Single Currency

HC Deb 24 January 1996 vol 270 cc286-308

11 am

Mr. Christopher Gill (Ludlow)

I am extremely grateful for the opportunity to debate the consequences of abolishing the pound sterling. I appreciate that the debate is about the implications for the United Kingdom of a single European currency, but in plain language what we are really talking about are the consequences of getting rid of the pound. I hope that the sensibilities of right hon. and hon. Members will not be offended if I continue to express myself in those terms.

The debate takes place against the background of a round-table meeting in Brussels, hosted by the European Commission, to discuss the single currency. It will provide an opportunity for the 400 participants, who represent a wide range of interested parties from throughout the European Union, to discuss their expectations, concerns and ideas about the single currency.

There is absolutely no doubt where the European Commission President, Jacques Santer, stands on these matters. He is reported as having said to the European Parliament last Tuesday that a single currency was crucial in building a dynamic, strong and prosperous Europe. He went on to say that, with some member states devoting 20 per cent. of their budget to servicing their national debts, Europe would have to put its economic house in order anyway, regardless of whether it was introducing the single currency.

Indeed, as Europe's largest-circulation English language newspaper, the Europa Times, stated in March 1995: A single currency needs uniformly low inflation and stable exchange rates. But with low inflation and stable exchange rates who needs a single currency? That view was echoed in the business section of The Sunday Telegraph on 12 March 1995, which quoted the European Commission itself as saying: Since the empirical research has not found any robust relationship between exchange rate variability and trade it is not possible to estimate the increase in intra-EC trade that might derive from the irrevocable fixing of exchange rates. I remind the House that both reports that I have just quoted came after 108 of my right hon. and hon. Friends signed early-day motion 581, tabled by my right hon. Friend the Member for Mole Valley (Mr. Baker) on 8 February 1995, which called on the House to congratulate the Prime Minister on making it clear on 8 January 1995 that it is not in the United Kingdom's interest to join a single currency in 1997, and on his confirmation that there are no proposals for legislation necessary for the purpose or for the United Kingdom to accept any changes at the intergovernmental conference that will impact on the constitution of the United Kingdom, and further noted his rejections of support for the principle of a single currency by the Leader of Her Majesty's Opposition and by Mr. Jacques Santer.

It is gratifying to see that the judgment of my colleagues was endorsed by the findings of the Henley Centre for Economic Forecasting, which reported in EP News, the newspaper of the European Parliament, in September 1995, that popular support in the United Kingdom for a single currency was only 31 per cent.—a figure which, broadly speaking, was endorsed by the findings of the Commission's private polling announced this Monday, which showed support for the abolition of the pound at 36 per cent. Clearly, no popular mandate exists for abolishing the pound. Nor, indeed, has one ever been sought.

It is my intention not to burden the House further with reports and opinions of other people in other places, but rather to turn directly to the facts that should concern us as Members of Parliament, answerable and accountable, as we will shortly be reminded, to the electorate whom we represent. The first fact concerns unemployment. In October 1990, when this country joined the exchange rate mechanism, unemployment totalled 1.67 million. Less than two years later—23 months—when we unceremoniously left the ERM, unemployment had soared to 2.85 million. There will be right hon. and hon. Members who will say, "Well, that was just the way the cookie crumbled on that occasion." Let me remind the House that that was precisely what happened when we were on fixed exchange rates between 1925 and 1931. I shall give the House the figures.

In 1925, when we joined the gold standard, unemployment stood at 1.25 million. By 1931, the figure had risen to 2.9 million. That has been the cost to this country of fixed exchange rates. The cost to my constituents has been the jobs that they lost and the consequential loss to many of them of their homes, because they could not keep up their mortgage repayments. In some cases, they lost their businesses.

Mrs. Teresa Gorman (Billericay)

rose—

Mr. Gill

I can see that my hon. Friend wishes to intervene. I must make it clear that I shall not be taking any interventions, because I want to allow maximum opportunity for other colleagues to make their contributions to the debate.

