulation.
Labour welcomed the conclusion of the Uruguay round of the general agreement on tariffs and trade and the creation of the World Trade Organisation, but we believe that more reform is still necessary, in particular to ensure that the benefits of free trade are generated in a fair and sustainable way. Thus a Labour Government will seek to amend GATT to make it clear that signatories have a right to protect natural resources and that that should refer not only to resources within the jurisdiction of the acting state, but to the "global commons".
Labour will also extend free trade agreements to include services and intellectual property rights. We will ensure that international environmental agreements are made exempt from challenge under the World Trade Organisation, including the Montreal protocol, the Basle convention, the Convention on International Trade in Endangered Species and the biodiversity and climate conventions. We endorse what my hon. Friend the Member for Denton and Reddish said on forestry conventions.
It is crucial that Britain plays a leading part in international efforts to create a stable international macro-economy that supports trade, employment and international stability. We hope that progress might be made on those issues in Singapore, but, like other Members today, we feel that there is not much evidence of that happening.
The WTO is not the only international body that must deal with the vital issues of trade and the environment. The United Nations too must have an enhanced role in co-ordinating international economic, social and environment policy. Labour will press for a greater role for the UN Environment Programme and for the Commission on Sustainable Development in the promotion of sustainable economic policies among UN member states.
The issues of trade and the environment are inextricably linked with those of aid and development. The protection of the global environment cannot be postponed until developing countries grow rich. Nor can it be achieved by keeping developing countries poor. Clearly, aid has a critical role in bringing about sustainable development. Labour in government will urge other institutions, including the World bank, to lend increasingly to agriculture, particularly to small-scale farming, and to integrate environmental sustainability into all aspects of the bank's work. We will report regularly to Parliament on the work of the World bank and of the International Monetary Fund and on the UK's role.
Under Labour, aid programmes will be audited for environmental impact and underpinned by a commitment to environmental sustainability. In Europe, Labour will work for greater consistency between European Union aid, trade, agriculture and economic reform policies and improvements to EU aid development programmes in relation to the environment.
There is no doubt that internationally agreed standards should be a floor for environmental protection and not a ceiling, although states must remain free to adopt higher standards if their populations demand it or if their environments are particularly vulnerable.

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This has been an excellent debate, for which we would all have wished for more time. There has been much agreement both with the report and with the sentiments that many of us have expressed from personal experience, but what really matters is action. The Minister has asked that I allow him a little more time because he wants to make some statements. I hope that he will respond to our concern on the Singapore conference and give a specific response to our questions.
12.14 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. James Clappison): This has been a good debate with some interesting speeches. I welcome the contribution from the hon. Member for Denton and Reddish (Mr. Bennett), who set the scene well. He knows that the Government welcome the work of his Select Committee in highlighting the often difficult and complex issue of trade and the environment. He gave an expert view on the various multilateral environmental agreements and the issues that concern his Committee. In the time available, I will endeavour to answer the specific points that he and others have raised.
The hon. Member for Denton and Reddish raised generally the subject of the three important multilateral environmental agreements: the Basle convention, the Montreal protocol and CITES. It is important to improve the operation of each of those agreements, which each cover issues of great global importance.
The hon. Member for Newham, North-West (Mr. Banks) asked in particular about the operation of CITES. He mentioned the seminar in October, which was organised by my Department, on combating environmental crime. The agencies that took part in the conference included the Environment Agency, the police and Customs and Excise, which are involved with the enforcement of wildlife law. The conference's aim was to bring those agencies together and to improve the practical enforcement of environmental law, and for the agencies to share their different and important experiences. It was a worthwhile conference and we hope to build on its work.
The hon. Member for Newham, North-West generously referred to some of the recent successes in enforcing wildlife law, particularly in seizing illegal goods such as rhino horns. Such goods cause great offence to many right-thinking members of the public, who hate the idea of those goods being traded to the disadvantage and possible extinction of species elsewhere in the world. I join him in what he said about that.
The hon. Member for Denton and Reddish also raised the subject of eco-labelling. He knows that we fully support the European Union eco-labelling scheme and the EU's efforts to argue for an effective World Trade Organisation regime that promotes full transparency in the development and operation of voluntary eco-labelling schemes, based on a life cycle approach.
My hon. Friend the Member for Sheffield, Hallam (Sir I. Patnick) mentioned that it is difficult sometimes to find goods with eco-labels on them. Certain types of washing machine have an eco-label. We want more such goods in the shops so that consumers can contribute to the environment by making environmental decisions.
On the Forest Stewardship Council accreditation scheme, we are interested in sustainable forestry. The hon. Member for Denton and Reddish will know that we have
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set out our plans for sustainable forestry and in particular the forestry standard. The Forestry Commission is carrying out consultation on a draft national standard. It is discussing differences between the United Kingdom forestry standard and the council's scheme. The hon. Gentleman will know from the evidence given to his Committee that some aspects of the scheme's criteria need investigation. No doubt the Forestry Commission will discuss those aspects with the council and it is right that those discussions should take place.
Mr. Bennett: Will the Minister give way?
Mr. Clappison: Very briefly. I have much ground to cover.
Mr. Bennett: Does the Minister agree that it is important to establish a worldwide standard and that matters cannot be left to individual countries?
Mr. Clappison: There is certainly a logic behind worldwide efforts to maintain sustainable forestry. Britain has played its part in those efforts by entering into a number of European and global agreements. The hon. Member for Lewisham, Deptford (Ms Ruddock) will be aware of the important part that we played in promoting forestry at the Rio summit.
The hon. Member for Penton and Reddish also referred to domestically prohibited goods. He will know that several separate agreements are in place or under negotiation requiring the identification of specific categories of goods. The World Trade Organisation committee on trade and the environment is producing a database that will cover existing agreements, but it will be necessary to return to the subject in future.
Before turning to Singapore, which has been the subject of a great deal of interest during the debate, I should like to address other specific matters that have been raised during the debate.
My hon. Friend the Member for Bromsgrove (Mr. Thomason) made an excellent and well-informed speech that reflected his role in the Select Committee. He was absolutely right to draw attention to the benefits of trade for developing countries and the way in which trade can spread high environmental standards. He drew attention to the high standards in United Kingdom companies which were borne out by the evidence given to the Select Committee and rightly concluded that we should be proud of their efforts on the international scene. The United Kingdom has a good environmental record both in Government and industry. My hon. Friend drew attention to the need to set a continuing high standard in future. We cannot be complacent. We have achieved a great deal and we must look forward to further challenges and further achievements by industry and Government.
The hon. Member for Truro (Mr. Taylor) made an interesting speech in which he used the situation affecting china clay in his constituency as an example of the difference between process-based environmental rules and product-based trade rules. It is an interesting subject. In our response to the Select Committee report and our earlier evidence to it, we recognised that there is sometimes tension between those two sets of rules which have developed against different backgrounds.

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Let me reiterate what we told the Select Committee. We consider that it would be helpful to explore the potential difficulties caused by different approaches and to examine the scope for solutions that, while avoiding undermining the multilateral trading system, could minimise the risk of conflict between the two systems.
Mr. Matthew Taylor: I hope that the Minister will be able to let us know whether any progress has been made at Singapore. All members of the Select Committee would like to know what is happening out there.
Mr. Clappison: Before I mention Singapore, let me turn to an important subject that was raised by my hon. Friend the Member for Eltham (Mr. Bottomley) in his intervention about animal welfare. I know that my hon. Friend had to keep another appointment. He does not need me to say what a keen advocate he is of animal welfare, as indeed is the hon. Member for Newham, North-West.
My hon. Friend the Member for Eltham raised the important subject of the leg-hold trap. He would be the first to understand that it would not be entirely desirable for me to speculate on the legal position of the World Trade Organisation rules in that respect. However, I certainly join him in recognising that leg-hold traps are cruel. The Government have long recognised that they are a cruel way of trapping animals and we have been working hard with our fellow European Union countries to uphold the original EU regulation that set out to ban leg-hold traps. We have been trying to keep the European Union steady to that aim. The House will be aware of recent developments, but our overriding aim is to uphold that regulation and minimise the cruelty to animals caused by leg-hold traps.
The hon. Member for Newham, North-West proposed bringing animal welfare into World Trade Organisation rules. He spoke with a strength of feeling on the subject that is widely shared among the public. He will realise that we have to work with other countries and we need more of an international consensus about animal welfare and trade rules. I entirely agreed with the hon. Gentleman when he said that we are all diminished when we lose other species. That is the thinking behind our contribution towards the Convention on International Trade in Endangered Species, our biodiversity plans and what we are doing to help other countries protect their biodiversity. I am sure that we all agree that it is an important subject.
My hon. Friend the Member for Hallam made an interesting speech drawing upon personal experience. He rightly highlighted the high standards set by British companies and observed that British-based companies are often involved in cleaning up pollution abroad. He drew attention to the role of water companies since privatisation in assisting other countries to deal with their pollution problems. I agree whole-heartedly with what he said about British business men who work overseas helping other countries and promoting our export efforts. He rightly paid tribute to their magnificent professionalism and their important role globally.
I have been asked about Singapore, which is of great interest to the entire House. The Singapore meeting is a useful opportunity to consolidate the work of the World Trade Organisation committee on trade and the
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environment. The committee has proposed a report on its work so far. I hope that we shall agree that the committee should continue its work.
I agree with hon. Members that it is disappointing that the committee was unable to agree on the need to clarify World Trade Organisation rules on trade measures taken under multilateral environmental agreements, but we look forward to continuing that work after Singapore.
I shall address the speech by the hon. Member for Deptford in a moment, but she should bear in mind the fact that we need to work internationally to reach agreements with developing countries and other developed nations. I am not sure whether some of her comments took account of that need.
I was asked what we consider to be important for the future. There are some important topics for the World Trade Organisation to explore as part of its further work. We have identified six topics as the focus of major international efforts in the near future.
First, we consider multilateral environmental agreements to be the most effective response to trans-boundary and global environment problems. We support the efforts of the European Union to clarify the relationship between trade measures in multilateral environmental agreements and GATT. If the hon. Lady is trying to suggest that there is some doubt about that, she is wrong.
Secondly, environmental policies based on processes represent an important task for the future. Thirdly, we support further examination of environmental effects. We should like to see more analysis by the World Trade Organisation of the potential environmental effects of trade proposals as they are developed. Fourthly, in respect of spreading environmental principles, there needs to be a better understanding among those concerned with trade policy of the principles and concepts underlying environmental laws and policy. Fifthly, market access for the least developed countries was of particular interest to the Select Committee.
Ms Ruddock rose—
Mr. Clappison: I shall not give way to the hon. Lady at this stage. I read with interest what the Select Committee said about the need to give assistance to developing countries to be represented and to make their own contributions.
Sixthly, we held a seminar on combating illegal trade in endangered species, chlorofluorocarbons and hazardous waste.
Ms Ruddock rose—
Mr. Clappison: Before the hon. Lady gets too carried away, I would draw her attention—
Ms Ruddock: I should like some answers.
Mr. Clappison: I have given the hon. Lady and the House many answers in a short time.
Ms Ruddock: What about Singapore?
Mr. Clappison: On Singapore, I have identified what we believe are the important subjects for the future.

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The hon. Lady would do well to listen to what we have done so far. We have contributed $40 million to the multilateral fund of the Montreal protocol that was set up to meet agreed incremental costs to developing countries. That is achievement, not just talk. We recently agreed a further $29 million funding for the next three years of multilateral fund operations. Having committed £130 million so far, the United Kingdom is the fifth largest donor to the global environment facility—a project that helps developing countries and other countries in transition to meet their obligations under the biodiversity convention and the climate change convention.
The hon. Member for Deptford mentioned Singapore and made a number of false points in her speech. At the beginning, she seemed to be attacking free trade; she went through a little doubt in the middle; and, by the end, she was saying how important free trade is. The Government are in no doubt. We realise that at the Singapore meeting it is important to talk about trade and the taking down and keeping down of unnecessary trade barriers, from which historically this country has benefited so much. Free trade also has the capacity to benefit developing countries in future. There is no equivocation on the Government Benches; we support free trade.
The Government set a high premium on environmental protection, as the hon. Member for Deptford knows. We have achieved a great deal, which is there for all to see in our policies and our commitment to sustainable development. If she is interested in that, she would do well, as I told her last week, to look at her party's manifesto, which does not mention sustainable development, let alone free trade and the environment. Her contributions last week and today—
Mr. Deputy Speaker (Sir Geoffrey Lofthouse): Order. We must move to the next debate.

Prison Estate (Isle of Wight)
12.30 pm
Mr. Barry Field: I should like to put two points on the record. First, I thank Madam Speaker through you, Mr. Deputy Speaker, for granting me this debate. Secondly, a jaundiced view is currently going round that somehow the art of debate, and its effectiveness in the Chamber, has lost some of its currency over recent years. However, the effect of securing a previous Adjournment debate on behalf of my constituents about a constituency problem—this debate also concerns a constituency problem—was remarkable, and with the help of the Isle of Wight council officers, we got a result. I therefore hope that no one will ever say, certainly in my hearing, that Parliament's effectiveness has been reduced over the years.
When I entered the House in 1987, I was told that the very best way to get on was to want for nothing. I had a check list of matters concerning the Isle of Wight that was slightly longer than a supermarket till printout, and gradually I have managed to put ticks beside the items. I am sure that the Minister, my hon. Friend the Member for Maidstone (Miss Widdecombe), who I am delighted will be replying to the debate, will be pleased to know that the subject of the debate is just about the last major problem that I inherited on being elected. I hope that the debate, which concerns the case of the residents of the prison residential estates of Albany, Camp Hill and Parkhurst, will lubricate a solution for my constituents, not hinder it.
In May 1984, the Home Office requested that the Isle of Wight county council adopt the prison estate roads on the Albany, Parkhurst and Camp Hill residential estates. Residents were subsequently asked by the Home Office in January 1985 for £131 a household towards road maintenance, but very few paid and those who did were refunded. Following a decision to sell prison officers their homes and the implementation of the "Fresh Start" policy, a number of serious problems arose.
The problems were brought to my attention in July 1988 when the island was accepted as a water metering trial area. I was alerted to the fact that residents paid their water bills directly to the prisons and not the water company. Even more curiously, the governors of the three island prisons debited the residents for their water consumption. I wrote to the Home Office about that and the adoption of the estate roads. Southern Water considered that the water supply pipes on the estates were not up to standard. A reply from the then Minister on 27 October 1988 stated that there was no question of the water supply pipes being renewed or adopted by the Home Office.
Following a meeting that I had at the Home Office on 8 November 1988 with the then Minister and his advisers, the Home Office wrote to Southern Water on 20 December 1988 to request that water meters be installed in prison estate properties. Agreement was reached with Southern Water and the Home Office in March 1989 for a new water mains supply and pipes, which was concluded in June 1989 and cost all the estates nearly £200,000. The amount covered the total cost of the new mains and one half of the cost of connections to individual properties. I must make it clear that the other half was met by the Department of the Environment under

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the water metering trial areas financing scheme. I took up the matter again in September 1989, when each household was asked to contribute £250. On 7 June 1991, a letter from the then Home Office Minister stated:
"I can confirm that the Home Office has paid for the work in connection with water metering and installation of pipes."
On 21 August 1991, the then Home Office Minister wrote to me about the cleansing, maintenance and weed growth on the roads and footpaths. That letter stated:
"Unfortunately, it has become increasingly difficult to find suitable inmates and resources"
to undertake maintenance work on roads, verges and payments. Hitherto, prisoners had formed work gangs to maintain estate roads and the general environment. Surely the letter is a clear admission of the Home Office's liability for the roads.
Another letter from the Home Office on 18 January 1993 said:
"The Head of Works has been concerned about the condition of street lighting."
Three years later, no action has been taken on a system that is by now well over 20 years old. That letter is surely another clear admission of the Home Office's liability.
Recently, the No. 30 bus service was withdrawn because the Home Office refused to allow a double-decker through the estate due to the Home Office's three-tonne limit on estate roads, yet prison vehicles way in excess of three tonnes regularly use the roads. Are my constituents to become responsible for the damage that will be caused by the weight of those vehicles on the roads if they are to assume liability as the Home Office has requested? Surely the fact that the Home Office has imposed its own weight limit is another tangible sign of liability and one that cannot be transferred to the residents.
In 1991, the residents sought a legal opinion. At the time, Mr. Attwater was the chief estates officer for the Home Office. The legal opinion stated:
"Continuing with legal points, it was suggested by Mr. Attwater"
at a meeting with the residents
"that the Residents in fact own the roads as there was a presumption in law (according to him) that a private highway was owned by adjoining landowners up to the middle of such highway. He stated that this was the view of the Treasury Solicitor."
The advice to the residents was that the solicitor did not accept that interpretation for one minute. The solicitor said:
"There may well be such a presumption but it can be easily rebutted by other evidence. In the first place, each householder is given a right of way over all the roads and footpaths without any reservation for the particular piece of highway in front of his land. Secondly, the Conveyances (which are modern), make no provision for such a statement in the Conveyance, which one would expect. Thirdly, if there was such a provision, either expressed or intended, one would have expected the Home Office to have reserved a right in all Conveyances to use the roads and footpaths.
The Home Office does not do this for the simple reason that it is not necessary. Undoubtedly, the Home Office has retained ownership of the roads in question."
He goes on to address some other points.
"Quite apart from all this, it would appear that the Home Office spent £13,000.00 on the roads a few years ago, and then called for a contribution from residents."
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As I have already said, that contribution was in fact not paid by the majority of the residents and those who did had the money refunded. He continues:
"This will be quite incredible if the Home Office was now found not to be the owner of the roads after all."
He addresses the point about the street lighting:
"it seems that by mistake, provision for this was not put into the Conveyances. The Home Office has paid for street lighting ever since. Again, this would be an incredible thing to do if the Home Office was no longer the owner of the roads in which the street lighting is placed."
I reach a number of conclusions. The first is that a conditioned precedent was established when the Home Office, which at first refused responsibility for the supply of water to the residents, subsequently admitted that liability by paying for the installation of pipes to a standard that made them available for adoption by the water company. That is what the residents are asking for in respect of the street lighting and the roads. My second conclusion is that, by demanding money for the maintenance of the roads more than 10 years ago and then refunding the money, the Home Office has again admitted its liability for the maintenance of those estate roads.
The legal opinion that the residents obtained will be of considerable interest to my hon. Friend the Minister. When I became the Member of Parliament, I had a queue of prison officers in my constituency surgery each week who came to complain about the delays in the conveyancing of their homes by the Treasury Solicitor. As a result of my intervention, the Treasury Solicitor's services were dropped by one of my hon. Friend's predecessors and a local solicitor—on the mainland, I hasten to add—was appointed to take over the work. One of the first comments made by that solicitor was that the properties should not have been conveyed without a proper estate management committee having been set up. By that time, it was too late and, despite a real attempt by that solicitor's firm to sort out what is a mess, to put it politely, it was not able to do so.
My third point for my hon. Friend is that I hope that she will not rely on the Treasury Solicitor for advice on the matter because her Department has already dropped that source. The Home Office itself has sought and appointed outside advisers. Further, the legal opinion obtained by the residents happens to have been written by a solicitor whose advice is so treasured by the Home Office that it has subsequently confirmed his appointment as Her Majesty's coroner for the Isle of Wight, so I know that my hon. Friend the Minister would not wish to call into doubt the advice that he gave the residents.
My fourth point is about the reduction in the extent of Crown immunity, on which I and my hon. Friend the Minister have campaigned for some years and which is making progress as a result of the Gracious Speech. One of the points that the coroner for the Isle of Wight rightly made when he was a local solicitor in his advice to the residents is that Crown immunity is involved in the problem. I believe that that has receded into the distance and the Crown can no longer hide behind that immunity. By its actions and to some extent its defaults, it has admitted liability in its entirety.
I have one final point to ask my hon. Friend the Minister as a matter of detail which has not come out in correspondence. If the Home Office seriously maintains that there is an apportionment between the residents and

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the Home Office, how many hundredth is the Home Office claiming that it owns compared with the residents? I understand the Home Office's situation, but the dwellings were not sold at a price that recognised the liability and the Department cannot hope to visit the sins of the Treasury Solicitor on the residents of the isle of Wight—at least, not so long as I am the Member of Parliament.
In conclusion, I wish to place on record the considerable help and assistance that I have received from Richard Tilt, the Director General of the Prison Service, and his staff, and from Felix Hetherington and his staff at the Isle of Wight county council. I tried to find a solution in a land swap between the two parties that would be of such value as to make the debate unnecessary. I come to the House not as a first resort, but as a last resort and I hope that—as a result of the debate and the good will that exists on the Isle of Wight for the prisons and that exists between the Home Office and the Isle of Wight county council and as a result of my hon. Friend the Minister's intervention—when we ring out the old and ring in the new, we shall find a solution to one of the final problems that has sat on my desk for too long.
12.45 pm
The Minister of State, Home Office (Miss Ann Widdecombe): I congratulate my hon. Friend the Member for Isle of Wight (Mr. Field) on obtaining the debate and also on the tireless way in which he represents the interests of his constituency. I do not know whether to be more sad or relieved that this is his last remaining problem, because that would deprive us of his ready eloquence. I feel like saying that I hope that he will find other problems, but I do not quite mean that and I am sure that he will continue to represent his constituency with all the vigour that he has shown in the past. If, as I have good reason to suspect, my hon. Friend is not satisfied with my response, I am willing to meet him, with my officials, to see whether we can make any further progress or obtain any further clarification. I may also say that my hon. Friend has shown a consistent interest in prison issues in general, for which I am extremely grateful—most of the time.
Since 1989, as part of the discounted sales scheme, the Prison Service has sold off some 90 per cent. of its housing on the former staff residential estates of Albany, Camp Hill and Parkhurst. Since then, as my hon. Friend pointed out, residents have complained that roads and services on the estates have not been maintained, and have argued that the Prison Service should retain responsibility for their maintenance.
During the past year, the Prison Service has made considerable efforts to resolve the difficulties. Prison Service officials have met representatives of the local residents associations on a number of occasions, and the Director General of the Prison Service met my hon. Friend on 18 March. On that occasion, my hon. Friend acknowledged that the difficulties experienced by the residents were complex, and suggested that the Prison Service arrange for the Isle of Wight council to adopt all liabilities on the estates, in exchange for the release of Prison Service land to the council.
We agreed to explore that possibility, and Prison Service officials met Isle of Wight council officials on 22 March to discuss my hon. Friend's proposal.
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However, on 29 June, the Isle of Wight council rejected the proposal, stating that it felt that it would be taking on liabilities and responsibilities far in excess of the value of the land offered. Prison Service officials met again with Isle of Wight officials on 21 October, when it was agreed that there was no quick and acceptable solution to improving the roads and services on the estate. While the council was prepared to assist with any improvements, it said that it was unable to provide capital funding for any maintenance work.
In an attempt to resolve the impasse, the Prison Service subsequently agreed that the Isle of Wight council should commission a feasibility study to establish the scope and cost of the maintenance work needed to bring the roads and services on the Albany estate to an acceptable standard for adoption by the council. While agreeing, in principle, to undertake any maintenance work, the council requested that the Prison Service should provide capital funding in advance that would then be recouped from the residents. On 29 November, the Isle of Wight council advised the Prison Service that the cost of upgrading the roads on the Albany estate would be in the region of £215,000. The Prison Service is currently considering how that work might be taken forward.
However, it would be wrong for the Prison Service to retain a responsibility for the maintenance of services to those properties. The conveyance documents—which I have been shown by the Prison Service—under which sales of the houses were arranged clearly set out the position on maintaining the roads and services applying to the properties. Although they did not include the estate roads, the conveyances for houses on the Camp Hill estate stated that there would be an obligation on the new owners to contribute to the cost of maintaining roads, footpaths, sewers, drains, water courses, gutters and electric street lighting. The conveyances for houses on the Albany estate included the transfer of ownership of the roads and made it clear that the new owners would have responsibility for maintenance, repair and removal of sewers, drains, water courses, gutters and street lighting. The conveyances for houses on the Parkhurst estate included a mixture of those conditions.
The conveyances provided for the new owners to contribute to the cost of any maintenance and improvement work. Each resident who accepted the terms of the discount sales scheme should have sought appropriate legal advice before accepting the conveyancing terms.
An independent firm of chartered surveyors, Gerald Eve, has confirmed the Prison Service's view about the terms of conveyance of the properties. Government property lawyers have confirmed that the Prison Service has no legal obligation to carry out maintenance and repairs to roads and services for the properties.
The Prison Service now owns only a small number of properties on the estates. It cannot continue to invest in those private estates from moneys voted by Parliament for the maintenance of operational prison establishments. The residents have therefore been given notice that they will be required to pay for the maintenance of roads and services in accordance with the terms of sale of their properties.
It is clear that responsibility for maintenance costs lies with the residents. That is set out in the terms of conveyance of the properties. The Prison Service has

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attempted to resolve some of the difficulties and will consider future proposals, but it is under no legal obligation to carry out maintenance work. In future it will carry out work only after consulting local residents and obtaining their agreement that they will fund such work.
Mr. Barry Field: I am pleased to hear my hon. Friend say that. The residents were told that if they did not get themselves organised to continue the street lighting, it would be turned off. That seems a pretty brutal arrangement, particularly in a community in which the two parties co-exist so well.
Miss Widdecombe: The conveyance made clear where the responsibility for street lighting lay. It would not be proper for the Prison Service to take responsibility for the lighting. It is right that local residents should adopt the responsibilities clearly shown in their conveyances. The Prison Service will, of course, continue to repair and maintain the access roads to the prisons.
I do not wish to dismiss the issue, but the legal position is clear. The Prison Service and I remain willing to consider any proposals that the residents, the council or my hon. Friend may wish to submit. In that spirit of co-operation, I hope that we shall be able to resolve this complex issue.
12.53 pm
Sitting suspended.
On resuming—
1 pm
Mr. Don Dixon: On a point of order, Mr. Deputy Speaker. I was greatly involved in the discussions on the Jopling recommendations and the Adjournment debates on Wednesday mornings. At no time during those discussions was it stated that, if a Minister was not on the Front Bench when the previous debate finished, the debate could not begin. However, I think that it was stated that, if the hon. Member with the next debate was in his place, it could go ahead, and that there should be no suspension of the House because the Minister was not in his place. Has there been a change since the Jopling recommendations?
Mr. Deputy Speaker (Sir Geoffrey Lofthouse): As far as I am aware, there has been no change. This is a 1 o'clock debate. If the hon. Member and the Minister are present and the previous debate ends early, it has been the practice that the next debate can begin. But there is no obligation on a Member or a Minister to be here before the allocated time. This debate was scheduled for 1 o'clock. The Minister was not present, so it could not go ahead.

Cyprus
1.1 pm
Mr. Tom Cox: At the start of this debate, I acknowledge the presence of the mayor of Famagusta, Mr. Andreas Pouyouros, and the deputy mayor of Famagusta, Mrs. Sophie Photidis, who have travelled from Cyprus to hear this debate. Earlier this morning, they presented a petition to the Prime Minister at 10 Downing street, calling for the return of Famagusta.
Famagusta was one of the loveliest towns in Cyprus before the Turkish invasion in 1974. Now, it is a ghost town. Yet, time and time again, its return has been promised by Mr. Denktash. However, its rightful owners still await the return of their town, lands and property. I hope that today the message of this House will be clear and loud—Famagusta is Greek Cypriot; it is not and never will be Turkish. When I, the people of Famagusta and hon. Members talk about the return of Famagusta, we talk about the total return of that town to its lawful owners.
This debate takes place a matter of days before the visit to Cyprus of the Foreign Secretary, and I warmly welcome that visit. It has certainly taken a long time to get a senior Foreign Minister to visit Cyprus to discuss solely the affairs of Cyprus. I will listen with great interest to the comments of the Minister of State today about that visit.
The Foreign Secretary's visit has been clouded by his remarks on the application by Cyprus for membership of the European Union, which were highly inappropriate before such a visit. We now hear more and more that a settlement is needed first. All of us in this House who are involved in Cypriot affairs wish for a settlement, and we have campaigned for many years for an honourable settlement that protects the rights and security of Turkish Cypriots just as much as Greek Cypriots.
The record of the Republic of Cyprus since the 1974 invasion in trying to work for a settlement for the benefit of Greek and Turkish Cypriots shows that there can be no doubt about its commitment. But it is totally unacceptable to Cyprus and to many hon. Members of all parties for obstacles now to be put up to Cyprus's membership of the EU. Sadly, the Foreign Secretary is playing into the hands of Mr. Denktash and his Turkish supporters by giving them yet more encouragement to delay—as they have been doing, in the view of many of us, since 1974—their obligation to work for an honourable settlement.
The case for Cyprus and its application for membership of the EU should be considered on merit and nothing else. Turkey and Mr. Denktash must be told repeatedly—I hope that we will hear the Foreign Secretary say this during his visit—that Turkey has no veto on Cyprus's application to become a member state of the EU. Discussions of the tragedy of Cyprus have gone on since the invasion of 1974, involving countless people—many of them very honourable—who have worked for a settlement, so we know what the issues are.
Much of the country is occupied, and in referring to Famagusta, I must add that I and my colleagues are equally committed to the return of Morphou and Kyrenia. We want all the occupied areas of Cyprus, and all the land and property that has been stolen, returned to the rightful owners.

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Listening to the debate today are British and Cypriot trade unionists, and I pay the warmest tribute to George Wright, the Welsh secretary of the Transport and General Workers Union, and to his colleague, Jim Hancocks. To their credit, they have brought together Greek and Turkish trade unionists to discuss their future and their country. I hope that we will listen to these men and women, whose home is in Cyprus and who come from a whole range of professions. They say that they want a free Cyprus where they can live and work together, and our duty is to support them.
Surely, after 22 years of the occupation of a Commonwealth country for which we are one of the guarantor powers, we have a duty to start working for a free and united Cyprus. The message of the House and this debate must be very clear. When we talk of one Cyprus, we talk of the Republic of Cyprus where Greek and Turkish Cypriots will live, work and prosper together.
I have deliberately shortened my speech because other hon. Members may wish to speak: I acknowledge the presence in the Chamber of my hon. Friends the Members for Knowsley, South (Mr. O'Hara), for Hornsey and Wood Green (Mrs. Roche), And for Ogmore (Sir R. Powell), my right hon. Friend the Member for Jarrow (Mr. Dixon) and my hon. Friend the Member for Mansfield (Mr. Meale), and the hon. Members for Hendon, South (Mr. Marshall) and for Edmonton (Dr. Twinn), the last of whom, I know, hopes to catch your eye, Mr. Deputy Speaker.
1.9 pm
Dr. Ian Twinn: I gladly declare an interest, having been a guest of the city of Morphou and of the House of Representatives in Nicosia this summer. I congratulate the hon. Member for Tooting (Mr. Cox) on securing this debate while the citizens and the mayor of Morphou are in the Palace. I hope that some people outside the House will hear what we have to say.
Famagusta, Morphou and the north of Cyprus have been occupied for 22 years, which is far too long. British parliamentarians have a responsibility, as the representatives of a guarantor power, to bring back peace to Cyprus, so that both communities can live together again.
I congratulate my right hon. and learned Friend the Foreign Secretary on grasping the Cyprus nettle and agreeing to go there to meet both Mr. Clerides and Mr. Denktash. A solution can be found only if both sides talk together. The history of Cyprus is full of minefields for any politician who visits, and it will not be easy to find a solution, but in my heart I know that a solution is possible and that good will can prevail. I hope that the good work that Her Majesty's Government are doing will bring that forward.
The House may be surprised to learn that I, too, am a trade unionist, and that I greatly welcome the work that trade unions are doing to bring both sides together in Cyprus. We need more dialogue between Cypriot citizens of both communities. The more citizens talk together and realise their common inheritance, as well as their close links to either Turkey or Greece, the more understanding there will be.
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I hope that my hon. Friend the Minister will confirm that it is Government policy to work hard for a settlement in Cyprus, and that, regardless of the political will or lack of it on either side, the entry of Cyprus cannot be vetoed by a recalcitrant partner to the negotiations. I say that to my friends who are Greek Cypriots. There has to be a positive will, such as has been shown over the past 22 years by the Government of Cyprus. I hope and believe that that will continue, and if it does not start on the other side, we shall have to devise a means of securing the entry of the rest of Cyprus, and the rest of the Cypriots, into Europe.
1.11 pm
Mr. Edward O'Hara: I congratulate my hon. Friend the Member for Tooting (Mr. Cox), and join him in welcoming to our debate the esteemed Andreas Haralambou Pouyouros, the mayor of Famagusta, and his able deputy, Sophie Photidis.
Mr. Deputy Speaker (Sir Geoffrey Lofthouse): Order. The hon. Gentleman must not refer to people in the Gallery.
Mr. O'Hara: I welcome other representatives of the Greek Cypriot community and trade unionists from the Transport and General Workers Union, who have come to support us.
I remind the House of the numerous occasions on which the resettlement of Famagusta has been proposed at a high level. The British-American-Canadian framework of 1978 said:
"In order to promote an atmosphere of good will and to resolve pressing humanitarian problems, the Varosha (Famagusta) area shall be resettled under UN auspices".
In his 1978 report, the Secretary-General of the United Nations said:
"The status of Famagusta which obviously should not be kept in its present empty and decaying condition, may provide an opportunity … Since Famagusta is situated in the immediate vicinity of the buffer zone".
The Secretary-General went on to propose the resettlement of Famagusta by its former inhabitants under UN auspices.
In 1979, a high-level agreement between the then President Kyprianou and Mr. Denktash said:
"Priority will be given to reaching agreement on the resettlement of Famagusta under UN auspices simultaneously with the beginning of the consideration"
of other matters. Security Council resolution 550 of 1984
"considers attempts to settle any part of Famagusta by people other than its inhabitants as inadmissible and calls for the transfer of this area to the administration of the United Nations".
Mr. John Marshall: Does the hon. Gentleman agree that it is chilling to go up to the border and see the lights in Famagusta in houses that belong to Greek Cypriots but are being inhabited by settlers from Anatolia? Is that not a complete disgrace?
Mr. O'Hara: The hon. Gentleman makes my point for me. Famagusta is largely occupied by people who have no entitlement to be there. That should cease.

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I conclude with some words from a poem by Dr. Kyriakos Hadjiyoannou:

"Eternal city

Paradise on earth

of the scent of lemon blossoms,

of the golden sands

and the sapphire sea,

from the depths of my heart,

in my pain

from afar,

I greet you."

May it not in the future be from afar that the citizens of Famagusta must greet their beautiful town.
1.15 pm
The Minister of State, Foreign and Commonwealth Office (Mr. David Davis): I thank the hon. Member for Tooting (Mr. Cox) for this latest opportunity to discuss the situation in Cyprus. I join him in welcoming the mayor of Famagusta and others to the country and to the House.
This is a regular event, and it reflects the importance of Cyprus to the House and to Britain. However, I am saddened by the familiarity of so much of the ground that we cover in these debates. That is a reflection not on the eloquence of hon. Members of all parties, either today or in previous debates, but on the regularity with which, year in, year out, we have heard a familiar and painful tale, of suffering and injustice, tension and mistrust, intransigence and missed opportunity—in short, a tale of failure.
To anyone in Cyprus, in the House or anywhere else, who is weary of the effort to find a solution to the problem, my message today is simple: this is a time—perhaps the time—for vigilance. We must be alert to the dangers of the situation as it stands today and to the opportunity that exists to shape a settlement before it becomes even more difficult.
We have seen far too much of the dangers already this year. The events of one hot week in August were a sickening reminder of what the United Nations Security Council means when it repeats that the status quo is unacceptable. The year just ending will be remembered in Cyprus for those and other senseless and unnecessary killings and as a year in which the ratchet of arms purchases and reinforcements on both sides clicked remorselessly round.
If 1996 is marked down as a year of danger, can 1997 come to be seen as a year of opportunity grasped? We in the Government cannot answer that question by ourselves, but we can and will recognise both our duty and our capacity to contribute to an answer. We will continue to support with action and energy all friends of a viable and lasting solution in Cyprus.
Why should 1997 be a year of progress? Does it truly offer better prospects for settlement than other years? Hon. Members will have heard about enough windows of opportunity to glaze a crystal palace, but so far those windows have all remained stubbornly shut. I should not be surprised to hear murmurs of cynicism if I were to speak of yet another, as our hopes have been raised only to be dashed on a great many occasions.
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Our disappointment on those occasions has been great, but the real losers have been the people of Cyprus. Over the past 30 years, they have been expelled from their homes and prevented from travelling freely in their country, and their children have grown up knowing only a land divided.
Today's debate is well timed. Next week, my right hon. and learned Friend the Foreign Secretary will visit Cyprus. That will be the first such visit by a British Foreign Secretary since Cyprus gained independence in 1960. His visit is an expression of his deeply held personal commitment to helping to overcome at long last the tragic division of the island, and reflects the Government's determination to support the United Nations Secretary-General by using our best endeavours to make 1997 a year of real progress in Cyprus.
Our long-standing friendship with Cyprus, our close cultural and economic ties, and Britain's status as a guarantor power ensure our continuing interest in settlement. We owe it to the Cypriots of both communities to strive whole-heartedly for a solution that will allow all Cypriots to live peaceably together.
Much has happened since our previous Adjournment debate on Cyprus in March this year. As the House knows, Britain has intensified its efforts to help find a solution. In May, my right hon. and learned Friend the Foreign Secretary appointed Sir David Hannay as his special representative for Cyprus. As he reminded the House on 25 October, that did not signal a separate British initiative; rather, we consider it vital for Britain, the United States and the European Union actively to support the United Nations. All countries with an interest in promoting a safe, prosperous future for Cyprus must work closely and constructively together if we are to succeed in the search for a settlement.

Sir David Hannay has made three visits to the island, during which he probed positions on both sides and tried to identify areas of possible flexibility. My right hon. and learned Friend the Foreign Secretary will take a similar approach during his visit. We believe that the basis for a political settlement is already on the table. That is the result of hard, painstaking work over many years under the leadership of the United Nations, which has pursued the international commitment to Cyprus with great tenacity.
How can we once again talk of a window of opportunity? It is because of the opportunity that has been created by the prospect of the island's accession to the European Union. I mentioned the importance of that in my remarks in the debate on 6 March. As I said then, we regard the prospect of accession as a positive stimulus to an intensive search for a lasting settlement.
In that sense, the decision of the Foreign Affairs Council on 6 March 1995 that accession negotiations with Cyprus should be opened six months after the end of the intergovernmental conference was an important milestone. It emphasised that accession should benefit both communities and mandated the Commission to develop contacts with the Turkish Cypriots to discover that community's detailed concerns about EU membership and to examine how they could be met.
Several EU emissaries have visited the island to discuss those matters, most recently the representative of the EU presidency, Ambassador Heaslip, and a member of the Commission, Mr. Serge Abou. It is clear that all Cypriots

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have much to gain from EU membership. That in turn should give them a strong incentive to find a mutually acceptable settlement, which would, we believe, bring European Union accession within easy reach. Membership offers not only the opportunity of the internal market and other material benefits but would give the Turkish Cypriot community in particular an acknowledged status in the wider world.
That is the 1997 window of opportunity; it means that each community has much to play for between now and the opening of accession negotiations, perhaps in early 1998, and that both are likely to be confronted by hard decisions. It is important that we underestimate neither the opportunity nor the difficulties.
The hon. Member for Tooting mentioned that, on 27 November, my right hon. and learned Friend the Foreign Secretary answered questions in the House on Cyprus. Some hon. Members have expressed concern that the accession of Cyprus to the EU could not go ahead unless a settlement was in place. That is not a question for the British Government alone, but it may be useful if I set out clearly an objective assessment.
The accession of Cyprus to the European Union would be far easier if it involved both communities on the island, and took place after a settlement was achieved. Any other path to accession could only be much more difficult and complex. For example, how could a Government whose writ did not in practice extend over the whole island give firm assurances that they could fulfil the EU acquis on, say, freedom of movement over the whole island?
I invite hon. Members to weigh my words carefully. I stress that they do not, as some in both Britain and Cyprus have claimed, give Turkish Cypriots a veto over the settlement. That is emphatically not the Government's position; there can be no question of that. We welcome with hope and enthusiasm the prospect of Cyprus joining the European Union. We are determined to do what we can to help Cyprus along the path to joining it, but it would be neither honest nor helpful to ignore the difficulties that may lie ahead.
The economic benefits are clear. The single market would stimulate foreign investment in the north; the restoration of international links would pave the way for a boost to the tourist sector; and northern Cyprus would be eligible for significant cohesion payments.
It is essential that we ensure that the wider Turkish Cypriot community understands the solid advantages of membership. However, I must admit that, although many Turkish Cypriot business men understand the advantages of European Union accession, Turkish Cypriot leaders do not yet appear to be convinced that the prospect of EU membership is a passport to a brighter future for their community. As the House knows, EU accession remains controversial in their eyes.
Mr. Denktash and other leading Turkish Cypriots continue to argue that the application for membership of the Cyprus Government in 1990 was illegal, having been made without the involvement of Turkish Cypriots. They fear that, once Cyprus was in the Union, it would be impossible to defend vital Turkish Cypriot community
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interests, and that European Union law could be used to overturn controversial safeguards designed to protect them, even if they had been previously entrenched in a settlement. Most of all, they fear erosion of their relationship with Turkey, and of the security guarantee in article IV of the 1960 treaty of guarantee, if it were held to be incompatible with EU membership.
We and the Commission believe that those fears are unfounded. We are confident that, once a federal, bizonal, bicommunal settlement has been reached that offers safeguards to both communities along the lines envisaged by the international community, it would be possible for the EU to enshrine and safeguard such a settlement in the terms of accession.
I do not wish to make any of that sound easy. For example, an arms race is in full swing on the island. There is a greater density of modern weapons and men under arms in Cyprus than in almost anywhere else in the world. That is an expression of the deep insecurity felt by its people.
However, there can be no doubt that current security arrangements give each side a sense of security only at the expense of the other. Turkish troops in the north make Greek Cypriots feel insecure, and the increasingly sophisticated armaments in the south and the defence pact with Greece alarm Turkish Cypriots. The UN is urgently working on proposals for unmanning and unloading along the ceasefire lines. The United States has proposed arrangements for a ban on overflights by Greek and Turkish military aircraft. We strongly support those initiatives. All hon. Members, after this year's events, will understand their undoubted benefits.
Security is the most important issue that divides the two sides. There will be no settlement unless both are fully satisfied about it. It will also be the essential element in ensuring that the political settlement lasts, and that, once in place, it cannot be undermined by extremist elements on either side. How might progress on security be achieved? President Clerides recently suggested some ideas for progressive demilitarisation and the presence of an international military force. Combined with the security guarantees devised at the time of Cyprus's independence, to which the Turkish Cypriots attach such importance, they could yet offer a way forward.
If the security concerns of both communities can be addressed, it should not be impossible to find solutions to other difficulties. For example, it is not yet clear how the political equality of the two communities will be expressed in the new constitution; how much territory currently occupied by Turkish Cypriots will be returned to the Greek Cypriot administration; or—this is an issue that has come up in the House before—how those who became refugees in 1974 will be compensated. Those are all matters on which much remains to be done, and about which hard decisions will have to be made.
When my right hon. and learned Friend makes his historic visit to Cyprus next week—the first since 1960—he will discuss all those issues when he meets President Clerides and Mr. Denktash. His aim will be to help them find ways in which divides can be bridged and a secure and prosperous future for Cyprus assured. That is an aim that I hope every hon. Member can support.