Are the figures that I just quoted on unemployment a price worth paying for what is no more and no less than an economic theory? Even if they are, who in the House will vote for a single currency? Certainly not all hon. Members on the Conservative Benches, and definitely not all hon. Members on the Opposition Benches.

Mr. Walter Sweeney (Vale of Glamorgan)

rose—

Mr. Gill

I am not giving way.

Indeed, there is increasing doubt that such a measure would command a majority in the House, even on a free vote. Why can we not simply conclude that a single currency is not in Britain's interest? Why must we keep up the pretence that, in spite of experience and all the political pain along the way, one day—miraculously—it will all come right? What the country needs is certainty. Decision makers in trade, industry and commerce need certainty, as do individuals, families, and—dare I say—politicians, particularly if they are seeking re-election, because in the final analysis there are no votes in equivocation, obfuscation and prevarication.

I hope that, when my hon. Friend the Economic Secretary responds to the debate, she will be able to provide the House with some sound and positive reasons for abolishing the pound. Before she does that, I remind her of yet another fact. Between 1925 and 1931, while the country was on the gold standard, economic activity stagnated, just as it did between 1990 and 1992 during our membership of the ERM. On each occasion, the abandonment of fixed exchange rates resulted in dramatically reduced interest rates—from 6 per cent. in September 1931 to 2 per cent. a mere nine months later, and from 12 per cent. on black Wednesday to 6 per cent. only three months later.

In both instances, the start of economic recovery coincided with the abandonment of fixed exchange rates, the effect of which had been to choke off exports due to an unrealistic and uncompetitive exchange rate, and to choke off investment due to the necessity to keep interest rates high to sustain a totally arbitrary rate of exchange. That was a vicious circle, the inevitable consequences of which were, as I have described, unemployment, economic stagnation and all the consequential effects on Government expenditure and the public sector borrowing requirement.

We should look at the situation today, now we are free of the straitjacket of fixed exchange rates. On 20 June 1995, The Daily Telegraph, in an article headed: Britain runs ahead of EU rivals said: Britain outpaced its main European rivals last year, achieving a growth rate of 3.8 per cent. against 2.9 per cent. for Germany, 2.7 per cent. for France and 2.2 per cent. for Italy. The report then said: Norway, which decided to stay out of the EU, experienced a 5.1 per cent. rise in its gross domestic product last year. Last week, The Daily Telegraph, in an article headlined, Britain shows the way on jobs said: On internationally agreed measures, the jobless rate in Britain, has fallen to 8.1 per cent. against a European average of 10.6 per cent. Unemployment has reached 11.4 per cent. in France and 9.9 per cent. in Germany. If my analysis of the effect of fixed exchange rates on interest rates, unemployment and economic activity in Britain is wrong, I am sure that the House will be quick to correct me.

Another question arises from the proposition to abolish the pound. It is the associated costs of doing so—the costs to the Treasury, to banks and the financial sector, and to trade, industry and commerce, not to mention to the general public. Various bodies have made inspired guesses as to the overall cost, but one thing is for certain—Treasury Ministers, as evidenced by their written answer to me on 6 December 1995, do not know or will not tell. They will only say: there will be transitional costs to business and public authorities, associated with the changeover to the single currency. These potential costs would be one of the factors that would need to be taken into account, at the appropriate time, when the Government make their assessment of whether it is in the United Kingdom's interest to join a move to the third stage of economic and monetary union."—[Official Report, 6 December 1995; Vol. 268, c. 261.] In other words, there will be no cost-benefit analysis because, as is all too plain to see, the decision to abolish the pound will be made, not for economic but for political reasons.

Without a shadow of doubt, the abolition of the pound, and all other national currencies in Europe, and the creation of a single currency, is the keystone to the completion of political union—the very apogee of the integrationists' dreams. The implication is that, by not ruling out the abolition of the pound, Her Majesty's Government are reconciled to the inevitability of political union. Again, if I am wrong, let my hon. Friend the Economic Secretary say so unequivocally, but I should perhaps warn her that many Conservative Members will need much convincing that political union does not follow monetary union as surely as night follows day.

I say to the House in all sincerity and with all due humility, this is not an enterprise to be entered into lightly. What we are talking about is the ending of 600 years of parliamentary democracy; the ending of the freedom of the British people to make their own laws in their own Parliament and according to their own preferences freely expressed in British ballot boxes.

Abolition of the British pound would be the final curtain call for the independent nation state. The issue cannot be fudged. The party managers cannot hope to finesse the outcome of a vote on a matter of such crucial importance. I call on our Government to dismiss the proposition for what it is—a mischievous and highly dangerous irrelevance which serves only to distract us from all that we might otherwise be more profitably doing.

11.14 am

Mr. Hugh Dykes (Harrow, East)

Thank you, Mr. Deputy Speaker, for calling me. I am grateful, as I am sure are other hon. Members, to my hon. Friend the Member for Ludlow (Mr. Gill) for initiating the debate, although they do not necessarily agree with most of the points that he has made.

If it does not offend anyone, I should like to follow my hon. Friend's excellent principle of not necessarily giving way to interventions because I am sure that that will allow more hon. Members to take part. I hope to be brief.

At the beginning of last November, the European Commissioner in charge of the EMU plans, the French Commissioner, Yves-Thibault de Silguy, confirmed yet again that the European Union is on target to commence the single currency by 1 January 1999, the expected date of commencement in Europe generally—at least in the rest of Europe.

That statement runs contrary to the superficial counter-propaganda that appears in some British newspapers—they have been growing in number slightly recently—that appear to be nervous and timid about the prospect. They constantly seek to undermine the plans, usually because of the reactionary attitudes of their non-British owners and short-sighted editors. The journalists have to follow suit because, after all, everyone is involved in the circulation battle.

The Commissioner's robust reaffirmation was welcome to those who are keen on this most exciting project and was particularly welcomed—it was mentioned specifically by a number of people—in what I would call financial and City circles. It also fits in with the optimistic and realistic expectation of the Commission President, Jacques Santer, who has now on three separate occasions emphatically reaffirmed his expectation that seven to nine countries could be in line to join in the unified currency system at, or close to, the target date without any impairment of the existing convergence criteria.

There is an interesting possibility that one of the best candidates for convergence criteria realisation will be the United Kingdom although, officially, the Government have our reserve on the opt-out, which seems to meet with the support of most of my hon. Friends for the moment. That is a reserve which in no way says that the United Kingdom is against monetary union or Britain joining it; it just says that we will make that crucial decision at a later date depending on the circumstances that are then emerging.

In the same November statement, Mr. Silguy reiterated, with enormous justification, once again the main objectives of the single currency system. The first is to boost growth and job creation in the future throughout the single market. My hon. Friend the Member for Ludlow is right to point up differences in unemployment figures because the member states' economies have not reached the full real economy convergence, aside from the statistical convergence that is necessary under the programme, that will gradually come as more and more intra-community trade develops. We know already how high our export ratio is to the other European countries.

Secondly, Mr. Silguy reiterated with great emphasis the need to eliminate the unnecessary bilateral and multilateral exchange costs that come from having different currencies in a single market. It is an interesting phenomenon, and a puzzle to me, that Conservative Members, and politicians and others in the United Kingdom generally, who are rightly keen on the single market in all its aspects, which are numerous, from specifications to measurements to trading conditions to standards—the whole edifice of the single market, which is more than just a trading area, as we know—are against the most essential lubricant of the single market; the need for currency harmonisation.

Those extra costs, which exist as a result of having differential currencies, aside from the disutilities of the fluctuations that occur, are estimated conservatively to be a minimum of 0.5 per cent. of combined European Union GDP. That is a vast amount of unnecessary expenditure. I should have thought that it was a good Conservative philosophy not to be in favour of unnecessary, expenditure and wasting of money.

Thirdly, the French Commissioner said that one of the crucial objectives was the cutting of costs for companies—the corporate sector is the most important aspect of that—to ensure that they are not burdened unnecessarily. Conservative Members are rightly keen, particularly with our deregulation policies—this is an aspect of that—to cut the unnecessary costs that companies face. During the past six to nine months, virtually all finance directors have probably expressed the view that the single currency is necessary.