Haemophiliacs (Compensation)
1.29 pm
Mr. John Marshall: The issue that we are now to discuss has been raised on a number of occasions, and has secured widespread support across both main political parties. The right hon. Member for Manchester, Wythenshawe (Mr. Morris) has been a doughty supporter of this cause, as indeed have the hon. Members for Leeds, East (Mr. Mudie) and for Wallasey (Ms Eagle). I have also been supported by my right hon. Friends the Members for Wealden (Sir G. Johnson Smith) and for Worthing (Sir T. Higgins) and my hon. Friend the Member for Exeter (Sir J. Hannam).
This is not the first time that I have raised the problem of haemophiliacs in the House. Indeed, the first time was in an Adjournment debate in October 1990. In parenthesis, I pay tribute to the tolerance, broad-mindedness and compassion of my right hon. Friend the Member for Chelsea (Sir N. Scott). At that time, I was his parliamentary private secretary, and the Whips' Office was not terribly amused at the thought of a PPS raising an issue that was not exactly complimentary of Government policy, but my right hon. Friend treated me, as all who know him would expect, with compassion, and I think that he had more than a mite of support for my cause.
My Adjournment debate was followed only a few weeks later by the Government's decision to compensate all haemophiliacs infected with human immunodeficiency virus. There are three reasons why I am still taking up the cause. First, it seems to me fundamentally wrong that individuals who suffer as a result of treatment given on the national health service should be ignored by society. If treatment creates a problem, exacerbates a situation or causes premature death or economic suffering, we as a society cannot, like the Pharisees of old, walk on the other side of the road, indifferent to the suffering that has been created.
Secondly, I once tutored a haemophiliac, and became well aware of the difficulties that haemophiliacs face. My student, who lived in Dunoon, suffered from internal bleeding. For a whole academic year, he was unable to make the journey from Dunoon to Glasgow university, so he attended not one lecture. He had to make do with a number of tutorials which I went down to Dunoon to give. As a result of not attending lectures, he came out second in the year. That showed how valuable lectures were, or it may have shown, as I tried to convince my friends with mixed success, how valuable my tuition was. Here was an individual facing great hardship and suffering, yet he worked hard to ensure that he passed his examinations, and made a positive contribution to society.
Thirdly, one of my constituents is Rev. Alan Tanner, chairman of the Haemophilia Society. He is much admired in Hendon and elsewhere for the courage that he has shown and his cheerfulness in the face of adversity. He is a good witness to his faith. The work of the Haemophilia Society is universally admired for what it does for a relatively small number of people in the United Kingdom.
Today is a happy coincidence. When Madam Speaker drew the numbers out of the ballot, she did not know that, later this afternoon the right hon. Member for Wythenshawe and I would hand in a petition at No. 10 Downing street which would demonstrate the depth of
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feeling among not only Members of Parliament and haemophiliacs but others who had a social conscience and recognised the need to improve the position of haemophiliacs infected with hepatitis C.
In addition, this afternoon there will be a lobby of Parliament by those who feel strongly about the matter. So it is a happy coincidence that we are having this debate today, and we ought to thank Madam Speaker for being clever enough to draw my number. As I have had three Adjournment debates this Session, perhaps I ought to buy a ticket for the national lottery this weekend.
The origin of the problem goes back to the 1970s, when there was a failure to screen imported blood products. My view is that that demonstrated negligence on the part of the Department of Health. It was known at that time that, in the United States, blood donors were paid for giving blood. Those who feel so hard up that they give pints of blood for money include drug addicts and others whose blood may well be infected. The Department of Health must have known of those risks.
In the 1960s or early 1970s, the Institute of Economic Affairs produced a pamphlet entitled "Paying for Blood". Those who reviewed that pamphlet in the serious press made the point that, in the United States, where people paid for blood, infected blood was given.
So we are discussing the issue in the 1990s because there was some negligence and complacency in the 1970s. If my right hon. Friend the Member for Wealden were here, he would make the point that, at the beginning of the 1980s, he and his wife made visits to the United States. His wife is a distinguished general practitioner. She heard expressed then some of the concerns about the safety of certain blood products. In 1986, heat treatment was introduced to end the risk of contaminated blood products in the United Kingdom. We can therefore rejoice that a similar disaster will not happen in future, but we must face the consequences of the indecision of the 1970s.
The justification for giving assistance to haemophiliacs with HIV was that they faced a suspended sentence of death. Indeed, many died fairly quickly of full-blown acquired immune deficiency syndrome. Others have lingered on, and, such are the advances in medical science, some may do so for many years to come. All who have lived have done so not knowing how long they would live. Many found it difficult to get a job, and certainly difficult to get a mortgage. Of course, in the case of hepatitis C, there is a difference, but it is only of degree.
Some of those infected with hepatitis C have already died. Others will die prematurely. There has been no official estimate. Indeed, in answer to a recent parliamentary question, the Department of Health admitted that it had made no estimate of the number of those infected with hepatitis C who would die in the next five years. In the absence of an official estimate, I give my hon. Friend the Minister my estimate. At least 700 will die prematurely. For many others, the quality of life will deteriorate dramatically, and they will suffer severe physical and economic hardship. Of the 3,000 or so infected, only about 600 will make a full recovery.
It is true that those with hepatitis C do not suffer the prejudice that is associated with HIV. Those who attended a meeting in No. 1 Parliament street, as I know the right hon. Member for Wythenshawe did, listened to the victims and their families. The hardship they suffer is very

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real indeed. The hardship is physical. There was a driver there who said that he had managed to drive a lorry despite suffering haemophilia, but that the additional pain associated with hepatitis C meant that he could no longer do so. He suffered the indignity of losing his job, as well as the physical pain of his illness.
Victims lose self-respect when they lose their job. They feel that they ought to be the breadwinner, but they know that they can no longer be so. For all of them there is physical pain, emotional pain and hardship. Already more than 60 have died.
There is one particular family whose experience encapsulates the problem in its entirety. In that family, three brothers have died: two were haemophiliacs infected with HIV and one was a haemophiliac infected with hepatitis C. How can we say to the mother that it was right and proper that her two sons who were infected with HIV should be the subject of compensation, but that, in the case of her son who was infected with hepatitis C, not a penny should be paid in compensation?
One would need the intellectual casuistry of a Treasury mandarin to justify such an action. To say that one death is worthy of compensation, but that another is worth nothing at all is heartless and intellectually barren. It is not only grieving relatives who find the differential unacceptable and immoral—more than 270 Members of Parliament have signed early-day motion 4, asking for compensation to be paid. The vast bulk of decent people find the differential unacceptable.
Of course, we welcome the fact that the Department of Health is funding treatment to try to improve victims' quality of life. I also welcome the research into haemophilia that is taking place at the Royal Free hospital, which helps to give hope that, in future, haemophilia will cease to be the scourge that it has been, and that it will be eradicated.
When my hon. Friend the Minister was asked earlier this year whether he would provide help, he argued that the Department of Health budget should be used for patient care. Everyone accepts that the Secretary of State and his Ministers should try to protect the Department of Health budget—indeed, I congratulate my right hon. Friend the Secretary of State on his success in so doing—but the argument that help should be denied because the health budget must be protected is intellectually threadbare and immoral.
We all know that, when the Macfarlane Trust was set up, for which measure our right hon. Friend the Leader of the House was responsible, no one said that the money would have to come out of the Department of Health's budget. There is a thing called the contingency fund that can be used to bail out Departments in such circumstances; when, in 1990, compensation was paid to haemophiliacs with HIV, the contingency fund bailed out the Department of Health—the money did not come out of the Department's budget. My right hon. Friend the Chief Secretary should remember that, because he was the Secretary of State for Health at that time.
The Haemophilia Society has, in a statesmanlike way, recognised the Treasury's problems, and said that its immediate priority is the creation of a hardship fund to help the relatives of those who have died, and those who are too ill to work. The cost of such a fund would be somewhere about £12 million to £15 million. That is a small price to pay to ensure that hardship is relieved—it
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is a mere bagatelle in the totality of Government expenditure. We can all think of ways in which Government money is wasted, and anyone who says that that small sum cannot be found cannot be looking very hard.
Thereafter, we have to look to the future. There would be merit in setting up an inquiry to hear what outside experts say about the number of people who will die and the extent of the hardship created. The inquiry could also look into the possibility of doing more to help those who have been so unfortunate as to receive what was thought at the time to be a good treatment—one that would improve their life expectancy and give them a better quality of life—which has instead destroyed their quality of life and, in many cases, reduced their life expectancy and caused great economic hardship. That we should refuse to give assistance to a small group of people who are suffering through no fault of their own is not to the honour of this country, and it is not moral.
1.44 pm
Mr. Alfred Morris: I was glad to learn that the hon. Member for Hendon, South (Mr. Marshall) had secured this timely debate, and I most warmly endorse his moving plea.
Sadly, more than 60 of the victims of the tragedy have already gone to their graves with a deep sense of injustice. The achievement of elementary justice for some very needful people is at the heart of our campaign, which, as the hon. Member said, is now supported by more than 270 Members of Parliament of all parties. Our campaign is also about morality. The Government accepted their moral responsibility in the case of HIV infection in the course of national health service treatment. They now have the same responsibility in the hepatitis C cases.
It is morally wrong to deny the victims of this appalling further tragedy in the haemophilia community the modest help they seek. What is morally wrong ought no longer to be tolerated in Britain. There is ample parliamentary time available. The Government's legislative programme is gossamer thin, and, given the nod by Ministers, I am sure that the House would approve within an hour the help we seek.
1.45 pm
The Parliamentary Under-Secretary of State for Health (Mr. John Horam): It is almost exactly a year since we had a similar debate on this subject. At that time, it was the hon. Member for Leeds, East (Mr. Mudie) who was successful in the ballot. Today, it is my hon. Friend the Member for Hendon, South (Mr. Marshall) who has initiated the debate. That is entirely appropriate. Not only is his constituent Rev. Alan Tanner the chairman of the Haemophilia Society, whose work in this field we all applaud, but my hon. Friend has himself taken a continuing interest in the plight of those patients with haemophilia who were inadvertently infected with hepatitis C through blood products, before those products began to be heat-treated in 1985.
I was interested to learn that my hon. Friend's first Adjournment debate on this subject was as long ago as October 1990, which must be some sort of record. He stated his case today not only movingly, as the right hon. Member for Manchester, Wythenshawe (Mr. Morris) said, but extremely eloquently. I answered a related question

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from my hon Friend only two weeks ago; he is also a sponsor of early-day motion 4, which was tabled this Session; and I am also aware of early-day motion 9, which was tabled last month.
Health Ministers have had the opportunity twice this year to meet with my hon Friend to discuss these issues. The discussions which I have had with my hon Friend and with representatives of the Haemophilia Society have brought home to me very clearly the plight of those who find themselves infected with hepatitis C, in addition to suffering from haemophilia. Nobody could fail to sympathise with the distress of people who, already suffering from one disorder, have found that the treatment for that disorder has given them another.
That is especially true because factor 8 transformed the lives of many people with haemophilia—we should not forget that it greatly increased their life expectancy and improved their quality of life. It was undoubtedly the best treatment available for people with haemophilia in the light of medical knowledge at the time. However, medical procedures rarely come without risk, and those are not always known about or capable of being guarded against in time.
Factor 8, at the time at which the people we are talking about were infected, was made from human plasma and, for the most part, it still is. We have a very safe blood supply, thanks to the voluntary basis of the scheme—that contrasts with the scheme in America, to which my hon. Friend referred—and because of the screening and other safety measures that are in place. I am glad to say that UK blood remains among the safest in the world.
Sir Geoffrey Johnson Smith: Will my hon. Friend clear up a point about factor 8? In a previous debate, I asked about factor 8 treatment. None of us is a medical scientist, but I believe that there is a genetically manufactured form of factor 8, called, I think, recombinant factor 8. Am I right in saying that it could help to prevent further infection?
Mr. Horam: In answer to my right hon. Friend, whose interest in this area I also acknowledge, it is for clinicians to decide whether to use the plasma-based factor 8 or recombinant factor 8. I should stress that, although recombinant factor 8 has some advantages, it is not without disadvantages. For example, it can encourage the development of inhibitors, a problem that has been encountered by some of those who have used recombinant factor 8. So neither is without a small element of risk.
My right hon. Friend will recall that recombinant factor 8 uses plasma-derived albumin as a stabiliser, and therefore is not entirely free of problems. Nothing is totally risk-free, and it must be for clinicians to decide which of the two, given also their relative cost, is best to use.
May I return to the issue of blood and blood products? All reasonable steps are taken to ensure their safety, including the careful questioning of donors to exclude those likely to represent a risk of transmitting infection, and the testing of donations for hepatitis B and C, HIV 1 and 2, and syphilis. Pools of plasma from which blood products are to be made are tested again, and, wherever it is possible, as it is with factor 8, undergo manufacturing
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processes to remove or inactivate viruses. Also, all batches of blood products are separately tested for viral markers of infection by the independent National Institute for Biological Standards Control.
The safety of blood and blood products is kept under regular review by the expert Advisory Committee on the Microbiological Safety of Blood and Tissues for Transplantation, which advises Health Ministers.
Not all the current safety measures that I have mentioned were available at the time that we are discussing today. That was a long time ago—before blood products began to be heat-treated in 1985 to destroy viruses. I stress that factor 8, which has been treated to destroy viruses, has an excellent safety record.
Nor was there at the time a test available for detecting hepatitis C in blood donations. Such testing was introduced in 1991 as soon as reliable tests first became available. The people we are discussing today therefore received the best treatment available at the time.
My hon. Friend the Member for Hendon, South mentioned numbers. Let me remind the House of the number of people we are talking about. It is thought that some 4,000 people with haemophilia may have been infected with hepatitis C through blood products before heat treatment of those products was introduced. Of those, about 1,000 were, sadly, also infected with HIV, and have received payments under the HIV-haemophilia scheme. In addition, possibly a further 3,000 people who are still alive, who had blood transfusions before September 1991 and who have been infected with hepatitis C as a result, are likely to be identified by the look-back exercise that is in progress.
It has been suggested in this debate that there have been more than 50 deaths of haemophiliacs from liver disease so far. We have no reason to dispute that figure. However, many people infected with hepatitis C may enjoy a long period without any symptoms appearing. Some 50 per cent. of sufferers may progress to chronic hepatitis with varying degrees of good and ill health. Some 20 per cent. of infected patients may develop cirrhosis, a progressive destruction of the liver, which may take 20 to 30 years. Fortunately, the majority of those years will be trouble-free in terms of health.
Since last year's debate, I have studied the final version of a report from the Haemophilia Society on the plight of the people we are discussing today, and in March I met representatives of the society to discuss it. The meeting covered a range of issues concerning haemophiliacs infected with hepatitis C, and I outlined the action that the Government are taking, including research and support for voluntary organisations working in that field.
The Haemophilia Society subsequently wrote to me in June asking for the Government to set up a trust fund to make payments to those infected who were in financial need, and their dependants, and also to make payments to each person who had been infected. As my hon. Friend stressed, that is similar to the help previously given to those infected with HIV.
I took time to consider these proposals carefully before replying to the Haemophilia Society in October. Most hon. Members will by now be aware that I did not accept the society's proposals for payments for those infected with hepatitis C, but I stressed that I remained open to further arguments. I also outlined the support that we are giving to work with those infected, and to research in this area.

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I should mention that the society understandably prefers that the financial assistance that it requested should not be described as "compensation"—particularly as it does not consider the NHS to have been negligent in this matter. However, my reasons for not agreeing to provide the help requested hold good, however we describe the financial help sought.
First, we do not accept—I disagree with my hon. Friend on this—that the NHS has been negligent. As I said, the Haemophilia Society has confirmed that it does not dispute that point. Tragic though it may be that the treatment designed to help those infected patients should have harmed them, there can be no question but that they received the best treatment available at the time. That treatment was essential for their survival. There was no alternative. We take the view that compensation is appropriate only where there has been negligence.
If we were to provide payment on the basis of non-negligent harm, that would very quickly develop into a general no-fault compensation scheme, which would be both unworkable and unfair. That point was considered in relation to the settlement of HIV cases. On that occasion, we were convinced by the very special nature of the disease, by public reaction to it, and by arguments that it would not lead to further similar claims for compensation.
We are not convinced that hepatitis C falls into the same special category. We need to remember that, at the time of the HIV settlement, it was believed that HIV would lead speedily to death and that some haemophiliacs infected with HIV, especially children, were subject to some appalling examples of ostracism. We now know rather more about the effects of HIV, and there is a much greater public understanding of how relatively limited are the ways in which it can be passed on. We are all grateful for that.
Secondly, as my hon. Friend said, all the proposals for payment schemes involve the expenditure of substantial sums of public money. I have considered a wide range of options for such schemes—I really have done that—including the possibility of a scheme limited to those who go on to develop cirrhosis only. But they all have significant costs. As a Health Minister, I have a duty to consider the effect of such a sizeable sum on other heath service expenditure. That duty has led me to conclude that funds that are available to the NHS, from whatever source, are best used in direct patient care.
It has been suggested—it was reiterated today by my hon. Friend—that there should be funding compensation sources other than from the national health service budget. Naturally, I am sympathetic to that suggestion. Given their knowledge of how the Government work, right hon. and hon. Members who have spoken in this debate will understand that those matters are not within the compass
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of my duties as Health Minister, and they must look to other Ministers to put their case, particularly as regards the contingency fund, which my hon. Friend the Member for Hendon, South mentioned. It has also been suggested that money from the national lottery might be used in this case. Again, that matter can be pursued independently through the national lottery.
In its letter to me in June, the Haemophilia Society suggested a need for progress in a number of areas of work on hepatitis C, such as the treatment and care of those infected, research and public education. I want to help the society in supporting its work in that area.
A key priority must be to improve our understanding of the disease. We have made an additional £1 million available to aid research into hepatitis C, its natural history, transmission and prevalence. Although primarily geared to improving the understanding of the disease, any developments will be important to co-sufferers of haemophilia.
One of the best ways to improve still further the treatments available is to establish the relative effectiveness of new treatments such as alpha interferon. Local purchasers can then make informed decisions on using resources for the most effective treatments available for both haemophilia and hepatitis C. The standing group on health technology has identified the evaluation of the use of alpha interferon in the treatment of hepatitis C as a priority for the NHS. That work is being taken forward as speedily as possible by the National Coordinating Centre for Health Technology.
We have also been providing assistance to the Haemophilia Society in the form of grants from a Department of Health scheme for voluntary organisations, which includes a grant for a project concerned with the needs of those with haemophilia, who have also been infected with hepatitis C. I made it made clear to the society that we shall welcome proposals from it to provide continuing support to haemophiliacs infected with hepatitis C, as part of the society's on-going activities.
I regard this as a useful and practical approach, which would draw on the valuable findings of the research that the society is already undertaking. This is an area where resources can be directly targeted to provide practical help in such forms as advice and information. It will thereby improve services to infected haemophiliacs. I have assured the society that I shall take a positive view of any application for further assistance from the Department under our section 64 scheme to take this matter forward.
It being Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.
Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half-past Two o'clock.

Oral Answers to Questions
  EDUCATION AND EMPLOYMENT

    Employment Statistics
    Mr. Foulkes: To ask the Secretary of State for Education and Employment what assessment she has made of the role played in the formulation of her Department's policy by (a) the figures for those unemployed and claiming benefit and (b) the labour force survey. [7051]
    The Minister of State, Department for Education and Employment (Mr. Eric Forth): Both statistics are valuable and confirm that the Government's policies are working.
    Mr. Foulkes: I am almost speechless after that reply. The Minister must surely admit that the labour force survey shows that one household in five contains an unemployed person. The New Cumnock survey showed that the real level of unemployment is double the published figure. The Minister must therefore admit that the published figure is entirely bogus, as it shows only the number of people entitled to claim benefit. After 32 fiddles by the Government, that is a false and inaccurate figure.
    Mr. Forth: Presumably the hon. Gentleman is a fan of the International Labour Organisation. If he were not, he would be unusual on the Labour Benches. I assume that most Labour Members admire the ILO and all its doings—a view that I do not necessarily share. As the labour force survey—the approved ILO method of establishing who is out of work—closely mirrors our own claimant count, I am astonished at the hon. Gentleman's outburst. Our claimant count shows just over 2 million people out of work. The labour force survey shows a similar number. According to our figures, the percentage of unemployment is seven point something; according to the labour force survey it is 8.1. By any measure, the two sets of figures show broadly the same absolute level and broadly the same downward trend in unemployment. If the hon. Gentleman is criticising the claimant count, he is also, by implication, criticising the ILO. He had better take that up with his colleagues.
    Mr. Devlin: Can my hon. Friend tell me what proportion of the working-age population is currently in work, and how that compares with comparable countries in the European Union?
    Mr. Forth: My hon. Friend makes a good point. The United Kingdom has one of the highest proportions of people of working age in employment. That is because we have traditionally provided and continue to provide people with the maximum opportunity to be employed. If Labour Members believe, as they occasionally imply, that a European model is to be admired and emulated, I invite them to consider the fact that in most European countries not only is the percentage of unemployment higher, but the proportion of the work force who are employed is much lower than in the UK. We gain on every score.

    Nursery Vouchers
    Mr. Heppell: To ask the Secretary of State for Education and Employment if she will estimate how many play groups have gone out of business as a result of the nursery voucher scheme. [7052]
    The Secretary of State for Education and Employment (Mrs. Gillian Shephard): I expect the number of pre-schools in the nursery voucher scheme to fluctuate, as they open and close for a variety of reasons.
    Mr. Heppell: Will the Secretary of State acknowledge that, far from broadening parental choice, the voucher scheme has led to the closure of nurseries and play groups in both the voluntary and the private sector. Does that not erode the choice available to parents?
    Mrs. Shephard: The hon. Gentleman should understand the position. A number of pre-schools have left the scheme, but that is because of the cyclical nature of admissions to school. The number of four-year-olds drops in the autumn term because many schools have long-established policies of admitting children at the start of the year in which they turn five. Therefore, there will be fewer parents of four-year-olds looking for places for their children in voluntary and private provision in the autumn term. Pre-schools and others are used to that pattern. I am surprised that the hon. Gentleman is surprised.
    Mr. Riddick: Is my right hon. Friend aware that one of the reasons why play groups face some problems in the pilot areas is that the legal limit for the pupil-teacher ratio is lower in private play groups than in those funded by local education authorities? Is she aware that the chief inspector of schools told the Select Committee last week that he considered it important to have a level playing field and to ensure that parents were given genuine freedom to choose? Will my right hon. Friend examine the position?
    Mrs. Shephard: Schools should certainly think carefully before taking large numbers of young four-year-olds into reception classes, but the type of service that they provide for that age group will be scrutinised carefully in the course of the Office for Standards in Education inspections.
    Ms Estelle Morris: Will the Secretary of State confirm that £56 million was cut from the nursery voucher scheme in the Budget, and that her Department's explanation is that it changed its mind about the number of four-year-olds in the population? If that is the case, rather than giving up £56 million from the Budget, why does the right hon. Lady not use the money to extend nursery education to the 56 per cent. of three-year-olds who are currently denied it?
    Mrs. Shephard: There will be a place for every four-year-old whose parents want one, over time. We have been entirely consistent about that guarantee. I remind the hon. Lady and her hon. Friends that as recently as November the hon. Member for Liverpool, Walton (Mr. Kilfoyle) said that under Labour three-year-olds

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    would be guaranteed places—only to have that denied by the financial fiasco of Labour's costings, which was revealed a few days later.

    Unemployment
    Mr. Fabricant: To ask the Secretary of State for Education and Employment what assessment she has made of the report of the International Labour Organisation concerning levels of unemployment; and if she will make a statement. [7053]
    The Parliamentary Under-Secretary of State for Education and Employment (Mr. James Paice): We welcome the fact that the ILO agrees that the United Kingdom is the only major industrialised country with falling unemployment, and that our job assistance and advice service is working well.
    Mr. Fabricant: Is it not ironic that the Labour party has been saying for years that we have been lying about the fall in our unemployment figures, but the ILO has now vindicated what we have been saying for the past few years? Has not the Organisation for Economic Co-operation and Development also been saying that this is because the social chapter has been creating unemployment in Europe? Does that perhaps explain why today's Daily Mail says that the Leader of the Opposition is now going to ditch the social chapter?
    Mr. Paice: I am sure that my hon. Friend is not alone in being interested in that article. [Interruption.] I am sure that others are interested—not least the hon. Member for Sheffield, Brightside (Mr. Blunkett), who has just said from a sedentary position that even he was interested. That just shows that, yet again, he is not being consulted on these matters. If it is indeed true that the Leader of the Opposition intends to ditch his commitment to the social chapter, that just proves yet again that he is prepared to change his mind on any issue in his desperate search for power.
    Mr. MacShane: May I tear the Minister away from the Daily Mail and its fantasies? He has praised the ILO report. Will he now tell the House that the British Government, who founded the ILO, will abide by its conventions and implement its recommendations in all regards?
    Mr. Paice: We judge each case on its merits.
    Mr. Tredinnick: Does my hon. Friend agree that the best possible Christmas present for my Leicestershire constituents is the news that unemployment is down to under 3 per cent. and the number of vacancies has risen by nearly 100 in a year? Does that not vindicate not only the policy of my right hon. Friend the Prime Minister, but the labour force survey and its recent findings?
    Mr. Paice: I am sure that my hon. Friend knows best what it is right for his constituents to receive for Christmas, not just this year but next year and in the years ahead. When he talks to his constituents, he will doubtless bear it in mind that the United Kingdom—with no social chapter and no minimum wage—has more people in work and fewer out of work than any of the other major European countries.
    Mr. Hain: Why does the Minister not come clean and admit that the unemployment figures hide the
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    Government's shameful jobs record? Is he aware that his ministerial colleague the Economic Secretary admitted that since 1979, when the Tories came to power, Britain has fallen to 17th in the international jobs league, far behind all our major competitor countries? For millions of people, employment in Britain is now poor, nasty, brutish and short. The nation is haunted by job insecurity and even if Conservative Members will not admit that, they will find it out for themselves at the next general election.
    Mr. Paice: The hon. Gentleman forgot one thing—the fact that 768,000 extra jobs have been created since the last recession.
    Mr. Congdon: Is it not good news that the unemployment rate in this country has fallen by more than 900,000 since its peak, in sharp contrast to the higher and increasing unemployment rates among our major competitors such as France and Germany? Does that not clearly show the dinosaurs in the Opposition that it would be absolutely crazy for this country to introduce socialist measures such as the minimum wage and the social chapter?
    Mr. Paice: My hon. Friend is entirely right. Every survey and study shows that Britain's unemployment record is an example to the rest of Europe. Countries that are not at the top of the jobs league and European business men also realise that our labour market is the best.

    Pupil Exclusions
    Mr. Soley: To ask the Secretary of State for Education and Employment what new proposals she has on returning excluded pupils to full-time education. [7054]
    Mrs. Gillian Shephard: The Education Bill will require local education authorities to publish a full statement of their arrangements for pupils with behavioural problems.
    Mr. Soley: Will the Secretary of State give a careful and considered response to the report prepared by the university of Plymouth for the Economic and Social Research Council which shows that something like 60 per cent. of excluded children have a history of neglect, abuse or violence at home? Does she agree with the all-party group on parenting matters, who believe that there is a serious need for the Government to co-ordinate a response to such problems across Departments and between Government Departments and local authorities?
    Mrs. Shephard: I have not yet seen the report that the hon. Gentleman mentions and about which he had the courtesy to forewarn me. He will know that once the Education Bill is enacted, we shall be issuing detailed guidance to local education authorities on the implementation of the new behaviour support plans. For the first time, there will be a requirement for proper co-ordination between schools, local education authorities and social services. We are also looking to see how else we can promote good practice in joint working between education and social services in that sphere.
    On the second part of the hon. Gentleman's question, with the Department of Health we are considering options to help collaboration through a number of pilot projects so

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    as to spread any lessons that might be learnt. The hon. Gentleman is right that there needs to be more collaboration between agencies for some of these children.
    Mr. Pawsey: The hon. Member for Hammersmith (Mr. Soley) has raised a very interesting matter. Many hon. Members will agree that far too many youngsters are now being excluded from schools. Does my right hon. Friend the Secretary of State agree that exclusions result in those children who would benefit most from being in school being left out? Has she had an opportunity to read what the Commission for Racial Equality said about the total cost of exclusions, which I believe was part of the point made by the hon. Member for Hammersmith? Will my right hon. Friend join me in seeking alternatives to exclusion, of which corporal punishment might be one?
    Mrs. Shephard: The Government's views on corporal punishment have been set out by me and by others. My hon. Friend's views are equally well known to the House. I remind him of the findings of the recent Ofsted report on exclusions, which pointed out that good teaching in particular is likely to be the solution to many behavioural problems. The report also said that schools which exclude few pupils tend to be better at managing behaviour than those which exclude many.
    Mr. Davidson: Let us return to the serious issue of excluded students, and not talk nonsense about corporal punishment. When will the Government recognise that an increasing number of young people who have been excluded from school join the large percentage—14 per cent.—of people who receive no education or training beyond the age of 16? That is a shameful record, and an indictment of 17 years of Conservative rule.
    Mrs. Shephard: As the festive season is approaching, I do not wish to be ungracious to the hon. Gentleman. I merely mention Calderdale and Labour control as providing a lesson in how not to cope with behaviour problems. It is clear that a well-structured and soundly taught curriculum is the best way of dealing with unruly behaviour. Some pupils are demotivated and thus at risk of disaffection, and they will be helped by the relaunch provisions and entry qualifications arrangements outlined in the White Paper that I announced on Monday.
    Mr. Harry Greenway: Does my right hon. Friend think that the old maxim which is often applied in schools as it is in families—"Spare the rod and spoil the child"—is entirely out of date?
    Mrs. Shephard: I have nothing to add to the answer that I gave to my hon. Friend the Member for Rugby and Kenilworth (Mr. Pawsey).

    Training and Enterprise Councils
    Mr. Eastham: To ask the Secretary of State for Education and Employment when she next plans to meet representatives of training and enterprise councils to discuss the future of training. [7055]
    Mrs. Bridget Prentice: To ask the Secretary of State for Education and Employment when she next plans to meet with the training and enterprise councils to discuss the future of training. [7059]
    Mr. Paice: My right hon. Friend and I meet regularly with TEC representatives to discuss a wide range of topics, including the future of training.
    Mr. Eastham: When the Minister next speaks to the TEC organisation, will he discuss the serious problem of skill shortages? How does he reconcile those shortages with the fact that the budget for TECs has been cut by £34 million and that that figure will increase when the inflation factor is taken into account? How does he justify the merger with local chambers of commerce, which are using TEC funding—private organisations using public money—and how will that help the 600,000 young people under 25 who have no jobs?
    Mr. Paice: On mergers with chambers of commerce, the public funding of the TEC parts of those organisations is closely audited and there is no question of its being used for other matters related to the chamber of commerce.
    On overall funding, the reality is that we will be spending more money on programmes for young people, more on work experience and more on TEC discretion. The only significant reduction will be in training for work: we expect to spend 4.5 per cent. less than forecast for this year while unemployment has decreased by 10 per cent. in the same period.
    Mrs. Prentice: Is the Minister aware that not only have 600,000 young people under the age of 25 no job or education or training place, but 250,000 young people have been out of work for more than six months? What guarantee of a future can the Minister give them in view of the cuts that the Government have made in the TEC budgets?
    Mr. Paice: The overall number of opportunities provided by TECs and the Employment Service is not being reduced—there are just as many. Young people who have not found their way into the work force for a long period will benefit from the tripling of opportunities in pre-vocational programmes next year. It has been clearly established that one of the problems is that some of those youngsters do not have the basic skills on which to build a vocational qualification. The Employment Service offers the one-to-one programme. As my right hon. Friend the Secretary of State said, in the longer term the measures announced in the White Paper on Monday will guarantee all young people a good opportunity for training or education up to national vocational qualification level 3.
    Mr. Hawkins: Does my hon. Friend agree that one of the most significant developments is the growth of modern apprenticeships? As industry is so concerned to improve training for young people, the fact that 67,000 modern apprenticeships are due to be on stream by 2000 is good news, and a clear demonstration of the Government's commitment to that policy.
    Mr. Paice: I welcome my hon. Friend's remarks. He is right that industry and commerce across the piece have

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    widely accepted modern apprenticeships, not just in the traditional vocations but in many modern and novel vocations. The success of modern apprenticeships has led us to adopt the same approach to the development of national traineeships which we outlined on Monday.
    Mr. Byers: Can the Minister confirm that he has received the strongest possible representations from the TEC movement urging the Government to submit an application under objective 4 of the European social fund? Does he accept that a failure to submit such a programme would mean the loss of £140 million from Europe which is badly needed to assist in-work training? Even at this late stage, will the Minister give an assurance that further consideration will be given to an application for objective 4 funding under the European social fund?
    Mr. Paice: I do not accept the position as the hon. Gentleman describes it, but the Government will be setting out their position on objectives 3 and 4 in the near future.

    Jobseeker's Allowance
    Mr. Connarty: To ask the Secretary of State for Education and Employment what policies she intends to pursue to increase the opportunity for full-time employment for people on jobseeker's allowance. [7056]
    Mr. Forth: We shall continue to pursue the policies which have led to our having more people in work and fewer unemployed people than any other major European Union country.
    Mr. Connarty: Is the Minister not ashamed to be still dragging his heels and refusing to bring in regulations to ban sex advertisements in publications such as those revealed this year in a question by my hon. Friend the Member for Makerfield (Mr. McCartney)? Will he now do something about that and, as we have requested, bring in regulations to ban advertisements for sexual services in publications in jobcentres, which up to this point he has refused to do?
    Mr. Forth: I can understand the hon. Gentleman getting excited about this subject, but we should al I take it—[Interruption.] There is no point in the hon. Gentleman waving bits of paper around and shouting about bans. The matter is being dealt with in the proper way. My right hon. Friend the Secretary of State is taking a direct interest in the matter and—
    Mr. Connarty: I am speaking of a ban.
    Mr. Forth: The hon. Gentleman keeps shouting from a sedentary position about a ban. That seems to be the only thought that occurs to Opposition Members when a problem arises. This is a complicated matter. It is not simple or straightforward. My right hon. Friend and I have discussed it with the chief executive of the Employment Agency, new guidelines have been prepared and legal advice has been taken. The new guidelines will be issued shortly and they will be in the public domain. The matter has been dealt with in a calm, proper and constructive way.
    Sir Alan Haselhurst: Will my hon. Friend give careful consideration to the postal signing arrangements for the
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    jobseeker's allowance, bearing in mind the fact that some of the people seeking full-time employment have particular specialist backgrounds and their continued appearance at jobcentres at some cost to themselves will not necessarily add materially to their prospects of obtaining the full-time employment for which they are experienced?
    Mr. Forth: I understand my hon. Friend's point, but it is not only proper but desirable that those people who unfortunately are out of work and claiming benefit deserve the fullest possible support from the expert staff in our jobcentres. We make appropriate, realistic and proper arrangements for people to claim by post where that is appropriate, but equally it is right that the bulk of people who can make a journey easily should come to our jobcentres, share their experiences with us and receive our advice and support. That includes people of all types and backgrounds. To start to try to make a distinction of the kind that my hon. Friend understandably suggests would probably be rather difficult and I am not sure that it would be wise.
    Mr. Alan Howarth: Will the Minister acknowledge that the Employment Service is using jobseeker's directions and the threat of benefit sanctions to drive people to take part-time jobs which they cannot legally be required to take? Should he not also be very worried that less than 3 per cent. of the Government's target number of employers have availed themselves of the relief from national insurance contributions offered when they recruit someone who has been unemployed for more than two years? Does that not show that the policy has been badly designed and badly implemented?
    Mr. Forth: On the first point, if the hon. Gentleman has any evidence of his allegation, I hope that he will share it with me so that I can have it properly considered, but I am not happy with his implication that part-time work is somehow undesirable, menial or no good. As he should know, many people welcome the opportunity to move from unemployment into part-time work, either of their own choice or often as a useful stepping stone into full-time employment, if that is what they want. Part-time employment has a proper part to play in our labour market and we wish to encourage such employment at all times. However, I should like to follow up the hon. Gentleman's question, so if he is referring to specific cases, perhaps he will please let me have details of them.

    Local Education Authorities (Administration)
    Mr. Steen: To ask the Secretary of State for Education and Employment how many local education authorities increased the amount spent on administration and reduced the amount spent on schools in the last year for which information is available. [7057]
    The Parliamentary Under-Secretary of State for Education and Employment (Mr. Robin Squire): In 1994–95, there were 14 such authorities. This year the Government have announced a further hefty increase—an extra £633 million—in provision for local education authorities. I urge all LEAs to deliver that spending power to schools and not to use it to fund bureaucracy.
    Mr. Steen: Will the Minister confirm that next year Devon's county education budget will increase by over

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    3 per cent. and that that money will go to schools and not to administration? Will he say something to the misguided and wholly unacceptable banner-waving groups in my constituency who are crying, "Cuts in education." when everyone knows that Devon education has never had more money than it will have next year?
    Mr. Squire: I am grateful to my hon. Friend for his question. I can confirm that the increase in Devon's education standard spending assessment is 3.8 per cent., which is above the national average. Of course—as he is aware, but as some of his constituents, misled by placard wavers, may not be aware—between 1979–80 and 1994–95 the Government increased funding per pupil by 48 per cent., after taking out all inflation. We have a proud record on funding. It is clear that Devon has the resources and I hope that it, and all LEAs, will devote a lion's share of the increases to schools rather than to town hall and county hall.
    Mr. Jamieson: Will the Minister confirm that Devon is in the lowest 15 in Britain for spending on central administration and has a tine record? Perhaps he will also confirm, however, that the high spenders on central bureaucracy are Westminster [HON. MEMBERS: "Tory"], Wandsworth [HON. MEMBERS: "Tory"], Kensington and Chelsea [HoN. MEMBERS: "Tory"] and the City of London [HON. MEMBERS: "Tory"].
    Mr. Squire: I was going to keep a shroud over the list of 14 authorities in the original question, but as the hon. Gentleman tempts me to name some of them, I can confirm that Sheffield, Camden and Durham are also in that list.
    Sir Malcolm Thornton: My hon. Friend is aware of the success of the delegation of budgets to schools and we would all like the maximum amount of money to be transferred from LEAs to schools, consistent with the provision of those essential central services. Does he accept that, because of the tendency to enshrine historic expenditure in the local formula adopted by the vast majority of LEAs, anomalies have started to appear over time? Will he confirm that the Department is still working towards an evaluation of the need for a national formula for funding?
    Mr. Squire: I can certainly confirm my hon. Friend's last point. We are taking careful account of the many representations that we received in the consultation earlier this year.
    On what I judge to be my hon. Friend's central point about local management of schools schemes and the way in which local authorities distribute funding to schools, it is a good responsibility for LEAs to keep such things up to date and to take account of the points that my hon. Friend has made.
    Mr. Don Foster: Does the Minister agree that a great deal of humbug is talked about the amount of money spent on administration in education? Will he confirm that the White Paper published in the summer shows that, on average, administration costs represent about 1.8 per cent. of the total cost per pupil? Will he further confirm that that figure is considerably less than the amount spent by
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    his Department and the Funding Agency for Schools on administration in respect of pupils in grant-maintained schools?
    While we are on the subject of humbug, does the Minister accept that his answer to the hon. Member for South Hams (Mr. Steen) was complete humbug? He tried to tell the House that the Government were making more money available for education, when the Red Book shows that the amount of money that central Government are providing to local government is being cut in real terms.
    Mr. Squire: The hon. Gentleman has underlined why we invariably look to the Liberal Democrat Benches for classic humbug as opposed to occasional humbug.
    On administration, I can give the hon. Gentleman a straight answer. What matters is how each and every local authority and central Government make efficiency savings year on year. Averages often disguise the truth. What matters is that all LEAs have the same commitment to delivering quality services. I repeat for the benefit of the hon. Gentleman, who may not have heard me, that we are providing significant additional funding to schools this year and we expect it to be spent predominantly on the schools themselves.
    Mr. Dunn: Given that Labour and Liberal Democrat-controlled Kent county council is one of the worst offenders and spends a huge amount of money on administration, will my hon. Friend arrange for an official inquiry into the spending plans and policies of that county council to reduce that huge sum so that extra funds can be given to the county's schools? It is a nightmare for the people of Kent.
    Mr. Squire: Obviously, I shall consider my hon. Friend's suggestion, but I know, from his long experience in education matters and his knowledge of the highways and byways, that he will continue to publicise the poor administration record of the Labour and Liberal Democrat-controlled Kent LEA.
    Mr. Dafis: Have not schools shown strong resistance to any proposals to increase the compulsory percentage of money delegated to their budgets? Is that not why the proposal in the White Paper was withdrawn? Is it not time to introduce greater flexibility, as schools bear a heavy administrative burden and small schools in particular find it difficult to cope with heavy management responsibilities? Could that not be achieved through sensible county-wide negotiations between LEAs and federations of school governors?
    Mr. Squire: First, let me confirm that the proposal in the summer White Paper has not been withdrawn. It does not feature in current legislation, precisely because there is a need for widespread consultation among schools and LEAs and because some of the figure work will be fairly complex. Secondly, I am quite prepared to believe that some schools do not wish to have a greater share of their budget devolved to them. However, in response to the central issue that the hon. Gentleman raises, the record of grant-maintained schools—which control 100 per cent. of their budgets—shows overwhelmingly that they achieve better value for money. I am confident that, if LEA schools controlled a greater share of their budget, they could do the same.

    Job Creation
    Mr. John Marshall: To ask the Secretary of State for Education and Employment when she last met the representatives of other member states in the Council of Ministers to discuss job creation. [7058]
    Mr. Forth: Whenever other United Kingdom Ministers and I meet our European counterparts, we make it clear that the way to create jobs is through the development of efficient, flexible and competitive labour markets, not through imposing new legislative burdens on employers which only damage competitiveness and destroy jobs.
    Mr. Marshall: As the United Kingdom is in the premier league of job creation and countries such as Germany are in the third division, will my hon. Friend ask my right hon. Friend the Prime Minister to host a seminar on job creation in Dublin this weekend so that Chancellor Kohl can discover that we in Britain can teach him a thing or two?
    Mr. Forth: I suspect that my right hon. Friend the Prime Minister has been given quite a lot of advice about what he might say in Dublin this weekend from a number of different quarters, and I therefore hesitate to add even my hon. Friend's words of wisdom. He makes the valid point that we can now conclude safely that the route that we have chosen to take and the policies that we have chosen to pursue to create an environment that is friendly to job creation and business and attractive to inward investment present a far better chance of creating the maximum number of jobs—real jobs, jobs for the future—than the route chosen by our continental partners. That is becoming clear. The extent to which our partners have been persuaded by that argument will perhaps be better known after the Dublin summit.
    Mr. Sheerman: Before the Minister goes to the Council of Ministers with his usual bundle of prejudices, will he talk to the Business Services Association and other major employers that want a national minimum wage because they believe that it will raise standards, create jobs and stop the scandal of spending £3 billion of taxpayers' money on subsidising poor employers?
    Mr. Forth: Of course we listen to all groups and all representations on such matters; that has always been so. I must admit to a slight lingering suspicion that some groups take the view that the imposition of a statutory minimum wage would help to eliminate competition that they find difficult and unhelpful. If a statutory minimum wage were ever to eliminate new, thrusting, dynamic, entrepreneurial businesses, which tend to compete with established businesses, it would demonstrate beyond a doubt that the policy of a minimum wage, so beloved by the hon. Gentleman, would destroy many jobs in our economy.

    Village Schools
    Mr. Tyler: To ask the Secretary of State for Education and Employment what educational criteria she uses to assess the case for the retention of small village schools. [7060]
    The Parliamentary Under-Secretary of State for Education and Employment (Mrs. Cheryl Gillan): The closures of county and voluntary schools are considered on their own merits.
    Mr. Tyler: The guidance that the Minister can give to local education authorities of all political colours will be very helpful and I hope that it will be spelt out in detail. May I ask her more specifically for advice on the plight facing Blisland school in my constituency, where the roll fell to such a level that it was no longer educationally or economically viable and the LEA, with the concurrence and support of the Secretary of State, decided that the school should be closed? What advice can the hon. Lady give in the present circumstances, where the school roll is increasing again and the local authority, with cross-party agreement, has decided to review the situation? Will the Secretary of State be prepared to review the closure and retrieve Blisland school? What educational and economic criteria will she need to be persuaded of to establish its future?
    Mrs. Gillan: The hon. Gentleman knows that I am well aware of the situation concerning Blisland school. The Liberal Democrat-controlled council published the proposal to close it as recently as March this year. Her Majesty's inspectorate visited the school, where there were nine pupils and one teacher. We received no representations from the hon. Gentleman about the school. He is now telling me that the Liberal Democrats have changed their minds, which does not surprise me and I am sure does not surprise anybody else. Now that the decision has been taken to close the school, and since the LEA made such a good case for doing so originally, I must advise him that it will be necessary for that local authority to publish fresh proposals to make a case for keeping the school open.
    Dame Elaine Kellett-Bowman: No doubt my hon. Friend will be pleased to know that those of my village schools that have been assessed in the recent inspection round have had exceptionally good results, co-operate with one another to provide a much broader curriculum and are in every way admirable.
    Mrs. Gillan: As usual, I agree with my hon. Friend, who is obviously making a very strong point in favour of good rural schools. Good rural schools are supported by the Government.