Most important, however, is the need for the single currency not merely to satisfy keen pan-European politicians—regardless of the member state to which they belong—or, indeed, the central banking elites, but to be in the interest of consumers, who, under the Maastricht treaty, are now citizens of the European Union as well as of their own countries. European consumers—patriotic British, French, German and Italian consumers—are increasingly mobile: they want to move around the European Union in economic as well as social and holiday terms, and they rightly want the best possible bargain as purchasers of goods and services.

Boosting mass interest of consumers in the prices of consumer durables and all the available services—to be quoted in the same currency denomination or price expression—would be of enormous advantage to the public. They are slowly beginning to realise that, although—as has been said—they are understandably apprehensive because of false propaganda in the British papers.

I shall give an example of what I am describing, to calm the excited spirits of some of my colleagues who, as we know, wish to live in the past. It is generally recognised that, for some inexplicable reason, motor car final retail prices in Britain are generally higher than those in Belgium, France, Germany and other European countries. Apart from duty differences, no one really knows the reason for that. About four years ago, the Department of Trade and Industry carried out a wonderful investigation, but reached no conclusion other than blaming the sinister impact of some intermediaries—and even that was not properly explained.

We can imagine how the British public—Mr. and Mrs. John Citizen—would feel if car prices were expressed in the same currency denomination, in terms of the euro or whatever it will be called in the future. They would be able to compare the prices of many other consumer durables as well. That is the magic of the single currency and the single market. It is better to bear that in mind than to theorise about convergence criteria, low inflation rates and all the other matters that—understandably—preoccupy the central bankers.

The Commissioner's November statement was important because it provided the basis for Commission and European Union plans for Ministers' policies, and because it was accepted by member Governments at the time. The Commissioner rightly avoided any partisan comments about what the United Kingdom or Denmark should finally decide to do, equipped as those countries are with their reserve opt-out. However, he felt strongly—and I agree with him—that it would be in the United Kingdom's interest to remain an active participant in the detailed preparations for the commencement of the new currency on 1 January 1999.

I thank the Government wholeheartedly: although, for self-evident reasons, we have that constitutional, legal and political reserve, they have participated fully in all the working groups and other preparations as though we were going to join the single currency in any event. That is, of course, unavoidable; it would be very difficult for the Government not to participate, and no final judgment arrêté arises. The Government are simply being very practical. I believe, however, that their actions will in due course help to reassure the public that a single currency is an attractive proposition.

We are not talking merely of the practitioners in the financial markets, and all those who must deal with the increasingly old-fashioned syndrome of European currencies clashing and bumping against each other without any real rationale. Let me offer a chilling reminder of the behaviour of the United Kingdom's national currency. Since 1950, or the year before, when the deutschmark was established, the pound sterling has fallen by 90 per cent. against the deutschmark, which is the most successful currency in Europe.

The general perception is that, in broad output and production terms, the German economy overtook the British economy—sadly for this country—in 1955. Since then, the pound sterling has depreciated against the deutschmark by 79 per cent. Lest those of us who are consumed—as we all too often are—by huge prejudices against our friends in Italy think that the Italian lira has performed less well, I should point out that the difference is not great: the lira has depreciated by 84 per cent.

The sad reality is that that progressive depreciation of the pound has not built the United Kingdom up into a strong, high-output, dynamic economy. Economists never agree about anything, but if one factor can be singled out as the most important it is the rate of reinvestment in new assets. That must be the characteristic of the future strength of production, and of the balance between manufacturing industry and other services in significant economies.

I only wish that Britain were ahead of Germany now. We would have been if, in the 1950s, 1960s and 1970s, we had pursued different currency and reinvestment policies—but, for numerous reasons, that was not to be. Certainly, the latest devaluation of sterling has led to no long-term, durable improvement in the British economy, although I welcome the short-term cyclical improvement. It is good to see the economy recovering in a short-term statistical sense.

We should note the courage of the French in maintaining a high-currency policy despite the pain being experienced in Paris. The French franc is now higher against the pound than it was in December, despite what the British newspapers have said. That policy is now creating a high-production syndrome in France, similar to that in Germany. It will achieve the desired result in the longer term.

We need to exercise common sense in regard to the single currency. We must wait to see how convergence develops. I think that the United Kingdom will be a prime candidate, but we should show more self-confidence, and feel more excitement about the future and more willingness to explain the issue to the public. I am sadly, but understandably, reluctant to agree with my hon. Friend the Member for Ludlow.

11.26 am

Sir Teddy Taylor (Southend, East)

Although my hon. Friend the Member for Harrow, East (Mr. Dykes) has been consistent in his views over the years, I think that, as a truthful person, he would accept that the opinions that he has just expressed are now held by a minority in the Conservative party. The party has woken up. I find it a tragedy that the Labour and Liberal Democrat Benches are virtually empty. We simply cannot persuade Labour and Liberal Members that monetary union is not a miracle, and will not bring benefits.

Mr. Sweeney

Does my hon. Friend agree that the almost complete absence of Opposition Members demonstrates that Labour is soft on European union, and soft on the causes of European union?

Sir Teddy Taylor

The last thing that I want to do is attack the Opposition parties. I want to persuade them that they are supporting a policy that will create unemployment, misery and degradation. I only wish that every Labour and Liberal Democrat Member would read the book by Mr. Connolly, the man who headed the department dealing with economic and monetary union in the Commission. He put at risk an easy, cushy number— a big job with big pay and big prospects—because he believed passionately that economic and monetary union would create mass unemployment and civil unrest. Unfortunately, however, there is nothing that we can do to persuade people.

Apart from my hon. Friend the Member for Harrow, East, few Conservatives would support monetary union. The Minister—she, too, is a truthful person—could help to involve the public by answering five brief questions. First, what about the tragedy of France today? France is one of the loveliest countries in the world, and contains the most fascinating people, but it is now creating more and more unemployment. It is putting people out of work and creating human misery solely for the sake of a mad policy of artificial exchange rates, which every Conservative wishes to have nothing to do with. Surely the Government must accept that our experience in the exchange rate mechanism, France's current tragedy and Germany's problem of 4 million unemployed demonstrate beyond a shadow of doubt that fixed exchange rates are simply a recipe for mass unemployment.

As for civil unrest, if Britain were involved in monetary union—if we had high unemployment and, for good European reasons, the central bank decided to raise interest rates—people would be outraged. They would protest. They would go to the politicians, and would find that they could do nothing. I wish that the Government—despite the sincere views of the tiny minority in our party who still support the crazy socialist nonsense of fixed exchange rates and monetary union—would just come out and say, "We will have nothing to do with it."

However, I move to my questions. First, is it true that, if we get involved with the euro, all our gold and other reserves must be handed over to the European central bank? People should be told the answer. I hope that the Minister will answer so that, through Hansard and through our wonderful press, people can be told the facts.

The second question is: is it true that, if Britain were involved in the euro, no Minister, no individual, no banker, not even my hon. Friend the Member for Harrow, East would be allowed to make representations to the bank about its policy? We all offer advice to the Bank of England and to the Chancellor of the Exchequer. It is appalling that we are going to have a central bank running a nation's economic affairs and that, under the Maastricht treaty, we will not even be allowed to make representations to it. Of course, that may just be silly Euro-sceptic nonsense, but the Minister knows the facts. Her splendid civil servants, who are running up and down to all these meetings all the time, know the facts. Is that true or not? We must be told everything about that matter.

The third question is important to the Conservative party. I was delighted—because I know that, if anyone can solve this problem, our Prime Minister will—to hear the Prime Minister say that Britain will not re-engage in a fixed exchange rate system such as the exchange rate mechanism. My reading of the Maastricht treaty—this is only as interpreted by the European Court of Justice—is that one cannot join the single currency in the first stage unless one goes through two years of fixed exchange rates.