    School Class Sizes
    Mr. Alan W. Williams: To ask the Secretary of State for Education and Employment what steps she plans to take to reduce class sizes in primary schools. [7061]
    Mrs. Gillian Shephard: Decisions about class sizes are a matter for local education authorities and schools.
    Mr. Williams: Do the Government now accept what 90 per cent. of parents considered to be self-evident: with a given teacher in a given classroom, the quality of learning and the amount of individual attention given to children's reading, writing and arithmetic are greater in class sizes of 30 rather than 35?
    Mrs. Shephard: The hon. Gentleman should refer to the report produced by the Office for Standards in

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    Education specifically on class sizes. He will find that the chief inspector stated that there was no simple link between class size and quality of teaching and learning. If the hon. Gentleman remains as unconvinced as he looks, he should ponder on the fact that in Hackney, long under Labour control, standards at the Hackney Downs school were so deplorable that the school had to be closed, yet it had only eight pupils to every teacher.
    Mrs. Peacock: What positive steps is my right hon. Friend taking to encourage all local education authorities to pass 95 per cent. of the budget to schools so that schools can make decisions on class sizes, which is what they really want to do?
    Mrs. Shephard: I should hope that such a policy would be so self-evidently sensible to all properly run LEAs that there would be no need for me to encourage them further.
    Mr. Kilfoyle: Has the Secretary of State seen the recently published Organisation for Economic Co-operation and Development report which illustrates how our international competitors have had a substantial improvement in pupil-teacher ratios, leading to reductions in class sizes? The report also notes that, under three successive Tory Governments, the reverse process has occurred in the United Kingdom, leading to increased class sizes. Given that the Government have appropriated huge parts of Labour party policy in their current Education Bill and given that Her Majesty's chief inspector has admitted the link between smaller class sizes and improved performance at key stage 1, will the Secretary of State now join the Labour party in giving a commitment that, at key stage 1, there will be no class of more than 30?
    Mrs. Shephard: Perhaps I may remind the hon. Gentleman that his party's class-envious plans to destroy the assisted places scheme—and, with it, opportunities for able children from less well-off families—to reduce class size would yield one extra teacher for every nine schools. I wonder how he would divide them up.
    Mr. Nicholas Winterton: I am sure that my right hon. Friend will agree that, although class sizes clearly have a part to play in the attraction of a school, it is the structure and ethos of the school and the quality of teaching that are far more important to parents. Does she accept that, in many rural schools, it is the quality and ethos of the school and the teaching that are important, and that those are the schools that are attractive to parents and to which they want their children to go?
    Mrs. Shephard: Parents are well aware of which schools are popular and successful and willingly choose larger classes if they think those schools will do best for their children.

    School Security
    Mr. Turner: To ask the Secretary of State for Education and Employment what additional financial
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    assistance is being proposed for local education authorities and schools to tackle the problems of school security. [7062]
    Mr. Robin Squire: An extra £66 million is being made available for security measures at LEA-maintained and grant-maintained schools over the next three years.
    Mr. Turner: I thank the Minister for the answer, but the question is whether that is enough. The Minister will be aware that, following the horrific machete attack at St. Luke's school in my constituency, my local LEA has been actively encouraging schools to draw up school security programmes. To date, the total amount of money that has been identified is in the region of £1 million. The amount of money coming to Wolverhampton as a result of the Government's additional programme is approximately £100,000. It can be clearly seen that that is a tiny amount and just a drop in the ocean.
    Madam Speaker: Order. That was another non-question. Perhaps the Minister might try to answer the non-question.
    Mr. Squire: I will do my best, Madam Speaker.
    We will announce shortly the individual LEA allocations, but even if—for the sake of discussion—I ran with the figure of £100,000 that the hon. Gentleman produced, over three years that would mean some £225,000 from Government, in addition, and I stress that, to the money already being spent on security by schools and LEAs. I do not believe that the country would consider £66 million to be as insignificant a sum as the hon. Gentleman suggests.

    Standard Spending Assessments
    Sir Colin Shepherd: To ask the Secretary of State for Education and Employment what representations she has received in respect of the method by which the education standard spending assessment is derived. [7063]
    Mr. Robin Squire: My right hon. Friend has received a number of representations offering a range of views on possible adjustments to the SSA methodology.
    Sir Colin Shepherd: May I draw my hon. Friend's attention to sparsity, which is an important matter in my part of the world? Does he agree that, in a sparsely populated area, it is necessary for a local education authority to maintain a larger number of smaller schools than would be needed in a more densely populated urban area? Small, rural schools cannot achieve the same economies of scale as larger schools. In my county, we have to maintain 5.15 schools per 10,000 of the population, compared to a shire average of 4.86 per 10,000. In my part of the world, it is felt that the sparsity factor is not adequately recognised when the overall figures are considered. Will my hon. Friend ask my right hon. Friend the Secretary of State to go back to the Department of the Environment and the local government associations and review the sparsity factor to ensure that it reflects what is necessary?
    Mr. Squire: As my hon. Friend is aware, I recently met representatives of a group of local authorities, including his. We discussed the sparsity factor and related issues.

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    My hon. Friend is also aware that the sparsity allowance compensates authorities for the additional costs of providing small schools and for extra transport costs in sparsely populated areas. The review recently undertaken did not put forward any robust evidence for increasing the sparsity factor. However, we shall continue to keep the issue under close review.
    Mr. Pike: How many local education authorities, if they limited their spending to standard spending assessment levels, would have to reduce their expenditure from what they are spending this year?
    Mr. Squire: I obviously cannot answer that now. If the hon. Gentleman tables that question as a written question, I shall provide the answer.
    The principle has long existed that local authorities are free to spend more or less than individual SSAs on services. I am pleased that many of them spend more than their SSA on education, but that remains their decision, for which they are accountable to their electors.
    Mr. Viggers: Will my hon. Friend confirm that the increase in education provision in Hampshire is fully consistent with the increase in inflation and with the priority that we give to education? It is misleading for Hampshire county council to stir up a writing campaign of complaint against the provision.
    Mr. Squire: I can certainly confirm to my hon. Friend that the national increase in SSAs of 3.4 per cent.—3.6 per cent. overall in education services to local authorities—is comfortably ahead of the rate of inflation and of the projected growth in pupil numbers.

    Departmental Policy
    Mr. Gapes: To ask the Secretary of State for Education and Employment what account she takes of the relationship between the levels of (a) unemployment and (b) employment in formulating her Department's policy decisions. [7064]
    Mr. Forth: The Department's latest assessment shows that our policies are working; employment is rising and unemployment is falling.
    Mr. Gapes: If unemployment is falling in the way in which the Minister claims, why are there 800,000 fewer people in employment than when the right hon. Member for Huntingdon (Mr. Major) became Prime Minister? Is not the truth that hundreds of thousands of workers are disappearing from the job statistics and that, despite the Government's claims, many people face greater job insecurity as a result of the Government's policies?
    Mr. Forth: No. For political purposes, those such as the hon. Gentleman would like people to think that they face greater job insecurity. It is irresponsible of Labour Members to continue trying to plant that idea in people's minds. There is nothing to support that in the relevant statistics on the average length of job tenure or any other issue. The hon. Gentleman seems to imply that the labour force survey figures, endorsed by the
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    International Labour Organisation, no less, are wrong. He cannot mean that, because I am sure that Labour Members all think that ILO-endorsed figures must be the bee's knees. Since they show that unemployment has been falling and employment is rising, I hope that the hon. Gentleman goes off and does more homework.
    Mr. Nigel Evans: Irrespective of the relationship between unemployment and employment, does my hon. Friend agree that it would be damaging to unemployment and to employment prospects if this country were to adopt the social chapter or the minimum wage?
    Mr. Forth: My hon. Friend is right to remind the House—I do not think we have had the reminder today—that, were this country ever to contemplate signing up to the social chapter or a statutory minimum wage, we would be likely to suffer what our continental partners who signed up to these measures have suffered. They have high and rising unemployment, as opposed to our recent experience which, I am happy to say, is of lower unemployment than most of our direct competitors and partners, and falling unemployment. Any rational man must surely conclude that there is an obvious causal connection between the social chapter and a minimum wage on the one hand and high and rising unemployment on the other.
    Mr. Blunkett: I was going to wish Ministers a happy Christmas, but I suspect that the Minister of State would merely shout, "Humbug," in his usual fashion. Why did unemployment triple under this Government without a minimum wage and without the social chapter? On job tenure, why did 52 per cent. of all those who gained a job in the past year return to the unemployment register within a year? Why has the proportion of inactive males increased by 27.3 per cent. in the past five years? Why has there been a drop in the number of males with full-time jobs in the past 12 months? Is this not a Goebbels approach to statistical analysis that tries to pretend that the more inactive people there are in the labour force, and the fewer full-time jobs there are, the more beneficial it is to the nation as a whole? Is that not the real humbug of Christmas in 1996?
    Mr. Forth: That proves that the hon. Gentleman's researchers have had to become more ingenious in finding some sort of figure to support his gloomy view of what is going on in this country today. The reason why unemployment rose throughout the advanced and developed countries in the 1980s was partly intensive global competition and—in this country—partly the fact that we inherited a position of grotesque structural overmanning in our industries that had to be dealt with. The Government elected in 1979 dealt with those problems, and that has put us in a competitive position that is the envy of our continental partners and competitors. That is the reality, and I invite the hon. Gentleman to consider it over his, I hope, very happy Christmas.
    Sir Donald Thompson: How is it that the Opposition believe the figures when they get worse, but disbelieve them when they get better? Do their prejudices extend

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    to our service industries, about which they are constantly sniping? [Interruption.] Snipe, snipe, snipe. That sector is where new jobs will come from.
    Mr. Forth: Yes, I agree, and it is perhaps time that we did some snipe-shooting. My hon. Friend made an important point. The service sector is a vital part of our economy—one that is growing successfully in leisure, tourism and financial services—and it improves our international competitiveness by leaps and bounds. It is putting us in a strong position to export and to attract inward investment. All these factors put together give rise to our optimism and positivism, and lead me to wonder where Opposition Members get their negativism and the gloom and doom that they peddle every time we have Education and Employment questions.
    Mr. Beggs: Will the Minister seek co-operation from other Departments and officials throughout the United Kingdom in dealing with planning applications so that the Government's policy of keeping jobs in rural areas can be achieved? Will he request that sympathetic consideration be given to those who want to start new play groups in rural areas?
    Mr. Forth: I am grateful to the hon. Gentleman for making that important point. I can assure him that we work constantly with our colleagues in the Department of the Environment and in the territorial offices to ensure that all our policies help the rural areas in every possible way and do not hinder them. It is easyrightly—to become absorbed by the problems of inner cities and we must never forget that the problems of dispersed and remote rural areas are just as serious and deserve every bit of policy attention. We will continue to give that attention.

    Assisted Places
    Mr. Hanson: To ask the Secretary of State for Education and Employment what plans she has to review provision for assisted places in 1997–98. [7065]
    Mrs. Gillan: None.
    Mr. Hanson: If the Minister has no plans for a review, perhaps she should take time to consider whether any changes should be made. Does she agree that the £140 million that is planned to be spent on subsidising 40,000 people on assisted places schemes next year could be far better spent on reducing class sizes for 400,000-plus five, six and seven-year-olds? Will the Conservative party make time for a review next year and try to take care of the many rather than the few?
    Mrs. Gillan: I do not agree with the hon. Gentleman. Everyone knows that Conservative Members believe that the assisted places scheme offers a valuable choice to many parents throughout the country. The scheme plays an integral part in our policy of choice and diversity. The Labour party's proposals to phase out the assisted places scheme would yield about £5 million in the first year, which could possibly deliver 200 teachers into the system,
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    meaning that the Labour party would weigh the interests of 200 more primary teachers against those of the 10,000 children whom they would deprive of the scheme.
    Sir Patrick Cormack: Does my hon. Friend accept that, excellent as the assisted places scheme is, it is still nowhere near as good as the direct grant scheme that it replaced?
    Mrs. Gillan: The assisted places scheme is an extremely good scheme, but we all know what happened to the direct grant scheme and who was responsible for abolishing those schools.

    Training Opportunities (Young People)
    Mrs. Fyfe: To ask the Secretary of State for Education and Employment what plans she has to extend training opportunities for those aged under 25 years. [7066]
    Mr. Paice: The White Paper "Learning to Compete", published on 9 December, builds on the exciting range of opportunities for young people. It sets out a learning entitlement up to national vocational qualification level 3, through a choice of routes including national traineeships and further expansion of modern apprenticeships, with special measures for those who need extra help to get started.
    Mrs. Fyfe: If the Labour party can guarantee real training with meaningful qualifications for a quarter of a million under-25s, what excuse does the Minister have for the betrayal of under-25s in the past 17 years?
    Mr. Paice: The hon. Lady would have done the House a greater service by drawing attention to, and admitting, the fact that Labour party policy is an absolute sham. The Labour party proposes to give people the chance to study only to NVQ level 2, which is equivalent to five GCSEs, when already nearly half our young people achieve that while they are at school. The Labour party is therefore merely extending the opportunity to become semi-skilled, in contrast with our proposals, announced on Monday, which will entitle all young people to study for a level 3 qualification as an entry into higher education or to become a qualified craftsman, technician or supervisor, with a real platform for a future career.

    Examination Results
    Mr. Spring: To ask the Secretary of State for Education and Employment how many (a) grant-maintained and (b) local education authority schools are represented in the top 50 state schools measured by A-level results. [7069]
    Mrs. Gillan: Thirty of the top 50 schools in England are grant-maintained and 20 are LEA-maintained.
    Mr. Spring: Can my hon. Friend confirm that the pattern of GCSE results is similar to that of A-level results in grant-maintained schools, and does she agree that the excellent results from grant-maintained schools vindicate the wide diversity of parents who choose GM schools for their children?
    Mrs. Gillan: I can indeed confirm that. The GCSE results tell the same story: half the pupils in GM schools

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    achieved five good passes at GCSE, compared with 41 per cent. of pupils in local education authority schools. I am delighted that GM schools are achieving such excellent results, not only at A-level but at GCSE and in the national curriculum assessments; they figure strongly both in the top 50 at A-level and in the Office for Standards in Education's list of outstanding schools. They account for a quarter of all schools with sixth forms and three fifths of the top 50 at A-level—and we all know that the Labour party would abolish them.
    Mr. O'Hara: The Minister knows that her last statement is erroneous. The presumption behind the question demonstrates the fault of the obsession with
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    league tables. Would it not be more relevant to compare the performance of grant-maintained schools with what they achieved before they were grant-maintained? There is an element of self-fulfilment in the league tables. How many grant-maintained schools are diagnosed as failing and what will the Minister do about them?
    Mrs. Gillan: The Labour party's opposition to everything that the Government have done to improve our education system is well known. It opposed league tables and grant-maintained schools and it would abolish assisted places. The performance tables have operated for five years and are respected throughout the education system. The Government will continue to produce performance tables, as we have promised.

BILL PRESENTED
  WAR WIDOWS AND PENSIONERS (EQUAL TREATMENT)
  Mr. Simon Hughes presented a Bill to end the differential treatment of war widows and war disablement pensioners by local authorities; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 24 January 1997, and to be printed [Bill 56].

Point of Order
3.31 pm
Mr. Elfyn Llwyd: On a point of order, Madam Speaker. In view of the understanding that the next financial settlement in Wales will result in at least 1,200 teachers being dismissed, has the Secretary of State for Education and Employment applied to make a statement to the House? If not, why not? Given the serious situation, should she not do so as soon as possible?
Madam Speaker: The answer is no. No Minister has let me know today that they are seeking to make a statement. I cannot help the hon. Gentleman any further.

Fire Safety
3.31 pm
Mr. John Heppell: I beg to move,
That leave be given to bring in a Bill to make further provision for the protection of persons from fire risks; and for purposes connected therewith.
The Bill is far-reaching. I recognise that, in the time available, I shall not be able to cover all its points. I shall try to give a decent summary.
The Keighley mill fire in February 1956 resulted in the death of eight people and led to the Factories Act 1961. The Hendersons department store fire in June 1960 resulted in the death of 11 people and led to the Offices, Shops and Railway Premises Act 1963. The Top Storey club fire in Bolton resulted in 19 deaths and led to greater powers for fire authorities under the Licensing Act 1964. The Rose and Crown fire in Saffron Walden on Boxing day 1969 resulted in 11 deaths and led to hotels and boarding houses being designated under the Fire Precautions Act 1971. The Woolworths store fire in Manchester in 1979 resulted in 12 deaths and led to the Upholstered Furniture (Safety) Regulations 1980. The Bradford football stadium fire in May 1985, in which 58 people died, resulted in the Fire Safety and Safety of Places of Sport Act 1987. Finally, the King's Cross rail fire of 1987 resulted in 31 deaths and led to the Fire Precautions (Sub-surface Railway Stations) Regulations 1989.
Those pieces of legislation had one thing in common: they were what is known in the trade as tombstone legislation. People have had to die before action has been taken. I should love to be able to say that I am proposing legislation that will stop tragedies happening rather than legislation as a result of tragedies. Unfortunately, I cannot, because on 6 September 1993, two firemen were killed at Sun Valley Poultry Ltd. in Hereford.
That happened in a former factory that had been turned into a poultry processing plant. Panels had been built round the inside of the building, creating a building within a building. Fire broke through one of those panels. Firefighters who went to fight the fire did not know what was happening in between those panels. The roof burned and collapsed and two firefighters, who were doing the work that they did every day for all the people of this country, were killed. That is one of the reasons why I present the Bill, but there are other reasons.
There was much speculation in 1994 about the weakening of fire safety regulations under the deregulation initiative. I am anxious to ensure that I have cross-party support for the Bill, but it seemed to me, at a time when most people realised the need for greater fire safety, that we were taking forward measures that could cost people's lives. Since then, there seems to have been literally review after review, recommendation after recommendation and report after report. Some the Government have accepted and some they have not, some rightly so. One thing that has become clear as a result of that constant review is that there is a need after more than 25 years to review fire safety legislation.
The Fire Precautions Act 1971 served its purpose well. Most people agree that it was a good piece of legislation, but it did not do what it set out to do. It set out to be an all-embracing Act that would take in every fire safety measure. My Bill would do that. It would consolidate all fire safety legislation. It would replace in part or in total

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more than 54 pieces of legislation on the statute book and put fire legislation into one single Bill. So it is both simplifying and, in some respects, deregulatory. I hope that it will receive the support of the House.
My Bill is also progressive and forward-looking. It incorporates many new recommendations that were made as a result of the 1993 Home Office review of the Fire Precautions Act 1971. My Bill supports the Government's view announced in May 1996 that fire safety should in general be treated separately in legislation and that its enforcement should rest principally with fire authorities. Indeed, one of the main intentions of the Bill is to create a one-stop shop for fire safety. The one-stop shop would be the fire authority and the Department responsible would be the Home Office.
The Bill is also designed to complement the Government's proposals on the EC framework workplaces directive. It is designed to be compatible with the directive and to use the same general duty principle and risk assessment approach as do the Government's proposals. The Bill will use risk assessment to determine fire standards, so that the measures taken are appropriate but not excessive. It will be flexible enough to incorporate all future European legislation.
Even more important, for the first time ever in fire safety legislation, the Bill will take into account not just the safety of the public—most fire legislation has taken that into account—but the safety of firefighters and give them some protection. We are currently building in England and Wales—not in Scotland; they seem to have more sense there—gigantic buildings with no compartmentalisation. It seems to be the view of many people that it is acceptable for such places to burn down; that if there is a fire, the fire services should get the people out and let the building burn. That is not acceptable when it results in the death of firefighters. Nor is it acceptable in terms of insurance, because insurance companies have to meet the cost of fires. That means that all of us suffer as we have to pay extra insurance. Furthermore, it is not acceptable in terms of the effect on the environment. Some fires can be devastating to the environment in general. For the first time, the Bill imposes a duty to think not only of the safety of people, but of the safety of premises. It is a genuine fire safety Bill.
I suspect that, if there is any criticism of the Bill, it will be that it has been designed for firefighters. I make no apology for that—firefighters are the people who, year by year, week by week and day by day, put their lives on the line for the rest of us. As far as I am concerned, they are the experts on fire safety, because they are the ones who tackle fires and who know what needs to be done to put fires out.
I make no apology for the fact that the Bill is drafted by firefighters and I hope that hon. Members will accept that firefighters are the best people to talk about fire safety. The Bill enjoys the support of all the fire service organisations represented by the Central Fire Brigades Advisory Council for England and Wales, which advises the Home Office on all matters relating to the fire service.
Finally, I repeat that firefighters are the experts on fire safety. Let us put responsibility with the fire service, which is where the majority of the general
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public already think it lies. Let us make sure that the people who go into fires when we are coming out of them are protected. Let us make sure that we have decent fire safety legislation for the 21st century.
3.40 pm
Mr. Anthony Steen: I oppose leave being given to bring in the Bill, and I shall explain why.
Fire is a most dreadful, destructive and terrifying force and, in our complex and modern society, we must do all that we can to reduce the prospects of fire. To that end, we have a plethora of fire regulations—25 measures in the past nine years, including an Act of Parliament. There are teams of fire inspectors, spending a total of 1.8 million hours a year enforcing existing regulations. We have smoke detectors, fire alarms and fire stations around nearly every corner. Firemen are poised to respond within seconds to any call. The cost to the taxpayer of that fire operation is £1.38 billion per year and that is a price worth paying.
Yet, in spite of all that and in spite of high public awareness, the number of fires continues to rise. It has risen from 392,000 in 1989 to 411,000 in 1994. None the less, the number of house fires is dropping, because people are taking action to reduce risk, without the need for lengthy, costly, bureaucratic and over-prescriptive regulations. Already European directives in the 1980s have cost industry £10 billion—that is equivalent to 500 new hospitals and no end of lost job opportunities.
The hon. Gentleman's proposal illustrates well the difference between the Labour party's approach and ours. He believes that fire can be outlawed by passing legislation. Legislation, like some elixir, cures all. The Labour party claims that more regulations create more safety, but that does not follow. Take road safety: in spite of the ever increasing number of regulations, nearly 10 people a day are killed on the roads and some 300,000 are injured. Regulations pour in from Europe, on safety in the home, yet in 1994 4,140 adults and children were tragically killed in household accidents. Although no one doubts that the hon. Gentleman has been prompted to seek the leave of the House to bring in his Bill by the highest motives, he is mistaken if he believes that legislation can cure the ills that he describes.
It is worse than that. I suspect that the Bill would create an additional bill in knock-on costs for small businesses. That is the problem with the Labour party. Labour Members do not understand that not only does legislation not solve problems, but additional rules and regulations imposed on industry make us less competitive and cost people jobs. That is why I oppose the Bill.
Question put, pursuant to Standing Order No. 19 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—
The House divided: Ayes 125, Noes 40.

Division No. 29]

[3.45 pm

AYES

Ainger, Nick

Beggs, Roy

Alexander, Richard

Beith, A J

Ashdown, Paddy

Benn, Tony

Ashton, Joseph

Bennett, Andrew F

Barnes, Harry

Bermingham, Gerald

285

Betts, Clive

McAvoy, Thomas

Bray, Dr Jeremy

Macdonald, Calum

Brown, Nicholas (Newcastle E)

McFall, John

Bruce, Malcolm (Gordon)

Mackinlay, Andrew

Byers, Stephen

MacShane, Denis

Callaghan, Jim

McWilliam, John

Campbell, Mrs Anne (C'bridge)

Madden, Max

Campbell, Menzies (Fife NE)

Mahon, Mrs Alice

Campbell, Ronnie (Blyth V)

Marek, Dr John

Canavan, Dennis

Marshall, David (Shettleston)

Clark, Dr David (S Shields)

Marshall, Jim (Leicester S)

Cousins, Jim

Meale, Alan

Cox, Tom

Michael, Alun

Cummings, John

Michie, Bill (Shef'ld Heeley)

Cunningham, Jim (Cov'try SE)

Milburn, Alan

Dafis, Cynog

Mitchell, Austin (Gt Grimsby)

Dalyell, Tam

Morgan, Rhodri

Davies, Denzil (Llanelli)

Morris, Alfred (Wy'nshawe)

Davies, Ron (Caerphilly)

Morris, Ms Estelle (B'ham Yardley)

Davis, Terry (B'ham Hodge H)

Morris, John (Aberavon)

Donohoe, Brian H

Mudie, George

Eastham, Ken

Mullin, Chris

Etherington, Bill

Murphy, Paul

Evans, John (St Helens N)

O'Brien, William (Normanton)

Ewing, Mrs Margaret

Pike, Peter L

Faulds, Andrew

Pope, Greg

Foster, Derek

Powell, Sir Raymond (Ogmore)

Foster, Don (Bath)

Prentice, Mrs B (Lewisham E)

Fyfe, Mrs Maria

Prentice, Gordon (Pendle)

Gapes, Mike

Primarolo, Ms Dawn

Garrett, John

Radice, Giles

Grant, Bernie (Tottenham)

Randall, Stuart

Griffiths, Win (Bridgend)

Rendel, David

Grocott, Bruce

Robinson, Peter (Belfast E)

Gunnell, John

Rooker, Jeff

Hain, Peter

Rowlands, Ted

Henderson, Doug

Sedgemore, Brian

Heppell, John

Sheerman, Barry

Hood, Jimmy

Sheldon, Robert

Howarth, George (Knowsley N)

Shore, Peter

Hoyle, Doug

Skinner, Dennis

Hughes, Kevin (Doncaster N)

Soley, Clive

Hughes, Robert (Ab'd'n N)

Spearing, Nigel

Hughes, Roy (Newport E)

Spellar, John

Hughes, Simon (Southwark)

Squire, Ms R (Dunfermline W)

Jackson, Mrs Helen (Hillsborough)

Taylor, Matthew (Truro)

Jamieson, David

Thompson, Jack (Wansbeck)

Jenkins, Brian D (SE Staffs)

Timms, Stephen

Jones, leuan Wyn (Ynys Môn)

Trimble, David

Jones, Jon Owen (Cardiff C)

Tyler, Paul

Jones, Martyn (Clwyd SW)

Wareing, Robert N

Kaufman, Gerald

Williams, Alan W (Carmarthen)

Kennedy, Charles (Ross C & S)

Winnick, David

Kennedy, Mrs Jane (Broadgreen)

Wise, Mrs Audrey

Khabra, Piara S

Wray, Jimmy

Kilfoyle, Peter

Lewis, Terry

Litherland, Robert

Tellers for the Ayes:

Lynne, Ms Liz

Mr. Keith Hill and

McAllion, John

Mr. Graham Allen.

286

NOES

Arnold, Jacques (Gravesham)

Nicholls, Patrick

Ashby, David

Onslow, Sir Cranley

Bowden, Sir Andrew

Pawsey, James

Butcher, John

Redwood, John

Cash, William

Riddick, Graham

Chapman, Sir Sydney

Shaw, David (Dover)

Cope, Sir John

Shaw, Sir Giles (Pudsey)

Durant, Sir Anthony

Spicer, Sir Jim (W Dorset)

Emery, Sir Peter

Spicer, Sir Michael (S Worcs)

Evans, David (Welwyn Hatf'ld)

Steen, Anthony

Gardiner, Sir George

Sweeney, Walter

Gill, Christopher

Tapsell, Sir Peter

Greenway, Harry (Ealing N)

Thompson, Sir Donald (Calder V)

Grylls, Sir Michael

Townend, John (Bridlington)

Hannam, Sir John

Townsend, Cyril D (Bexl'yh'th)

Heathcoat-Amory, David

Viggers, Peter

Leigh, Edward

Walker, Bill (N Tayside)

Lloyd, Sir Peter (Fareham)

Wiggin, Sir Jerry

Marlow, Tony

Martin, David (Portsmouth S)

Tellers for the Noes:

Mills, Iain

Mr. Tim Devlin and

Mitchell, Sir David (NW Hants)

Mr. Rupert Allason.

Question accordingly agreed to.
Bill ordered to be brought in by Mr. John Heppell, Sir David Knox, Sir Geoffrey Johnson Smith, Mrs. Diana Maddock, Mr. Jim Marshall, Mr. Gordon Prentice, Mr. Stanley Orme, Mr. John Austin-Walker, Mr. Joseph Ashton, Mr. Greg Pope, Mr. David Hanson and Mr. Ian Pearson.

Fire Safety

  FIRE SAFETY
  Mr. John Heppell accordingly presented a Bill to make further provision for the protection of persons from fire risks; and for purposes connected therewith: And the same was read the First time; and ordered to be read a Second time upon Friday 14 February 1997, and to be printed [Bill 55].
  Mrs. Alice Mahon: On a point of order, Madam Speaker. I understand that the hon. Member for Havant (Mr. Willetts) has resigned his position as a Minister following the publication of the report of the Select Committee on Standards and Privileges. Is it customary or optional for a Member in that position to come to the House and offer an apology or an explanation, or would the Leader of the House offer such an explanation?
  Madam Speaker: If the Member concerned wishes to do so, he or she makes an approach to me to make a personal statement. No such approach has been made to me.

European Union
[Relevant documents: The White Paper on Developments in the European Union, January to June 1996 (Cm 3469); Presidency General Outline for a draft revision of the Treaties; The Commission's Work Programme for 1997: New Legislative Proposals (SEC(96)1819); The Commission's Work Programme for 1997: Political Priorities (COM(96)507); European Community Document No. 10867/96 on the introduction of the euro; European Community Document No. 10893/96 on reinforced convergence procedures and a new exchange rate mechanism; European Community Document No. 10892/96 on a stability pact for ensuring budgetary discipline in stage 3 of EMU; Second and Third Reports from the Select Committee on European Legislation of Session 1996–97 (HC 36-ii and 36-iii); Sixth Report from the Select Committee on European Legislation of Session 1996–97, European Documents on Economic and Monetary Union: the Scrutiny Process (HC 36-vi); Eighth Report from the Treasury Committee of Session 1995–96, The Prognosis for Stage Three of Economic and Monetary Union (HC 283-I and II); Minutes of Evidence taken before the Select Committee on European Legislation on 3rd December (HC 136-i); and Minutes of Evidence taken before the Foreign Affairs Committee on 5th and 9th December (HC 148-i and 148-ii).]
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Anthony Coombs.]
Madam Speaker: Before we begin, let me inform the House that it has been indicated to me that, today alone, more than 46 Back Benchers wish to speak, and in my judgment a similar number will wish to speak tomorrow. I ask all hon. Members to stay in the House for the remainder of the day and see what their chances are. In such circumstances, I have had to impose a 10-minute limit for Back-Bench speeches.
Sir Edward Heath: On a point of order, Madam Speaker. Would it be in order for me to ask you whether you would be prepared to refer the situation that has now arisen to the Procedure Committee for further consideration, or whether you would require a Member of Parliament to do that? In a two-day debate, only Front Benchers will be able to develop the argument or answer questions asked by other Members; the rest of us will have no time to develop the argument properly. Moreover, if there are interruptions, we shall not be able to give the information that is requested. I think that the Procedure Committee ought to consider the matter again.
Madam Speaker: The right hon. Gentleman will be aware that it is only recently that the Procedure Committee has given me authority to impose 10-minute limits on speeches throughout a debate. Perhaps the right hon. Gentleman would consider asking the Procedure Committee to look into the matter. I take his point very much to heart. I am concerned with the high quality of debate in the House, and I appreciate that, when I have to limit speeches to 10 minutes, we do not get the debate to which we are accustomed here.
3.59 pm
The Chancellor of the Exchequer (Mr. Kenneth Clarke): Out of deference to the intervention of my right hon. Friend the Member for Old Bexley and Sidcup
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(Sir E. Heath), I shall probably give way rather less than I sometimes do. The temptation will be for hon. Members to interrupt me, my temptation will be to give way and I should probably use a disproportionate amount of time, but I should like to cover a lot of ground.
This is an important debate, because it comes on the eve of the European summit in Dublin, where the British team—my right hon. Friend the Prime Minister, my right hon. and learned Friend the Foreign Secretary and I—will be defending and advancing British interests in Europe. Our overriding aim at Dublin will be to ensure that the United Kingdom continues to benefit from our membership of the European Union and that we continue to play a major role in moulding that European Union as it evolves as a partnership of nation states. The key issue in addressing those objectives is, where does the national interest lie?
In recent weeks, we have debated the details of the arrangements for economic and monetary union—important details, such as regulations relating to article 1091(4) or the public accounting conventions of France—but those details are symbols, and they are a focus for more deep-rooted anxieties about Britain's future political and economic identity. The real core of the debate is the much wider and more important issue of the United Kingdom's national identity and our future role in the modern world. In my experience, this country returns to agonising about its national identity every few years or so when important occasions arise.
Mr. Tony Marlow rose—
Mr. Clarke: In the light of what I said earlier, I may give way later, when I get to more specific points.
I hope that, during the next two days of debate, the House can address and allay some of the anxieties about our relationship with Europe. I want to explain how, in my judgment, our political and economic future is bound up with the future of the European Union, and how our negotiations at Dublin and thereafter will be pursuing our national interest.
I hope that we can avoid irrelevancies. There is no Conservative politician in the House who is a federalist; no Conservative politician would accept a European super-state. Every Conservative opposes any suggestion of the creation of a united states of Europe. Treating the debate about economic and monetary union as if it were a debate about the creation of a super-state arouses public fears and deprives the public of sensible information about the issue. [Interruption.] We may return to this, but we last debated the matter when we debated the Maastricht treaty, and I responded then to several hon. Friends who intervened.
In my view, fewer and fewer people on the continent see economic and monetary union as a tool for political integration—[Interruption.] Well, if they do, we do not agree with them. If they do, I do not think that most of the younger generation of politicians on the continent agree with them either—by "younger", I mean people of my age and below. We have to judge the discussions on economic and monetary union in terms of British economic interests and Britain's role in the European Union.

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The United Kingdom is and must continue to be an extremely influential player on the world stage, but our future national identity and future international influence will be secured and strengthened by our retaining our position as a major European power.
My right hon. and learned Friend the Foreign Secretary will be debating the framework for political co-operation between European Union members in the House tomorrow. The Government remain firmly in favour of the approach taken in the Maastricht treaty, where co-operation over matters such as foreign and security policy and justice and home affairs is dealt with on an intergovernmental basis—the so-called pillared approach.
Dame Elaine Kellett-Bowman: Hear, hear.
Mr. Clarke: I have always said, and my hon. Friend has always said—I have said it in the House and outside—that that pillared approach is and was the best feature of the Maastricht treaty. I will not read out my own speech as reported in Hansard at column 1108 on 27 January 1993.
The pillared approach opens the way for closer co-operation between member states on issues such as foreign policy and home affairs, but on the basis of unanimous decision taking by independent nation states and without the involvement of Community institutions such as the European Parliament and the European court. I have always said in particular that the British armed forces would never be committed to any foreign policy initiative unless the British Parliament supported it. The Government will ensure that it stays that way.
On the other hand, I have always said that the weakest part of the Maastricht treaty was the artificial timetable for economic and monetary union. Those have always been my views, and they remain my views.
Our economic interests are inextricably linked to our position in Europe. British economic success is the result of a combination of three factors: first, the Government's successful macro-economic policies; secondly, the Government's supply-side reforms, which have given us some of the most flexible products and labour markets in the industrialised world; and, thirdly, our access to the European single market, which is our biggest marketplace and the largest open market in the world.
The combination of those three factors is crucial to our future prosperity and success. All three of them lead to job creation, and make Britain a magnet for overseas investors looking for a foothold in the European market.
Mr. Marlow: No one has suggested that the single market is at risk. My right hon. and learned Friend said this morning that the single currency is no threat to nation states. Why does he think that the vast majority of the Conservative party is against the single currency? It is precisely because it would be the end of the nation state.
Mr. Clarke: I know that my hon. Friend holds that belief firmly, so I realise that for him it is a straightforward question. If I shared his belief, I would be against economic and monetary union. We need to have a debate. I do not hold that belief, and I do not think that such a belief is the be-all and end-all of debate.
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Other economic issues are involved, and we must consider the impact on the single market of the creation of a euro zone in the middle of it—I am glad that my hon. Friend and I agree on the importance of the single market. The Government's economic policy consists of getting right our macro-economic policy, our supply-side, micro-economic measures and the nature of the single market in which we operate and our influence on it.
The British Government played a leading role in creating the single market, and in seeking to complete it. When we signed the Single European Act, we entered into a single market that had institutions and rules. We have always accepted that a huge single market requires institutions and rules. We need to ensure that those rules are obeyed by every member state, and that the single market continues to provide the right climate for a competitive, free market economy such as ours to succeed.
That is one of the main reasons why I attend Economic and Finance Council and European Council meetings. It is in our national interest, and one of the key British objectives in our detailed negotiations on the euro zone as it emerges, to ensure that the right climate exists for our competitive position.
Sir Teddy Taylor: How do we display our influence in economic affairs if the European central bank makes the basic economic decisions, and under the Maastricht treaty we are not allowed even to make representations to the bank? Is that not a collapse of sovereignty and democracy?
Mr. Clarke: The European central bank will be an independent bank, such as that which they have had for years in the United States of America and they had in the Federal Republic of Germany. It will be responsible for monetary policy decisions. Questions of taxation, public spending and priorities and budget setting of the kind that I presented to the House two weeks ago would remain the responsibility of the nation state. I shall return to that subject in a moment.
Mr. Gordon Brown: We are anxious to know the Government's position. This morning, the Chancellor said that he supported the principle of a single currency. Is that the position of the Prime Minister, the Cabinet and the Government?
Mr. Clarke: I do not believe that I said that. I support having the option. I am answering questions from those who believe that one of the options would rule out the existence of the nation state. I do not agree with that, but I have made it clear that I am sympathetic to the idea of economic and monetary union. I am trying to explain why I believe that the Government's policy of retaining the choice in both directions, and exercising it responsibly in the national interest, is what we are all about. I am seeking to define the national interest in relation to economic policy.
Mr. Brown: The Chancellor said this morning that he had no objection, in principle, to a single currency. Will he answer a second question? A number of Conservative Members have said that they will stand under a different manifesto, and that they will oppose a single currency in principle. Has the Cabinet agreed a dispensation for them?
Mr. Clarke: I shall be deterred by that irrelevance for only a few moments. I have here a list of 50 members of

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the parliamentary Labour party who, in July this year, put out a document opposing the whole idea of a single European currency. When we discussed Maastricht, Labour was against having an opt-out. At the last election, the Labour party's policy was to bind ourselves by treaty without a choice to a single European currency. We have a clear policy, on which we shall stand at the next election. [Interruption.] The right hon. Gentleman has his answer, and he knows perfectly well what our policy is.
Let us consider the Government's economic aims, which, unlike those of the Opposition, are clear. All Conservatives want a deregulated market economy in Europe. We are all vehemently against the social chapter, no one more vehemently than me. We all want subsidiarity to be respected to the full in the single market. We can accept no question of Government or Parliament giving up control of either public spending or taxation. But we have many allies on those points in the European Councils that I attend. The Germans are probably our strongest supporters on deregulation, subsidiarity and national control of taxation.
The British Government insist that the European market must continue to be based on competitive free market principles and free trade. British membership of the EU was extremely important in shaping the European contribution to the successful completion of the last general agreement on tariffs and trade round. At this very moment, while we have this debate, at the first ministerial meeting of the World Trade Organisation in Singapore, we are pushing forward our free trade agenda. In Singapore, we the British are fending off the protectionist instincts that some of our trading partners would like to introduce into the European position.
It is against that background of the clarity on the Government Benches of our key interest in the nature of the single market that we have to consider our role in negotiations about a possible future single currency.
The European countries committed to joining a single currency are our nearest neighbours. They are the market for nearly 60 per cent. of our exports of goods. Our companies are big investors in their companies. When our continental neighbours do badly, we slow down. When they do well, we prosper. That is the economic reality. That is why we must do everything we can to ensure that, if economic and monetary union goes ahead with any member states in membership, it has to be a success.
The United Kingdom ought to punch its weight inside the EU. We have shaped the rules in the single market, to the benefit of everyone in Europe. We should have the self-confidence to believe that we can do the same on the single currency if we stay at the table.
Mr. Peter Shore: I understand very well that the Chancellor is blind to all the evidence of the federal thrust on the continent of Europe, but he is at least, or so he tells us, concerned about the sustainability of any euro currency that emerges, and totally opposed to finagling with the criteria.
That being so, what has the Chancellor to say about the evidence of finagling on the other side, and in particular of the Commission accepting the French Government's transfer of the France Telecom pension fund into their account, so that they can reduce their borrowing requirement by half of 1 per cent.? The Chancellor knows
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that there are half a dozen other examples as well. According to his own criteria, he should be saying now that he will not join a fiddled currency.
Mr. Clarke: I have been debating the fear of a European super-state with the right hon. Gentleman in one way or another for about 25 years now, and we have always disagreed on that. It has not happened yet, and I do not think that it will happen, either. For the umpteenth time, I am against it.
Mr. Norman Lamont: Will my right hon. and learned Friend give way?
Mr. Clarke: No.
On the second point, I disapprove of the transfer to the French Government of payments for the pensions liabilities of France Telecom being regarded as acceptable—the only difference that it has made. As I shall explain, that one transfer, which everyone knows about, does not affect one's basic judgment about convergence. I, along with most other people, would disregard it when it came to making the key judgment in the end, and I am sure that all the other member states will as well.
Several hon. Members rose—
Mr. Clarke: With respect, I must be allowed to make a little progress. I should like to go on to the negotiations. I will return to convergence.
Our strongest card in the discussions on economic and monetary union is the British option that my right hon. Friend the Prime Minister negotiated at Maastricht. The House needs to debate how and when to exercise that option. Whenever the time for decision comes, the answer must depend on a balanced judgment of possible advantages and disadvantages. Nothing in this world is ever going to be black and white, but, when we do exercise our option, essentially it will be a judgment for the House to make about the upside and the downside, and we will probably find that they present themselves in a combination that we should begin to analyse at this stage of the debate.
Mr. Lamont rose—
Mr. Clarke: I should be grateful if my right hon. Friend would allow me to move on.
I understand how strongly some Members feel about the federal united states of Europe and so on, and we all understand the difference of opinion on that issue, but I should like to move on to what might be the advantages and disadvantages of a single currency. It is time that, as a House, we debated what we perceive the arguments on both sides to be, because that is the balance that we are going to have to strike.
Let me first consider—I stress that I am coming to the possible disadvantages—what the possible advantages of a single currency are. Why are we going to Dublin at all and taking part in the discussion? Why did we leave an option open at all at Maastricht, and why did the Labour party say that it would sign up there and then, and enter into a treaty commitment to take advantage of economic and monetary union?