During those two years, in which lots of money will be splashed around to try and create convergence, there will be lots of misery and unemployment, but is it true that, if one is to be one of the first participants in the single currency, one must go through two years of fixed exchange rates, which, unlike the ERM, will be irrevocable and irreversible? If so, it would seem from what the Prime Minister said that there is no way in which Britain could be one of the first participants in the euro. People should know about that.

Mr. Barry Legg (Milton Keynes, South-West)

I am grateful to my hon. Friend for raising this important point. I would like to shed a small bit of light on this matter. When he returned from the Madrid summit, the Prime Minister said to the House that the convergence criteria under ERM conditions no longer applied. Does that not reinforce the fact that the decision to move to a single currency will be primarily a political rather than an economic decision?

Sir Teddy Taylor

My hon. Friend is expressing the sort of fears and worries that I have. It is exactly because of that that I should like the Minister to say what the truth is. If we are going to be one of the first guys in the euro, do we need two years of fixed exchange rates? If so, does the Prime Minister's statement mean that we will not be one of those chaps? That is a simple question; it is not complicated. It would be helpful if the Government would answer yes or no.

Mr. Tony Marlow (Northampton, North)

I regret breaking into my hon. Friend's speech, but he will know that, subsequent to the statement in the House, my right hon. Friend the Prime Minister answered a question on this issue from a prominent friend of ours among the Opposition, and the matter is not as straightforward as it appeared when he made his statement on his return from Madrid. I remind my hon. Friend that the criteria are set out in the Maastricht treaty, which is the law of Europe, and that, to have any change in the Maastricht treaty, there must be a treaty amendment, which would have to be ratified by every country in the European Union.

Sir Teddy Taylor

I am always grateful to my hon. Friend for explanations. He shows that the situation is confusing, but this is where the Treasury can help us. We want to know the facts. Is it true that we need two years of fixed exchange rates and, if so, does the Prime Minister's statement mean that we will not be involved?

The fourth question we must ask is: what are the conditions for countries that join at a later stage? It would be appalling if what happened under the then Chancellor of the Exchequer, Lord Lawson, were to happen again. I well remember how Britain unofficially joined the ERM without anyone knowing about it. This is meant to be a democratic House of Commons and assembly, and we became locked into that business without anyone being aware of it. We did not join officially; we joined unofficially. I hope therefore that the Government will help to clarify those four issues, which are terribly important. In particular, will they say what the conditions would be for joining at the second stage and whether the House of Commons would have an opportunity to express a view?

I have opposed the European Community from the beginning, and have believed passionately that it means misery for poor people, high prices and policies such as the common agricultural policy that cannot be changed. Of course, the Government will be aware that this year the CAP budget is £9 billion more than it was two years ago. We are all told that it will be reduced, but we know that all those assurances are absolute rubbish. It is terribly important that the Government answer this simple question: do they believe that, before any decision is made to contemplate joining the European Union, the people of the country must be asked?

Frankly, I do not think that most people are aware of the matter. It is not simply a matter of saying, "Do we have a currency that we can go to France and to Italy with?" Basically, if one accepts the single currency, in effect one is accepting a single European state without democracy. Mr. Deputy Speaker, you know that I am a well-behaved person, but the one thing that sickens me, and the only time that I feel like punching people—I really mean this—is when I hear a Conservative Minister say, "We are going to fight a federal Europe." There is nothing more sickening or misleading than that statement because a federal Europe would be infinitely better than what we have. It would at least have a democratic base and lay down guidelines on what belongs to the centre and what to member states. With a single currency, we are planning a single European state without democracy and, more important, a socialist state.

The whole principle of the European Union is artificial pricing, which unfortunately creates massive problems. The monstrous CAP policy, which my hon. Friend the Member for Mid-Kent (Mr. Rowe) supports so lustily, has meant that the average family in Britain spends an extra £28 a week in higher food prices and taxes. Nothing can be done to reform it—if only people would wake up to the fact that that simply cannot happen. The average family in Britain will pay an extra £5 a week for the net membership fee this year. Poor people are suffering and jobs are being destroyed.