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If EMU can be made to work, it would eradicate exchange rate movements, which can disrupt trade and have disrupted trade in our recent history. We have done well in the past two or three years partly because we have had a reasonably stable exchange rate, but our comparative success is tending to strengthen the pound. Exporting industrialists have already begun to voice concerns about strong upward movements, which obviously happen when we have a floating currency.
Against a weak euro of non-convergent economies, for example, the pound outside could strengthen a lot or it could simply fluctuate widely. Inside a strong EMU, countries would engage in straight competition, undistorted by the foreign exchange markets.
EMU would also reduce transaction costs, making it easier for smaller businesses to enter into and compete in the European market. The members of a strong euro zone would also expect to enjoy lower interest rates, both short and long term, based on the financial strength and reputation of the bloc. Countries with a history of devaluation or bursts of inflation pay a lasting premium in terms of higher interest rates, as we in Britain know only too well.
Mr. Lamont rose—
Mr. John Redwood rose—
Mr. Clarke: Let me finish the advantages, and then I will give way.
Finally, a single currency will make comparisons of prices and wages across member states direct and stark—they would all be denominated in the same terms. That will expose industry in member countries to more intense direct competition with one another, which could reinforce the desirable pressure on industry and commerce in all member states to become ever more efficient and competitive. It would speed up the drive towards competitiveness.
In that way, EMU could help member economies to rise to the real global challenges of the next 10 years. Every member state in Europe must contemplate the need to be able to compete with the economic might of Japan and of the United States of America, and with the increasing strength of the south-east Asian economies and Latin America. That is one of the European problems, and EMU could speed up that drive, making the core economies competitive.
Therefore, if a single currency could be made to work, it is even arguable—no more than that—that we might benefit more from it than most other aspiring member states. British business is already seriously competitive. Removing exchange rate risk would open up our markets further and provide tremendous opportunities for British business.
We in Britain have already taken the necessary steps to strengthen our private sector and to make our labour markets more flexible. Other countries in Europe are now realising that they must follow the lead that we have been giving for the past 15 years and more. If France and Germany were to fail to restructure their labour markets,
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for example, they would find it very difficult to compete with the British economy within a single currency and a euro zone.
Mr. Redwood: Does my right hon. and learned Friend believe that it is better for France to close factories because she cannot compete within the current exchange rates? Does he believe that it is better to have massive Budget cuts and damaging cuts in public services than to have a flexible exchange rate? Is not part of the genius of the current British economic policy and recovery the fact that we have flexible exchange rates and interest rates suited to our needs?
Mr. Clarke: I believe that it is in the interests of France to tackle her excessive fiscal deficit and bring public finances back under control. If my right hon. Friend were a Frenchman, he would agree with that. He has always agreed with me in that regard in respect of the British Government. I do not think that the French should go in for competitive devaluation or start believing that devaluation is a way out of making the necessary structural changes.
When my right hon. Friend and I were in government together, we never thought that we should duck structural changes or deliberately devalue the currency in order to avoid making those changes. The pace at which France tackles its fiscal problems is a matter for the French Government, who have to decide their own priorities. It is their duty as a sovereign nation state to tackle that. However, I do not think that comments on their methods are germane to today's debate.
Let me turn to the possible disadvantages of EMU and the reasons why that the question must be kept open. That is why we have adopted the most sensible policy. As I have just said, the intense competition which could be one of the key advantages of a single currency could also be its downfall. Countries that cannot be guaranteed to stay competitive or are not sufficiently flexible to respond to shocks in other ways than devaluation should not join EMU.
Any attempt to fudge the criteria to admit such countries would not be in the real interests of those countries, and could be disastrous for the rest of the EU, which would have to suffer the consequences. I have always acknowledged that there are possible disadvantages of membership of EMU. That is why I have always argued for the option. I may have admitted that I was attracted to it in principle, but I have also said that I could see myself being on the side of those who have argued that we should not join.
One of the key risks to the whole enterprise must be the possibility that it is set up on the basis of political compromise rather than economic judgments. The consequences of a euro zone which was badly put together, or which contained seriously non-convergent countries, would be extremely damaging to all member states of the European Union. No stability pact, no matter how strict, and no matter how dire the punishment for transgressions, could hold such a euro zone together.
If EMU is entered into by nation states that are not truly competitive with the others, or which are too inflexible in their economic structures to respond to pressures in other ways than by devaluation, it will set up insupportable and damaging strains.

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When we get there, we shall also have to consider not only the economic arguments, but what EMU implies about the political future of the European Union. As I have said several times already, I do not believe EMU will lead to a European super-state. If I did, I would not contemplate Britain joining it. However, we need to satisfy ourselves about the intentions of our EU partners.
At the end of the day, even if the single currency system is well set up and we believe that it will work for Europe, even if the convergence criteria have been respected properly and in full, we can still ask whether it is right for Britain in economic and political terms. That is the value of our opt-out.
Mr. Lamont: As my right hon. and learned Friend is so adamant that monetary union will not lead to political union, will he address the fact that most of our partners in Europe—certainly the Germans—seem to believe that? The chief economist of the Bundesbank has said:
"there is no example in history of a lasting monetary union that was not linked to one state."
The president of the Bundesbank said:
"A European currency will lead to member-nations transferring their sovereignty over financial and wage policy as well as in monetary affairs. It is an illusion to think that states can hold onto their autonomy over taxation policies."
Our partners believe that; surely it must be addressed.
Mr. Clarke: Hans Tietmeyer does not speak for Germany. It is no good—[Interruption.] I agree with Hans Tietmeyer on large parts of the argument, but I do not believe him if he made that statement.
Putting together the comments of Hans Tietmeyer and one member of the Bundesbank council and saying that therefore all the Germans and all our partners believe such a thing is, with the greatest respect to my right hon. Friend, a non sequitur. There are a variety of opinions across western Europe. He has probably had the opportunities that I have had of hearing Helmut Kohl say frequently enough that he is not in favour of a united states of Europe or a federal super-state.
Mr. Lamont indicated dissent.
Mr. Clarke: It is no good him shaking his head. No doubt we will find next that the state president of the Bank of Baden-Württemberg has said something different.
I said that some people who attend the Dublin summit may believe that EMU is primarily an instrument for achieving closer political integration, but I do not believe that the majority of politicians from the other states do. I do not believe that the Gaullists of France believe that they are submerging the nation state of France in economic and monetary union, yet the French are the biggest, strongest advocates of economic and monetary union in Europe. Some of them advocate it for reasons that I do not share, but it is not the reason that my right hon. Friend fears.
Having for the first time had the opportunity to set out in this way what are in my opinion the advantages, I turn to the disadvantages, so that the House might concentrate on what matters. How do we believe that the national interest should best be judged when we come to make the decision on the option that we have safeguarded for four years? I turn to the question of convergence, which is at the root of many of the present problems.
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If economic and monetary union goes ahead, it is in our interest to ensure that it does so on a timetable and a basis that can be sustained whether we join it or not. I am one of those who, like Theo Waigel, the German Finance Minister, my direct opposite number who first used the phrase that I use frequently, believes that convergence is more important than the timetable. I can reassure the right hon. Member for Bethnal Green and Stepney (Mr. Shore) that I mean genuine convergence. The key is whether the countries wishing to join will be able to achieve genuine and sustainable convergence.
The Maastricht treaty sets out a list of nominal convergence criteria that should be used as a first measure of whether a country is a credible candidate for economic and monetary union. I believe that the criteria are sensible and should be rigorously applied. They take as their underlying principles our own guiding principles on macro-economic policy.
It is not surprising that my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) took part in the negotiations on the convergence criteria, because they concentrate on low inflation and sound public finances. He was one of the architects of those conditions, which are essential for economic success. I believe that they are very necessary conditions that any country must fulfil before even contemplating membership of a single currency.
Countries joining the euro zone must not just meet the convergence criteria in a particular year. That is one reason why a particular transaction, however large and startling, proves nothing. I would certainly not regard it as any evidence that France was achieving anything that mattered. Convergence means demonstrating a credible commitment to durable and sustainable convergence. That is the key; that is what the treaty says; and that is the basis on which decisions on who should join EMU must be taken. It is certainly the basis on which the Government will take their decisions and cast any votes that we come to cast at the relevant time.
I am trying to explain that I am one of those who are genuinely waiting to decide. That is sometimes a difficult position to occupy in the House, but I think it is firmly occupied by at least 70 per cent. of the British public who are trying to follow this debate. My judgment will depend on the actual circumstances we face at the time, and where the national interest lies. It is a parody of my views and those of many others to imply that I think that the UK should join EMU this weekend.
We need to have the full picture and to debate all the issues before we take such a key decision on the economic future of our country. We have not taken all the tough steps that we have to make Britain the enterprise centre of Europe simply to make a premature and superficial judgment of our role in or out of any euro zone.
The British opt-out is described as a wait-and-see policy—a balancing act. In my opinion, those are dismissive terms for an extremely sensible policy that is, in fact, the only policy that is in the best interests of the British. That policy puts us in a position that a number of our European partners clearly envy. Unlike them, we have kept solely in the hands of the British Government, the British Parliament and the British people the ultimate decision about whether or not we will join EMU.
Those who would like us to exercise our opt-out now are asking us to throw away that hard-won advantage. Presumably they would say that a referendum is no

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consolation, and that they would set aside the views of the British public, because they wish to say no now, in the same way that they would say no whatever the outcome of the referendum to which we are committed.
As my right hon. Friend the Prime Minister said at the weekend, to throw away our hard-won advantage would be
"fleeing the field when the game is still to be played".
We have everything to gain and nothing to lose from staying in the game. It is only now, as practical preparations get going and as a picture begins to emerge of who will be part of the project and how it will be run, that we are enjoying the full value of our opt-out.
Mr. Edward Leigh: Will my right hon. and learned Friend give way?
Mr. Clarke: I must get on, because otherwise I will take up a disproportionate time.
We are determining—for example, in the discussions on the regulations which most of us have now forgotten and which originally gave rise to the demand for this two-day debate; although I am glad we have moved on to the wider scene—the terms on which any British Government might, at any time in the foreseeable future, join EMU. That is why the legislation is so important. We are also helping to shape the rules that will govern the system, whether we are a member of it or not.
Our EMU option is no soft option, and I am better placed than most to know that because I have been attending the Council of Ministers since 1979. It takes a lot of hard work and a lot of nitty-gritty practical negotiations with our European partners on the part of my right hon. Friend the Prime Minister.
That would not be made any easier if partners round the table suspected that it was just an academic exercise for the UK. It is true that we could still sit at the negotiating table even if we had opted out. We could still argue in logic that our national interests enabled us to play a full part, but the reality is that the influence at the negotiating table of those countries likely to be out for the foreseeable future is far, far less than that of the lead contenders for membership.
Keeping our options open is much more than just a bargaining ploy. It is leaving us with a genuine choice to exercise at the right time in our national interest, and meanwhile keeping our national power to influence the course of great events at the negotiating table.
Mr. Malcolm Bruce: The Chancellor is making a clear case for monetary union and the circumstances in which the Government would not join. The Government would not join if they thought there was a political fudge, and, of course, if the United Kingdom had not qualified. What would be the Government's position if it were agreed that there was no political fudge and the United Kingdom had qualified? Will the British Government recommend that we enter in the first tranche?
Mr. Clarke: I hope that the logic of my speech makes it clear that, if—as events turn out—those possible advantages that I have described strongly outweighed the
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possible disadvantages that I described, I would probably be in favour of joining. When I say that I retain the right to wait and decide, I have made it clear that that decision could go in either direction so far as I am concerned. I am not saying that I would necessarily say no, but I tend to emphasise that I could probably say no because that is always found more surprising by my auditors. It is obvious that I could also say yes, because I think we might lose if we stayed out of a properly functioning economic and monetary union.
Several hon. Members rose—
Mr. Clarke: Before I give way again, I should like to explain why we cannot sensibly decide now. Apart from the matters that I have already mentioned, there are far too many uncertainties about the shape of the euro zone and how it will function. No one can yet say for certain when or if EMU will happen. It would be foolish to ignore the huge political capital and practical effort that is being invested in the project by the other member states of the European Union.
We do not know which countries are likely to be in the first wave if and when it goes ahead. We do not know how much economic convergence will have been achieved, how strictly the criteria will have been adhered to, and how far participants will have achieved the necessary flexibility in their markets to deal with, for example, differing levels of structural unemployment. We do not even have enough detail on how the European central bank or the single monetary policy will operate. We also need to consider how relations with those who remain outside the euro zone will be handled by those inside it.
We need to consider the implications for the enlargement of the European Union. It is far too soon to determine the overall balance of advantage for the City and for British business in general. Those issues will all have a significant impact on the relative advantage of being in or out. Whatever we decide—in or out—EMU will affect us. We must stay involved and ensure that British interests are protected and advanced.
We have already made major advances in negotiations. We played a critical role in the original design of economic and monetary union back in 1991, when my right hon. Friends the Members for Witney (Mr. Hurd) and for Kingston upon Thames took part in the negotiations. The British negotiators took the key role in ensuring that the European central bank would be independent, that price stability would be its goal, that convergence criteria would apply and that only genuinely convergent countries would go ahead to join stage 3.
By staying involved since 1991, we have continued to exercise a key influence. My right hon. Friend the Member for Kingston upon Thames put the relations between ins and outs firmly on the agenda when other member states were seeking to avoid it. Recently, we have ensured that the so-called ERM 2 remains voluntary. We have agreed the terms, subject to our parliamentary reserve, of regulations on the continuity of contracts after a single currency. That is important for the City of London, as I explained to the House last week.

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Those are just some concrete examples of how staying involved in the preparations for EMU has already proved, and will continue to prove, the best way to protect British interests.
Mr. William Cash: As my right hon. and learned Friend knows only too well, we stated in the Maastricht treaty that, legally, we would never prevent the other member states from going ahead. Thereby we sold a pass.
However, can my right hon. and learned Friend explain how we can be said to be negotiating at the table when we have specifically excluded ourselves from discussions on the single currency at the intergovernmental conference, unlike those at the European Monetary Institute, in which we are engaged in the preparations? Will my right hon. and learned Friend explain the distinction between those two situations? How can we be negotiating on something that we have ruled ourselves out of?
Mr. Clarke: With the greatest respect, my hon. Friend is getting himself into some confusion. It is true that, in the original treaty, we are committed not to seek to obstruct the progress of those member states that wish to proceed to economic and monetary union. It would clearly be unproductive to do so, and, anyway, the treaty is so constructed that it is not possible to vote to do so in any meaningful fashion at any time.
Economic and monetary union is not being raised at the intergovernmental conference. All the member states have agreed that it is not on the agenda. The two are separate items at the summit tomorrow. No discussions are going on about economic and monetary union from which the British Government have excluded ourselves. I am seeking to ensure not only that we do not exclude ourselves, but that we continue to punch our weight on our behalf, in our interests, when we take part in the discussions.
The immediate issue for Finance Ministers tomorrow night on the eve of Dublin will be the stability pact. The stability pact seeks to give practical effect to our existing treaty commitments to pursue sensible economic policies and avoid unsustainable deficit financing. It is all about ensuring that convergence is sustainable and durable—that is important to members of all parties. It is worth making it clear precisely why we need a stability pact.
In today's global financial markets, any nation state that fails to keep Government borrowing under control is rapidly punished by those deregulated markets as the interest rates it has to pay to finance its debts rise. In an EMU, if any one member state gets itself into fiscal difficulties or debt problems, all member states may be punished by the markets. All EMU members may have to pay the penalty of higher interest rates exacted by the financial markets for one member's irresponsible policies. Any country that was a close trading partner of the EMU bloc would have a very close interest in the stability of that bloc for its own economic prosperity.
That is why the Maastricht treaty envisages fines for countries in the single currency that run excessive deficits and which not only incur a deficit but fail to take any effective action to get it down again. The current
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discussions on the so-called stability pact are about how to determine such fines and when to impose them. In my view, it is important to get these rules right.
Sir Peter Tapsell: Those who favour a single European currency are in the habit of pointing to the United States as an example of where such a currency operates, but the United States does not have a stability pact. The state of California—which produces about 12 per cent. of the GDP of the United States—very nearly went bankrupt, as did the city of New York, but there was never any suggestion that the Federal Reserve or the US Government should step in. Why does Europe need a stability pact, except as part of a bureaucratic, socialist, centralising, federalist state?
Mr. Clarke: The United States of America is not a partnership of independent nation states of the kind we are contemplating. As I have been emphasising throughout most of my speech, most of the analogies with the United States are, in my opinion, substantially wide of the mark, both politically and economically.
There is absolutely no suggestion of the European central bank stepping in to rescue any member state from the financial consequences of its own fiscal indiscipline. That is not what we are contemplating. There is a no-bail-out clause in the treaty that expressly stops one country bailing out another. We are talking about putting pressure on a sovereign nation state to take the necessary action in the interests of the EMU group—to which, by then, it will belong—to get its fiscal affairs back under control so that the markets give the benefits of membership to all EMU members. Those rules must be right.
Several hon. Members rose—
Mr. Clarke: I shall give way in a moment, but I wish to continue my comments on the stability pact.
We cannot have a set of rules so rigid and inflexible and fines so draconian that every fiscal problem is turned into a crisis. That is the view that I have been taking, and many right hon. and hon. Members will be relieved to know that that is probably the only substantial matter that I shall be discussing in depth over the next two or three days.
But while I am against inflexible rules and draconian penalties, we cannot have a set of commitments so vague that they are more often broken than met. In particular, we need to retain an element of flexibility and political discretion over the whole process. That is the way in which Ministers such as myself, who believe that it is the right way, are steadily taking the discussion.
The other part of the stability pact is making all EU members submit convergence reports on how they are managing their economies. In the European single market—whether or not we have EMU—all countries share an interest in promoting macro-economic stability. Surveillance provides a mechanism for this, and it is now a part of the international financial scene in the modern world.
The British Government believe in international and mutual surveillance of economic performance. We have signed up to independent examination of our economic health by the International Monetary Fund, the

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Organisation for Economic Co-operation and Development and the G7, as well as the EU. The UK is a role model in the provision of open, up-to-date and independent statistical information on the progress of our economy. I have published the IMF article IV report on its annual surveillance of the UK, and I am the first British Chancellor ever to do so.
All member states agreed to produce convergence reports when they signed up to the Single European Act, and we agreed to that when we signed it as a Government led by my noble Friend Baroness Thatcher. The United Kingdom has always produced the reports scrupulously, while other member states sometimes produce out-of-date reports or reports thin on information.
Making the reports compulsory is a very sensible idea, but I am determined to ensure—I give this undertaking again to my right hon. Friend the Member for Wokingham (Mr. Redwood) and to others among my right hon. and hon. Friends—that there is nothing in the regulations on the stability pact that gives rise to any possibility that the monitoring could have binding legal consequences for the UK if we remained outside economic and monetary union.
We have been in favour of the principles of the stability pact all along. By staying involved in negotiating the details, I intend to ensure that, when the time comes to agree it, it will be a system that a future British Government can sign up to.
Mr. John Wilkinson: Can my right hon. and learned Friend explain to the House how, if a country exceeds its stipulated budget deficit and consequently has a relatively weak economy, that will be improved by a fine? Was not the demand for reparations from Germany after the first world war utterly disastrous, and did it not lead to Germany borrowing more money to comply? Would it not be a system of paying tribute to a superior power—the European Union?
Mr. Clarke: If I may say so, my hon. Friend warmed to his argument. He began with a good argument, with which I have some sympathy, and I can reassure him that we are not contemplating anything on the scale of reparations or penalties about which the country can do nothing and which are a burden placed on it for the misdeeds of a former Government.
When we helped to put the provisions in the Maastricht treaty, I am sure that we had in mind the possibility of penalties as a last-resort deterrent to give some added determination to a Government and a Parliament to take effective action to remedy their fiscal deficit. Not to have any deterrent in prospect could lead to some countries constantly expecting to be forgiven extremely slow progress towards fiscal health.
In the negotiations, I have been against those who want automaticity and rapid timetables for the penalties and who think that it gives credibility to the system to show the markets that huge penalties would fall on countries suffering fiscal difficulties. I quite agree that John Maynard Keynes would be spinning in his grave if he was told that the solution to a country getting into serious fiscal deficit problems was to impose on it a fine equivalent to the cost of our bovine spongiform encephalopathy crisis.
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We are negotiating something that, like all the best deterrents, would not be used but would reinforce the political will of a Government to take the necessary action to get back into conformity with their treaty commitments.
To join or not to join is ultimately a political decision. Britain's interests will dictate which way our decision goes. To rush into a premature decision, to extract ourselves from the debate about Britain's future, would be, as my right hon. Friend the Prime Minister put it, "a dereliction of responsibility".
It is entirely right that the House should be debating the Government's policy on Europe over the next two days. We spend too little time debating these matters in the House. I hope that this debate will be part of the process of defining where we believe our national interests lie and determining the true balance of advantages and risks that we face, so that we can help the British public to form their views.
Mrs. Teresa Gorman rose—
Mr. Clarke: The key question for the country is, who do we want sitting in the chair at the negotiations? Tomorrow we go to Dublin. It remains to be decided who goes to Amsterdam in six months' time. The right hon. Member for Dunfermline, East (Mr. Brown) has a simplified approach of not exercising or having an option on the single currency. I know whom I would prefer to go to Amsterdam, when faced with the choice of the man who negotiated our option on EMU, or the man who says that he would never be isolated in Europe.
Over the years, I have sat many times alongside my right hon. Friend the Prime Minister negotiating at the big tables, not just at the European Council but at G7 meetings. He is a master of the art of small negotiation; that is why he came back with a triumph from Maastricht. When I look across the House, as I sometimes do, at the polished public image and public relations shallowness of the Leader of the Opposition and listen to the shadow Chancellor and the shadow Foreign Secretary, I know which team I prefer. In my judgment, the leaders of Europe would eat the Opposition Front-Bench spokesmen alive. They would not be so much turkeys dressed for Christmas as a prawn cocktail before tea for the great statesmen of Europe.
When the time comes, it must be a Conservative Government who consider the issues coolly and come to the right decision for Britain. So long as this party remains in power, the people of Britain can he sure of one thing: we will decide at the right time, for the right reasons; and our decision will be entirely determined by the interests of the United Kingdom.
4.50 pm
Mr. Gordon Brown: The first question that came into the minds of Conservative Members when the Chancellor was asking who they would want to represent them at Amsterdam was whether they would want him to. When he set out the advantages and disadvantages of being inside a single currency; set out, with enthusiasm, what he believed were the principal advantages of a single currency; and said that Britain might get some of the biggest advantages from the lower interest rates that could result from a single currency, he spoke with enthusiasm, passion and conviction. But I kept asking

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myself whether he spoke for the Conservative party and for the Government. Does he, week to week, continue to speak for the Prime Minister on those vital issues?
The problem was summed up when the Chancellor said that the policy of the Government had the support of 70 per cent. of the population and there were jeers from Conservative Members. We know exactly what Conservative Members think of that policy. As we had jeers when the Chancellor talked of the advantages of the single currency and cheers when the right hon. Member for Kingston upon Thames (Mr. Lamont) put the disadvantages, we know why the Government were so anxious to avoid a vote on a take note motion after this debate and why the Prime Minister had to admit on Sunday that divisions in the Conservative party were damaging the national interest.
Several hon. Members rose—
Mr. Brown: I do not know whether to take a Euro-sceptic, a Euro-enthusiast or what. I shall take the hon. Member for Gainsborough and Horncastle (Mr. Leigh).
Mr. Leigh: It is almost certain that Britain will meet the Maastricht economic criteria at the appropriate time. Will the right hon. Gentleman confirm that it is still Labour party policy to commit the nation to join the single currency in that event, and therefore confirm that, by voting Labour, people will vote to abolish the pound?
Mr. Brown: I will come to the hon. Gentleman's point. We will make the decision in the national economic interest and I will lay out the factors that we will consider. [Interruption.] The hon. Gentleman disparages what I am saying, but that is the policy of the Chancellor of the Exchequer as well. Today, the hon. Gentleman expresses himself as opposing the Opposition; on Friday, he was all over the airwaves saying that the Chancellor and the Prime Minister were defying the will of the majority of the Conservative party. That is the current state of the Conservative party.
Mr. David Shaw rose—
Mr. Rod Richards rose—
Mr. Brown: I do not know whether to give way to the hon. Member with the Union Jack tie or the hon. Member for Dover (Mr. Shaw).
Mr. Shaw: Can the right hon. Gentleman say whether it is still Labour party policy, as written in its policy documents of the past year, that the convergence criteria must be applied flexibly? Is its policy still to fudge the convergence criteria or has it moved from its original policy document?
Mr. Brown: The word "flexible" is not used in our policy document. If the hon. Gentleman wants to read it out, let him please do so.
Mr. Shaw: My understanding is that—[HON. MEMBERS: "Ah."] If the right hon. Gentleman reads "A New Economic Future for Britain" published by the Labour party in June 1995, he will see on page 23 the words:
"Convergence must be based on improving levels of growth and employment, and not just on monetary objectives alone. That is why we have long argued that the convergence criteria must be applied flexibly."
Mr. Brown: The hon. Gentleman mentions employment and growth—exactly issues that we believe
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should be taken into account. The hon. Gentleman was trying to suggest that we intended to fudge the public spending guidelines. I had better deal with this now. We have always said, first, that we see substantial benefits in the principle. We have always said, secondly, that the decision should be made in the national economic interest. We have said, thirdly, that employment criteria—the real condition of the economy—have to be taken into account and, fourthly, that there must be a test of public opinion. That is a fair way of approaching the issue.
Mr. Richards: Will the right hon. Gentleman give way?
Mr. Brown: I shall make some progress and then give way to some hon. Members. [Interruption.] The Exchequer Secretary to the Treasury is shouting. Perhaps he will answer when he replies to the debate why he has been put up to answer the debate by the Chancellor when he said on the Frost programme only a few weeks ago, "I am a Euro-sceptic. I cannot support the principle of economic and monetary union." Why has he been put up to close the debate and give a position that is diametrically opposite to that of the Chancellor?
Mr. Richards: Will the right hon. Gentleman give way?
Mr. Brown: I will give way once more and then I shall move forward.
Mr. Richards: Does the right hon. Gentleman have any objection in principle to a single European currency?
Mr. Brown: I have said exactly what is the case. We see substantial benefits in principle in a single currency, but the decision must be made in the national economic interest. We must take into account the advantages and disadvantages of being in, but also the advantages and disadvantages of being out. We must take a decision when we know the full economic information and can make an assessment of it. If the hon. Gentleman disagrees with me on that, he disagrees with the Prime Minister because that is the position that the Prime Minister laid out on Sunday.
I shall examine point by point the important decisions that will be made this weekend in Dublin and the Conservative party's position on them. The Chancellor did not deal with those important issues. I shall state the Labour party's position. We will show issue by issue that Conservative divisions are denying us the unity that is necessary, and therefore damaging the national interest on these matters.
The Chancellor tried to take comfort from what he said were divisions in the Labour party on a single currency. Let me give him a challenge. Let him do what the Labour party did and put his policy to his party membership, including its proposals on Europe, a commitment to the benefits that we see of a single currency, and the need to make the decision in the national interest and to consult the public. Let him see what the result is. Judging by his speech this afternoon, I doubt that the Chancellor will be able to guarantee a majority not just in his party but among his Back Benchers for his position, and perhaps not even a majority in the Cabinet. Who is divided on the issue of Europe?

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The Chancellor presented a theoretical case for being inside a single currency. The fact is that decisions are being made every week in Europe on these issues, and Conservative Members know that. The Chancellor concentrated, as he has done in our two previous exchanges, more on the decisions that have not been made, not yet been made or will be made later, for which he wants discretion from the House, than on the decisions that are being made.
In this two-day debate, we must face up to the decisions that have been made, say what is our view on the matter, give advice to the Government where that is necessary and see why the divisions on the Conservative Benches, which cannot be concealed, are preventing our national interest from being effectively represented.
The Chancellor says that there will be no final agreements at Dublin. It is true that there will be no legislative agreements until Amsterdam and that the Finance Ministers meet again tomorrow, but no one is in any doubt that important economic decisions—perhaps some of the most important decisions that Europe has made on economic matters—are being reached in ECOFIN and are to be put to the Council and to the summit on Sunday.
We know what newspapers across the continent are saying. French newspapers are reporting French Ministers as saying that all but two issues of detail have been agreed. Indeed, the Chancellor told the Select Committee on European Legislation, chaired by my hon. Friend the Member for Clydesdale (Mr. Hood), that political agreement is likely at the European Council on 13 and 14 December. The Leader of the House said that we had to have scrutiny in the Committee because political agreement was likely. The Chancellor, reporting back to the House last Tuesday, said that there were only two outstanding issues. We know that the Irish Prime Minister has said that 98 per cent. of the proposals on the economy are already agreed in outline form and that the formal agreement comes to be ratified in Dublin before the legislation is drawn up.
Try as he does to find common ground with his Back Benchers, the Chancellor has to deny the importance of all the decisions that are being made at the moment. I believe that debate is required on the details of those agreements, which are about to be made. I shall raise some of those issues, because parliamentary approval should be sought. The public need to know and to understand what is at stake. If they do not, because divisions in the Conservative party prevent that full national debate on the detailed issues from taking place, it will not be in the national interest.
It is important also to understand why the take note motion is not before the House this afternoon. We were told that the take note motion had to be dealt with before Dublin, yet suddenly last Thursday we were told that it was not necessary because political agreements would not be reached.
Mr. Marlow: Will the right hon. Gentleman give way?
Mr. Brown: No, I am not giving way at the moment.
The truth is that political agreements are being reached. The position of the Government and that of Parliament should be known on these issues. What has changed in the
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past few days is not that no agreements are going to be reached—what has changed is the Government's ability to get that motion through the House of Commons. That is why divisions weaken this country in negotiations. The Prime Minister goes to Dublin without the authority of Parliament to reach the final decisions, when he knows that those agreements are being reached and are only to be ratified at the Amsterdam summit.
Let us look at substantive issues. I have said where the Labour party stands. Our draft manifesto clearly states our position on the principle of a single currency and on the decisions that have to be made. The Chancellor raised the subject of the stability pact. He has reached agreement on all but two outstanding issues. He has agreed that there will be limits to deficits and that there is an agreed procedure for dealing with them. He has agreed that penalties will be there as a last resort and that fines will be paid to the European Commission. All that is agreed—Conservative Members should know that he has not opposed those proposals and that the common view in the Finance Council is that they are agreed.
In addition, the Chancellor has already agreed, as he mentioned, that convergence programmes are important for the outs who remain outside the single currency; that they will now be obligatory; that their contents will include matters on budgetary deficits; that they should be developed along the same lines in reporting as the stability programme; that those plans will have to be submitted every year and that they will form the basis of public comment by Commission; and that Britain could be rebuked for failure to take "necessary action".
Those proposals should be debated in detail in the House, but the main thrust of the Chancellor's report from the summit last Tuesday and of his speech today is that he has secured copper-bottomed guarantees in respect of Conservative Back Benchers' demands that things be written into the agreement to ensure that the obligation to avoid excessive deficits does not apply to the United Kingdom, as long as it remains outside the euro.
Mr. Shore: My right hon. Friend has made it clear—very convincingly—that all the information is now available about the stability pact, about what would happen to us if we remained outside and so on, to enable us to make a rational decision about whether it is in the British interest to join. What we would also like to know is what my right hon. Friend thinks about the stability pact and its imposition on the British people.
Mr. Brown: If my right hon. Friend, who contributes to all these debates and has done so for many years, will be patient, I shall tell him. As he knows, there are two outstanding issues relating to the stability pact that have yet to be agreed and I shall come to those issues in a minute. They are the definition of exceptional circumstances and the discretion that is available to the Council. I think that he would agree that those are important issues on which the Labour party—[Interruption.] This is the problem with trying to have a rational debate on Europe. Because some Conservative Members are against a single currency in principle and in all circumstances, they are not prepared to debate the issues that affect the United Kingdom.
Several hon. Members rose—
Mr. Brown: Now they ask me to give way to them, so that they can repeat their views. I shall not do so.
Mr. Bernard Jenkin rose—
Mr. Cash rose—
Mr. Brown: The two hon. Members, who have ruled out support for a single currency in all circumstances, now ask me to give way simply so that they can put their case. Let us look at the detail—that is what we are going to do.
Mr. Jenkin: On a point of order, Madam Deputy Speaker. I believe that the right hon. Gentleman is misleading the House. He says that he wants a debate, but when anybody tries to engage in debate with him, he does not give way.
Madam Deputy Speaker (Dame Janet Fookes): That is not a point of order for me.
Mr. Brown: The Chancellor tries to find common ground with the rebels. He goes to Europe and comes back saying that he has got what amounts to a footnote in the new agreements that member states that are outside the euro will be under no obligation to avoid excessive deficits—something that was already stated in black and white in the Maastricht treaty anyway.
The Chancellor gets that provision in order to appease Conservative Members, but it makes no difference to them. They have only one mission in mind, which is to prevent there being a single currency in any circumstances—the tragedy is that the Chancellor knows that too. If they can, they will write into the Conservative manifesto that there will be no commitment to a single currency in any circumstances. If they fail to do that, they have made it clear that they will have their separate, personal manifestos and write it into those. They will also write in a statement that they would prefer Britain to be outside the European Union altogether.
Mr. John Townend rose—
Mr. Brown: Here is another Conservative Member who takes that view. That is the position of many hon. Members on the Conservative Back Benches—I suspect that they form a majority of the hon. Members present today. Increasingly, they are becoming a party within a party and no amount of rabble-rousing on their part can disguise their agenda and their pursuit of it.
Several hon. Members rose—
Madam Deputy Speaker: Order. It is quite clear that the right hon. Gentleman is not giving way. It is his right not to do so, if that is his wish.
Mr. Brown: I shall give way to one hon. Gentleman, but then I shall move on.
Mr. Townend: Will the right hon. Gentleman now come to the heart of the problem? If he, as Chancellor of this country, decided that it was right to abolish the pound, does he accept that that would mean a major transfer of sovereignty from this House to Europe?
Mr. Brown: We do not accept that a country moves into a federal Europe immediately on considering the
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issue of a single currency. We shall look at the issue in terms of what is the national interest. The hon. Gentleman should look at those questions in detail.
I give way all the time to Conservative Members and, instead of asking questions about details that affect Britain's interest, they repeat the same old question, because they are wholly against the single currency. That is their agenda.
Sir Peter Tapsell: Get to the detail.
Mr. Brown: I am now on the detail. [Interruption.] We have one section of the Conservative party saying, "Let's have a debate on the detail," and another saying, "We must debate only the principle and we must rule out the principle of a single currency."
Several hon. Members rose—
Mr. Brown: I shall make progress with my speech now and take no more interventions from the disruptive element that is trying to prevent me from speaking.
Mr. Terry Dicks rose—
Mr. Brown: If, in the interests of fairness, I take one intervention from a pro-European on the Conservative Benches, I suppose that it must be the hon. Gentleman.
Mr. Dicks: The right hon. Gentleman just said that he would make a decision in the national economic interest. Does he see a distinction between that, which is what the Chancellor said, and the national interest vis-à-vis sovereignty? There must be a distinction. Does the right hon. Gentleman not see it?
Mr. Brown: I am glad that the hon. Gentleman is participating in this debate. He is the person who rebelled on Sunday when the Prime Minister talked about irrelevant Members of Parliament who were stirring up the issue to get a moment's fame. The hon. Gentleman asks about sovereignty. I do not accept that a single currency removes our freedom to make decisions on taxation and other issues in the House of Commons. It will annoy Conservative Members that I share the Chancellor's view on that matter—[Interruption. The Chancellor is smiling because he has at least one supporter on the issue in the House. That will be the Labour party's position on the matter.
We cannot sit out these negotiations simply because a group of Conservative Members say that we must rule everything out in principle. We must play an active part in the negotiations, but, try as the Chancellor does to find common ground between him and his Back Benchers, it is becoming impossible as they push him further and further to a position where he cannot agree with them.
On the two outstanding issues on the stability pact, there must be flexibility rather than rigidity in the definition of exceptional rules. On that point we would agree with the position that the French have put over the past few days.
There must be discretion for the Council. Indeed, that was the spirit of the Maastricht treaty. In answer to a question put earlier, we should have the ability to examine

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the state of the economic cycle and to take past trends and levels of investment into account when deciding what action to take.
Mr. David Hunt: Will the right hon. Gentleman allow me to recap? When a question was put to him earlier, he said that the word "flexibly" did not appear in the document. It was then put to him that page 23 of "A New Economic Future for Britain" says:
"the convergence criteria must be applied flexibly".
What does he mean by that?
Mr. Brown: I thought that the right hon. Gentleman was referring to "The Road to the Manifesto", the document that we have produced and circulated to our members. That has been voted on by 95 per cent. of the members and is the manifesto on which we shall fight the next general election. The right hon. Gentleman is not quoting from that document, but that was my understanding of the comment that was made, and that is the basis on which we shall fight the election. I understand that it is impossible for the Conservatives to have a similar document at this stage. Indeed, it may be impossible for them to agree on a manifesto on those issues, but the Labour party has agreed its position. [HON. MEMBERS: "But what does it mean?"] I explained to hon. Gentlemen what it meant. It meant taking into account employment issues when making a final decision on monetary union.
It is interesting that the Chancellor said little about exchange rate co-operation, but concentrated on the stability pact. We know that the exchange rates of the outs as well as the ins will have to be monitored and assessed under the new arrangements being agreed, but the purpose is to avoid real exchange rate misalignments. Surveillance of what are clearly market-sensitive areas will be published by the Commission in the form of recommendations. Whether binding or not, recommendations in such market-sensitive areas are bound to have an impact. Once again, however, desperate for common ground, the Chancellor tried to get included in the document an understanding that that would be non-binding on the British Government if they were outside the euro.
The House must debate the fact that all member states, whether they introduce the euro or not, will be subject to recommendations on their exchange rates. Those will have market-sensitive implications, and we must take that point into account. We shall support the necessary surveillance. We accept that exchange rates will be monitored and published. That is another issue which, for reasons of holding the Conservative party together, the Chancellor, who has raised no general objections to those matters, chooses not to emphasise.
Mr. Barry Legg: Will the right hon. Gentleman give way?
Mr. Brown: I shall not give way again. I have made that absolutely clear.
We have dealt with the stability pact and exchange rate co-operation, the issue that will come to the Dublin summit. But, as all the interventions from Conservative Members who are against Europe and a single currency have made clear, the real issue is the single currency. We
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know that the Chancellor agrees with the principle and that a decision should be made in the national interest. We also know that he agrees that we should assess the advantages and disadvantages of being out as well as in. That would be my position as well. However, it is because the Chancellor is in favour of the principle of a single currency that the Conservative party cannot unite on the issue. That is what the House should face up to today.
At least 50 Members of Parliament and candidates have said that they will stand on a separate manifesto. Like the debate on what the IGC should recommend, the debate on a referendum and the decision made by the Prime Minister and the Cabinet on that matter in March, a pattern of events is consistently followed. Conservative Euro-sceptics make a demand, they expect the Prime Minister to vacillate, the Chancellor digs in, the Prime Minister retreats a little, factional war then breaks out and the war of the factions effectively decides the final outcome.
Even when we have a period of truce, the silence lasts only a few days, sometimes even less, while regrouping takes place so that the Euro-sceptics can fight again. A group of Conservative Members is so implacably opposed to the principle of a single currency that no peace within the Conservative party is possible.
Mr. Marlow: Will the right hon. Gentleman give way?
Mr. Brown: No, I shall not give way.
That is the new constitutional theory that runs the Government. Ministers used to initiate, the Cabinet used to decide and Parliament used to approve. Now, however, Euro-sceptics initiate on this great issue of Europe, Ministers are always in a position of reacting, factional in-fighting always breaks out, and the war of the factions decides the final solution. That is what lies behind all the events of the past few days.
When the Chancellor went to lunch at Chez Nico only a few days ago, at the back of his mind was the attempt by Conservative Back Benchers to force on to the Prime Minister a new manifesto commitment, or at least a statement during the election campaign, that he would rule out a single currency. If anybody doubts that, he or she should read the interview given by Lord Tebbit on Sunday when he made it absolutely clear that a plan was afoot. He said that he was in discussion with Downing street and made it clear that moves were being made by some people with influence at No. 10—
"some people like myself—to find a formula which would bring me and my friends back on board. This formula, which looks as though it might be successful, was that we would accept the Prime Minister's word. Let me say that at the beginning of the election campaign he would say, 'Look, Ken Clarke takes his view. I take this view: while I am Prime Minister I can assure you we are not going into the single currency in the next Parliament because the Europeans arc fudging it and it would be a mess.'"
That plan led to the article in The Daily Telegraph, which was what so exercised the Chancellor when he went to lunch. It was just a few days after the Budget when he had been boasting about the state of the economy. When he went to that lunch with two BBC journalists, was he there to boast about his great economic achievements and his success story in Europe? What was on his mind? What was his agenda? Was it to defend the Budget? Was it to reassert the ringing declaration of his loyalty and that
"any enemy of John Major is an enemy of mine"?

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No. What was his real agenda? So keen was the Chancellor, after the events of the previous few days, to unburden himself on the European issue that, it is reported, he did not even drink much of the two bottles of wine that were produced by the BBC reporters—he was talking so much. It turned out to be a perfect lunch. That may be an additional reason why the Chancellor got more exercised towards the end of the conversation. The significant claim that he made was not about explosives or scooters. The significant claim that he made—the straight talking—was, according to the report,
"Mr. Clarke does not doubt that the source of the story ruling out a single currency was someone close to the Prime Minister."
In vino veritas. No wonder his mind was not on the Budget or the economy. It was on the attempted betrayal, as he saw it, of No. 11 Downing street by No. 10. After that, the next stage of the familiar cycle started to work itself out. Nothing that I could say about what is going on in the Tory party could be as damaging as what its members have said about each other over the past few days, with talk of madness, purges, Ministers alleged to be puppets, allegations of political suicide, betrayal, treachery—those are only the allegations that they made about themselves during the past week—words that make the Chancellor's comments about boomerangs, explosives and scooters seem mild and statesmanlike, even if he was speaking through the wine that he had enjoyed. One member—
The Exchequer Secretary to the Treasury (Mr. Phillip Oppenheim): Will the right hon. Gentleman give way?
Mr. Brown: I am not giving way now. [Interruption.]
Mr. Oppenheim: I thank the right hon. Gentleman for having the courtesy to give way. He is in misquotation mood. He claimed earlier that I made a statement on "Breakfast with Frost". It may have been a little too early for the right hon. Gentleman—he was probably bleary. Let me tell him what I said. It was not what he claimed. I said:
"I am a Euro-sceptic. I may not be in quite the same league as you …"—
I was referring to the hon. Member for Billericay (Mrs. Gorman)—
"but I would find it totally unacceptable if the British Government was trying to commit us to EMU without having a referendum and without it going through Parliament."
I hope that the right hon. Gentleman will have the good grace to apologise for his earlier misquotation.
Mr. Brown: The Minister said that he was a Euro-sceptic. I saw "Breakfast with Frost". He has now read out his statement. The Minister who is to reply to the debate on behalf of the Chancellor later this evening went on the programme as a Treasury Minister who is supposed to defend the documents, and said that he was a Euro-sceptic. [Interruption.]
The House will look strangely on a Minister of the Treasury who said publicly on "Breakfast with Frost" that he was a Euro-sceptic. That sends out a clear message. If he says—which I accept—that he does not support the principle of a single currency without a referendum being held and without proper parliamentary approval—[HON. MEMBERS: "Apologise."] If the Minister is saying that he will not support the principle of a single currency—economic and monetary union—without a referendum and without the matter coming before the
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House, is he saying that with a referendum and after it has come before the House, he will be prepared to support the principle of a single currency?
Mr. Oppenheim: Earlier in the debate the right hon. Gentleman attributed to me a statement that was wrong. It is beneath him and shows ill grace for him not to withdraw it and apologise.
Mr. Brown: I was reading the quotation from The Independent on the Monday after the Minister's Frost interview. Does he deny saying that he was a Euro-sceptic? [HON. MEMBERS: "Withdraw."] "I am a Euro-sceptic," he said. That is typical of the Conservative party. Conservative Members are divided and they are clutching at straws. We have a Conservative Treasury Minister—
Mr. Douglas Hurd: The right hon. Gentleman should not debate in this way. After the remark about my hon. Friend being a Euro-sceptic, the right hon. Gentleman went on to attribute to him remarks on the Frost programme that he now knows my hon. Friend did not make. In those circumstances, the right hon. Gentleman should withdraw.
Mr. Brown: I am reading the report from The Independent. [HON. MEMBERS: "Withdraw."] If I have misquoted the hon. Gentleman, I apologise. [HON. MEMBERS: "Five minutes."] The hon. Gentleman said that he is a Treasury Minister who is a Euro-sceptic. Given a referendum and parliamentary approval, would he support the principle of economic and monetary union—yes or no?
Mr. Oppenheim: Only if the Government of the time thought that that was in the British interest. That is the policy of the Government Front Bench, subject to a referendum. I understood that that was the policy of the Opposition Front Bench, too.
Mr. Brown: There is the division. During the debate the Chancellor said that he supports the principle of monetary union. The Minister cannot say that. Is that not an example of the division at the heart of the Treasury? Conservative Members are clutching at straws if they believe that they can wish away the fact that within the Treasury the Chancellor says one thing and the Minister who is to reply to the debate says another.
Mr. Kenneth Clarke: May I tell the right hon. Gentleman that wine played a much smaller part at the lunch than he believes, but that is the least of my complaints against the BBC journalists involved?
On the argument that the right hon. Gentleman is trying so passionately to deploy, can he deny that if he went to lunch with the right hon. Member for Bethnal Green and Stepney (Mr. Shore) and the hon. Member for Bolsover (Mr. Skinner), he would not find the slightest shred of agreement on any of his arguments? At least 50 members of the Labour party do not believe a word that he is saying and would vote against his argument if they had the chance. Why is he trying to distract attention, instead of trying to deal seriously with the real issues?
Mr. Brown: The Chancellor knows that it would be extremely difficult to get my hon. Friend the Member for Bolsover (Mr. Skinner) to a place like Chez Nico.

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Can the Chancellor imagine putting to his party membership his policy on Europe and finding that he could get a straight majority, far less 95 per cent. of the party voting in favour of a draft manifesto?
The situation in the Conservative party is summed up by events since the Prime Minister's interview on Sunday. The Prime Minister went on television on Sunday. He was to unite the party. He would draw a line. Clarity and coherence would reappear. The in-fighting would stop. All the damage done off the record by the Chancellor would be resolved by the interview on the record by the Prime Minister. Yet within five minutes of the interview being completed, the right hon. Member for Wokingham (Mr. Redwood) was saying one thing, Lord Howe was saying another and the cycle began again—there was a momentary remission during the Prime Minister's interview, before the relapse.
Small wonder it is that Lord Blake said:
"Since I was old enough to vote I have lived through 14 general elections. I have never seen the party I support in a worse state of disarray, a worse state of confusion, of factiousness, than today."
What chance is there of reconciliation when, clutch at straws as they might this afternoon, Conservative Members express entirely different views from the Government Front Bench and have no intention of reconciliation on the issue of the single currency? We were taught that Cabinets decide and Parliament approves. We now know that factions in the Conservative party initiate, Ministers react, factions fight it out and struggle among the factions decides the outcome.
Very important issues are at stake at Dublin. There is the stability pact, which I have mentioned; there is the future of exchange rate co-operation; there is the decision on the euro. The decisions about a European single currency must be made in the national economic interest. In my view, the worst thing that has been happening in recent days is that, when we have needed a debate in the national economic interest so that a decision can eventually be made on those issues, divisions within the Conservative party on matters of theology, ideology and dogma have prevented that decision from being made. It seems that, despite what the Prime Minister said on Sunday, the national interest always comes second.
Three years ago, the Chancellor said that the Conservative party was in a hole. It still is. It has long ceased to be able to govern on the vital issue of Europe. It is no longer seen as a party by the general public. It cannot unite the country; it cannot even unite itself. Its divisions are damaging the national interest. It is time that the national interest came first: it is time that this Government went.
5.30 pm
Sir Edward Heath: It is a long-established tradition in our Parliament, and particularly in the House of Commons, that on all questions of international negotiations—and, indeed, on many involving national negotiations—no attempt should be made to bind the hands of those taking part, whether Prime Minister, members of the Cabinet or other Ministers. In my experience of innumerable negotiations, particularly international ones, no attempt has ever been made to bind me to particular positions while they have been going on.
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During the long negotiations between 1961 and 1963 on the first attempt to enter what is now the European Union, I reported frequently—to the astonishment of my colleagues from other countries involved in the negotiations—but was never asked here to bind myself either to what had been agreed or to what was going to happen. That position should, I believe, be maintained—and more so, not less so, because we are within five months of a general election. That is vital.
These negotiations cannot be finished before the possible date of a general election. We should therefore accept, as a Parliament—I believe that the people of this country are perfectly prepared to accept it—that we shall not know the answer until the negotiations are concluded, whichever party is in power. Unless we do that, we are heading for catastrophe.
I believe that my right hon. Friend the Prime Minister was absolutely right to say on Sunday that he would not be forced to make any announcement, either now or during an election campaign. He is backed by the Chancellor of the Exchequer, the Deputy Prime Minister and the Foreign Secretary, and rightly so. I therefore hope that all of them will adhere strictly to what has been said. I believe that it is right. It is what Parliament is accustomed to, it is what Parliament needs, and I believe that Parliament should have it.
When considering the general questions that are at issue, we must recognise that the Six, as they originally were—and the members of the Union, as they are today—have always benefited from the fact that their principal parties have agreed on their membership of the Union and on the steps that have been taken to develop it, as, almost without exception, have all members of those principal parties. There are those who say today that they never realised that there was any politics in it. Many people say that all the time. I am sorry, but it has been clear from the beginning that this was a political development, and also an economic development. There are those who talk glibly about sovereignty. Of course the Union, or the European Coal and Steel Community as it was then, had supranationality. It gave up sovereignty at once, in order to maintain peace in our continent by governing, centrally, what Germany and France could do in regard to creating weapons of war by means of the two materials of coal and steel. That has always been there.
Every treaty has emphasised this. The treaty of Rome, which we signed—we are not in the habit of breaking treaties—sets out quite clearly that what is involved is ever closer union, which involves sovereignty, and that such a union is political as well as economic. That is absolutely clear, and always has been.
Mr. Cash: Will my right hon. Friend give way?
Sir Edward Heath: No.
Sovereignty exists for the benefit of the people. It exists for the benefit of our fellow citizens. If we can do something to which our sovereignty contributes for the benefit of our people, its use is absolutely justified.
I must also point out that when it comes to NATO, on which there is very little division of opinion—perhaps I could draw the Chancellor's attention to this—our surrender of sovereignty is complete and absolute. NATO says that an attack on one is an attack on all. It does not say, "You must go back to Parliament to get approval." It

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does not say, "You must have a referendum," or, "You must have a general election." What it says is, "Without question, you go to the defence of the member that is attacked." No one could ask for greater abandonment of sovereignty than that. Why? Because we believe that it is justifiable, in our national interest and in the interest of peace.
As for the single currency, an argument that has not been used today but that I consider important is that no single market in the world has more than one currency. We have heard great support for the single market, and in some ways I agree with what has been said about the United States, which is the world's biggest single market—unless we consider the Union to be a fully developed single market: in any case, the United States is a very big single market, and it has only one currency. It is impossible to imagine the United States with 50 different currencies. We can work out individual aspects, but that is a very important one.
The reason is simple. If members keep their currencies, they cheat. That is what we did when we devalued the pound by 15 per cent: we cheated, and they all believe that we cheated. That is an essential aspect, quite apart from the benefit to industry and to individual citizens.
A factor that should not be overlooked, particularly by members of our party, is that industry believes that it will benefit from a single currency in the Union. It will benefit, and that is why it wants a single currency. As for the question of articles 103 and 104, health and society, and so on, those in industry are clear about the fact that that does not bother them. The Confederation of British Industry has said that, if we return to minimum wages at a reasonable level, the effect on us will be perfectly acceptable. Even the Institute of Directors says that it does not mind. Very well: we cannot ask for more than that from the business point of view. Is it not time that we paid some attention to what industry wants, given that industry is the basis of our own existence? Of course we should do that.
We hear a great deal about the nation state. The fact is that the Union, as it is today and as it has always been, is sui generis: it exists in its own framework. There has never been anything like it before, and it is unlikely that there will be. What we must do is not waste time on arguments about the definition of federalism, and so forth, but ensure that what we as a Union need to operate efficiently is there, in the framework.
What worries me is that in all these debates—today's debate was announced as being of great importance from the point of view of the details of the single currency—there is no positive contribution. If there are problems, and we all know what they are, why can we not make a positive contribution to their solution—Members of Parliament, apart from Ministers and the Government? That, I believe, is the task that we face.
As I have said, we have heard a great deal about the nation state. I have not heard so much about the nation state since I was an undergraduate reading political history. In the past, people talked about the nation state; it is only in the past three years, and only in this country, that there has been so much emphasis on the nation state. The plain fact is that the nation state seeks the highest standard of living for its people. That has been the emphasis here, and we must judge things on the benefits that they bring to the people of our nation state.
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My view is quite clear: the greatest possible benefit for the nation state lies in the European Union. That is why we must remain not only members but positive, constructive members of it, which in turn will help the rest of the Union to develop in the way that is most beneficial to its people. That is the task to which we should address ourselves and to which I believe the people of this country want us to devote ourselves.
There are perhaps some people here who think that the election will be settled on the question of Europe. It will not. It will be settled on many other issues—and we know what they are. Let Parliament concentrate on making a success of the European Union to which we belong.
5.40 pm
Mr. Peter Shore: It is always a challenge to follow the right hon. Member for Old Bexley and Sidcup (Sir E. Heath). I must say straight away, however, that although he used phrases such as "sovereignty" and "nation state", the conspicuous absentees were "democracy" and "self-government". What is at stake in our relations with Europe is very much the question of who governs Britain in the future. If that is not of great concern to the right hon. Gentleman, it should be: his failure to take account of that marred his own negotiations and the signing of the treaty of accession in 1973. I should like to spend more time on this matter, but so little is available to us that I turn straight away to what I regard as the major new factor in this debate—the stability pact.
The stability pact was not even mentioned on the Floor of the House until today, or at least until the Chancellor was forced—reluctantly—to make a statement on 23 November, or whenever it was. The stability pact is a major new dimension to the Maastricht treaty. It has three components of which we should be very conscious.
The first is that the norm expected of member states that are party to the single currency is that they should break even on their balance budget account year by year, and the 3 per cent. of gross domestic product figure is the exceptional margin that is to be allowed when things go wrong and when the economy appears to be plunging into recession. That is not exactly what people thought the original Maastricht criterion of 3 per cent. meant.
Secondly, under the stability pact, we are to be subject to fines which could amount to 0.5 per cent. of our gross domestic product every year. That is the formula. In Britain's case, it would be a fine of up to £3,500 million a year—that is what we are exposing ourselves to.
The third and very disagreeable feature of the stability pact is that, although the initial call is to make a deposit with the European central bank, if that deposit is not redeemed after two years it will be turned into a fine.
I find it truly remarkable that, as he told us in the letter he sent to us on 22 November, the Chancellor considers that
"the stability pact makes good economic sense".
He went on to say:
"we believe that deposits and fines will be useful deterrents against any member of EMU stage 3 who maintains irresponsible fiscal policies".
I intervened on the Chancellor and pointed out that, had the stability pact been in force during the four years that he had held that office, Britain would have had to

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contribute £11 billion to the European Union. I then asked him—I ask the House again today—whether we really think that he has been wholly irresponsible in his conduct of our affairs during the past four years, or whether we in fact accept that Britain had fallen into serious recession following our unhappy stay in the European exchange rate mechanism from which we broke out—or were driven out—only in September 1992. The economy was deeply depressed and, as my hon. Friends should understand better than the Conservatives, it therefore made sense to have a large borrowing requirement and to increase public expenditure even though it meant incurring that large borrowing requirement.
That is what sensible economic management dictates, and it is something that we as a party should never agree to abandon, in treaty form, to those in Europe who have an entirely different view about what is good economic policy and an entirely different political aim—that of creating, as soon as they can, a federal state or a united states of Europe. Those people do not disguise their intentions; it is only here that we cannot bear to face the reality.
I find it inconceivable that any British Government should have so little self-respect that they feel they have to be bound by treaties that others have written and hand over to unelected authorities in Europe the single most important financial judgment of the year—the Budget judgment on what the balance should be between taxation and expenditure. Are we really saying that, to pick up a phrase used by a Conservative Member some time ago, we are no better than a rate-capped local authority? Do we really think that we do not have the good sense to make the correct economic judgment for our people and our nation year by year?
If we feel that we no longer have the self-confidence or the ability to decide our yearly economic policy or, indeed, our economic policy as a whole, and if we are prepared to hand over control of not only our interest and exchange rates but the Budget judgment—and to do so without argument—what arguments have we against those who would press us at the intergovernmental conference, as they are now doing, into letting them take over our immigration and asylum policies and even our foreign policy? That is what is at stake.
I cannot believe that the House has so little regard for itself and its people that it is prepared to abandon that which the British people achieved for themselves and which has caused us to be the envy of the greater part of the world because we maintained it for so long and despite great difficulties. After all, most of us have lived through a period in which we in Britain were proud of our achievement in creating something like 40 additional nation states by the voluntary withdrawal from empire. Are we now to abandon for ourselves what we so prized for so many other nations and peoples—nations much weaker and smaller than ourselves and with far less experience of self-government? We should reject the stability pact and all that goes with it.
I come now to an entirely lesser matter of helping the Chancellor out of his difficulty. I intervened on him to tell him that he had a way out, if he was not too stubborn to take it. That way out is simple. Our European partners have indeed cheated on the convergence criteria. I mentioned France, but Italy, Spain and Belgium are all involved in
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open manipulation of and cheating on the so-called convergence criteria. However, something like two of the four convergence criteria have already been abandoned.
One involved being a member of the ERM within the narrow band of 2.5 per cent.—but that whole system has been scrapped, so that criterion can no longer be observed. In addition, is it not clear that, although the 3 per cent. criterion is still being partly adhered to, the 60 per cent. criterion is being abandoned? There is no question of Italy, Belgium, the Netherlands or any of the so-called candidate states—apart from Germany, France and Luxembourg—reducing their ratio of national debt to gross domestic product in the one year that is left. In some countries, the figure is 120 or 130 per cent. We know perfectly well that those countries will not observe the criteria.
The Government could say, "We don't think you are entitled to join. We don't think that it would make a sensible, strong euro." But that will be decided by qualified majority vote, and Britain does not have a veto to prevent any such candidate country—however fudged the criteria may be—from joining the single European currency.
Other than the political restraints within his party, the Chancellor has every reason to say no to Britain joining the European single currency, to say it now and to maintain that opposition throughout the next Parliament. The same applies to my right hon. Friend the Member for Dunfermline, East (Mr. Brown), who knows that there has been no convergence of the real economies.
5.50 pm
Mr. Douglas Hurd: The right hon. Gentleman always speaks eloquently and in tones of certainty. He speaks now in December 1996 as if he knows what the position will be in December 1997 or the spring of 1998. I think that that is wrong. Next year will be a year of turbulence and uncertainty right across the argument. This year began with doubts about whether the timetable and criteria for economic and monetary union would work. We passed through some months of total confidence, and now doubts are returning.
There are two certainties. First, if the single currency comes about, it will affect us greatly whether we are in or out. Secondly, if it goes ahead, it is in our interests for it to be well constructed and to succeed. It is not in our interests to be surrounded by the chaos and bad-tempered confusion of an abortive currency scheme. That could undermine the single market, which is the greatest achievement of the European Union to date, and is still incomplete.
I have never been an advocate of the single currency. It was planned as the latest in a series of great leaps forward in the integration of Europe. It is a gigantic leap. Currency stability is a sound aim of policy. It is now the fashion to extol wholly floating exchange rates, but retired Ministers do not have to be fashionable. I am sure that Europe needs a system with a bias towards currency stability, but that system should not impel a country to defend a particular exchange rate when economic reality has condemned it. When the memories of the last, partly mismanaged, tightly reined exchange rate mechanism have faded, we shall look again for such a system.
At Maastricht, instead of a flexible system, all those present—except us and the Danes later—plumped for a drastic, inflexible system. That political solution provides that, at a date to be fixed by political decision, every

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citizen in every high street in Europe, including Germany, France and Britain, will be told that what he or she has in his or her purse is trash. It assumes that, despite most of the present evidence, the economies of the nation states will converge and, more difficult to achieve, will stay converged. No one proposes what so alarmed my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory). No one would tolerate the huge increases in the European budget that might be necessary to keep convergence in place.
The single currency is a drastic proposal. It is right that if the British Government in the next Parliament—or at any time—decided that it was in the national interest for us to join, there should be a referendum. I am glad that the Government finally decided that they would hold a referendum, and that slowly and in a bedraggled way the Labour party has also taken that view.
One cannot be certain about where the national interest lies. Probably—not certainly—the euro will go ahead. No one can tell what its impact would be on our prosperity if others went ahead and we stayed out. I do not know of a single British institution that is not divided on that issue. Industry is divided, the City is divided, the Trades Union Congress is divided, the Labour party is divided and, occasionally, if I am right, even the Conservative party is divided on that issue.
Many people speculate, but the truth is that we do not know whether our economy and our prosperity would begin to lose blood. We do not know whether we would begin to lose investment, jobs and national prosperity. If there were such a haemorrhage, we do not know how great it would be, or whether it would be great enough to counterbalance the political arguments against a single currency, which are strongly felt, not just in parts of my party.
It would be rash, therefore, for people to say at the coming general election that, without any qualification, come wind come weather, they would never support the entry of this country into a single currency. I strongly support the line that was taken by the Cabinet this spring and reaffirmed by senior Ministers in the past few days.
As my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) said, we must consider this matter against the background of the part we play in Europe. It was disappointing that the right hon. Member for Dunfermline, East (Mr. Brown) did not attempt to do that. It is difficult to do so, partly because of the lamentable state of reporting of these matters in our press. Politicians are scared of attacking the press, but again ex-Ministers do not have a great deal to lose. In my experience, it is not possible to read in any of our broadsheet newspapers—except one—anything like a full, plain, factual account of what happened yesterday, whether in Paris, Bonn or Brussels. There is plenty of opinion and gossip, and there are some fine columnists, but factual reporting is thin and trivial.
I shall give one example of that—I could give many. It is difficult to find in our press reports on the liberalisation process within the single market. The Commission and the European Court are our allies in that liberalisation, however imperfect it may be. The prising open of telecommunications, aviation, electricity and, I hope, gas is a huge advantage to British enterprises that are already liberalised. British Airways is a classic example. It is subtly and energetically using the prising open of the
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continental market achieved by the Commission and the court, and it is seizing every opportunity to pounce and to move in. It is not put off by the caricature of Europe, which supposes that we will always be isolated and defeated.
I have always been against pushing the process of integration to a fully integrated united states of Europe. Many hon. Members and I have seen the reef—a barrier of rocks under the water. That barrier reef is the loyalty that most people—not just in Britain—bear to their nation and its ways. It is not true that we are alone. What defeats me so often in these arguments is the wrong assumption that we are alone and isolated in our feelings. That barrier reef exists in France, Germany and in all the Scandinavian states.
I would be delighted if I were told tomorrow that all the leaders of Europe were aware of that reef and were determined to avoid it, and that their main concern was to carry through what we have already undertaken but not completed: liberalisation in the single market, the enlargement of our Union to the east and co-operation on foreign policy so that we can be valid partners of the United States on important issues.
The priority for Europe should be to make a success of the present before launching further into the future. The arguments that Ministers have made over and again—particularly in the White Paper this year—are valid. They are weakened, perhaps crippled, by the trivial, distorted nature of much of the debate in Britain. My right hon. Friend the Member for Old Bexley and Sidcup is right. We are trying to achieve something that is new in history. The United States and Germany are not the models. We are trying to reconcile the identity of European nations with their working together far more effectively than ever before—the ever closer union not of states but of peoples. I believe that that is what most people in the House and in Britain want, and the main danger to realising that is that we shall be defeated by our own defeatism.
Mr. Tam Dalyell: On a point of order, Mr. Deputy Speaker. One of the difficulties of 10-minute speeches is that distinguished former Ministers can make statements that are factually not true. The Trades Union Congress is not divided.
Mr. Deputy Speaker (Mr. Michael Morris): Order. We are not debating the 10-minute rule now.
6 pm
Mr. Malcolm Bruce: The debate has been characterised by a great deal of uncertainty and division across the parties, certainly the two larger parties, and in the country. That lack of purpose is a matter of concern. At least the Liberal Democrats have a clear position on a single currency. We believe that a well-formed single currency would be in Britain's national interest. It would help us to cut interest rates and transaction costs and it would help our trade.
The Chancellor gave a robust explanation of what he believed the potential advantages would be, and we concur with that point of view. To some extent, the current level of interest rates across Europe confirms that view. We have the highest long-term interest rates in Europe, with the exception of Greece. Even Italy, Spain and Portugal have lower interest rates than Britain.

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That is partly a sign of the failure of the Government's economic policy, but it is also a sign that long-term investors in the United Kingdom do not believe that we shall pursue the stable, consistent economic policies to which those most committed to monetary union have declared themselves committed. It makes a fundamental difference.
Those who make passionate statements about what they are against in the frame of monetary union have some obligation to explain how they believe that Britain will operate differently outside and what the benefits would be. Mostly, they articulate the negative rather than the positive view of being outside.
Sir Teddy Taylor: Will the hon. Gentleman give way?
Mr. Bruce: No. I do not have much time and I do not wish to detain the House.
The arguments for and against monetary union, where they are genuine as opposed to rooted in a totally rigid preconceived position, are well known. Therefore, I shall concentrate on the three current most topical issues—the convergence criteria, whether they could be fudged and what that would mean, the stability pact and monetary policy.
The convergence criteria have been well discussed and argued as being good housekeeping agreements by those who seek to prepare themselves for monetary union, which needs to be followed with a degree of firmness and genuine commitment. At the moment, one of the arguments in the Conservative party, which may be designed to lighten the divisions, is that the convergence criteria might be fudged. Those on the extreme anti-monetary union wing of the Conservative party say that they definitely are being fudged and that that is their rationale for suggesting today that we should declare that we want no part of it. Those on the other side may be grasping at the idea that the possibility that they might be fudged is some kind of argument for leaving the option a little blurred.
The reality is—I challenged the Chancellor and he gave me a fairly straight answer—that if the convergence criteria are to be strictly applied, and Germany for one is saying that they must be, and if the United Kingdom were to meet those convergence criteria, which is by no means as certain as some hon. Members suggest, the benefits to Britain in being a founder member of the euro zone far outweigh the disadvantages. It would be a unique opportunity for the United Kingdom to be in on the ground floor of a European enterprise for the first time rather than to be dragged in struggling, kicking and screaming at a later date. That is extremely important.
The Government's position is not quite clear. The position that the Chancellor articulated was that there are real advantages and if those two criteria were met, he was clear that he could argue that it would be in the British national interest to be a member. It is not at all clear whether he has the Cabinet behind him on that.
We are entitled to know the circumstances in which the Government would exercise their opt-out to opt in. The paralysis of the Conservative party and the Government stems from the fact that they are so internally divided that no one but the Chancellor seems capable of expressing a
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view on that. That is greatly to the weakness of Britain's negotiating and bargaining position. That is at the heart of why the Prime Minister was forced to admit in his interview on Sunday that the divisions within his party were damaging the British national interest and weakening our negotiating position before monetary union. Therefore, I do not believe that opting out, as some member states want, would benefit the Conservative party. Failing to explain the circumstances in which it will opt in is serving neither its interests nor the national interest.
There is no doubt that none of us believes that a monetary union that goes ahead on the basis of blatantly fudged criteria is likely to be sustainable. In a sense, the trumpeting of the merits of the opt-out is slightly overblown in that there is no real suggestion that any member state would be forced unwillingly into monetary union if it were deemed that in so doing it was being asked to accept criteria which other member states knew had been severely fudged—no one favours that—but if they are sustained and we qualify, we should join.
Because the convergence criteria are so important to the determination of who is eligible and whether monetary union is likely to be sustainable, it is inevitable that there should be discussion of a stability pact. The right hon. Member for Bethnal Green and Stepney (Mr. Shore) is right on that count. Simply to determine on an instant in time that a number of member states have achieved an agreed set of criteria which makes them eligible to join monetary union and for that union to go ahead should not be the end of the matter. The conditions under which new members should join as monetary union grows then have to be determined, and those members within monetary union should determine their relationships with each other. That is perfectly rational and some of the more extreme elements of the Conservative party are simply wrapped up in a lather of phobia about this, without recognising that there have to be agreed principles in order for there to be business-like arrangements. Therefore, there needs to be a stability pact and it needs to be firm, not blurred at the edges.
There should also be some discretion within that pact. Its purpose is to stop nations backsliding into bad old ways. If they do not have the option of competitive devaluation, about which some Conservative Members seem so enthusiastic, they must clearly operate on other criteria and the level of borrowing is a significant factor.
Why should those countries which, for example, have qualified well under the GDP-debt criteria of 60 per cent., be constrained to the same degree as those which have qualified above those criteria but are moving down sharply? It is reasonable that the stability pact should differentiate between countries that have got their GDP-debt ratio down much further than others at the time of membership. The treaty is clear that 60 per cent. was never an absolute criterion, but an objective to which all applicants should aspire and be moving rapidly towards. In those circumstances, it might be possible to say that a country that had got its GDP-debt ratio down to 50 per cent. might, if it so required and if it were agreed by the other members, run a budget deficit of, say, 4 per cent. and not be strictly tied to a 3 per cent. deficit.
Within that context, there has been discussion of the role of monetary policy. It is unsustainable to suggest that the creation of a single currency unit automatically leads to the abolition of sovereignty. It is a pooling of

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sovereignty. It is an agreement to share certain decisions in common, in particular the setting of interest rates. It is an interesting comment on the British style of economic management, as contrasted with the continental style, that politicians of both Labour and Tory persuasion seem anxious that they should have the opportunity to interfere in the short-term strategy of interest rate setting, even though the record shows that such interference nearly always damages the long-term interest of sustained recovery and growth. The short-term intervention of successive Chancellors, Labour and Conservative, has created the UK's boom-bust climate. The absence of that facility has contributed significantly to the much more constant and sustainable growth that, for example, Germany has achieved.
Having said that, I believe that whether Britain opts in or out, we should be considering moving the central bank from its position of current transparency to genuine operational independence. That needs to be done whether or not Britain joins in the first wave of monetary union.
Even if we decided to stay out in the first wave, we would presumably continue to monitor our position and, effectively, remain an applicant. Sooner or later, we would by treaty be obliged to create an independent central bank, but in any case the markets would be highly suspicious of an economy that had qualified for monetary union and then refused to join it.
Therefore, it would be highly desirable for us to give a clear signal to the markets that we are not going to take advantage of the position in an irresponsible way and that, as a measure of our good faith, we are going to make our central bank independent. I suggest to Front-Bench teams that it would be extremely beneficial if both could pledge to the House today—although, disappointingly, I do not expect them to do so—that the operational independence of our central bank will be in the next Queen's Speech, whoever wins the election.
The Chancellor made a good case for keeping Britain's option open on monetary union, but unfortunately he made it—this was apparent from the Opposition Benches—against the background of a party that has already closed its mind. He remains clearly of the view that monetary union might be in Britain's interest. He can envisage circumstances where signing up in the first tranche would be in Britain's interests, but many in his party have decided, not because they think that it is in Britain's interests, but because they think it is in their party's interests, to close that option and to leave the Government effectively defenceless in the negotiations.
The sceptical members of the Conservative party are trying to put a fudge on a fudge. The whole point about the opt-out was that it was a fudge to try to placate the Euro-sceptics in the Conservative party. The problem with the Euro-sceptics is that the more the Government give them, the more they want. It is absolutely clear that the opt-out is not good enough. They want it to be exercised now and in so doing they want the national interest to be thrown to the winds.
As the right hon. Member for Witney (Mr. Hurd) made absolutely clear, it is not possible to determine now exactly who will qualify, on what terms, whether it will be viable and whether it will be in the British national interest to join. What is clear is that there is a political determination among the main players in Europe to be part of monetary union. Britain must think carefully about
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the extent to which our national interest would be well served by qualifying, by seeing others qualify and then by exercising our option not to be part of that monetary union. That would be a betrayal of Britain's economic interests. It would be a lack of vision and a narrowness of appreciation of the fact that Britain's future is bound up in Europe whether we are in or out. Being in gives us a hell of a lot more influence than being out ever will.
6.13 pm
Mr. Norman Lamont: Since the Maastricht treaty was agreed four years ago, the House has had many opportunities to debate monetary union and the question will not go away, although I am sure that the Government wish that it would. European politicians have performed their primitive rain dance and, contrary to the predictions, the first few drops of rain are beginning to appear.
The Government have had four years to develop their position, years that saw the Danish referendum and the tortured passage of the Maastricht Bill through the House. Our economic performance conclusively demonstrates that Britain can prosper without an exchange rate link to Europe. All that might have been a reason for the Government to have moved confidently towards saying no to monetary union.
The Government risk being left powerless to lead the debate on Europe at the general election. In contrast with the Labour party, they say that they are against political integration. It is not entirely credible for them to be opposed to making Britain part of a federal Europe and at the same time to be neutral on the most important move to a federal Europe ever proposed.
I understand the Prime Minister's predicament, but in Britain there is a legacy of distrust and a sense of betrayal over Europe. I welcome the fact that the Prime Minister said at the weekend not only that the convergence criteria should not be fudged, but that convergence must be lasting. As lasting convergence cannot be demonstrated in advance and as, in fact, it will not be achieved, I took that as a signal that the Prime Minister is moving towards saying no to a single currency, and so he should.
As my right hon. Friend the Member for Witney (Mr. Hurd) said, Europe is taking a monstrous gamble—a huge unprecedented risk. The convergence criteria are really financial criteria designed to stop Germany, having to be responsible for Italy's debts. The criteria do not tell us anything about real economic convergence.
The conditions for a single currency in Europe simply do not exist. A natural currency zone—normally a country—has to be both a single and a flexible labour market. Europe's labour market is neither single nor flexible. The most important barriers in Europe's labour market involve the fact that Europe consists of different countries. Someone who has been made unemployed in Motherwell going to Brescia or to Germany to find a job is a completely different matter from someone who has been made redundant in New Jersey going west to find work elsewhere in his country.
The labour markets in individual countries in Europe are notoriously inflexible. I think of the non-portability of pensions, job protection regulations and social security entitlements. Everything that Europe does makes that worse and a single currency would make it worse still.

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With monetary union, there will be one interest rate for the whole of Europe. Surely the lesson of our experience in the exchange rate mechanism was that it is difficult to set a single interest rate for a whole continent, with different economic conditions in different parts.
The Government say that they will not make up their mind until the last moment because they want greater influence. It is a curious logic to think that other countries will be remotely influenced by a country that cannot persuade itself what it wants to do. The trouble with a wait-and-see policy is that it assumes that there is no fundamental issue of principle involved in monetary union, but a profound principle is involved: can a country continue to be independent and self-governing within monetary union?
The Chancellor of the Exchequer thinks that no such dilemma exists, but the Prime Minister recognised it when he said that the possibility of a single currency was
"the greatest constitutional question to face this country this century".
I quoted to the Chancellor what the president of the Bundesbank and another of its members have said. European politicians are completely open in arguing for monetary union on the ground that it will lead to political union. Not so long ago, I took part in a public debate in Switzerland with Karl Lamers, a European spokesman in the Bundestag and a close friend of Chancellor Kohl. I stated my opposition to monetary union on the ground that it would lead to political union. When Mr. Lamers began his speech, he said, "I am not sure that there is anything to discuss. Of course Mr. Lamont is right. That is why we Germans want monetary union." Whether the Chancellor of the Exchequer recognises it or not, that is what is felt by many continental politicians.
Part of the debate has been about the stability pact. Some of my hon. Friends worry that it will not be enforced and others worry that it will. They are all right. It will be a disaster if it is enforced and it will be a disaster if it is not.
The risks of being in the single currency are far greater than the risks of being out. Britain has nothing whatever to fear from being out. The City of London already trades more deutschmarks than are traded in Frankfurt. There is no reason why, outside the single currency, London should not be the centre of trading in euros.
Increasingly, the only argument for the single currency—it resembles one argument for the EU that is increasingly advanced in desperation—is the feeble one that if we are not part of it, others will discriminate against us. The very same people who tell us that Europe is liberal, outward looking and free trading hint darkly that if we do not go along with its plans, Europe will find a way around GATT and the treaty of Rome to make life difficult for us. That is an argument not for being at the heart of Europe but for having nothing to do with the single currency.
Far from being afraid, Britain should welcome the opportunity to go it alone in monetary affairs and to set an example of what can be achieved with an independent Bank of England and a competitive, deregulated economy, especially to create jobs for the unemployed.
The Europeans support monetary union on the basis of politics, not economic analysis. The mystery is why European politicians are so obsessed with political union.
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In his recent Harold Wincott memorial lecture, the Spanish economist Dr. Pedro Schwartz said that he sometimes thought that the Common Market had not been
"founded in Rome but in Vienna, on Dr. Freud's couch".
He said that the Germans wanted the Union to stop them falling into Nazi ways; the French wanted to be cured of an inferiority complex; the Italians wanted to become a nation; the Spaniards wanted to bury Franco; the Portuguese wanted to be French; and the Greeks did not want to be Turks.
The trouble is that it is not just the Europeans who have their neuroses; we British have them too. We have been bullied into believing that we can prosper only through Europe. We are told that millions of jobs depend on the European Union. Millions of jobs may depend on European consumers and markets, but no business actually sells to an organisation called the European Union. The Swiss, the Norwegians, the Japanese and the Americans have all increased their exports into the European Union just as quickly as we have.
There is no reason why Britain should not prosper outside a single currency or in a semi-detached relationship with Europe. Our prosperity depends on the efforts of our people and our Government. We should not just be trying to halt the drift towards a European state; we should be trying to reverse it. It is not sufficient just to say no to more powers for the European Parliament and the European Commission. We should be repatriating powers to national Governments.
The British Government say that they want a Europe of nation states, but is Europe really interested in being a Europe of nation states? A Europe of nation states would not seek to weaken our anti-terrorist laws. It would not promote anti-smoking campaigns nor would it have 100 embassies around the world. Should we be surprised by that? Chancellor Kohl has told us that the day of the nation state has passed and nation states cannot solve the problems of the next century.
We are not winning the argument in Europe. There is a fundamental, irreconcilable difference between what we want from Europe and what the Europeans want from Europe and one day that clash will have to be faced and choices made.
6.23 pm
Mr. Giles Radice: I congratulate both my right hon. Friend the Member for Dunfermline, East (Mr. Brown) on his speech and the Chancellor, who gave us a fine exposition of the pros and cons of the single currency.
Like my right hon. Friend the Leader of the Opposition, I congratulate the Prime Minister on his "On the Record" interview on Sunday. Although I considered him far too negative about the British negotiating stance at the intergovernmental conference and about the prospects for the intergovernmental conference, I agreed with what he said about the importance of British membership of the European Union and the need for Britain to keep open the option of joining the single currency.
Indeed, it is a pity that the Prime Minister has not given a few more interviews such as that one and made a few more speeches in the same spirit. Had he done so, the Tory party might not be in such deep trouble about European issues. The problem is that the so-called

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Euro-sceptics who are scheming away on the Conservative Back Benches think that they can push the Prime Minister around and make him change his political position. That is what the article in last Monday's The Daily Telegraph was all about. No doubt in the new year they will make another attempt to change the policy. That is bad news for Britain.
I should like to warn the House against the unholy alliance of Europhobic ideologues—we have just heard from one of them—blatantly biased newspaper editors and owners—I do not see any of them in the Press Gallery, but it is typical that they do not want to listen to the debate—and ambitious Conservative politicians who seek not only to capture the Tory party, but to subvert the national interest.
Let us make no mistake about it, for all their occasionally comic aspects, the so-called Euro-sceptics are dangerous people. The term Euro-sceptic is a total misnomer. If they were truly Euro-sceptics, they would approach the IGC pragmatically and want to keep open the option of joining the single currency—as poll after poll shows the majority of people do. If they were truly Euro-sceptics, they would be in favour of compromise and of a constructive relationship with our European partners.
The only genuine Euro-sceptic speech was made by the right hon. Member for Witney (Mr. Hurd), the former Foreign Secretary. He is a Euro-sceptic; the rest are Europhobes. They hate the European Union and all its works. They distrust anything from Brussels and they blame Brussels for almost anything that happens here. In their heart of hearts, many of them still believe that, far from being good democrats, the Germans still wear jackboots. We hear that occasionally from the hon. Member for East Lindsey (Sir P. Tapsell), who once talked about Panzer divisions. That is quite disgraceful.
Unfortunately, those people are uncritically backed by the Murdoch and Black press. Those powerful combines should declare their interest. One would never know from reading The Sun or The Times that they were owned by an Australian American who has a commercial interest in keeping nations weak and unco-operative. That is the reality that we never hear. One has to ask how credible the Canadian-owned newspaper, The Daily Telegraph, is as a judge of the British interest.
Those newspapers consistently pump out anti-European propaganda. They are a disgrace to the British press. They suppress any debate about the European Union. One has only to ask pro-European Conservative Members how easy it is to get articles or their letters into The Times or The Daily Telegraph. It is almost impossible. I was amazed that The Times actually accepted an advertisement from the European Movement, signed by hon. Members on both sides of the House. I hope that that was a turn for the better. Journalists and editors who work for those newspapers should start to examine their conscience and what they are doing for a free press in Britain. Above all, we should be aware of the motives of the leaders of the anti-European faction in the Conservative party.
Of course, there are genuine anti-Europeans, such as the hon. Member for Southend, East (Sir T. Taylor) and my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore), who have always been against the European Union; there are genuine sceptics, such as my pair, the right hon. Member for North Shropshire (Mr. Biffen); and there are the genuine resigners on
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principle, such as the right hon. Member for Wells (Mr. Heathcoat-Amory), whom I respect for it; but I must query the credentials of hon. Members such as the right hon. Member for Wokingham (Mr. Redwood). One would never guess from listening to him—and we do so quite a lot—that he headed Mrs. Thatcher's policy unit at the time of the signing of the Single European Act, which not only introduced the single market but greatly increased and strengthened qualified majority voting. One would never guess from his present stance that he was in the Government who took the Maastricht treaty through the House.
One would never guess from listening to the right hon. Member for Kingston upon Thames (Mr. Lamont) that he was at Maastricht negotiating the opt-out. If all is as he has said, why did he not resign from the Government or insist on Britain using its veto? That is the logic of his position. He tells us now how terrible everything is, but I listened to his speeches and he was not saying that at the time. We should examine the records of such right hon. Members, and they should examine their conscience and what they are saying now.
I have a message for my own party. Labour Front Benchers are absolutely right—I congratulate my party on it—to stick to the policy of keeping the option open of joining the single currency in the first wave, if we think that it is right to do so. We are also right to say that a deal is waiting to be struck at the IGC. It is not a difficult deal to make, but it will very much be in Britain's national interest. The Conservative party cannot make a deal because it is so hampered by the Euro-sceptics on its Back Benches.
Contrary to press reports and what has been suggested in the debate, my party is overwhelmingly united behind the party policy that was agreed at conference and, as my right hon. Friend the Member for Dunfermline, East said, in a ballot of all members. Our supporters will be strengthened by representation in the House after the next election because the young candidates are all pro-European. I regret to say from a personal point of view that some older anti-European Members will leave.
I believe that European policies need to be carried through the House on a cross-party basis. One of the Prime Minister's biggest mistakes has been to rely solely on the Conservative majority. That majority has been threatened by the Euro-sceptics and has now disappeared. There is a European majority in the House; in the right circumstances, there will be a majority in favour of a single currency. There is certainly a majority in favour of a positive European approach, although we never hear it fully, because it is suppressed and subverted by the Euro-sceptics, who do not speak for the majority of the House or—I believe—for the majority of the country.
The prototype for the approach that we should be taking is represented by the all-party European Movement, of which I am fortunate to be the chairman. A number of other hon. Members are also officers of it. We placed an advertisement in The Times—the hon. Member for Gillingham (Mr. Couchman), who is in his place, signed it—which described what I believe is a prototype. If I have a single message to send to my party, it is this: if we are to be successful when we are in government after the next election in promoting the British interest in the European Union, we need to mobilise the widest possible cross-party alliance for our European policies.
6.33 pm
Mr. David Howell: I do not share the terrors of the objectives of the stability pact that the right hon. Member for Bethnal Green and Stepney (Mr. Shore) expressed in his passionate and eloquent speech, because I have always believed that rigid monetary and fiscal discipline is the key to prosperity, growth and jobs. We are benefiting today in this country from that austere approach. That is what I have always argued—except perhaps during a flirtation with Keynes in my student days.
I have never believed that competitive devaluation is the easy way out. Oddly, it might have worked—although I do not think that we yet have the full story—when we were most recently bounced out of the exchange rate mechanism, but I do not believe that it worked very successfully throughout the post-war period. It was a desperate remedy to try to compensate for a basic lack of enterprise and firm government by successive Governments, especially the disastrous post-war Labour Government, who got us off to such a bad start after the second world war, from which it has taken us 50 years to recover.
It seems like only yesterday when some of my right hon. and hon. Friends agreed with me that the key was monetary and fiscal austerity and discipline, yet suddenly, they are implying that the disciplines that would be imposed by the Maastricht convergence criteria—which are very disciplined—are undesirable and not the key to economic equilibrium and growth. I am not quite sure why they have undergone that U-turn, given that they believed so strongly—as I do—that the key to good economic policy was monetary and fiscal discipline and encouraging enterprise as much as possible.
I should like to make three assumptions that are almost predictions. First, the euro project will take place. A group of countries, probably including France, will pass the selection criteria in 1998 and get going on 1 January 1999. In July 1999, about six months later—this is the latest version of a little bit of fudge—Italy, Spain, Portugal and possibly Sweden will enter the single currency as well. We must start from that fact—amidst all the adversarial comment, this debate has struck some constructive notes—and ask ourselves how we shall address it.
Secondly, I do not believe that we should be in the first wave. I do not think that we shall be, although Labour Members might deny that. I do not envisage this country joining that first wave in January 1999 in whatever form it takes, although there will certainly be such a wave on that date.
Thirdly, it seems that the choice is really between a weak euro and a very weak euro. The latter is a danger to us all. The prospect of monetary chaos, which would spread far outside those in the inner core and members of the single market such as ourselves to world financial markets, is extremely worrying. It is not at all in our interest to stand back and see that develop.
Although I may not agree with all his nuances, I share the view of my right hon. and learned Friend the Chancellor—he expressed it clearly—that we must play a strong role in the monetary situation regardless of whether we are in or out. Incidentally, I found some of the
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barracking and baying behind him during his speech, as opposed to the honest interruptions, rather repulsive. I personally believe that we can probably play a stronger role from outside than we could by opting in, but a strong role we must play. The idea that one can stand back, that somehow an independent sterling policy can be operated and that sterling will not be implicated in what others are up to, whether in the stability pact or under other arrangements, is nearing the land of the cloud cuckoo.
There is no possibility of our not being implicated through the exercise of international capital markets in what happens to the euro. As I said, not only will it be extremely bad for us if a very weak euro tries to take off and comes crashing down, but international capital markets will be watching even if it is less unsuccessful. They will consider the pound, and while Members of Parliament think that it is wonderful that we are not bound by the stability pact and are somehow free, there will still be rebukes issued under the surveillance system and the monitoring. Those rebukes will be noted by international capital markets and punishment will be visited on any currency, including sterling, if it has diverted from what are called the convergence criteria but are actually the criteria of sensible, orthodox monetary and fiscal behaviour. Those rebukes will be swift and just as painful as any sanctions and punishments.
The idea that we could stand outside is like our dear old friends in the Lambeth Labour party making the borough a nuclear-free zone, as if when the holocaust came, it would not hurt them. Likewise, when my right hon. and hon. Friends seek to have written on the face of the treaty some protection, it is equivalent to asking that when the rain rains on everybody else, it does not rain on them.
We have to face the detailed involvement into which we have already been sucked. That may be a matter for regret and it could be argued that treaties should not have been signed and that mistakes have been made, but we are involved and we must address the policy needed to pursue our national interest in that entirely new context. That is why I support the German attempts to have a strong stability pact—we should support them from outside—and why I believe that we can, by staying out, play a strong and leading role with those inside. My right hon. Friend the Member for Witney (Mr. Hurd) wisely warned us—some people are living in a world of illusion—that we shall shortly have to face the question of our relationship with that pact. Will the pact be an exchange rate mechanism mark 2—the very words cause apoplexy in some of my right hon. Friends—or will we take a lead in some other type of more flexible central rate shadowing without intervention, of the kind that is being discussed especially in the Bundesbank?
All I ask my right hon. and hon. Friends to do is not to live in the world of illusion where they think that there are copper-bottomed guarantees that we can stay clear—there are not—or where they demand that protection is written into the treaty, because it will not be. We shall be deeply involved and we must have a firm policy for our currency to ensure, first, that we play a good role in Europe and see that chaos is prevented from coming to a disintegrating Europe—and that has always been one of the dangers of the single currency project, which I oppose—and, secondly, that we promote our interests and keep control of our internal domestic affairs, which could be bitterly and directly affected by currency chaos.