Sadly, as Mr. Connolly rightly stated, across the whole of Europe, including dear old France, fixed exchange rates, where they are applied, are putting decent people out of work unnecessarily, and creating an appalling mess and misery. Question No. 5, as the Minister is aware, is: do the Government think that big countries or big organisations have a better future than small countries? Around the world today, all conglomerations of states are not doing well; small countries controlling their own affairs and applying Conservative policies are doing very well.

I shall give just two tiny examples. The first involves a little country called Switzerland. I am sure that my hon. Friend the Member for Harrow, East will have heard of it. How did its exports to the European Community do last year? Strange to say, they increased dramatically more than Britain's did, and that happened by Switzerland not being in the European Union.

Referendums took place in Sweden and Norway. In Norway and Sweden, in which I am interested and which I visit regularly because I am involved in the Ansvar insurance company which promotes temperance, all the people were told that they had to join the European Union to safeguard jobs. The same old Confederation of British Industry blokes we have here told them all that joining was vital. Poor old Sweden voted yes, although I told it not to, and Norway voted no.

What has happened since? Sweden is in an appalling economic mess. I have never heard of such devastating Treasury action taking place in any European country. Norway has never had it so good. If we look around the world—at little countries such as Japan and other countries—we will find that prosperity and growth are occurring in small and independent countries and not in ones that get involved with the big battalions.

Mrs. Gorman

What about that little country Great Britain, which is doing more trade with China than it does with any of our European partners?

Sir Teddy Taylor

As always, my hon. Friend is right. She showed great courage and determination in saying such things when we were laughed at and harassed in the party.

Mr. William Cash (Stafford)

Yes.

Sir Teddy Taylor

Yes, indeed. I know that my hon. Friend the Member for Stafford (Mr. Cash) has not had an easy time, but my hon. Friend the Member for Billericay (Mrs. Gorman) has had a terrible time with people attacking her. Her views are now accepted by the vast majority of the party, and I am obviously glad for her. Still, having said that, I should like to pay tribute to her courage and determination throughout this period.

We must remember that, if we are to survive as a small country off Europe we must go for world trade, low costs and the Conservative policy of getting away from artificial subsidy. I believe that the Economic Secretary to the Treasury is a straight and honourable person and I hope that, instead of voicing the usual Treasury nonsense, ambiguous words and things that mean nothing, she will tell people five simple facts. I have asked her for factual information. I know that we will receive that information from her and that it will be a major contribution to this desperately important debate.

In the next election, how great it would be if it was made clear to the people of Britain that the Conservative party will have nothing to do with this undemocratic, socialist job-destroying nonsense, and that the Labour party—sadly for the working class—will be supporting that nonsense, as will the Liberal Democrats, for reasons that I have never understood. If the people had a choice, they could vote for freedom and liberty and the end of all this nonsense. If the people could have a choice, it would be great, but it would require the Government to take a firm stand. I am sure that the Minister would be willing to do that; I hope that the Government will also.

11.40 am

Mr. Andrew Rowe (Mid-Kent)

My friends and family sometimes tell me that one of the many reasons why I have never been asked to join the Front-Bench team is that I have an uncanny habit of naively exposing the fact that I am not as sophisticated or well informed as many people, and that I should keep my mouth shut when I do not know what I am talking about. I am not an economist and, unlike many of my hon. Friends, I feel insecure in talking about economic concepts. There is not a great deal of harm, however, in exposing to the House the type of difficulties that the ordinary punter faces in this debate.

I was brought up to believe that devaluation, on the whole, was to be avoided. As my hon. Friend the Member for Harrow, East (Mr. Dykes) has pointed out, however, we have been engaged in devaluing the pound since the time I was born, and certainly since the second world war, yet those who most passionately resist any attempts to devalue never seem to talk about any of the costs that are involved therein.

Mr. Bernard Jenkin (Colchester, North)

Everyone is against devaluation or debasement of the currency. It is important to realise that devaluation of the currency occurs when one has economic inflation and then resists the consequential adjustment of exchange rates, leaving an imbalance between the exchange rate and the real value of the currency which causes the economic dislocation. That is what occurred when we were in the exchange rate mechanism, and that is what occurred under the gold standard.