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The policy of waiting and seeing should include a strong wait and a strong see. We are right to stand back from this dangerous project. I see great dangers ahead, but we, as a leading European power, need to play a responsible, constructive and positive role in facing the situation.
6.41 pm
Mr. Tam Dalyell: During the period in which the right hon. Member for Guildford (Mr. Howell) was flirting with Keynes—to borrow his picturesque language—I was the lowly parliamentary private secretary to the Leader of the House, Richard Crossman, who was sent some 30-odd years ago to find George Brown on the night of the gold crisis. My right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) will recollect that that was vividly recalled in Mr. Crossman's diaries. Such an experience makes me into one of those, tagged by the Chancellor of the Exchequer this afternoon, who would have us sign up to EMU this proverbial weekend. No wait, no see. We should take the plunge and get on with it.
In that view, I am sustained by the trade unions. The right hon. Member for Witney (Mr. Hurd), the former Foreign Secretary, was wrong, because the Trades Union Congress statement has gone unchallenged. I am also sustained by employers who operate from Scotland, not on a British basis but on a European basis. Part of the reason why I speak as I do is that every week I travel by the Edinburgh-London shuttle and I sit next to people who are going to Brussels, Dusseldorf, Milan and Frankfurt to do their business in a wider context. Those people influence me greatly. I am also influenced greatly by my excellent local Member of the European Parliament, David Martin, who has done a study in depth of the issue.
The problem is that we are not operating in a vacuum. If we were to start from scratch, there would be arguments on both sides, but the fact is that EMU will go ahead if Germany is willing and France is able—and that seems increasingly likely. In 1999, 12 or more member states, including Ireland, could join the first wave of EMU, because the convergence criteria are not as rigid as they appear. There is no binding rule that countries must have a maximum of 3 per cent. deficit and a debt ratio of 60 per cent. Those are reference values inserted into a protocol and not the main text of the treaty. There are a number of loopholes. If countries are reducing debt or deficit, they do not have to reach the magic figures. If Governments are investing rather than spending, that allows further leeway. The Commission is also required to take account of other relevant factors, including the medium-term economic and budgetary position of member states.
I believe that economic and monetary union could be balanced by an employment union. The Swedish Government, backed by Labour in Europe, argue that the intergovernmental conference should add an employment chapter to the new treaty. That would commit the Union, first, to enable all men and women to attain a secure livelihood through freely chosen productive employment; secondly, to do something about long-term unemployment and social exclusion; thirdly, to ensure that demand grows at an adequate rate to ensure sustainable growth; and fourthly, to promote flexibility by providing workers and job seekers with the skills to adapt to a constantly changing economy. For any Labour Member of
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Parliament, those are extremely important ends. The TUC argues that if EMU goes ahead, it will have a fundamental effect on the UK economy, whether we are in or out. We should therefore be in the first wave and helping to write the rules to ensure employment and prosperity for all Europe's people and for future development.
The real question for Britain is not whether a single currency is good or bad, but rather whether we can afford to stay out when other leading European Union countries go ahead. What we need is a genuine and sustainable convergence. I shall also be blunt. I would be relaxed—but some of my colleagues would not—about the condition for an independent Bank of England. I do not see that as a bogey or as an impediment to a Labour Government. The sooner we get ahead with a single currency and make up our mind that we shall be in it and enthusiastic about it, the better.
6.47 pm
Mr. Tim Renton: I also wish to congratulate my right hon. and learned Friend the Chancellor of the Exchequer on his robust speech this afternoon, which went into the details of the advantages and real disadvantages of joining economic and monetary union.
I am one of those who feel that it would, at this early stage, be totally crazy to throw away our option to participate in forming the terms of economic and monetary union, whether or not we join. In saying that, I wish to point out to Opposition Members, who seem to think that there are no interested, positive Europeans on the Conservative Benches, that I am the fourth Back Bencher now to speak along those lines. We are not all Sir Buftons who have been wheeled out to make those comments: we do so because we believe in them solemnly. I believe that a large majority of the Conservative party also believes in them, although among the exceptions is my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont)—an old friend of mine, who is unfortunately absent from his place—who takes a different view. I think that he is wrong, and that he is in the minority. The other Conservative Back Benchers who have spoken so far represent the sensible, positive majority.
Mr. Denis MacShane: Will the right hon. Gentleman give way?
Mr. Renton: I have no time to give way.
Like my right hon. Friend the Member for Witney (Mr. Hurd), I have concerns about the single currency, but I feel strongly about the subject because I look back in history. I remember well that, twice at the beginning of my political life, under Macmillan, we made approaches to join the single market, some seven or eight years after it had been founded, and we were rejected by de Gaulle.
In consequence, by the time we joined in 1972, many of the rules had already been decided, including those of the common agricultural policy. We have been arguing and fighting against those rules that were decided before we joined, and paying for them ever since. That is precisely what we do not want to happen on this new, extremely important occasion.
My right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) suggested that it would be good if some of us came forward with one or two positive ideas

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in the debate, apart from the grand scale of ideas. Yesterday, the Bank of England published a little book called, "Introduction of the Euro—What does it mean for business?" It was produced for the joint Confederation of British Industry and the British Chambers of Commerce workshops on EMU this month. I heartily recommend it to anyone who has not yet read it.
Given that there is likely to be a referendum on the subject at some point after the next general election, it would be sensible of the Treasury to ask the Bank of England to produce a booklet spelling out fairly the advantages and disadvantages of EMU, to be distributed to every household in the country before the next election. Only the Bank of England can do that, because it is not politically driven.
Our constituents need to know the facts. Of course, a large amount of hypothesis is still involved, because we do not know what will happen after 1999, but they should have an objective summary of the current situation produced by a respected body such as the Bank of England. I hope that my right hon. Friend the Chief Secretary, who is on the Front Bench at the moment, will take note of that and pursue the idea.
My right hon. Friend the Member for Guildford (Mr. Howell), for whose financial knowledge I have a great deal of respect, hinted that he did not think that we could join in the first wave. If we do not, there can be no certainty that we could join in the second wave after 2002. We cannot take that for granted, for the simple reason that, if we met the criteria, our application would have to be decided by qualified majority voting at ECOFIN, and there would have to be unanimity on the rate of conversion between sterling and the euro.
Despite the remarks of my right hon. Friend the Member for Kingston upon Thames, it is possible that, by that stage, the Korean and Japanese companies that are currently investing heavily in this country—the House should remember that, in recent months, Korean and Japanese investment in our manufacturing industry has run at a staggering $1 billion a month and in some months has reached £1 billion a month—might decide that, with us out of EMU but EMU working on the continent, they should put their new plant in Leipzig, Marseilles or Barcelona rather than here.
It would be perfectly understandable if some of the countries in EMU decided that it was going along very well without us and that that would be a real reason for trying to keep the British and other countries out, just as de Gaulle did in the 1960s. We cannot take for granted our ability to get in on the second wave.
That leads on to the question whether we can have a truly effective single market—we all agree that that is necessary—without a single currency throughout that single market. We are understandably pleased with the results of the devaluation of sterling a few years ago, just as the Italians are pleased with the results of the devaluation of the lira. It has had a huge improving effect on our trade figures. The converse of that is the chagrin of the French and Germans, who do not want it to happen again, because it had a bad effect on their trade figures. It is possible to argue that every member of a true single market must be within a single currency to stop competitive devaluations that fundamentally change the terms of trade.
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One does not like to say it too publicly, but the unpleasant obverse of the coin is that, whatever the formal rules, members of EMU are likely in the long run to bend the practice and observation of the rules of the single market to the disadvantage of those members of the European Union that are not in EMU. That point was made by Sir lain Valiance, the chairman of British Telecom, in the recent publication of the Philip Morris Institute, "Is the Single Market working?" He said:
"Some form of supranational monetary discipline may be necessary to realise the full benefits of the single market."
I do not think that the European Union is at a critical stage. Progress on EMU and enlargement will be made in future, but it will be slow and tricky, and there will be quite a few changes of course. Sometimes, the only ones who seem to be in a crisis on the issue are us—the Members of Parliament at Westminster—aided and abetted by a generally anti-European press.
I noted the comments of the hon. Member for North Durham (Mr. Radice). I end by quoting the conclusion of an article that appeared in The Daily Telegraph today—a sometimes anti-European paper:
"At Maastricht, John Major gained an invaluable breathing space that enables us to take part in the formation of EMU without yet deciding whether we wish to join, a negotiating position that we painfully lacked with the CAP. What we must do is use that advantage to the full. We owe it to the electorate."
It is pure chance that the author of that article is me.
6.56 pm
Mr. Denzil Davies: I thought for a fleeting moment during the debate that we had all become Euro-sceptics on the single currency—the right hon. Member for Witney (Mr. Hurd) did not know whether we should join; the Chancellor of the Exchequer did not know whether we should join; the shadow Chancellor did not know whether we should join. For a moment, I thought that perhaps we were winning the argument. Then I listened to the reasonable and rational tones of the right hon. Member for Mid-Sussex (Mr. Renton) and the uncharacteristically strident tones of my hon. Friend the Member for North Durham (Mr. Radice).
Mr. Radice: "Passionate" is the word.
Mr. Davies: Strident.
I came back to earth and realised that the Euro-coalition in the House was alive and strong. [HON. MEMBERS: "Hear, hear."] We all know what will happen after the next election: whichever party wins—I expect it to be the Labour party—the Euro-coalition in the House will use every hook and crook, every stratagem and every fear to try to get Britain over the top and into the single currency in the first wave. I have participated in debates in the House on this subject since 1972. I hear the noises of assent all round me as the Euro-coalition bellows from time to time. They are feeling a little confident this evening.
Because there is an election coming, the Government are peddling the line—especially on the so-called stability pact and the convergence criteria—that we cannot rule out the single currency because we, the Brits, have to be in there negotiating in Brussels or Dublin, or wherever it might be. We cannot really trust those foreigners, say the Government, because, if we are not there, those

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continentals will fudge the single currency. The Chancellor did not say that so much today, but that was his escape route when he made his statement of 23 November: "The Brits must be there because these Europeans will fudge it and it will be a weak currency. We, of course, want a strong currency."
If we are concerned about fudging, I ask myself, why do we not support the Germans? The poor Germans are on their own in wanting a super-strong stability pact to prevent fudging. Apparently, however, we are not supporting the Germans. Apparently we are sitting with the other fudgers—the French, the Italians, the Belgians, the Greeks and the Spanish. Apparently we are against fudging—but we are not dogmatic about it.
The Italian fudge is elegant and tasty, as one would expect. The Italians have created something that they call a Euro-tax, which is a forced loan that will be repaid after 1 January 1999 with credits against income tax bills. The Italians, I suspect, are using the fact that there will not be a stability pact on national debt, and they will convert budget deficits—to get the deficit below 3 per cent.—into a national debt, which can be above 60 per cent. after 1 January 1999 because there are no sanctions on national debt. The French are not quite so good as the Italians, but we know what the French have been doing as well.
I am not sure whether the Chancellor of the Exchequer comes to all this with clean hands, either. If one opens the Red Book these days, it is sticky all over with fudge. Of course, it is not Italian fudge, but good honest British fudge. What is the private finance initiative but a fudge to try to avoid the public sector borrowing requirement? The Treasury has been very clever about the sale of the Army's surplus property, which cannot be said to be a privatisation. If it was a privatisation, the money would not show up in the European system of accounts, and we would not be able to get borrowing down to 3 per cent. We are fudging as well.
The real fudge is not in Brussels or Dublin, but here, as the Government and the Opposition try by every means to avoid a debate on the matter until after the general election. Labour Members should not be surprised that the Tory party wants to keep down public borrowing and, indeed, is prepared ultimately to allow fines against countries that transgress.
However, some of us—perhaps there are not many of us left—are worried. We represent constituencies where the income per head is much lower than the average, even for Britain; where the unemployment rate is higher; where the percentage of families on benefits increases all the time and where fewer people bring in money from employment; and where public expenditure, sadly, is a very high percentage of the wealth and income. Frankly, those of us who still worry about these things worry that the shadow Chancellor, my right hon. Friend the Member for Dunfermline, East (Mr. Brown), is, as we saw today, as keen as the Chancellor on the stability pact and all the paraphernalia of fines and reducing borrowing below 3 per cent.
Some unkind people who have made a textual study of my right hon. Friend's speeches in the past six months might say that he would be sitting with the Germans if it came to a decision on the stability pact. But the coalition
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in the Labour party is now in agreement with the Conservative party on limiting public expenditure, and, in effect, public borrowing.
The convergence criteria and the stability pact will be paid for, and there will be a price to be paid for the fines—if they ever come—and a price to he paid for avoiding the fines by reducing public expenditure. As I have said in the House before, the price will be paid by the poor, the unemployed and the disabled, and by the gradual dismantling in Britain and western Europe of the welfare state. There was a time when one could expect growth in the economy to reduce deficits. That was a long time ago, and the central bank will not allow that any more. Herbert Hoover is alive and well. The central bank will make sure that growth will be choked to prevent unemployment from falling too rapidly.
Growth cannot help us, but of course we could increase income tax. We could pay for the convergence criteria by putting up income tax for the comfortable 40 per cent. But we cannot do that—the consensus will not allow it. My hon. Friend the Member for North Durham had a go at newspapers, and perhaps I will as well. The chattering classes who write for pseudo-radical newspapers such as The Guardian and The Observer and who live at the bottom of the think tanks that proliferate everywhere are all for the single currency, but they earn good salaries and do not want to pay for it. In the triangular tug-of-war involving the central bank, the chattering classes and the welfare state, the poor, frankly, do not stand a chance.
The chattering classes will no doubt salve their consciences by writing and reading articles about the evils of a dependency culture, and they will hide behind meaningless phrases such as "welfare to work", when there is no work. I read now that there has been a revival of social Darwinism, and no doubt it will be possible to excuse all this on the ground of biology, not economics.
My right hon. Friend the Member for Dunfermline, East, seemed a bit worried, and said that the stability pact would be agreed, but that is not how I read it, and it is not what came from the Nuremburg meeting. He hopes that a few little details and directives will be agreed, but I suspect that there will not be agreement in Dublin, that it might very well go to Amsterdam, and not just on formalities. If that is the case, my right hon. Friend will almost certainly be there to decide on the matter. I trust, and I hope, that he will decide against it. I trust that he will have the political confidence and the social conscience to do so. I trust so, but I fear not.
7.6 pm
Mr. David Heathcoat-Amory: It is of great benefit to follow the right hon. Member for Llanelli (Mr. Davies), whose record on European matters has been entirely constant and honourable, and usually right. Both he and I would agree that, in the European Union today, we see an organisation that is visibly failing. It is experiencing an unemployment crisis, and there are getting on for 20 million people out of work in the EU. It is suffering a loss of competitiveness on the world stage. That is extremely serious, and bodes very ill for the future prosperity of all the citizens of Europe. It is losing the respect of the European public.
Instead of grappling with these fundamental problems, the organs of the EU are instead pursuing the wholly irrelevant project of monetary union. The reason is that

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monetary union is not primarily an economic project, but a political one. On the continent, it is quite openly seen as the next big step towards a politically integrated Europe, with centralised powers and a federal budget. My right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) confirmed this when he drew a parallel between his vision of a single currency in Europe and the success of the dollar in the United States.
In the United States, they first achieved a federal union. It took a civil war, incidentally, in which 600,000 American soldiers died. Much later, the United States formed a currency union, and the Federal Reserve was set up only in 1914. The circumstances were favourable, as America has a tradition of labour migration, and the states share a language and a political system.
Most tellingly of all, the United States has a federal Government with federal powers and, by European standards, an enormous federal budget that acts as a stabiliser between the various regions. If we want a single currency zone, we must, and will, have a federal Government with federal powers. That is apparently seen much more clearly on the continent than on the Treasury Bench.

My criticism of advocates of monetary union is that they do not make clear the huge constitutional implications of what they propose. When challenged—an example is the right hon. Member for Dunfermline, East (Mr. Brown)—they are dismissive of the democratic issue at the heart of the debate.
Let us be clear. If we join a single European currency, we will thereby transfer decisions on monetary policy immediately and irreversibly to the European central bank in Frankfurt. We will have one representative on the governing council, and that person will be forbidden by treaty law from taking any instructions or advice from the British Government or the House. We now learn, in addition, that there is to be a stability pact to add to the bonfire of democratic controls by subjecting our borrowing levels to external control and ultimately to the judgment of the European Court of Justice, which of course has its own activist, federalist mission.
It is extraordinary that Labour Members—with a few honourable and notable exceptions—who until recently were prepared, and even proud, to call themselves socialists, are willing to accept that control of the British economy should be handed over not only to bankers but to bankers in another country who are by treaty law insulated entirely from the democratic process. Surely some vestigial principle still lurks among them: an attachment, at least, to the concept of self-government and to the notion that we should not hand over to an external authority the powers that the public give to us.
Leaving aside for a moment the constitutional debate, there are enormous economic risks in what is proposed. A national currency is not there merely to give national politicians something to adjust or devalue; it is an indispensable adjustment mechanism that allows policy to be set according to the particular requirements of the national economy.
The economies of Europe have different structures, financial markets, pension funds and trade patterns, and they respond differently to external shocks. To try to force
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them all into the same financial straitjacket with a single interest rate and a single monetary and fiscal policy would be to risk catastrophe.
We glimpsed such a catastrophe in our experience with the exchange rate mechanism. By 1992, Germany wanted higher interest rates to ease inflationary pressures, while we and many other member states wanted lower interest rates to prevent a recession, and the mechanism broke up. At least it could break up, and we could get out of it. The much-derided devaluation that followed led to the economic success and stability and to the growth and falling unemployment that we have experienced from that day to this.
In a single currency area—this is the warning—those differences and divergences would persist and be repeated. Without the migration of labour and the flexible labour markets that exist in other currency zones, such as the United States, the strains and stresses would become intolerable, and would be relieved only by huge transfers of cash from one member state to another. That was the conclusion of a study group set up by the Commission under the chairmanship of the British economist Sir Donald MacDougall. He postulated at least a quadrupling of the size of the European budget to make possible those cash transfers.
When that point is made to Ministers or to Opposition spokesmen, they simply deny that it will happen, and wish away the conclusions of the study group, because they conflict with their political desire for monetary union.
The question of direct financial cost—the cost to retailers, banks, computer systems, tax agencies and Government Departments of abolishing our currency and converting to the euro—has not yet been raised in the debate. The cost would certainly be many billions of pounds, but when I tabled a parliamentary question on the subject, I was told:
"The Government have not made any such estimates."—[Official Report, 12 November 1996; Vol. 285, c. 165.]
That is in breach of the White Paper, "Releasing Enterprise", in which it is clearly stated that compliance cost assessments are to be provided
"for every proposed regulation that could affect business."
I cannot imagine regulations that affect business more directly than the proposal to abolish our currency, but when the regulations were presented to the House for scrutiny three weeks ago, there was no cost assessment.
Leaving aside the technical requirements and the understanding between the Government and the House on the matter, I find it extraordinary that we may be committing ourselves next year to a multi-billion-pound expenditure project affecting the entire economy, yet the Treasury has no idea what it would cost.
As part of the debate that we have started today, I ask my hon. Friend the Economic Secretary, who may be winding up the debate—if I can attract her attention for a moment; if not, perhaps someone else will hear me—to respect the procedures of the House and give us the information that I have requested. That would be in line with previous Government commitments, and if we intend to spend tens of billions of pounds changing our currency, we would like at least to have the raw material and know what it will cost.
Mr. Deputy Speaker: Order. Mr. Mike Gapes.
7.16 pm
Mr. Mike Gapes: I had a conversation on Saturday with a German Member of Parliament who represents Frankfurt. He said that he would be happy if our country stayed out of a single currency, because that would mean that Frankfurt would replace London and get more of its business.
One of the problems in this debate is the incredible insularity and the feeling that we can debate the matter as though we could act independently of the world outside. If we stay out of the single currency, there will be costs, as the right hon. Member for Guildford (Mr. Howell) said. Those costs must be examined calmly. There may also be costs involved in going in, but the fact remains that if there is not a zero sum gain—costs of going in and costs of staying out—we must consider the situation calmly, logically and rationally.
The costs of staying out—in which we would be accompanied perhaps by Denmark and Sweden and definitely by Greece—would involve our political influence being reduced and a possible reduction in our economic potential. There would be speculation against our currency, potentially higher interest rates and damage to inward investment, because the Japanese and others would choose other European Union countries—perhaps Ireland, because it also uses the English language—rather than the United Kingdom, as they might prefer to invest into the single market and the currency established with it.
Staying out in 1999—in January or a few months later—may not be so bad. But, as has been said, there is no guarantee that it will be easy to get in later on. I hope that if we stay out at that time because we do not get political consent, we will recognise that our long-term interest is to be in the system. Surely it is better to face the issue at the first stage than to go into a system that we are known to have entered reluctantly and in a way that could be damaging.
If our economy meets the convergence criteria in 1998–99 and we choose to stay out, we may damage the economy in such a way that we cannot meet the criteria two or three years later. Perhaps that is what some Conservative Members want. As some of them said, they think that it is an issue of principle that we should under no circumstances be in a currency union with anyone else. I do not know whether they took that view when the British and Irish pounds were in a currency union or whether they apply it in all respects to the international economy. Do they think that the Hong Kong dollar should not be linked to the American dollar? If one believes for all time in floating exchange rates and the potential for massive movements that bear no relation to the real economy through devaluation or appreciation over short periods, one will take that view. I can understand free market Thatcherites taking that view but not why people on the left or left of centre in the Labour party or the trade union movement take it.
We believe that there is a role for state and society in the way in which our affairs are governed. The right hon. Member for Wells (Mr. Heathcoat-Amory) asked whether there were any socialists any more, which was amusing coming from him. Some of us believe that there is more to life than a free market and that the European Union has a role in minimum standards, environmental protection and other matters about which we can co-operate with our neighbours.
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If the single currency goes to a referendum, the referendum will not be about a single currency but about the position of Britain in the world and the direction on which we focus. It will be a watershed for the sort of society that we wish to live in. I say that as someone who has opposed a referendum because I do not believe that we should have them on narrow issues. But if we are to have one, fine; but let us have it early and lance the boil of Euro-scepticism. Let us get the issue out of the way once and for all so that the people of Britain can choose whether we wish to be a grumbling island off the Eurasian landmass and, though not the 53rd or 54th state of the United States, a country with an important role in the world whose potential is undermined because we have excluded ourselves from our largest markets, our closest neighbours. The political and economic costs—
Mr. Nigel Spearing: No.
Mr. Gapes: Yes. There will be costs that will damage our trading relationships if we take that course to its logical conclusion. The logic of the Euro-sceptic position is, "We don't like foreigners, especially Germans, and we do not want anything to do with them." I see that the hon. Member for Billericay (Mrs. Gorman) agrees with that.
Mrs. Gorman: It was my hon. Friend the Member for Welwyn Hatfield (Mr. Evans).
Mr. Gapes: I apologise to the hon. Lady if I have maligned her.
The positive Labour case for a single currency was put forward in the pamphlet that 14 Labour Members published in September. It is worth reading. Conservative Members have also written pamphlets: the hon. Members for Stamford and Spalding (Mr. Davies) and for South Derbyshire (Mrs. Currie) and others have written in support of a single currency from a different philosophical point of view. At least they recognise that Britain cannot say, "Stop the process, we want to opt out," because, at the end of the day, it is going to happen. There will be a single currency. The question will be whether we want to be in at the beginning, influencing the way in which it develops, whether we try and fail, as we will undoubtedly will, to sabotage it or whether we sit it out and damage our economy and the future prosperity of our people.
7.24 pm
Sir Wyn Roberts: I am bound to say that the European Union issue, symbolised by the single currency, is the biggest that has confronted the country for some time. It looms ever larger as European intentions and the choice that confronts us become clearer. Opinion in Britain is sharply divided, and that is reflected in the House. The division cuts across party boundaries, so the House has become a parade ground for statements of personal beliefs, which are often strongly held. Some of us may feel that we have a surfeit of drill sergeant-majors shouting at us from different quarters of the parade ground introducing confusion into the ranks. Be that as it may, it seems that the choice before us—certainly from this debate—is whether to become more deeply involved in the European Union and pay the political price that that entails, or to preserve such independence as we have and possibly assert it more strongly as circumstances permit.

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The ultimate determinant of our choice must be the future economic and political well-being of our people. Without political freedom, we cannot properly exercise economic self-control. Of course, we are reluctant to give that control to people outside this country and our democratic process. In these matters, I tend to follow my right hon. Friend the Member for Mid-Sussex (Mr. Renton) and take a historical approach.
Although we have lost our empire and not yet found a role, as Dean Acheson put it in his damning dictum of the early 1960s, as a people we are still imbued with the imperial spirit; we like to get our own way in the world. However, it is becoming increasingly clear that we are not getting our way in Europe. Perhaps, as my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) said, it is because we are not pressing our views hard enough.

We envisage Europe as a vast free trading bloc in which we can continue to flourish. But that is not the prime objective in the eyes of the European political elite, as Jacques Santer, the President of the Commission, made clear yet again only last week. Its main thrust is towards greater political unity. That comes from Germany and France, and Germany in particular. It seems that there is no stopping them.
Chancellor Kohl said that the Union is about war and peace in the 21st century; he may well be right. The Germans certainly distrust themselves, and with two world wars behind them I suppose that they have good reason. Perhaps they can see foresee troubles on their extensive eastern and southern frontiers and want the moral and military power of Europe behind them in resolving any difficulties that may arise. That is understandable from their point of view. But what is the British interest in all that? We have learned from our participation in two world wars that we have an interest in the preservation of peace in Europe, but historically our ability to influence developments and events in Europe is limited, especially without the backing of the United States. Any thought that we can do so independently is illusory. We are an island, not a continental power.
We also have our eyes on the rest of the world, especially those parts of it where we have traditionally exercised great influence. It is a fact of life that the most promising prospects of economic growth in the next century lie outside Europe in Asia and the emerging markets elsewhere. As a trading nation, we cannot afford to be confined and tied down by our European involvement, as will inevitably be the case. So the challenge to us now is to keep our foothold in Europe, reaping such economic advantages as we can at the least possible political cost. We certainly cannot afford to endanger that 60 per cent. of our trade which is with Europe. Nor can the European countries afford to lose their trade with us. We certainly cannot afford to lose all the foreign investment that has come here on account of our membership of the EU and the single market.
The Government have a difficult task in ensuring that our future remains unshackled and that any opt-outs that we secure are respected and not eroded. The "wait and see" description of the Government's policy is a misnomer. I believe that the Government are in there fighting for British interests, and they must continue to do
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so as vigorously as possible. It may often look like a rearguard action because of the considerable extent of our involvement to date and the way in which we have been drawn in ever closer to the European vortex which so many of us find uncomfortable.
The pledge that no irrevocable commitment to a single currency will be given without a referendum—a pledge that has been belatedly reciprocated by the Labour party—should provide sufficient reassurance. I cannot agree with my colleagues who would like the Government to commit themselves in advance to blocking out a possibility which may or may not materialise and, if it does, might profoundly affect us, whether we are in or out of the single currency and what I call its accoutrements—the central bank and so on. Our negotiators must not be sent naked into the conference chamber, to adapt a phrase that may still be familiar to some. We really must trust my right hon. Friend the Prime Minister and my right hon. and learned Friend the Chancellor, who will report to the House at every stage.
One thing seems certain. The Leader of the Opposition and new Labour are more committed to more of the European agenda than is the Conservative party. I am not talking only about the social chapter. There is a pseudo-socialist ethos to present-day Europe and my guess is that new Labour is comfortable with it. The idea that primacy should be given to Britain's interests as a trading nation does not sound quite Labour's line. It may be antipathetic to them. I believe that new Labour would willingly throw in its lot with the other European nations in the Union and hope for the best, which might well be made attractive to the mass of British electors in the short term.
We should take a long-term view of British interests. Wages and standards of living may be low in the emerging markets now, but they will not always be so. We know that those markets can develop. We must not only face up to their competition but supply those expanding markets. Just as the European Common Market beckoned us in the second half of this century, the global market is beckoning us now, as we approach the next century.
I think that I have made my position clear. I hope that we stay in Europe and safeguard British interests there. At the same time, I hope that we are not so closely bound up with Europe that we are unable to take full advantage of the burgeoning opportunities in the world outside.
We must not get so involved in the detail that we lose sight of the principles that should govern our policies. Politics and economics are inextricably intertwined in this situation and there is no clear dividing line. There is an element of give and take and our job is to ensure that the take is more substantial than the give, not just for the present—
Madam Deputy Speaker (Dame Janet Fookes): Order.
7.34 pm
Mr. David Winnick: It was reported recently that at the time of the Maastricht treaty the Prime Minister did not believe that the other countries were serious about the third stage of EMU. If that was the position, I am rather surprised. It is spelt out clearly on

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page 87 of the Maastricht treaty. The leading and founding countries of the European Union have always wanted to proceed to deeper integration. Britain has always made the mistake, whichever party happened to be in office, of underestimating the deeply held and far from secret wish of those countries, particularly France and Germany, for deeper integration. So it comes as no surprise to me that the leading countries which have signed the treaty on the third stage of EMU now wish to proceed as quickly as possible.
Nor should we work on the assumption that when those Governments argue and press for deeper integration, they are necessarily out of step with most of their electorates. I have been pleased and encouraged by the demonstrations that have occurred in a number of European countries. I do not know whether some of my hon. Friends who are very keen on the third stage of EMU believe that those protests and demonstrations—today in Spain and recently in France and Germany—against convergence and what it implies have been justified. I believe that they have been because it has meant large cuts in public expenditure and services.
Some Conservative Members argue that we should not take too seriously the convergence criteria and the rest of it. I accept that there is a good deal of fudge, but the fact remains that many public expenditure cuts have been made on the continent to meet the criteria. Hence the reason for the protests, led in almost all circumstances by trade unions.
One of the ironies of the political situation in Britain is that the sorts of policies to which I am opposed in so many respects are precisely the policies of which the Euro-sceptics in the Conservative party are usually in favour, including strict economic and fiscal discipline, taking the axe to public expenditure and continued privatisation. Conservative Members who have been critical tonight have described what they called a pseudo-socialist Europe, but such policies are hardly what I would describe as socialist or on the left. It is understandable that many of us have the deepest reservations about pursuing those policies.
One of the differences of view about deeper integration between the continental countries and Britain is that most people in Europe probably believe that it will reduce substantially the chances of another European war. That is why I said earlier that I accepted that when national Governments on the continent pressed for deeper integration, they were not necessarily out of step with their electorates. It is a view sincerely held by people. I do not believe—I want to make this clear—that EMU or anything connected with it is a deep German plot to carry out economically what they could not carry out militarily in the past two wars. That view is alien to my thinking and, I imagine, to that of almost everyone in the Labour movement.
I do not however take the view that European peace is dependent on a tightly integrated Europe. On several occasions, it has been said that stable democracies rarely go to war against each other and that is true. I cannot accept the view expressed by the hon. Member for East Lindsey (Sir P. Tapsell), who I understand was reported
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as having said, at the last meeting of the 1922 Committee, that this is another 1940. Despite all my reservations, I do not believe that this is another 1940.
Sir Peter Tapsell indicated dissent.
Mr. Winnick: The hon. Gentleman shakes his head. If he says he was reported incorrectly, I accept that entirely.
It is important to have a balanced debate and to recognise that the situation is as far removed from that of 1940 as it possibly could be. As I shall argue, there are many concerns about political and economic sovereignty, but it would be foolish to exaggerate in such a way as to make it appear that this is the same situation as we faced 56 years ago.
On the third stage of EMU, I have heard my hon. Friend the Member for North Durham (Mr. Radice), who is the chairman of the European Movement, and my hon. Friend the Member for Linlithgow (Mr. Dalyell) express their enthusiasm. Indeed, my hon. Friend the Member for Linlithgow said that he would like to go into EMU as quickly as possible.
However, I heard the same enthusiasm expressed by some of my hon. Friends and by some Conservative Members in connection with the European exchange rate mechanism. I heard the same wish on the part of the European Movement—we were told that we should not any longer be isolated and that to stay out of the ERM would be disastrous for Britain. I know what was disastrous for Britain—going into the ERM. Any recovery that we have experienced since 1992 started after we left. Of course I have such reservations, because EMU would lock us in even further than did the ERM. No one could argue that the ERM was not disastrous for Britain, although we could argue about whether that was because we went in at the wrong rate. Given that it was disastrous for Britain, why should we conclude that joining the third stage of EMU and having a fully integrated economic Europe would be to our advantage?
Whichever view we take, there are profound implications relating to the economic and political sovereignty of this country. That is why it is right and proper that, at the appropriate time, the British people should have a say. I am not generally in favour of referendums, but this issue is so serious and so profound that it is necessary to consult the British people in the same way as they were consulted in 1975. We should not work on the assumption that we know best and that we can, in the next Parliament, act on an issue of such significance for this country's future without consulting the people in some form other than a general election. That is why I am pleased that both main parties are now committed to a referendum.
I am glad that this debate is taking place. We shall continue it for a long time to come, because the issue is not settled. We are not going to join EMU in the near future, as my hon. Friend the Member for Linlithgow would like. When we do—if we do—it must be on different conditions from those laid down in the Maastricht treaty.
7.43 pm
Sir Peter Emery: I congratulate my right hon. and learned Friend the Chancellor of the Exchequer on a speech made in the face of barracking from in front

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and behind. He set out to try to make a debate and spelled out in a reasonable fashion both the pros and the cons of the problem. Hon. Members on both sides of the House should congratulate him on that effort.
In debating fashion, I turn to two of my right hon. Friends, who have now left the Chamber. My right hon. Friend the Member for Mid-Sussex (Mr. Renton) tried to remind the House that, if we did not get into the common currency in the first wave, we might not get in in a second wave. That is exactly what happened when we did not insist on signing up to the treaty of Rome—we allowed that to be signed so that it could be completed before the German and French elections, but said that we would come in soon afterwards. In fact, after two years of negotiation between 1962 and 1963, and just as everything appeared to be favourable, down came the no. It was 20 years before we became part of the Common Market.
My right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) seems to claim that every European Member of Parliament is massively in favour of a federal, unified structure of greater growth. That simply is not true. I am a member of the North Atlantic Assembly and treasurer of the parliamentary assembly of the Organisation for Security and Co-operation in Europe. Nearly twice a month, I meet Members of Parliament from all the countries of the European Community. On the whole, I find that the Germans and the French have no desire for a position whereby their economy and their fiscal and monetary policy are controlled by a central bank; they want to be able to ensure that French and German taxes are controlled by Frenchmen and Germans, just as we want to ensure that our policies are controlled by the English people.
I am concerned that a number of my hon. Friends, normally described as intelligent, if not highly intelligent, are allowing prejudice to overcome logic in this matter. Of course, there have always been a handful of Conservative Members and a handful of people in the country who have never wanted to be in Europe at all, but they have always been a very small minority. In the past, they pointed to Sweden and Switzerland and to what those countries were doing. Now, Sweden is a member of the European Union and Switzerland—the most non-aligned of all countries—has applied to join. How can it make sense that we should stand apart?
Some argue that we can align ourselves with the Commonwealth and with America, but the Commonwealth, in the old sense, no longer exists as a trading bloc. Australia and New Zealand participate massively in the Association of South-East Asian Nations and look to the far east as their market. Canada has already aligned itself with the trading bloc that includes America and Mexico. America, in many instances, looks to us as the influential player in Europe that has the greatest affinity to the United States. If we were not in Europe, playing a major part, the Americans would soon turn to Germany or some other EU member state for such a relationship. Equally, anyone who believes that inward investment from Japan and Korea would continue to come to Britain if we left is dreaming. Those countries see production in this country as the way to get their products into the European continent.
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The negotiations surrounding the common currency are massively complicated. No one knows today what the presiding conditions will be at the end of negotiations. We have some idea, but we do not know absolutely. No ordinary person with any common sense will either accept or reject a proposition or deal until he knows all the surrounding facts. For instance, our national reserves might be used to stabilise the whole European monetary position—whether or not that was to our advantage. Would that not change if we negotiated a reserve position that allowed Britain to use British reserves, when we wanted to do so and, in any necessity, for our domestic fiscal or economic position? That could easily be negotiated and I suggest that it should be.
The position if the central bank set the rate of interest within a snake, perhaps with a variation of 2 or 2.5 per cent., would be vastly different from what it would be if a single rate of interest were set, and it would allow the sort of development that we would want in the British economy. Therefore, the concept that a common currency would allow a European central bank to dominate Britain's fiscal and monetary policy need not be true. If it is, there is a different picture to paint of the euro. If we saw that investment continued to come to Britain, that, too, would alter our judgment.
I am not in favour—I would fight it as a matter of basic principle—of Britain being pushed away from our growing trade success, brought about by the conditions established by a Conservative Government. Nor am I willing to see Britain's position in the world eroded. But the first absolute fact in the argument about EMU and a common currency is that Britain will be and must be affected, whether we enter the currency or not. It is therefore essential that the Prime Minister goes to the IGC in Dublin to negotiate, with the backing of the nation, to ensure the best possible deal for Britain. Anybody who does not want the best possible deal to be negotiated for Britain should stand up and be counted.
Do we start, before the negotiations begin, by declaring unilaterally that under no regime and in no circumstances would Britain join a common currency? In two quite disparate ways, that is nonsense. Certain businesses, and commercial and tourism interests, find considerable advantage in a common currency and their opinions must hold some weight, even with the sceptical. Before we make up our minds, we need to know the facts. We need to ensure that those matters, which are imperative for Britain's interests, are tied up as legally as possible.
I appeal to the whole House to accept the obvious fact that if, at the start of the negotiations, we categorically state that our position is to undermine and contract out of a common currency, none of our friends will be interested in our arguments and views. Of course we shall sit at the negotiating table, but everyone will turn a deaf ear to our arguments and proposals. That will not be negotiating to win the best position for Britain; it will be exactly the reverse.
Some people have made the ludicrous claim that most Conservative Members support the Euro-sceptics or the Euro-sceptical position rather than the position of the Government and the Prime Minister. Those who repeat that untruth must believe in the Goebbels philosophy that, if one keeps saying something frequently enough, people will eventually believe it.

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What are the facts? Only eight weeks ago at a conference of more than 3,500 Conservatives in Bournemouth, support was given on the conference floor to the Chancellor, the Prime Minister and the Foreign Secretary without a ripple of dissent, interruption or speech in opposition. A vast standing ovation was given to the Prime Minister—[Laughter.] Some Conservatives may laugh at that, but that is how the people in the country feel. Senior members of the Conservative party, who claim to be good Conservative Members of Parliament, should realise that, if they continue as they are, they will lose the election for the Conservative party. That is what our constituents feel.
The media's calling the Prime Minister's stance a "wait and see" policy was disparaging and misleading. The Prime Minister's negotiating stance is best for Britain—
Madam Deputy Speaker: Order. I call Mr. Keith Hill.
7.53 pm
Mr. Keith Hill: This has been an excellent debate, because it has provided a platform for a number of highly reasonable and positive contributions on the single currency from hon. Members on both sides of the House. Hitherto, the so-called Euro-sceptics have dominated discussion surrounding a single currency, and few issues in modern British politics have been the subject of wilder exaggeration and distortion.
Not all the distortions have been confined to the Prime Minister's enemies and the Conservative party. I regret to say that we continue to hear from Labour Members about the myth of the £18 billion cut in public expenditure, which, it is asserted, would be forced on us to meet the 3 per cent. criterion. Ludicrous claims are made about massive rises in income tax and VAT. It is even claimed that unemployment could rise by up to a million.
None of that is true, however. The Treasury summer forecast projected a deficit of 3 per cent. in 1997–98, a figure endorsed by the International Monetary Fund. The Red Book now puts the figure at 2.5 per cent., both for the public sector borrowing requirement and for the general Government financial deficit, which is the deficit measure now adopted by the European Commission. Nothing that I have heard from my right hon. Friend the shadow Chancellor suggests a significant relaxation in that target, even if the market would permit it, which is doubtful. Are my hon. Friends who have so far stuck to the £18 billion myth so pessimistic that they believe that growth will cease under a Labour Government? I cannot believe that that is a rational or politically appropriate expectation.
The dominant myth among Conservative Euro-sceptics is different. It is that entry into a single currency will represent a terminal loss of sovereignty or, even more dramatic, an irreversible step towards creating a European super-state. In part, as Professor Joad might have said, it all depends on what one means by sovereignty. I shall say a little more about that shortly.
It is simply wrong to claim that a single currency will mean the end of the British state. Since 1921, Belgium and Luxembourg have enjoyed the benefits of a currency union without any trend towards political integration between their countries—quite the contrary, as anyone who knows anything about the history of Belgium understands. Perhaps we should learn something from those countries and their experience of a currency union. Whereas Britain stands at No. 18 in the OECD's world prosperity league, Belgium stands at No. 5 and Luxembourg tops the list.
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Let me bring the argument closer to home. For nearly 60 years, until 1978, Ireland and Britain had a de facto monetary union. Would any hon. Member seriously suggest that that led to the political integration of our countries? The idea is preposterous. It is equally preposterous to imagine that monetary union—a single currency—will in itself coerce the nations of Europe against their will into a European super-state. The facts of history speak against it.
The next fallback for Euro-sceptics is loss of economic sovereignty; yet, five days ago, two words from the chairman of the American Federal Reserve wiped £14 billion off the value of stock in the City of London. We must ask ourselves just how real is the concept of economic sovereignty in the modern world of interlocking financial markets. What genuine freedom of manoeuvre nowadays remains to a British Chancellor of the Exchequer when it comes to setting interest rates, deficits and the level of debt? Like it or not, the decisions of the Bundesbank, currently made only in the interests of Germany but backed up by the money markets, determine the main outlines of monetary policy in Britain as elsewhere in Europe.
Is it not logical, therefore, that Britain should be represented in a European central bank, exerting a direct influence on European economic and monetary policy in the British interest? Whether inside or outside EMU, Britain will have no option but to pursue the convergence criteria. The markets will give us no choice. Are we to understand that Conservative Euro-sceptics think that the markets would be wrong? Are we to understand that they are in favour of deficits over 3 per cent. and debt ratios at more than 60 per cent.? For 17 years, the Conservative party has preached the gospel of sound money. Is devaluation the new Euro-sceptic orthodoxy? If we opt out of EMU, that will be the inevitable conclusion drawn by the money markets. With equal inevitability, Britain will pay the penalty in higher interest rates and lost jobs.
The last refuge of the Euro-sceptic is the currently fashionable argument that the convergence criteria are being fudged, the stability pact will not work and, two or three years down the road, it will all end in tears. Even if that happened to be true, there is no way that Britain could escape the fallout. That in itself is a powerful argument for our remaining at the centre of the negotiations, doing our best to get it right.
Of course, putting public finances on a sound footing is a stressful exercise. We should know a little about that in Britain. Is it seriously suggested that our European partners are going through all that pain, with no intention of sticking to the criteria? Our European partners are already proving that they can reduce the deficit sharply in a short period and sustain those reductions. In 1993, Sweden's deficit stood at more than 12 per cent.; in 1996, it is just under 4 per cent. It is now likely that Sweden will meet the criteria for EMU.
It is patronising and ignorant to suggest that our European partners would sign up to EMU and not be serious about the criteria or about their commitment to fulfilling them. EMU will happen. Our European partners will make it happen, because it makes sense for their economies. It makes sense for Britain too, and I see no virtue in delaying our entry.
In explaining our case for the euro, we should not fall into the trap of exaggeration and distortion, which has characterised the Euro-sceptic approach. The benefits of

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EMU will not be huge, but they will be widespread and significant. The elimination of national currencies will be cheaper and more convenient for the tourist. The ending of transaction costs will improve the competitive position of small to medium-sized firms vis-á-vis large companies. The consumer will benefit from increased cross-border competition between firms, once all prices are quoted in the same currency. EMU will render currency speculation obsolete. That will be a special gain to British firms and to small traders in particular, whose exports and business plans have often been damaged by fluctuations affecting sterling in the post-war period.
For a country such as Britain whose currency has carried a risk premium because of our record on inflation and devaluation, there will be a permanent gain in lower interest rates. That will mean higher growth and more jobs, cheaper mortgages for British householders and cheaper finance for industry.
Those are the sensible and practical economic and financial arguments for monetary union. Sooner, I hope, rather than later, the Labour Government will hold our promised referendum on the single currency. When that day comes, I have no doubt that the common sense of the British people will give us a massive yes to the euro.
8.3 pm
Sir Peter Tapsell: To reply to the question put to me by the hon. Member for Walsall, North (Mr. Winnick), I did not suggest in a recent speech that there was any military analogy between 1996 and 1940. The point that I made was that there are rare occasions in politics when the use of the word "never" is justified. In 1940, Churchill said that Britain would never surrender. I thought that we ought to say in 1996 and 1997 that Britain would never join a single currency.
We should make that declaration not only because of the serious technical disadvantages that would flow from membership of a single European currency—I earned my living, such as it was, for 35 years in the City of London in currency and bond markets—but because the overwhelming argument against joining a single European currency is the constitutional argument.
I cannot accept that it is possible to join a single European currency without giving up a large measure of our national sovereignty, particularly because the mechanisms of the single currency that are proposed are essentially undemocratic. As many hon. Members on both sides of the House have pointed out, the proposed European central bank, which would dominate the proceedings, would not be accountable in any democratic way to any elected body.
Only three days ago, President Chirac said that he was concerned about the undemocratic nature of the European central bank and suggested that some counterbalance to it was needed. For some extraordinary reason, he seemed to think that the proposed stability pact might provide that counterbalance.
It must be remembered that a nation state depends for its continued existence on three conditions: control of its armed forces, control of its currency and control of its borders and the territory contained within them. If it loses any of those, it ceases to be a nation and becomes a
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satellite, a province or a Government in exile, such as those of many countries that were set up in London during the war.
Without control of our currency, we would lose control of our interest rates. Those would be determined by the European central bank. Britain would be particularly adversely affected by that: interest rate movements have a greater political impact in Britain than in any other country in continental Europe, because a far higher proportion of people buy their houses in Britain and there is a much smaller rented sector than in the rest of Europe. Everyone knows that the smallest movements of interest rates in Britain have a large social and political impact via mortgage rates. The idea that those decisions should pass into the hands of non-accountable foreign bankers is politically unacceptable.
What guarantee is there that the European interest rate would always be appropriate to the needs of the British economy? The hon. Member for Streatham (Mr. Hill) made that assumption. He understands such matters, but I draw different conclusions from his. I do not understand why he assumes that sterling outside the euro would necessarily be a weak currency. On the contrary, precisely because there are fears throughout Europe and among international fund managers that the euro may come into being, there has been a considerable outflow of their funds into Switzerland and Britain. Even the Germans have been transferring money into sterling for fear of the euro.
Following our experience with the exchange rate mechanism, I do not know why the hon. Member for Streatham should assume that our interest rates would necessarily be higher if we were outside the euro than if we were in it. They would, of course, vary according to the state of the British economy in relation to the state of the continental European economies.
In the period from 1990 to 1992, our interest rates would unquestionably have been lower if we had been outside the ERM. I remember clashing publicly and quite fiercely on two occasions with my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont), who was then the Chancellor of the Exchequer, when he kept saying that if we left the ERM, our interest rates would go up. I argued forcefully during that period that we should leave the ERM before we were driven out and that our interest rates would go down. I do not think that there is any certainty about those matters, but I think that it is important for us to retain effective British control of them.
It is time for the leaders of our nation, particularly the leaders of the two main political parties, to spell out clearly to the British people exactly what is their vision of the Europe of the future, and what that future holds for us. If the vision is of a Europe of independent nation states co-operating to increase trade and prosperity and combining to maintain peace and combat crime, it is a vision behind which all the British people could unite; but that vision is wholly incompatible with British membership of a single European currency, and it is grossly dishonest and insulting to the intelligence of the British electorate to pretend otherwise. A single European currency is the chosen instrument by which Chancellor Kohl plans to create a federal super-state.
I, too, frequently attend international conferences in Europe. I was in Helsinki the other day—the day on which the Finns joined the exchange rate mechanism. Everyone there, from many European countries,

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welcomed it, because they saw it as a step towards the building of a federal Europe. I have seldom met a leading politician in a continental country who was not enthusiastic about the building of a federal Europe. European politicians think that the single currency is the essential element of such a process, and that is why they attach so much importance to it.
The idea that certain absolutes should be laid down, in the form of the Maastricht economic criteria, strikes me as naive and economically illiterate. We all know that in every aspect of life, especially politics and business, the laying down of absolutes is usually very unwise. It so happens that, in this particular phase of the British economic cycle, the Maastricht criteria are consistent with the broad economic policies that any sensible British Government would now be following—we are following them with great success—but that will not always be the case for Britain, and it is certainly not the case for France or Spain now. Indeed, it was not the case for Britain in the ERM in 1991 and 1992.
The idea that one particular set of economic targets will always be appropriate for a wide variety of countries in all circumstances, at different stages of their economic and social development and at different stages in their trade cycles, is absurd. That degree of convergence is unattainable, and always will be.
Anyone reading the economic provisions of the Maastricht treaty would suppose that John Maynard Keynes had never lived. The capacity to employ variations in our country's exchange rate, interest rate and fiscal arrangements is an essential economic tool if Britain is not to be plunged into mass unemployment.
8.13 pm
Mr. Calum Macdonald: I welcomed the opening speeches of the Chancellor and shadow Chancellor. Both clearly stated their personal support for the principles of a single currency, and argued strongly for its advantages—provided, of course, that the convergence conditions were met. Both made excellent speeches, which I believe have moved our debate forward considerably.
One of the accusations levelled against the Chancellor by those sitting behind him during his speech was that much of the motivation for the drive towards a single currency was political. I do not think that we should be embarrassed about saying that the single currency is a political as well as an economic project: of course it is. A serious political debate is taking place in Europe today—but it is not between those supporting the caricature of federalism and the super-state and those supporting subsidiarity; the real debate is between nationalists and unionists.
As the Chancellor made clear, there is no federalist plot or project for Europe. What there certainly is, however, is a unionist argument within Europe. I am a unionist when it comes to Europe, for exactly the same reason that I am a unionist in the debate about the future of the United Kingdom. I oppose nationalism in Europe for exactly the same reason that I oppose it at home. That is because I believe that the peoples and nations of Europe grow stronger and are enriched when they co-operate, combine and pool their sovereignty. That is the real argument that is going on, not the absurd argument and accusations about a federal super-state. The real argument is between
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unionists—those who want the ever-closer union in Europe to which the treaty of Rome refers—and nationalists—those who believe in maintaining the maximum degree of sovereignty, and favour an abstract concept of independence for nation states.
I cannot understand those Tory Members who are staunchly unionist when it comes to the multinational Union of the United Kingdom, but somehow transform themselves into nationalists when it comes to addressing the same issues in Europe. I find that illogical, just as I find it illogical for some Opposition Members to be nationalists—Scottish nationalists, for example—in the United Kingdom, but unionists in Europe. I find those positions inconsistent.
I do not think that we should hide from the fact that there is a political argument behind the case for economic and monetary union. It is not simply a dry and bloodless argument over statistics; politics is at its heart, and those of us who have a political belief in an ever closer union should be happy and proud to declare that.
The economic arguments are also vital. Some economic issues have been identified today as obstacles in the way of monetary union. The right hon. Member for Wells (Mr. Heathcoat-Amory), for example, advanced an argument that has become quite familiar in the debate—that Europe is not what the economists call an optimal currency area. In other words, the regional differences between European countries are too great to permit their currencies to be locked together without the risk of dislocation and turmoil in those countries.
Although it is used a lot, I do not consider that a serious argument. It is obvious that none of the national currencies that currently exist in Europe occupies an optimal currency area; it is absurd to think that they do, or that they ever did. Europe's existing national currencies were not based on any rational calculation by a committee of economists: they are the product of historical and political evolution. There are huge regional differences within the existing national currency areas.
If the north of Italy were a separate country—as some northern separatists would like it to be—it would be the richest country in Europe; yet that zone of growth in northern Italy shares the lira with regions such as Calabria and Sicily, which are notorious for being among the most stagnant and underdeveloped in Europe. Likewise, no one can pretend that the highlands and islands in Scotland and the south-east of England share an optimal currency area—yet they share the pound, and both are affected by the decisions of the Chancellor and the Bank of England.
Of course there will be regional differences within the currency area of the new euro, but there are equally great differences within the existing nation states in terms of economic competitiveness, growth and unemployment. We find all those differences in the existing national currency areas. Just as the pound and the lira must respond to the different economic conditions and prospects in Britain and Italy respectively, so the new euro will have to respond to regional differences in the countries that sign up to the new single currency.
There will be one absolutely vital advantage: unlike the Bank of England which, as far as I know, has no voice representing the interests of the highlands and islands, the new European central bank will have representatives from all the nations that sign up to the new euro. Its decisions will therefore be properly representative of all the

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conditions across the currency area and will not be dominated by a single economic centre, whether it be London or Frankfurt.
Another argument commonly used against monetary union is that Europe is increasingly stagnant and uncompetitive economically and that such stagnation is made worse by the need to deflate European economies in order to meet the single currency criteria on inflation and borrowing. It is astonishing how widely that pessimistic and gloomy view of Europe has spread beyond its natural home on the Tory Back Benches and into the media. However, if we examine the statistics, we see that the reverse is true.
If we take the European Union as a whole and take its currencies as a single currency, we find that last year the European Union enjoyed growth of 2.5 per cent., that European Union inflation was below 3 per cent. and that it enjoyed a trade surplus of $145 billion. Indeed, were it not for the UK, the trade surplus would have been even greater. Europe has had a trade deficit in only three of the past 15 years.
I believe that that record, in terms of trade, competitiveness, growth and productivity, compares favourably with that of the United States, for example, which is often put forward by Euro-sceptics as a model to which we should be aspiring. They are the real facts that the Euro-sceptics and Euro-pessimists have consistently failed to address. I believe that it is in Europe's interest to form a single currency, provided that the convergence criteria can be met, and that it is in Britain's interest to join that single currency. When the Labour Government come to make their judgment in two years' time, I am confident that—provided the convergence criteria are met—they will reach the same conclusion.
8.22 pm
Mrs. Edwina Currie: I am delighted to be called relatively early in this two-day debate and put on record my pleasure in the fact that we are having this debate. It is about time that the importance of European issues was recognised by the business managers in the House. It took a lot of effort to get a two-day debate, and I hope the fact that nearly 100 Members have asked to be called to speak is taken into account when such matters are next discussed. Indeed, I hope that we are setting a precedent and that future European Council meetings are preceded—preferably in good time—by a two-day debate in the House, which will give far more of us an opportunity to be called.
The Father of the House, who spoke earlier, was absolutely right. It is about time that members of our Front-Bench team spoke far more positively about Europe. What worries me is that by not doing so, Cabinet members and members of important Ministries and Departments such as the Department of Trade and Industry and the Treasury are making a rod for their own backs or, indeed, for our backs. Where no enthusiasm is expressed about the European Union and its developments, doubt will tend to creep in; and if no information is made available, even from the Government, about any proposals—their complexity and their advantages and disadvantages—anxiety takes its place. Doubt and anxiety are now the prevailing emotions that pervade much of the discussion in the country at large.
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I should like to hear from every member of the Cabinet the same type of robust speech in defence of Europe that we have heard from the Chancellor today and, indeed, in the past few weeks. Would it not be wonderful if the Home Secretary spoke in favour of the European Court of Justice? Would it not be absolutely terrific if the Secretary of State for Social Security made positive suggestions as to how the unfunded pension liabilities of our colleagues overseas might be dealt with, and if he made available to them details of our experience in a friendly and constructive tone? We would gain a tremendous amount in this country and overseas if we adopted that approach.
In particular, I should like to hear far more Conservative Members and Ministers talk about how we gain from membership of the European Union. I should like to hear the same from Opposition Front Benchers. In the next few weeks, as we go into the general election, I hope that the Opposition do not start to back off; indeed, I look to one or two Labour colleagues who I see nodding at me to ensure that it does not happen.
Membership of the European Union is especially relevant to my constituency. The unemployment rate in South Derbyshire is 4.5 per cent. That must be one of the lowest rates in any industrial area in Europe, perhaps anywhere on the entire continent. It is partly due to the advent of Toyota, which has brought the largest inward investment that Europe has ever seen. In my area, it means jobs and exports. In fact, the United Kingdom has had the lion's share of inward investment to Europe from outside, and we ought to make it absolutely clear why that is so.
What we have tended to hear from the Government is that we have gained that inward investment because the UK is different from the rest of Europe. I should like to hear them say that it is because the UK is a member of the European Union and that, were we not, Toyota would not have given us a second glance—nor would most of the other overseas companies that have invested so heavily in us and are still doing so. We must make it clear that it is because we are a member of the European Union that these companies come to us. We must never let anyone in government, or out of it, forget that.
I am absolutely certain that Toyota did not come here because of a flexible exchange rate or because we were in or out of the exchange rate mechanism. Such considerations are not part of its planning. Much of our current economic strength is due not to the fact that we are in or out of the ERM but to the inward investment that has brought not only money but skills, management, jobs and imagination and the exports which it generates and which help to improve our situation.
As for the single currency—
Mr. David Shaw: Will my hon. Friend give way?
Mrs. Currie: I hope that my hon. Friend will forgive me, but there is not time.
As for the single currency, I am convinced that it will happen. From what I see on the continent, people are planning for it far more vigorously than we are. I am also convinced that it will work. I sometimes hear colleagues talk about foreigners as if they were all stupid. I have to say that most are not as stupid as some Members of this House. We ought to take into account the fact that they are planning carefully for what is going to happen in a couple of years' time.

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My concern is that a single currency might work too well. I fear that if a group of extremely strong countries with very high levels of foreign exchange reserves—Germany's foreign exchange reserves, for example, are twice as high as the UK's, and ours are tending to fall rather than rise—got together in a currency union, they would have a very strong currency indeed. Colleagues in the Bundesbank are quite mistaken if they fear that the single currency will be a weak currency. As I have said, I fear, and I believe that they should fear, that it will be a very strong currency, stronger even than the deutschmark. That would be rather worrying, given the lack of competitiveness which is a problem in much of Europe.
People who do not want monetary union—I refer especially to Conservatives—should make it absolutely clear why they do not want it. In all the kerfuffle about dominance by Germany and in all the talk about democracy and the nation state, they fail to admit, and are shy of coming to grips with, the fact that the one policy option that would disappear were we to adopt the euro would be the option to devalue. It is an option which we have used extensively during my lifetime and which, I believe, we should abandon.
Devaluation means fiddling with our currency. At the least opportunity, or under the least pressure, Tory and Labour Governments have tended to debase our currency. The net result is that my constituents work just as hard as they did 10 years ago—indeed, they work with a higher percentage of capital investment than they did 10 years ago—but when they go abroad their precious sterling buys less than it did 10 years ago. Even though our currency has appreciated in recent weeks, it still costs them more to live in this country, because interest rates are increasing. Our interest rates are twice those of countries which it is widely believed will join the euro, and where devaluation is not a policy.
If the Government move any further to rule out our joining the single currency in the next Parliament or at any future point, they will have a problem with members of the Conservative party such as me. I have been a member for 30 years, but if the Government were to decide to shift from a policy of wait and see, I could not be a candidate at the next election. I defend the policy of wait and see: it is entirely sensible, as we do not yet know how the currency will work and which countries will join. It is right that, as we approach the election, we should say that, until we have more information, it would be unwise to make a decision.
We should be a core nation of the European Union. This nation will pay a great price if we do not join the single currency, provided that it is well run. As my right hon. Friend the Member for Mid-Sussex (Mr. Renton) said, the option is open to us now, but it may not be open to us when the single currency is in existence. Once it has been created, the option may be removed. We had the option to join the Common Market in the first place, but we refused and were then denied entry for 18 years. We should take that very seriously.
I say to my right hon. and hon. Friends on the Front Bench, "Please, this far and no further. Don't budge any further towards the Euro-sceptics. You won't win a single vote, and you will not do this party, this Government or this country any good by shifting." If the Government shift any further, this lady at least will not be fighting in South Derbyshire. When so many jobs depend on us being at the heart of Europe in the future, I cannot explain to
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my constituents why the Government have become Euro-sceptic. That is not the way forward, and it is not a view that I can accept.
8.31 pm
Mr. Stuart Randall: I endorse the point made by the hon. Member for South Derbyshire (Mrs. Currie) about the two-day debate. A debate on the pros and cons of EMU, the stability pact and such matters is welcome and long overdue.
I support the point made by my hon. Friend the Member for North Durham (Mr. Radice) about the way in which the debate on Europe has been conducted so far. The xenophobia and nationalism that has come through has brought Parliament and this country into disrepute. We can never support such behaviour. I hope that from now on debates will be conducted better than they have been.
I want this country to join the single currency on 1 January 1999. I believe that the benefits far outweigh the disadvantages. The single currency is unstoppable: it is bound to happen. The momentum behind it is immense.
The system must operate successfully. The euro must be a hard currency. We do not want a currency that is susceptible to speculation. All the member states that participate must have good monetary and economic discipline. The stability pact is not only desirable but essential to ensure that each member state acts responsibly, so that the single currency works successfully.
Both the major parties are in a wait-and-see situation. Some of the negotiations on the stability pact are still uncertain. They may argue that it is necessary to wait and see, but the Chancellor told us that the discussions in ECOFIN have gone far beyond what I imagined, and the whole package for EMU and a single currency seems to have already been tied up.
It is extraordinary that we have not yet debated the advantages and disadvantages of a single currency. I should like to use the few minutes available to me to list some of them, so that they are on the record. The obvious advantage is that traders and tourists would not have to change currencies. Currently, that equivalent to a trade tax amounts to about £3 billion per annum. A single currency would allow us to improve the profits of small businesses in particular. The consequence of a single currency would be a boost in trade between Britain and the other countries of the European Union.
Any business—especially a small business—needs stable exchange rates. That is an important requirement. Businesses can keep their costs under control, invest in the best technology and equipment and employ skilled and educated people, but a nasty fluctuation in the exchange rate can wipe out their profits, and possibly the businesses. I see hon. Members nodding in agreement, who, like me, have run businesses. It is a swamping factor. In the 1980s, under the Thatcher Government, we had huge rises in the value of sterling, which caused havoc for many small traders.
When companies submit bids for competitive tenders, they have to allow for such fluctuations. Their bids become less competitive because of the need to guarantee their business against fluctuations. When companies lose contracts, they lose jobs. The great advantage of a single currency is that companies are not susceptible to speculation.

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What would be the advantages for a small company in west Hull, which is near the Dutch coast? There is a North sea ferry across the channel. I would like such a small business in my constituency to be able to trade as easily with a company in Rotterdam as it does with a company in Leeds or Manchester. It would then be able to exploit the huge and exciting single market. That would not only boost the profits and business opportunities of that company in Hull, but create many jobs in my constituency.
If we had a single currency, we would be able to open up the single market, which has been extraordinarily successful. We want to take advantage of the single market, but we can do that only when we have a single currency.
My hon. Friend the Member for Streatham (Mr. Hill), who is not present at the moment, made a valid point about prices. Groups of pensioners go to Spain every winter for the sunshine and warm weather. The prices in the shops are in pesetas, so they do not know whether a product is cheaper or more expensive than it is at home. They need to know what the current rates are, and they need a calculator to work it out. With a single currency, they would be able to determine whether the prices in Spain were good or bad. That would lead to competition, and would bring great benefits to consumers. Economic and monetary union would have the great advantage of bringing prices down.
Another important benefit of the euro would be lower interest rates. British long-term rates are estimated to be about 1.5 per cent. greater than the rates in Germany and France, because the markets believe that the British economy is susceptible to higher inflation. Therefore, countries using the euro will be seen to be a lower risk, so we can expect lower interest rates.
For too long, Britain has been bedevilled by a bust-boom economy, and our competitors have been able to enjoy appreciably lower interest rates and lower inflation than ourselves. They have also been able to sustain those lower rates. With the European central bank, we can build on such experience in our competitor countries in the EU. The European central bank will provide a great opportunity for a euro zone, by ensuring that we can perform as well as our competitors. As a consequence, businesses will be able to make long-term investments without worrying about huge fluctuations in interest rates, and that will lead to greater investment.
Opting out of the single currency will leave us isolated. Experts to whom I have spoken have said that Germany and France will join by 1999 and that Benelux, Austria and Ireland will all join, leaving Britain, apart from Denmark, isolated. We would incur substantial costs, in terms of both lost investment and higher interest rates, if we were not part of the euro. Therefore, I appeal to all hon. Members to push for our membership of the euro by 1999.
8.41 pm
Mr. William Cash: A joke going around Westminster at present suggests that the arguments of the Euro-realists somehow undermine the national interest. As I mentioned to the Prime Minister the other day, I hope that we can all keep a sense of humour about this matter.
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It is important and serious, but I hope that we can keep a sense of humour and remain even-tempered. As I said last year at the time of the leadership election, it is important that we should talk to one another rather than at one another.
At the heart of the fudges within fudges and the arguments that we have heard so often today there is the question of the Maastricht treaty itself. That is why we are in such incredible difficulty and why it is now so difficult for many people who subscribed to it and whipped it through to admit that it went wrong. They now face the consequences of what was decided at that time.
The problem was that we said that we would never use our veto to prevent the other member states going ahead. Therefore, as I said in a paper that I was asked to write for the Conservative party's manifesto committee in 1991, we put ourselves on the outer tier of a two-tier Europe, where we would be marginalised, lose influence and be dominated by other countries, including Germany.
I am quite prepared to say that at that time I was simply trying to analyse or predict what might happen. I thought that I was right. But we now have the concrete evidence to demonstrate the veracity of the arguments that were presented during the Maastricht debates, in which, with hindsight, many people today would have liked to take part.
When we consider the exchange rate mechanism and its effect on the British economy, the riots and the disorder in other parts of the continent and the difficulty—I would say impossibility—of convergence, one is bound to ask whether that artificial construction is not based on something that could be described as an economical and political lie.
It is impossible to achieve the criteria because the convergence is impossible. Therefore, within the fudge within a fudge that we are now experiencing, we are being drawn deeper into a quagmire simply because of the lack of the realisation and acceptance that this is not merely a question of assertion, but a question of evidence. Furthermore, it is a question of principle.
In the Select Committee on European Legislation in February this year, I put it to the Foreign Secretary that economic and monetary union is surely a matter of principle. He replied that he did not follow my point. Many British people would be extremely surprised to hear that. It is a matter of principle on which we must sustain the national interest.
The national interest is undermined by our refusal to accept that the consequences of the single currency, the movement towards political union—which is infinitely more important than these artificial arguments dancing on the head of a pin about fudges within fudges and whether we shall be able to achieve the criteria—are ultimately about our democracy.
It is a great tribute to the House that this debate is taking place at all. It was precisely because, following the suggestion of the Select Committee on European Legislation, there was a genuine coalition, in the national interest, of people who refused to accept that there should not be a debate on the stability pact. that we have had this debate. Interestingly—I pay tribute to them—that coalition was made up of federalists and anti-federalists; people from all sides of all parties who joined together. We proved the point that our democracy in the national interest is at the heart of the reason why we are taking the position that we do on this European question.

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Another point connected with that is that in Europe the stability pact has, as a result of this victory for the House of Commons, been restrained, if not stopped—in other words, vetoed by the House of Commons. Mr. Chirac may now be beginning to Ilex his muscles on the stability pact, precisely because he knows that, with the scrutiny reserve under the resolution of 1990, the stability pact has been put on hold. We were told last Thursday by the eminently wise Leader of the House that the matter will be shunted forward possibly, perhaps probably, to Amsterdam next year. The bottom line is that the stability pact has been put on hold with the opportunity for us to examine this matter by virtue of a democratic decision taken by the House.
The intergovernmental conference in Dublin will have to consider the questions of defence and foreign policy and their dreadful implications, on which I am sure that the Government will take a tough line, as I hope they will on the 48-hour week and on quota hopping. But given the importance of the single currency issue and its direct relationship with Britain's ability to govern itself, it is essential that the matter is properly discussed at the intergovernmental conference. In an intervention on my right hon. and learned Friend the Chancellor of the Exchequer, I made the point that it is all very well talking about negotiations at the table, which was the basis on which our party conference gave him and my right hon. and learned Friend Foreign Secretary a standing ovation, hut, as the transcript of the Prime Minister's "On the Record" interview on Sunday clearly shows, they did not explain that, in this context, being at the table means the preparations in the European Monetary Institute, which are determined by qualified majority vote. That is the difference.
All the suggestions, which permeate the interview, that somehow or other we can veto and stop the arrangements, are simply not accurate. We are not properly negotiating the question of a single currency. The issue is fundamentally being dealt with in the European Monetary Institute, which is the preparatory stage and which, al: the same time, does not prevent us from being able to extricate ourselves from the mess that the Maastricht treaty put us in.
It is no good people saying that the Euro-realists, the Euro-sceptics or even—if they care to call us this—the Europhobes are marginalising us and putting us on the sidelines, when it was the protocol in the third stage of the Maastricht treaty which said that, legally, we would never prevent the other member states from going ahead, which effectively allowed the surge of federalism to drive forward. That is precisely where we are now.
It is of the greatest concern that the "On the Record" interview does not seem to deal with the fundamental question that we should be considering in relation to where we are going on monetary union as a whole. My right hon. and learned Friend the Chancellor said, I think—he is here now, so I have an opportunity to test this—that about 70 per cent. were in favour of a single currency. [Interruption.] Perhaps I have got it wrong. My right hon. and learned Friend will no doubt correct me.
Mr. Kenneth Clarke: I think that about 70 per cent.—and I confess that I was speaking from memory—say that they are in favour of keeping the option open.
Mr. Cash: If, to put it another way—
Madam Deputy Speaker: Order. I am afraid that the 10 minutes are up.
8.52 pm
Mr. Denis MacShane: I have been in the House only a short time—not yet three years—but tonight has been a remarkable occasion because, since I entered the House, to be openly pro-European in Westminster meant feeling very much in a minority. [Interruption.] I meant in SW1, not in the House of Commons. I do not know what the House's view is, but in SW1, on television, Europhobes pant against Europe and in my newspapers, most of the pundits rant against it. I do not even quite know what is the line of my own preferred paper, The Guardian, on Europe.
Everyone can be in favour of some sludgy Europe, but when core decisions have to be taken—and in all honesty the only one that faces Britain in the next few years will be the next stage of European construction, which will involve economic and monetary union—even many of the so-called pro-Europeans tend to fade away into oblivion or find all the reasons why they are against taking a tough decision.
That is a hard decision. The decision was hard in 1950 when we did not go into the Schumann plan. It was hard in 1957 when we scorned the treaty of Rome. It was hard perhaps in 1962 when General de Gaulle was willing to make a deal with Harold Macmillan, provided that Mr. Macmillan distanced himself somewhat from subordination to the United States. Mr. Macmillan said no. That may have been the correct decision at the time, but the hard decision was fudged.
When finally the decision was taken in the early 1970s, it was massively endorsed in 1975 at the referendum. A set of interesting opinion polls were taken in the early 1980s when the British people, by three to one, said that they wanted to withdraw from Europe, let alone he part of a single currency. Withdrawal was the policy offered to the British electorate by my party in 1983 and the opposite policy was offered by the Conservative party—fat lot of good it did us.
This has been an interesting debate because, for the first time perhaps, the House of Commons—and I think probably the majority of Members reflect this—is saying no to the Europhobes, to the pundits and to the foreign press proprietors, and yes to the fact that the British people's interests lie in being in Europe and—if it is in our interests, as I believe it is—in playing a full part in the next construction of Europe.
I pay tribute to the Chancellor of the Exchequer because, apart from some rather jejune, boilerplate, anti-Labour stuff at the end of his speech, he offered a lead. He discussed in an adult and mature way the technical problems, the economic difficulties and the issues that are at stake.
I am looking forward to the winding-up speech of the Budget Master General, or whatever his new title is, because, in his interesting exchange with the shadow Chancellor, he did not deny that he said on television that he is a Euro-sceptic. A Euro-sceptic on the Conservative Benches means someone who is hostile to Europe, not someone who is sceptical about aspects of Europe—all of us are. It means someone who is in the Euro-sceptic and

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Europhobe camps. When he rises to his feet, he may dissemble—I think that that is the new parliamentary verb for facing both ways at once—but I want the Budget Master General to tell us whether he stands by his Chancellor, or whether he is going to run with what appears to be the majority of his party.
Sir Leon Brittan made the point passionately this week in his semaphored intervention from Singapore on Radio 4's "Today" programme. In effect, down on his knees, the former Home Secretary was saying to his party, "Grow up and get real because Britain's standing around the world"—forget Europe—"is declining as this broken-backed Government have to rely on one man—the Chancellor—to tell the truth about our future in Europe."
I found some of the Chancellor's remarks about the details of his negotiations most interesting because, in effect, we are seeing the tragedy of this once great party. It now has to speak a double language: one language negotiating the patriotic interests of Britain with our partners in Europe and another for The Daily Telegraph and the Daily Mail, in which the inducement of saying no to the single currency and no to Europe has to be offered to keep the rebellious troops in their place. I really would like a clear answer from the Europhobes.
Yesterday, I discussed the issue on television with the right hon. Member for Wells (Mr. Heathcoat-Amory), who had the courage to resign from the Government because of his opposition to the single currency. He was asked whether he was against the single currency on constitutional or sovereignty grounds. He replied that he could not decide what Parliament would do in five or 10 years' time. So, are we talking about a matter of sovereignty or a calendar?
Let the anti-Europeans make their position clear. There are two or three of them in the Labour party. They have given long and distinguished service to our party and our country and, sadly—I think that is the appropriate adverb—they will be retiring at the next election. They will be replaced by Labour party candidates who are sceptical about much of what happens in Europe, but profoundly believe that Britain's place is in Europe, that we have to work with our European partners and that the best interest of our nation is served not by standing outside, but by playing a full part in the next stage of European construction. In contrast, all the incoming Conservative candidates are anti-European.
This is not just a matter of the single currency; it concerns the future of Britain. Our country has at its essence the need to play a full part in the new global economy. If we are outside Europe, we shall not be new merchant venturers, but isolated also-rans. All the surveys suggest that inward investment is wholly predicated on the fact that Britain is a member of the European Union. If we withdraw from the European Union—as half the Conservative party would have us do—that inward investment will dry up and factories in Derbyshire, Sunderland and elsewhere will be relocated to elsewhere in the world's greatest single market.
I have long been in favour of a referendum. I do not want to lance the boil, as my hon. Friend the Member for Ilford, South (Mr. Gapes) said; I want to drain the poison that has destroyed the ability of the House—and I fear that of the Government—to take the best decision in the
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interests of our people. When that referendum comes, let us be quite clear that it will be on the future of Britain and whether we are in or out of the European Union. I have no fear of that question being put to the British people and I am quite confident about the result.
I say that from a position on the left. The Conservatives drove unemployment to unprecedented heights and have reduced it through devaluation, debauching our currency and driving wages down so far that people cannot earn enough even to afford to pay income tax. Until we learn some of the lessons not of Germany, which had to accommodate reunification, which is distorting its economy, or France, which needs labour market reform—
Mr. Deputy Speaker (Sir Geoffrey Lofthouse): Order. Time is up.
9.2 pm
Mr. James Couchman: I am delighted to speak in this evening's debate. As the hon. Member for North Durham (Mr. Radice) suggested, I am one of those who signed the European Movement policy statement that appeared in The Times on Monday. That statement accorded with much of the Government's position on many of the major issues that now confront the European Union.
I am no more a Euro-federalist than the great majority of Conservatives in the House or the country, but I wish to see the United Kingdom play a full role in a union of sovereign nation states. By full role, I mean that we should cease to play Eeyore at every possible opportunity. I have no doubt that the unhelpful policies adopted by the EU over bovine spongiform encephalopathy have been backed much more enthusiastically by some countries that are aghast at our frequently obstructive attitude.
Today's debate is principally about the economic issues facing the EU, particularly the single currency. I am pleased that we have started to discuss the practicalities of a single currency rather than simply indulging in polemics.
Yesterday, I and a number of right hon. and hon. Members on both sides of the House enjoyed a working lunch with senior members of the retail industry. They expressed their aspirations and fears about the changeover to a single currency should the United Kingdom decide to join such a currency. They did not express a view either way as to whether we should or should not join, but they identified the possible difficulties of training staff, educating customers and reprogramming cash-handling equipment. They pointed out the considerable advantages of a "big bang" approach—a direct changeover rather than running two currencies in parallel.
The retailers pointed out how unsuitable a date 1 January would be, as it falls in the middle of their busiest time of year. Mid-February or mid-October would be much better, they said. They asked for national and international consultation, and I trust that that will happen, for the retail industry will need at least three years' lead-in time to make a smooth transition to a single currency. They were particularly worried about over-prescriptive arrangements for pricing, especially unit pricing. Our retail friends were, however, able to appreciate the advantages that the low on-costs in Britain would have on much more transparent pricing across Europe. Lower prices in Britain could significantly benefit British retailers.

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The discussion with people who will have to adapt their businesses to the introduction of a single currency if—or more likely, when—it occurs was very useful and practical. It was also a good example of why my right hon. Friend the Prime Minister has been absolutely right to keep the British option open to the point where the whole scheme and its regulations and mechanisms will be negotiated and agreed. The Maastricht opt-out negotiated by my right hon. Friends the Prime Minister and the Member for Kingston upon Thames (Mr. Lamont) was indeed precious.
I am no great economist and do not pretend to be able to foresee the macro-economic consequences of a single currency, but I am not alone. In June, I attended a Confederation of British Industry conference on business in Europe. Some of the great panjandrums of British industry were there, telling the Government that they had to give a great lead to our push for European business.
Somewhat imprudently I asked those great leaders for a lead from industry on whether the United Kingdom should join a single currency in the first wave. There was a nervous coughing and spluttering into their sleeves by the chairmen of BA—British Airways—BP, BT, and B almost everything else, but answer came there none, for there is no certainty even among the major companies represented in the CBI about whether we should join.
No one knows what impact our participation—or perhaps our non-participation—in the first wave will have on the City, which is Europe's and possibly the world's pre-eminent financial centre. It would indeed be surprising if some of EMU's fiercest critics were not to be found in the ranks of foreign exchange dealers—self-interest is probably viewed as a quality in those circles.
What I do know is that if the Government had closed the possibility of the UK joining a single currency before May 2002—the probable end of the next Parliament—and a single currency introduced by our partners in our absence had a seriously deleterious effect on the City's complex but vital markets, the British Government would have been grossly negligent in their duty to do what is best for Britain.
There is great uncertainty about the impact on various aspects of our economy of a properly constituted single currency scheme. Will it lead to substantial employment migration from the poor south in Europe to the prosperous north? With falling unemployment in the UK at present and rising unemployment elsewhere, such migration could and may be taking place now—hence blond, blue-eyed Finnish nurses in Hackney. Employment migration certainly takes place in the United States from time to time.
Resource transfer from northern to southern Europe, or in future to new entrant countries in eastern Europe, might be necessary to turn back that tide, but employment and resource adjustments are more a feature of the single market than the prospect of a single currency. They will happen whether the UK joins a single currency or not. EMU would not limit Parliament's powers to tax and spend, although it would prevent future Governments from avoiding the consequences of their decisions. We could choose to be a low-tax, low-spending economy or a high-tax, high-spending economy. We could not be a high-spending, low-tax economy and cover the deficit by borrowing or monetisation—but only an irresponsible Government would want to do that.
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Britain has been remarkably successful in attracting investment into Europe from outside Europe, as several of my hon. Friends have said, and 40 per cent. of American and Japanese investment comes here. The European operations of three Japanese second or third-line companies are located in my constituency, partly for Gillingham's unique connections with Japan but mainly for the reasons why so much inward investment comes to the UK: the English language, benign company and individual tax regimes, a flexible and relatively well-trained work force, low social on-costs for labour, and so on. Above all, as my hon. Friend the Member for South Derbyshire (Mrs. Currie) said, companies from the US, Japan and other major far eastern countries set up their European operations here because we are in Europe. Those of my hon. Friends who advocate staying clear of any closer links with Europe, whether economic or political, and furthermore advocate a progressive disengagement from Europe, neglect to tell us what might happen to the hundreds of thousands of jobs already created here by inward investment or to such investment in the future, if their proposals were adopted.
For my part, I am convinced that it remains the duty of the Government to fight for Britain's interests in a Europe to which it fully contributes; to exercise our privileged position of opt-out or opt-in to a single currency at the proper moment; and to retain the possibility of reconsideration at a later date if we decide not to join in the first wave. It is a wise politician who never says never. The United Kingdom should have learnt the lesson of Messina. Joining someone else's club without the opportunity to contribute to the rule book always means being a second-class member.
9.10 pm
Mr. Stephen Timms: The hon. Member for Gillingham (Mr. Couchman) made an interesting speech, but the question that I wish to raise at the conclusion of today's debate is what sort of nation we want Britain to be in the future. Those in the Conservative party who attack the Prime Minister's policy frequently tell us what they do not want our future to be. They do not want us to be part of a federal European super-state ruled from Brussels, and we can all agree with that, but what they do not tell us is what sort of nation they do want us to be. Like it or not, Europe and the world are changing and we must change as well. We cannot stay as we are because our role in the world will change and the question is what we want that change to be. Conservative Members sometimes give the impression not only that they want our role to stay as it is now, but that they want it to return to what it was 100 years ago. That will not happen. We must be realistic in making a shrewd assessment of the future role that Britain can play in the world.
Let us suppose that we stay out of European monetary union for good. Most European countries will join it and it will extend to much of Europe the success that the deutschmark has enjoyed in Germany since the war, with low inflation and low interest rates. The euro will stand alongside the dollar and the yen as one of the world's three main currencies.
If we stand outside and stick with the pound, what will be our place in the world? Some 20 minutes away through the channel tunnel, one of the world's strongest currencies will be operating. More than half our international trade

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will be with the euro zone. We will have higher inflation, as we do now, and given the tradition of devaluation that has continued to flourish since 1979, we will have higher interest rates, as we also do now. Is not the reality that we would be locked into permanent economic weakness?
We have a poor record on investment, which is at the heart of our current economic weakness, and the weakness of our currency against the whole euro zone will simply make matters worse. It is true that we have captured a large share of the investment coming from outside Europe, but the benefits of that are dwarfed by the problems of the small investment in the United Kingdom by ourselves, so that our total level of investment is much smaller than elsewhere and much less than it should be. Permanently higher interest rates in the UK than in the whole euro zone will simply make matters worse.
It is not only our economic prospects that will be so gloomy if we stay for ever outside monetary union. We need to square up to the much wider question of our role in the world and, indeed, our sovereignty. Given economic and monetary union, Europe's main economic decisions will be made in Frankfurt. We will inevitably follow whatever is decided there because our trade is so dominated by countries in the euro zone. If we are not in the monetary union, we will have no say whatever in those decisions, but we will be profoundly affected by them. Surely the sovereignty argument, which is frequently articulated by Conservative Members, pushes us to be inside monetary union rather than outside it, because at least that way we will have a say in the most important decisions about our economy which, as I say, will be made in Frankfurt whether we are there or not.
I submit that being a committed member of a strong European Union—pooling our sovereignty in some areas in order to exercise our influence through the European Union and seeking to win the arguments about how Europe should be run—presents an attractive future for Britain. That approach would retain for Britain in the new millennium the influence that we have enjoyed in the latter part of this one, but in a modern form that can prosper in the new conditions of the world economy.
That will work only if the governing party ceases to be rent asunder by people arguing that we should not be involved. As the Prime Minister recognised on Sunday and again yesterday, he cannot win the arguments in Europe with the current shambles at home. Given a consensus in the governing party, participation in Europe—including in monetary union—holds out an attractive future role for our nation consistent with our history and with the reality of our current strength as the home of just 0.5 per cent. of the world's population.
What sort of future role do those who want us to stay outside monetary union or to leave the European Union want Britain to have? We know that they do not want Britain to be in a federal super-state, but what do they want? Some, undoubtedly, want Britannia to start ruling the waves again. My suspicion is that their position is based on an unrealistic view of Britain's place in the world. If that is not what they aspire to, what do they aspire to?
The realistic alternative to membership of economic and monetary union is for Britain to be the Canada of Europe. I am not denigrating that option. We need to have
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a cool debate about the realistic possible roles for Britain. Canada has its own currency, but its economy is dominated by the huge and powerful United States economy to the south. It is a great country. Those who argue against economic and monetary union may well want Britain to be the Canada of Europe, but Canada is a bit player on the world stage. What happens in Canada does not set the pace for the rest of the world. Music, fashion and sport from Canada do not set the world ablaze; music, fashion and sport from Britain do. I do not think that the British people want to be consigned to that role. We have much more to offer and much more to gain.
If we allow ourselves to keep our own weak currency and our economy is dominated, as it will be, by the strong European currency over which we have no influence, damage will be done not just to our economy but to our role in the world. By exercising influence through Europe, we can retain a role consistent with reality and with our history.
Playing a full part in Europe also holds out the prospect of a decent future for all our people, not of large numbers sliding into ever greater disadvantage compared with the few. As my hon. Friend the Member for Linlithgow (Mr. Dalyell) said earlier, that is why the trade union movement supports monetary union. It was striking that of all the major institutions to give evidence on monetary union to the Treasury Select Committee, the Trades Union Congress was the most supportive of the project.
It may not be possible for us to join monetary union at the outset, but we should not fool ourselves that sitting around and waiting to see how it works out before deciding whether to join will solve the problems. All the Chancellor's concerns about giving up our seat at the table would then arise again and the union that we eventually joined would have been completed in our absence. Missing the first wave and going in late would cause serious problems, as the Treasury Select Committee report points out.
I should like to comment briefly on the recent alarm about unfunded pension liabilities in other European countries. That is a red herring. There are plenty of ways of dealing with the problem without damaging the United Kingdom economy. It is certainly not a reason for us not to enter the single currency.
I represent an east London constituency, which has the characteristics eloquently described by my right hon. Friend the Member for Llanelli (Mr. Davies). My constituents in Newham are looking forward with optimism to a future with closer links with Europe. We are looking forward to the construction of the channel tunnel rail link, with an international station at Stratford, and to the subsequent investment in the area from European countries. The United Kingdom economy has not provided the opportunities that my constituents should have had. The European economy can provide those opportunities. I want a Government who will grasp and exploit them, rather than one who are poised to throw them away because of their divisions and their fearfulness for Britain's future in Europe.
9.18 pm
Mr. Ray Whitney: The speech of the hon. Member for Newham, North-East (Mr. Timms) underlines the reality demonstrated by this debate—that there is, across the House, strong support for a positive

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and constructive relationship with Europe and for maintaining our option to enter or stay out of a single currency. Clearly, the Labour and Conservative parties have sizeable minorities who are hostile to Europe. We have seen a document signed by 50 Labour Members of Parliament who express that opinion, and I imagine that a similar number of Conservative Members share their views. But they are not the majority, and they have been made to appear so by the press—about which so much has been heard in this debate, and rightly so.
We are halfway through this important debate—which I greatly welcome—and its value has been demonstrated. The real voice of the House of Commons needs to be heard above the xenophobia and paranoia to which we have grown accustomed over the past two or three years. We have now been able to see a little of what the Euro-sceptics actually believe in. In my view, scepticism is not a genuine political position—one must believe in something.
We have seen a series of contradictions from the sceptics on both sides of the House. They believe, for example, that a single currency will not work and that it is a leaky ship. They think that it will be a disaster, and they may well be right. As my right hon. and learned Friend the Chancellor has pointed out, it could conceivably turn out as they say. I think that that is unlikely, for reasons on which I shall touch in a moment. But those who say that this is a hopeless cause, a leaky ship and a dreadful mechanism that will impose terrible and insupportable burdens on our economy and will make us pay money that we do not have cannot have it both ways.
The sceptics in my party cannot claim to be good Conservatives, and I speak as someone with dry, right-wing credentials—that is, I believe in good housekeeping and all the other good monetary disciplines that are, to a degree, enshrined in the Maastricht criteria. I do not believe that any country can devalue its way into prosperity, and experience over the last generation has demonstrated that. Yet my hon. Friends—who, in months and years gone by, seemed to share those views—now reject them because the views have been embraced by the nasty, suspicious and scheming continentals. It does not negate the sanctity of those principles if other people have now discovered—albeit belatedly—that they are good ideas.
Frequently, the German bogey is brought out of the box. The fear is that, having failed in two world wars, this is the way in which the Germans will achieve domination over western Europe to start with and eastern Europe the day after tomorrow. Oddly enough, the German people seem unconvinced of that and, at the moment, the majority of German people are deeply suspicious. Some 60 per cent. or 70 per cent.—depending on which opinion poll one believes—have yet to be convinced by their political leaders that joining a single currency is a good idea. If I were a German who had worked hard for 45 or 50 years to maintain and develop a stable and strong economy and a stable and strong deutschmark, I would take a lot of convincing that I should launch the deutschmark into a system with other currencies with less impressive track records.
The Euro-sceptics refuse to face up to many challenges and constantly make negative attacks, but they face a conundrum. What are the other countries up to? Why are
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seven, eight or nine countries trying every trick in the book—I accept that there are some tricks being played—to get into the single currency?
Those countries live in much closer contiguity to the Germans than we do and they have genuine experience of German domination and understand much more clearly the realities of Germany. But are they stupid? Are they ready to give away their sovereignty, or do they know something that our Euro-sceptics do not know? I suggest that the answer is the latter.
We must also take account of the possibility that those countries are ready to throw away all their achievements, yet the record of many of them over 30 years is better than ours. In 1965, one could get more than DM11 for a pound and now one can get only DM2.30 or DM2.40, or whatever the rate happens to be today. I cannot believe, therefore, that either the Germans or any of the other countries will launch a ship that will sink within a year or two. We shall have to wait and see, but that seems highly unlikely.
The sceptics tell us that our trade opportunities with the rest of the world are wonderful, and I believe that they are, thanks to the Government's stewardship, but we should not forget the balance of trade and the almost 60 per cent. of our trade that is conducted with European Union countries. To put the matter in perspective, we should remind ourselves that our trade with the Netherlands amounts to as much as our trade with the six Asian tigers, China, Indonesia and the Philippines put together, and that our trade with Sweden amounts to as much as our trade with the whole of Latin America.
My right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) suggested that economic success had proved that the United Kingdom could prosper without the single currency, but of course there has not been a single currency. We are dealing with the world as it will be. There is no doubt that, at whatever time and in whatever shape a single currency comes, it will come, so it cuts no ice to suggest that we have done well without it.
My right hon. Friend the Member for Kingston upon Thames also said that he welcomed the opportunity to go it alone in monetary affairs. He had the honour of being Chancellor of the Exchequer. Of all people, surely Chancellors of the Exchequer know that going it alone in monetary affairs is not exactly an option.
On interest rates, it is interesting to note that our borrowing costs are somewhere between £5 billion and £7 billion more than Germany's, because interest rates there are much lower. If we had the German rates, the savings would mean a cut in income tax amounting to £10 a week for the average household. The chances are that a sound single currency will enable us to live with lower interest rates, and we must bear such factors in mind for our constituents' sake.
Some of my hon. Friends say that the majority of people in this country are doubtful and suspicious of the European Union and, more especially, of the single currency. I accept that that is true—it is also true, as I said, in most if not all the countries of the European Union—but it is the job of responsible politicians to lead and educate the electorate and not merely to listen to and follow them.
This debate has demonstrated that, to put it mildly, our minds should he kept open about the beneficial effects of a single currency. It would be a gross dereliction of duty

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to fail to lead the British people in the paths of common sense simply because Mr. Christopher Booker and the newspaper editors and owners about whom we have heard so much have misled them. I am glad to say that the debate has demonstrated that the majority of right hon. and hon. Members have that common sense, and I hope that we shall hear more of it in the months to come.
9.28 pm
Mr. Mike O'Brien: This is the debate that the Government did not want. A couple of weeks ago, they tried to sideline debate on crucial issues relating to the stability pact and the single currency to a backstairs Committee. It was only because ordinary parliamentarians, both Government and Opposition, were so outraged at their behaviour that we are having this debate on the Floor. The British constitution relies on the Executive's abstinence from the abuse of power: it gives great power to an Executive with a majority. Members of Parliament protect their right to debate issues. That is the check on Executive power. The Government tried to undermine the rights of Back Benchers by denying them the right to an open debate on the Floor on the single currency documents.
Mr. Marlow: That sounds strange from a Front-Bench spokesman of the Labour party. It has just passed party regulations that mean that anyone who speaks out of line will be thrown out. They all have to be drones and clones in the Labour party now.
Mr. O'Brien: In our party, we have sensible, reasoned debates. One could hardly call the Conservative party's debates sensible or reasonable.
The Government tried to prevent proper debate. Even now, they are trying to deal with the issues through a debate on the Adjournment because they are frightened of a vote that they might lose. They could not pass their resolution in European Standing Committee B and fear that they will be embarrassed on the Floor. They have become so bereft of proper respect for the British constitution that they are prepared to hide their embarrassment about the divisions in the Tory party by frustrating the right of Members of Parliament to debate and vote on fundamental issues. Those who elect us deserve better than that from the Government.
I do not want to criticise the Chancellor of the Exchequer too much; he has had enough criticism from his Back Benchers. In any case, I agree with much of what he said. As he spoke today, we watched the ranks behind him seethe. They were splintering before our eyes. The right hon. Member for Honiton (Sir P. Emery) referred to the barracking of the Chancellor. The Chancellor was supposed to be speaking for his party, but I suspect that his view was not that of the majority of his Back Benchers. As his speech went on, it seemed more like a personal manifesto—his personal commitment to the European ideal. The exchange with the right hon. Member for Wokingham (Mr. Redwood)—in many ways, the personification of Tory divisions—seemed like the first shot in the post-general election leadership campaign. The inevitable conclusion about his speech was that the Chancellor spoke for himself, not for the Government and much less for a majority of the Tory party.
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Recent newspaper headlines have expressed the consternation felt by the British people about the fiasco of Tory European policy. One Sunday newspaper called it
"Major's Meltdown—ruin upon ruin and rout upon Tory rout—the kites did not fly, boomerangs exploded and scooters were parked on lawns."
The Sunday Times headline was "Divided we fall" and it had a picture of the Prime Minister and the Chancellor, saying:
"Defeated and divided they could wander in the wilderness for years, even decades".
It implied that the Chancellor and the Deputy Prime Minister were more concerned with the post-general election civil war in the Tory party than with the belief that the Tory party, even if the current policy is sustained, would ever be able to take Britain into a single currency.
The Mail on Sunday said:
"thousands of Tory supporters this Sunday morning will be embarrassed and humiliated by the warfare among their party's leaders.
The Mail on Sunday shares that embarrassment and humiliation."
It demanded that the
"Prime Minister should sack Ken Clarke tomorrow."
The Sunday Telegraph headline was "The week John Major's Government fell apart". The following day, The Independent said of the Prime Minister's interview:
"All the Prime minister says is … 'trust me I'm honest John' … He isn't. And there are too many in his party who too obviously don't trust him."
The Prime Minister said that there would be no change in policy, then that there might be, then that there was never any thought of changing it.
The hon. Member for Hayes and Harlington (Mr. Dicks) is quoted in The Daily Telegraph as saying:
"I am in two minds whether to tell him to stuff his Government and his party."
The hon. Member for Reigate (Sir G. Gardiner) was quoted in the same newspaper as saying, "The strife goes on."
The former Paymaster General—or should I say the former, former Paymaster General?—the right hon. Member for Wells (Mr. Heathcoat-Amory), said that he would tell his constituents that he would vote against a single currency. He is quoted as saying:
"I cannot be expected to regard this as a breach of Party Policy since, as we have been told, there is no Party Policy."
Today, he continued his attack on his Front Benchers.
On Monday, Lord Tebbit said:
"If there is clear division and everybody knows about it, between the Chancellor and the Prime Minister, the Government is in desperate problems."
The Financial Times said:
"The electorate will not support a party which puts its own internal squabbles ahead of the national interest."
Mrs. Currie: I am listening to the hon. Gentleman with some care, but some puzzlement. Many hon. Members on both sides of the House are very much in favour of future developments in Europe. We would much rather hear what the Labour Front-Bench spokesman thinks about that.
Mr. O'Brien: If the hon. Lady waits a little while, she may well hear that. I am coming to her.

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During the debate today, we heard about the fears of the hon. Member for South Derbyshire (Mrs. Currie) for her party. She said that, if the policy was to change and the Euro-sceptics got their way, she could no longer stand as a Conservative candidate. That symbolises the strife within the Tory ranks today. Not only have Conservative Members joined the Opposition but some Conservative Members feel that, although they cannot do that, they are no longer prepared to carry the Conservative banner into the next election.
Mr. Bernard Jenkin: What is the Labour party's policy on the matter of convergence? Given that the Library reports that Belgium has a national debt of 130 per cent. of GDP, and it is unlikely that that will reduce below the 60 per cent. threshold in time for the first wave of monetary union, does the hon. Gentleman agree that Belgium does not qualify for monetary union? Will he confirm that that is his interpretation of the Maastricht criteria?
Mr. O'Brien: We are talking about sustainable economic convergence. I am not sure why the hon. Gentleman is so vexed. It seems from all his speeches that he has already decided what he is going to do. Why would he bother to get involved in the realities of the debate facing his Chancellor, who is trying to make a reasonably argued case against the hon. Gentleman and his colleagues on the Back Benches who do not support their Chancellor? What about the right hon. Member for Kingston upon Thames (Mr. Lamont), who talked of distrust and betrayal over Europe? He is right, to the extent that there is distrust because the Government put the party before the country. There is betrayal because the Government failed to get the best deal in Europe for Britain.
The Chancellor is not without some support among his Back Benchers. I have already referred to the hon. Member for South Derbyshire. The right hon. Member for Mid-Sussex (Mr. Renton) made an interesting speech in which he warned that we could not assume that there would be a second opportunity to join a single currency.
Many good points were made by my hon. Friends. My hon. Friend the Member for Ilford, South (Mr. Gapes) challenged the right hon. Member for Kingston upon Thames on his complacency about the City's position. My hon. Friend the Member for Linlithgow (Mr. Dalyell) asked whether we wanted Europe to go ahead, leaving Britain behind. My hon. Friend the Member for Rotherham (Mr. MacShane) gave a timely warning which the Chancellor might like to repeat to some of his Back-Bench colleagues. He said, "Remember when Labour was anti-Europe in the 1980s. A fat lot of good it did us."
My hon. Friend the Member for Newham, North-East (Mr. Timms) asked what sort of vision for the country the Euro-sceptics have. The answer, he said, was none. They hanker after an old empire—an old Commonwealth. Our future is in Europe, he said. The Tory Euro-sceptics might disagree with that, but, as my hon. Friends the Members for Streatham (Mr. Hill) and for Kingston upon Hull, West (Mr. Randall) pointed out, European co-operation can be both effective and successful for Britain if we get it on the right terms.
My right hon. Friends the Members for Bethnal Green and Stepney (Mr. Shore) and for Llanelli (Mr. Davies) made strong contributions to the debate on this issue in
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the Labour party. Let me point out that there are debates within all parties—it would be a poor reflection on our democracy were there not. These questions are of fundamental political importance, which is why we welcome contributions from my right hon. and hon. Friends who question a single currency.
The policy of a Government must be clear and a Prime Minister must lead—the Government owe the British people a clear sense of direction. Debate within a party is fine—it may even be healthy on occasion—but the Prime Minister must give leadership and this Prime Minister, on Europe, has failed to lead. A Labour Prime Minister, with a united shadow Cabinet and backed by a vote within the Labour party supported by 95 per cent. of the party's membership, will have a clear direction, a clear sense of policy and a clear way to lead.
From this Government, we have seen nothing but extraordinary splits, plotting and counter-plotting which extends to the highest reaches of the Tory party. We have a Chancellor who is quoted as talking of "a boomerang wrapped up in high explosive which has rebounded in the Prime Minister's face". The Conservative party is clearly in ferment. The BBC's Mark Mardell said that one Cabinet Minister told him that the party is "in chaos" and that the Chancellor is running policy, not the Prime Minister.
It all started with that now infamous story in The Daily Telegraph, that the Prime Minister was trying to push the Chancellor into ruling out a single currency in the next Parliament. Then the Chancellor and the Deputy Prime Minister swung into action: the Prime Minister was brought to heel. In the last week, the Tories have had the smack of firm leadership—not from the Prime Minister, but from the Chancellor. The Chancellor is the nearest the Government have to a leader—a tough and determined fighter for his pro-European beliefs. The Tories have a leader in Downing street—at No. 11. He sets the policy and the terms of government.
The Prime Minister was prepared to buckle under to the sceptics on his Back Benches, but the firm hand of the Chancellor steadied him in the pro-European course. When the Prime Minister, at Prime Minister's questions last Tuesday, tried to appear firm by committing the Government to a clear policy in defiance of his Back Benchers, one could almost see the Chancellor and the Deputy Prime Minister metaphorically standing behind him, exerting a steadying grip on each shoulder—or perhaps around his throat.
Even as the Prime Minister wavered, the strong Europhiles in the Cabinet showed their backbone. As the captain steered toward the rocks, the first mate and the bursar grabbed the wheel and put the ship back on course. The mutinous crew is still mutinous, but it appears that, from now on, the captain will do as he is told by the first mate and the bursar—but I suggest that there will be few votes from the public in favour of taking another passage with a crew so divided and at each others' throats as this one.
It is clear that the Chancellor and the Deputy Prime Minister have imposed on the Cabinet a strategy on the single currency that is closer to Labour's policy than to the view of the majority of Conservative Back Benchers. The Prime Minister is the prisoner of the Chancellor and the Deputy Prime Minister. As my hon. Friend the

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Member for Western Isles (Mr. Macdonald) implied, there is now clear blue water between the Tory leadership and the Tory party.
We all know the Chancellor's views and those of the Deputy Prime Minister. We know that most Tory Back Benchers broadly disagree with them. We know that the Prime Minister "goes wobbly" from time to time and that the Chancellor has to prop him up. We know that part of the deal is that the Chancellor does not tell us in Parliament what he has really agreed to at ECOFIN, nor can the Prime Minister concentrate on what he agrees at Dublin. Both must tell the House, not what they have done, but what they have not done—that they have not betrayed their Back Benchers. That is how the whole thrust of Government policy on Europe is now directed—to play down any moves towards European agreement and movement forward. They have had to raise isolation to an art form to keep their party together.
The Chancellor claims that binding decisions were not made on monetary union in Brussels on 2 December. The reality is that, with the exception of the definition of "exceptional and temporary" and one or two other small issues, most of the rest of the detail was agreed at various meetings over recent months. There has been a legal base set for the euro and a basis for a new, voluntary exchange rate mechanism. Many of the provisions of the stability pact have been negotiated by the Government.
It is disingenuous to claim that there is no agreement until it is legally binding in June. Either the Government keep the political agreements that they have made or they do not—and most of the agreements have already been made. The idea that it would be practicable for us to reopen all those issues next June is preposterous. The Chancellor is wary of admitting that, because he might exacerbate the civil war in his own party by doing so—yet that civil war goes on.
On Monday, we discovered that the hon. Member for Billericay (Mrs. Gorman) planned for a referendum on complete withdrawal from Europe. The former Tory Minister, Sir Leon Brittan, accused the sceptics of damaging Britain. Lord Tebbit has said that 100 Tory candidates are set to defy the leadership in their personal manifestos. The Tory party is split from top to bottom.
Mrs. Gorman: On a point of order, Mr. Deputy Speaker. The hon. Gentleman said that I had decided to introduce a Bill to withdraw from the European Union. That is completely untrue. My Bill proposes renegotiating with the European Union, so I hope that the hon. Gentleman will correct what he said.
Mr. Deputy Speaker: The hon. Gentleman is responsible for his own speech.
Mr. O'Brien: I thank the hon. Lady for clarifying that point. I accept her clarification, but publicity on the Bill has not been as clear as it should have been.
Labour will fight the next election in favour of constructive engagement in Europe. The Conservatives will claim that that means that we will sell out, but that is just more Tory lies. Labour will defend our national interests in Europe, instead of making a laughing stock of us as the Tories do. Labour opposes a federal state,
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remembering that those who signed Britain up to the Single European Act at Maastricht were the Tories. Labour will not give up our veto on strategic policies.
Constructive engagement means improving our relationship with our European partners, not squabbling with them for the purposes of domestic party consumption. It means putting British interests at the heart of Europe, not, as the Tories do, playing the British hokey cokey in Europe—in out, in out, shake it all about—a pointless little dance that no doubt placates Euro-sceptics' egos but, by turn, merely irritates and amuses our European partners.
The Government have not put Britain's interests first in Europe; they put their own political survival first. They damage relationships in Europe to please their Euro-sceptic rump. Tory divisions mean that the Prime Minister is selling Britain short. Labour will protect our national interests. We demand that Britain becomes a leading player in Europe: setting the agenda, not failing to do so; winning and not losing the debate; demanding the spotlight, not heckling from the sidelines. Labour will point the way forward for Europe while the Prime Minister wrings his hands in eternal indecision.
We shall ensure that we drive the single market forward in telecommunications, aviation and financial services. Whether Britain is ready to enter economic and monetary union on 1 January will not alter the necessity of our future being in Europe. That is why the current state of the British Government is so damaging to our people. On Europe, the Tory party is divided, disorganised and disgraceful. It is letting down itself, the country and the British people.
It is time to get rid of this tired and discredited Government. This country needs vision, direction and leadership in Europe. It will get all three from new Labour: on economic and monetary union; on the regeneration of the British economy; and on giving Britain increased influence on Europe.
We have seen the Chancellor's struggle to reconcile his views with those of his party—[Interruption.]
Mr. Deputy Speaker: Order. The House must settle down.
Mr. O'Brien: The Chancellor's struggle is almost over. He says, "Yes, yes, yes." The Prime Minister says, "Maybe, maybe, maybe." The Tory party says, "Never, never, never." But the British people will say, "Enough, enough, enough—begone."
9.47 pm
The Exchequer Secretary to the Treasury (Mr. Phillip Oppenheim): In a debate in which hon. Members have had 10 minutes to speak, the Opposition Front-Bench spokesman, the hon. Member for North Warwickshire (Mr. O'Brien), has taken 19 minutes to wind up. I hope that that will be noted.
My right hon. Friend the Member for Witney (Mr. Hurd) made a series of points with which few people would disagree. He stressed the importance of liberalisation, and said that he was against a united states of Europe and for a referendum on a single currency. Most hon. Members, including my right hon. Friends the Members for Honiton (Sir P. Emery), for Conwy

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(Sir W. Roberts), for Guildford (Mr. Howell), and for Mid-Sussex (Mr. Renton) and my hon. Friend the Member for Wycombe (Mr. Whitney), would not disagree with that and made similar good points.
My hon. Friends the Members for South Derbyshire (Mrs. Currie) and for Gillingham (Mr. Couchman) made some good and important points about the success of inward investment into Britain in recent years.
My right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) said that the float of sterling in 1992 was a cheat. I think that he implied that markets were cheats, but I do not wish to dwell too long on that aspect. He stressed the need to remain positive members of the European Union, and most hon. Members would agree with that.
My right hon. Friend the Member for Kingston upon Thames (Mr. Lamont), together with my hon. Friends the Members for East Lindsey (Sir P. Tapsell) and for Stafford (Mr. Cash) made a series of points from a slightly different angle. Nevertheless, I found plenty to agree with in their comments, although I shall not dwell on them in detail.
My right hon. Friend and predecessor, the Member for Wells (Mr. Heathcoat-Amory), asked whether the transitional costs of moving to a single currency would be taken into account and whether a compliance cost assessment had been made.
Mr. Heathcoat-Amory rose—
Mr. Oppenheim: As time is limited, I would appreciate it if I could answer the point. The Government have made it clear that their decision on whether or not to go forward into a single currency will take account of a large number of factors. Transitional costs will be one of those factors. A compliance cost assessment will be made in due course.
Mr. Heathcoat-Amory: Will my hon. Friend give way?
Mr. Oppenheim: I hope my right hon. Friend will forgive me. I have very little time. [HON. MEMBERS: "Answer the question."] I have done my best to do so. Very well. I give way.
Mr. Heathcoat-Amory: The Government published a White Paper promising a compliance cost assessment for, any regulations brought before the House affecting business costs. Regulations were submitted to the House three weeks ago without a compliance cost assessment. Will my hon. Friend undertake to correct that deficiency at an early date, and not next year?
Mr. Oppenheim: With respect to my right hon. Friend, my point is still valid. Those regulations will not apply to Britain unless we make a decision to go into the single currency. At that point, if necessary, a compliance cost assessment will be made.
The hon. Member for Streatham (Mr. Hill) attacked with great vehemence a document entitled "Europe isn't working". He called its claims myths. That document was signed by 50 of his colleagues.
Mr. MacShane: They are all going.
Mr. Oppenheim: That is an interesting insight into the unity on the Opposition Benches.
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The hon. Member for North Warwickshire said in his long peroration that his party had sensible and reasoned debates on these matters. The comments of the hon. Members for Streatham and for Rotherham (Mr. MacShane) are the denial incarnate of that.
The hon. Member for Streatham said that a single currency would not reduce sovereignty. He said that EMU means lower interest rates, so we should join. How does he know that EMU will mean lower interest rates? We will not know that until we know whether the criteria are being fiddled with and meddled with. That is why the Government's policy of negotiating and waiting until we are clear on these matters is the right policy.
Mr. Marlow: Will my hon. Friend give way?
Mr. Oppenheim: I hope my hon. Friend will forgive me. We have limited time. I shall try to give way later.
The right hon. Member for Bethnal Green and Stepney (Mr. Shore) came in from a slightly different side of the pitch. He said that he did not want foreigners telling us what to do. For an old socialist, there was not much of the brotherhood of man about his comments, but I know that they represent the views of some of his colleagues.
The hon. Member for Ilford, South (Mr. Gapes), by contrast, said that we should go into EMU at all costs. The hon. Member for Walsall, North (Mr. Winnick) said that we should not go in at any cost. The right hon. Member for Llanelli (Mr. Davies) said that those who want to go into EMU will use any trick to get into EMU. The hon. Member for Kingston upon Hull, West (Mr. Randall), who wants to go into EMU, is probably one of those to whom the right hon. Gentleman was referring.
The hon. Member for North Durham (Mr. Radice) said that Euro-sceptics are dangerous. I assume that he includes in his list the right hon. Members for Llanelli and for Bethnal Green and Stepney, and the hon. Member for Walsall, North, who are Euro-sceptics.
Mr. Cash rose—
Mr. Oppenheim: I hope that my hon. Friend will forgive me for a moment or two longer. I shall give way in a moment.
The hon. Member for Rotherham persists in getting my title wrong, although tonight's performance was a slight improvement on his last effort, when he called me the Posthorn General. He said that I was a Euro-sceptic and therefore I was hostile to Europe. He is right in one respect. I am a Euro-sceptic. That does not necessarily mean that one is hostile to Europe. It means that one is sceptical about Europe. One is pragmatic about Europe. [Interruption.] That is not the same thing.
Several hon. Members rose—
Mr. Deputy Speaker: Order. The House must settle down. The Minister must be given a reasonable hearing.
Mr. Cash rose—
Mr. Oppenheim: I give way to my hon. Friend.
Mr. Cash: Does my hon. Friend—who, of course, is a Euro-sceptic; we are sure of that—accept that anyone who says:

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"under no circumstances should the Government rule out participation in a single European currency, now or in the future"
is saying something that is inconsistent with Government policy? Has he noted the advertisement placed by the European Movement, bearing the names of a lot of people who are blaming the Euro-realists but who themselves are inconsistent with Government policy?
Mr. Oppenheim: We Euro-sceptics really should stick together, but I do not necessarily agree with my hon. Friend's premise.
All that this shows is that all the political parties are having a vigorous discussion. There are people who say that we should not have a vigorous discussion, but I think that they are wrong. This is far the most significant issue that we have faced in my 14 years in this place; it is one of the most pivotal issues since the war, and probably in this century. Many people say that it is as important as our decision to join the Community.
I know that many hon. Members feel that it is wrong in principle for us to go into EMU, and that we should say so now. Others take a different view. Whatever the view, the fact is that a single currency will affect us, whether we are in or out.
Some people say that we could just sit on the sidelines and gain some atavistic, mercantilist pleasure from any mess caused by an EMU based on skewed and muddled criteria. Some say that we may even gain advantage from such a mess on the continent—a kind of "capitalism in one country". I am not sure that they are right. More than half our exports go to Europe; United Kingdom companies are major investors in Europe, and vice versa; monetary and political chaos in Europe would probably lead to an over-strong or at least a volatile pound. We must also protect the position of the City, one of our most successful industries.
Those are all reasons why we must be at the negotiations, and why we cannot make a decision until the final shape of EMU is clear. At that point we do have the option to say no, and, even if any Government decided that it was in Britain's interest to go in, the British people would have the final say through a referendum. That is the right policy.
Mr. Marlow rose—
Mr. Oppenheim: I know that my hon. Friend is dying to get in, so I will give way, but this is absolutely the last time that I shall do so.
Mr. Marlow: I am grateful to my hon. Friend.
Constituents say to me, "Mr. Marlow"—[HON. MEMBERS: "Mr. Marlow!"] Actually, they call me Tony. "Tony," they say, "if we were to join the single currency,
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would that mean not only that we would lose the pound but that our interest rates would be decided overseas, and that eventually our taxation system would probably be taken over the Europeans?" They say, "Tony, does this effectively mean that we would cease to exist as a nation state?" I reply, "Yes, I believe that that is the case, but I can do better than that: I can ask my hon. Friend the Minister." Does my hon. Friend agree as well?
Mr. Oppenheim: I think that my right hon. and learned Friend the Chancellor answered that point in his speech.
One has to be deeply suspicious of a party that has so lost its soul—that so wants to get its collective snout into the red boxes—that wants power so badly—that it is willing to perform gymnastics with its policies, and play games with an issue as important as the single currency. That is what Labour is doing. On 30 October, the shadow Chancellor said:
"Our policy on the single currency has not changed and will not change."
On 11 November, in a speech to the CBI, he said:
"Labour supports the principle of a single currency."
The Opposition said that their policy on EMU would not change. A few days later, they announced that they would prance along behind us and hold a referendum. Some people say that that was a ploy aimed as much at some of my hon. Friends as at anyone else—[Interruption.] I hear one of the shadow Chancellor's hon. Friends say, "Hear, hear." If that is true, it illustrates the cynicism with which the Opposition approach an issue of overriding importance.
I know that the response of some to Labour's latest change of policy is to say, "Let us put clear blue water between the Government and Labour." I am never sure that it is the right tactic, if one is occupying good ground and someone else muscles in, to jump off and swim for it just to put water between oneself and that person. Some would say that a better stratagem would be to chuck them off, but these are questions of judgment and there is clear blue water between the Government and the Opposition, despite the Opposition's attempts to poodle along behind us.
Only yesterday, the shadow Foreign Secretary, who we all know is at one with the shadow Chancellor on these issues—I make that point only to illustrate that we are not the only party that is wholly united on these issues—affirmed that it was Labour policy to surrender Britain's right of veto over key areas such as social, employment, industrial and regional policy—[Interruption.] The hon. Member for Gateshead, East (Ms Quin) says that they are not key areas, but they are. There is clear blue water between the Government and the Opposition. The Opposition want closer union and to take the next big leap forward towards a centralised Europe—that is the difference between them and us.
It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Medicinal Drugs
Motion made, and Question proposed, That this House do now adjourn.—[Mr. McLoughlin.]
10 pm
Mr. Paul Flynn: Medicinal drugs are one of the great triumphs of science. They relieve the pain of millions of people and provide longer, healthier lives. Britain has better safeguards and less drug use—[Interruption.]
Mr. Deputy Speaker (Sir Geoffrey Lofthouse): Order. Hon. Members leaving the Chamber should please do so quietly.
Mr. Flynn: Medicinal drugs are one of the great triumphs of science. They relieve the pain of millions of people and provide healthier, longer lives. In many cases, Britain has higher standards and a lower rate of drug use than many other European countries. Drugs are wonderful servants but fearful masters—if misused, they can be the cause of death or disease on a prodigious scale.
In this short debate, it is possible to give only a few snapshots of the many current concerns, which include the 2,000-plus deaths from prescription and over-the-counter drugs, the over-medication of the elderly in residential homes, the hazards of road users whose senses are dulled by psycho-active drugs, the growing availability of potentially lethal doses of drugs, and, perhaps most important, the worldwide growth of antibiotic-resistant bacteria, which is leading to untreatable forms of ancient diseases. There is also concern about the use of antibiotics on animals and the possibility of their transmission to human beings through the food chain.
I had a message from the Alzheimer's Disease Society tonight. It wants to emphasise the fact that the sad cases illustrated in the recent "World in Action" programme, which showed the misuse of anti-psychotic drugs in residential homes, were not uncommon but are a feature of falling standards in residential and nursing homes. The society asked me to express its support for my call for a full inquiry into drug use.
In March 1996, the British Medical Journal gave a very disturbing account of an investigation carried out by researchers in Glasgow into anti-psychotic drugs called neuroleptics. They visited 28 nursing homes and examined the prescribing of what has been called a "chemical cosh" to 217 of the residents. Narcoleptics were considered to be appropriate for only 12 per cent. of them; 190 others had been prescribed them for wholly incorrect reasons—reasons which meant that the homes were probably easier to run but which left the elderly in greater confusion than ever.
The authors concluded that the results were a cause for grave concern, as the drugs have side effects that produce symptoms similar to those of Parkinson's disease. However, the most devastating conclusion of all from the Glasgow researchers was that American studies had proved that, when the use of these powerful drugs was reduced or stopped altogether, even in appropriate cases there was little, if any, deterioration in the patient's behaviour.
The great worldwide threat was illustrated in September in the journal Nature, which used language that is rare for a sober scientific journal:
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"The increased incidence of penicillin resistant bacteria is putting the treatment of serious childhood diseases in jeopardy — multi-resistant TB is becoming the norm".
It reported on the intense frustration of international scientists at a conference in London in the summer at the failure to mount a sustained campaign against what they described as the
"spread of resistance, which is an ecological disaster".
They recommended that we should use antibiotics more sparingly and prudently. The magic bullet that did so much good is losing its potency. A week ago, it was discovered that a disease was being fed and was growing stronger and more virulent on an antibiotic, which is an extraordinary turnabout.
Epidemics are now sweeping the planet. They are far worse in remote lands in Africa and South America. Although they have touched the United States of America, none has affected us to any great extent, with the exception of methicillin-resistant staphylococcus aureus. One bacterium, which is resistant to all known antibiotics, is the principal cause of all childhood deaths in Africa. That is an extremely serious problem. It could appropriately be described as a disaster.
In this city and in this Parliament, our lives were touched by the moving words of Lord Fitt about the death of his wife. He explained that she was suffering from asthma and was taking cortisone, which is a steroid drug. They were worried that she was taking too much of the drug, so she was admitted to hospital to try to get her on to less damaging drugs. Sadly, she shared a ward with someone with MRSA—the lethal hospital bug created by drug over-use. Tragically, Lady Fitt died a few weeks later.

On 16 April this year, the Minister for Health gave me figures on deaths caused by paracetamol. I thank him for that. We have had a long and often heated and angry correspondence, but I think that we now agree about the number of deaths caused by paracetamol. The minimum figure is about 200 a year.
In a recent reply, the Minister gave me the gross figures, which were 452 in 1993, 453 in 1994 and 568 in 1995. That is a huge number of deaths, given that Ecstasy, which everyone is worried about, accounts for 10 deaths a year. Co proximal accounts for 250 deaths a year, dothiepin for 150 deaths, and in America 7,000 deaths a year are caused by aspirin. Those are not drugs to cure life-threatening illnesses: they cure fairly minor illnesses. Drugs that kill people are the familiar, over-the-counter drugs. They are like loaded guns in the medicine chests of almost every home in the land.
Two years ago, a 12-year-old girl in Pontefract was sent out on a trial to buy 50 paracetamol tablets, which was enough to kill her three or four times over. She had no difficulty buying 50, but many people tried to sell her 100. It was not the pharmacists who pushed the drugs the most, but the supermarkets and the garages.
Cheaper, more accessible drugs may be on the way. The Office of Fair Trading is considering the alleged restrictive practice in a first step to abolishing controls on cheaper medicines. A 12-year-old girl may go into Asda and for 25p be able to buy enough paracetamol to kill her twice over.
The Government must take responsibility, because they reversed the 1978 reforms which restricted the sales of some over-the-counter medicines as people were

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becoming addicted to them. Some of those drugs are back on the market, including Paramol 118, which contains morphine and paracetamol. It is fast becoming a major street drug, which is open to abuse as it is an alternative for heroin users. There is even a new help organisation with 2,000 members for what the organiser calls a hidden army of high street junkies, many of whom are hooked on drugs which, until recently, had been available only on prescription.
Drugs also play a part in road accidents. There are 100 million annual prescriptions—a vast figure—for drugs such as tranquillisers, anti-depressants and sleeping pills, which make the user more intoxicated, less able to drive a car and slower in reacting than if that person was above the alcohol limit. The European Road Safety Federation estimates that 10 per cent. of road deaths are caused by drivers affected by medicinal drugs—350 deaths a year in Britain.
Another legitimate cause for concern is the use of antibiotics on animals. Strict limits are laid down so that the antibiotics used for animals are different from those used for human beings. But there is one major problem involving one antibiotic. The danger is that it will get into the food chain and we will become resistant to it. That drug has been banned in Germany and Denmark, but not here. A powerful lobbying organisation in Europe is trying to prevent such a ban, despite the fact that it would be sensible.
Objective science is saying, with one loud, unanimous voice, that there is vast over-use of medicinal drugs. It pleads with the Government to take action, because the bacteria are winning. Patients' organisations and consumer associations all say that we are an over-medicated nation. Health physician Martin Fischer, from Charing Cross hospital, said that half the modern drugs could well be thrown out of the window were it not for the fact that the birds might eat them.
We are less compassionate to ourselves and our children than we are to the birds. Society has been conditioned to believe that every pain, discomfort, grief and moment of boredom suffered must have a remedy in a drug. That myth is the creation not of doctors but of those who are selling the drugs and making large profits from them.
Which? published a devastating report on people's widespread ignorance of the drugs they take. A survey of asthma sufferers showed that 61 per cent. were taking drugs—aspirin and ibuprofen—that can trigger symptoms of asthma. Half those surveyed suffering from high blood pressure were taking remedies that would increase their risk of heart problems. There is widespread ignorance among patients of the drugs that are prescribed.
Many actions can be taken. We need a major inquiry into the use of all drugs. We want restraint in prescribing and no attempt to liberalise the present system or to make drugs cheaper, as supermarkets such as Asda want. The sale of lethal addictive drugs should be confined to pharmacists, with limits on their sales. We should publicise the great dangers to road users who are intoxicated by drugs. We should improve hospital isolation facilities and hygiene standards, preferably with nurse-led wards, as suggested by the King's Fund.
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There should be more of the so-called brown bag trials, where the elderly, who are the worst over-medicated group in society, are called in to explain to doctors what they are taking. Up to 15 per cent. of all elderly people are taking up to six different drugs each, the cocktail effect of which is the cause of many problems. Many trials are being carried out to re-examine such use and to give advice. We need an urgent inquiry into the medication of elderly people in residential homes, and we need a campaign of public education to persuade regular routine users of familiar medicines of the problems they cause.
The European body of specialists in research into headaches said that the main cause of headaches was paracetamol and aspirin. Timothy Steiner of Charing Cross hospital said:
"There are a lot of people who have daily headaches who take daily analgesics. If they stop the analgesics the headaches go away."
For many people, medicinal drugs are often essential life savers, but the greatest scientific wonder that any of us have ever encountered is the human body. It has miraculous restorative powers that are natural, and safer than many failing and dangerous chemical medicines, in which we have unwisely placed our trust.
10.14 pm
Mr. Alan W. Williams: I am grateful for the opportunity to make a few remarks in this debate. I congratulate my hon. Friend the Member for Newport, West (Mr. Flynn) on securing the parliamentary time. I should like to confine my remarks to MRSA—methicillin-resistant staphylococcus aureus—and underline the serious threat that that poses to anyone who goes to hospital for treatment.
I first heard of MRSA in 1993, when a friend telephoned me to say that there were a few cases of the antibiotic-resistant strain in my local Carmarthen hospital. I wrote to the hospital and met the chief executive and the public health laboratory consultant there. I was reassured that the number of cases was quite small.
At the hospital, in 1989, there were two MRSA cases; in 1990 there were two; in 1991 there were five; in 1992 there were 10; and in 1993, the year when I first heard of MRSA, there were 13. I spoke at the time to my brother who was a consultant in a London hospital. He said that MRSA was common in London hospitals, but that in Wales we did not have a particular problem.
I tabled some parliamentary questions at that time, and wrote to the Welsh Office. Generally. I received non-answers. The Welsh Office said that the information was not available, and not collated centrally. The reply that I received from the Under-Secretary of State for Wales was:
"The information … is not routinely collected"—
MRSA, in a sense, was too unimportant in 1993 for the figures to be collated centrally. I kept reading about MRSA incidents, however, in local and national newspapers. In July, I again tabled questions to the Welsh Office, and I was pleased that the information was now being made available and collated.
In my hospital, in 1994, there were 18 declared MRSA cases, in 1995, there were 36, and to July 1996, there have been 49 cases. That was a tenfold increase during that five-year period. Figures in parliamentary replies to my

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hon. Friend the Member for Newport, West show that, for Wales, in 1995 the total was 442, and that this year to date it is 2,100. That is a fivefold growth in the past year.
I am glad that the information is now being collated centrally and made available. A parliamentary reply from the Department of Health to a further question on 3 December showed that, in England and Wales, there were 2,286 MRSA cases in 1992 and 17,063 in 1995. During those three years, there had been a sevenfold growth in the incidence of MRSA in hospitals in England and Wales. That is disturbing. What was a small problem in the late 1980s and early 1990s has become a major problem. I know two people—members of the Labour party, as it happens—in my constituency who last year contracted MRSA while in hospital.
My hon. Friend the Member for Newport, West quoted the speech on 4 November by Lord Fitt, whose personal tragedy highlighted the problems that the bug is causing in hospitals.
The problem of antibiotic-resistant bugs is international and widespread. I only wish that the Government would take it more seriously. First, the Department of Health needs to liaise with the British Medical Association and the Medical Research Council to persuade general practitioners to prescribe antibiotics only when they are necessary.
Secondly, it is absurd for animal feeds to routinely contain antibiotics so that animals gain weight faster. It is done for economic, not health, reasons. Thirdly, there needs to be research into new antibiotics. We are in a race against new super-bugs that are adapting and modifying to become resistant to antibiotics. The Department of Health and the pharmaceutical companies must redouble their efforts to develop new antibiotics to address that increasing problem.
10.20 pm
The Minister for Health (Mr. Gerald Malone): I am pleased to have the opportunity to respond to the important debate initiated by the hon. Member for Newport, West (Mr. Flynn) and the points raised by the hon. Member for Carmarthen (Mr. Williams). They have raised a wide range of issues, and I am sure that they will understand that I cannot cover them all in great detail in the 10 minutes available to me.
First, I should like to reassure the hon. Gentlemen that Britain has one of the most effective control and licensing systems for drugs in any developed country, through the combination of the Medicines Control Agency and the Committee on Safety of Medicines. As the hon. Member for Newport West said, it is important that we do not have a closed mind on developments. The system for investigating the efficacy of drugs and the problems they may cause is a constant process of re-evaluation. Those who are charged by Government with the responsibility constantly to examine such matters on behalf of the public need to review their decisions in the light of any new evidence that emerges.
The hon. Member for Newport, West was quite right to point to the enormous benefits of modern medicine. The proper use of medicines relieves human suffering and cures or alters the course of many life-threatening diseases. However, modern medicine also involves a number of risks, and some concerns have been expressed about antibiotic-resistant organisms.
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It is not a new phenomenon. One might think from the lurid headlines on the issue that we are hurtling towards a post-antibiotic era, and that the problem has only just been spotted. That is not the case. It was identified at an early stage in the use of antibiotics, and was countered by conventional infection control techniques and other intervention strategies, such as limiting or rotating their use. Those methods were successful, but they were also overshadowed by what at the time seemed to be a plentiful supply of new antibiotics. Between 1939 and 1972, for example, more than 30 new antibiotics were discovered. In more recent years, however, the number has fallen.
Microbial antibiotic resistance has always been an issue, but the need to address it has now become more focused. It has to be managed better. In considering new strategies and policies to combat its spread, we need to ensure that we make the best use of those antibiotics currently available, and perhaps be prepared to re-learn a number of lessons from the past.
The hon. Member for Newport, West referred to the particular problems that are found in other countries. It might be useful for the purpose of this Adjournment debate to look at the difference between this and those other countries.
Mr. Jon Owen Jones: Will the Minister give way?
Mr. Malone: I do not intend to give way. I have a limited period in which to answer a very complex debate.
In many countries, the spread of such types of micro-organisms has now been accepted as more or less inevitable. That is not so in the United Kingdom. One of our most effective weapons is the high quality of the infection control systems in our health service and hospitals. We also maintain—the hon. Member for Newport, West asked for reassurance on them—very strict controls over accessibility to antibiotics by ensuring that they are available only on prescription. That is very different from what happens in other countries—even other countries in Europe—where antibiotics are available over the counter, and very readily too. We are concerned about the matter.
MRSA was especially mentioned. It has attracted many headlines recently, and it is not helpful when phrases such as "killer bug" and "super-bug" are used. They have invoked anxiety among many patients and their families and friends, and conjured up images of a modern-day health care system that cannot cope with such problems.
It might be important to put on the record the fact that MRSA is an antibiotic-resistant form of a fairly common bacterium, staphylococcus aureus. It is one of the most common of all bacteria—it is present in about one third of the population—but a problem occurs when it gets out of control, which may have alarming effects. How do we deal with it in the NHS?
Specifically to tackle the problem, clinical guidelines on MRSA have been developed over recent years. Such guidance includes that jointly published, for example, in 1986 by the Hospital Infection Society and the British Society for Antimicrobial Chemotherapy. The guidance was updated, republished in 1990 and formally commended by the Department of Health to the NHS in 1994. We are working with professional groups on

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how to take that further forward. We are of course concerned about such issues and alert to them, and will continue to update guidance as necessary.
The hon. Member for Newport, West raised an important point about treatment of elderly people, which I take extremely seriously. We issue advice on prescribing issues that include prescribing particularly for elderly patients, which is available to GPs from a range of sources. GPs are, of course, ultimately responsible for the prescriptions they write for their patients.
The Department publishes publications such as the British National Formulary, which is regularly updated and provides advice for all doctors. A number of bulletins also provide prescribing advice for all GPs. Copies of the British National Formulary are available in the Library if the hon. Member for Newport, West wants to have a look at it.
Concerns were expressed about the availability of medicines for children. Under guidelines issued by the Royal Pharmaceutical Society in relation to its code of ethics, a pharmacist should not supply medicine to children, regardless of whether they are receiving medicine for their own use or, as quite often happens, as a messenger for others, unless the pharmacist is satisfied that the product will be used correctly and delivered safely to an adult.
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I listened carefully to what the hon. Members for Newport, West and for Carmarthen said about the issue, and I am pleased to be able to reassure them that we are actively considering the need for further restrictions on the sale of medicines to children. If there is evidence of a problem, we shall certainly react to it.
The hon. Member for Newport, West mentioned the problem of paracetamol as he sees it. He is a doughty campaigner on the issue. Paracetamol is a safe medication for the relief of pain, but it is recognised that, if it is abused contrary to the instructions for use, problems result from an unexpected reaction to the drug, causing liver failure, which is not immediately apparent after the drug is taken. That is why consultation is occurring on what should happen about pack sizes.
We take very seriously indeed the points that have been raised by the hon. Members for Newport, West and for Carmarthen. The hon. Member for Newport, West is quite right to say that the matters are on-going and will always require the Government's interest. I give him the reassurance that we shall continue to look at them. A number of other points were raised with which, in the short time left to me, I have not been able to deal, but I shall write to the hon. Gentleman about them. As always, he made a constructive contribution to an extremely important matter.
Question put and agreed to.
Adjourned accordingly at twenty-nine minutes past Ten o'clock.