Mr. Rowe

I bow to my hon. Friend's superior knowledge, but his contribution does not explain the devaluations that occurred in the years before the European Union was even dreamed of.

National power is one of the main issues in the debate. The truth is that the world was once on the gold standard because it was the currency that the United Kingdom used. Worldwide, people wished to be linked with our currency to give their currencies credibility—a function of the enormous power that was wielded by this country. I have told the House before that we are no longer in a position to dictate to anyone in the world. That has marked consequences, shown most clearly in the Suez crisis when the world decided that it did not wish three sovereign states to continue a war and simply pulled the plug on them.

We are in no position to stand alone. Our armed services are so small that, with the exception of certain fire-fighting activities, there is no way that we can operate alone on the world stage. We require the sort of co-operation that is taking place—one hopes with happy results, eventually—in Bosnia. Except in certain cases, we do not even make our own armaments. We make bits of them because we are entirely dependent on our partnerships with manufacturers in other states. The process of gradually moving towards one another is accelerating.

As an ordinary layman, I become rather confused about why there is the tremendous imperative from above to drive us towards a single currency. A single currency will emerge during the years ahead, as sure as night follows day, as we do more and more business with our European partners. As my hon. Friend the Member for Harrow, East said, as more people travel through Europe and find that constant currency adjustments are expensive and tiring, we shall find that businesses increasingly wish to make use of a single currency unit. Big businesses will start the process, small businesses will follow, and tourists will follow that. In my lifetime, I do not expect to be able to buy a loaf of bread in my village bakery—should it manage to resist the supermarkets that long—with a single European currency unit.

Mr. Dykes

I am grateful to my hon. Friend for giving way. I did not give way at all, but he has kindly referred to me twice. Is it not interesting that consumers who go to other European countries are increasingly using credit cards rather than getting too much currency? The equivalent, therefore, is that the single currency becomes the credit card without any charges or expenses.

Mr. Rowe

That is entirely true.

Having a national currency is no guarantee of independence. I have just returned from Nepal, which is desperate to preserve its national independence and have its own currency. The idea that it is not wholly overshadowed by India, its enormous neighbour, is nonsense. I do not believe that the preservation of our national currency is a guarantee that we will not lose our capacity to act independently. That capacity has been substantially diminished over the years, for the reasons that I have set out.

We are engaged in an extraordinarily acerbic debate about something that has been made more immediate than it should have been by the pressures from the European Union and the central bank. I should much prefer us to evolve towards the single currency which I am sure will follow.

Mr. Marlow

My hon. Friend is making a case, albeit not a strong one, for joining a single currency. Given that any single European currency would include Greece and Portugal—that would happen if he were to have his way—would it not be rather better to join with the dollar and the United States?

Mr. Rowe

I am reluctant to join any closer to the United States. I am fond of the United States and think that it is a fine country, but I should infinitely prefer to resist a great many of the influences that come from it. I do not wish to be closer to a country whose racial problems, for example, could be imported into this country. I do not want such a divide in the United Kingdom. The American culture seems to be destructive of many of the values that we in the House hold dear.

Mr. Charles Kennedy (Ross, Cromarty and Skye)

I apologise to the hon. Member for Ludlow (Mr. Gill), who initiated the debate, for being elsewhere earlier and not hearing his speech. Does not the intervention by the hon. Member for Northampton, North (Mr. Marlow) tell us something interesting about that section of the parliamentary Tory party? The fact that the Americans have concluded a North American Free Trade Agreement in which, unless I have missed something, they did not expect the United Kingdom to participate speaks volumes. Does the hon. Member for Mid-Kent (Mr. Rowe) think that such an approach has any economic coherence given that we are part of a single market?

Mr. Rowe

It is fair to say that my hon. Friends do not stress the fact that we should also join Mexico, although they may prefer Mexico to Greece and Portugal.

It is important not to lose sight of the fact that the origins of the European Union arose from a passionate desire that Europe should not yet again plunge the world into war, the cost of which would dwarf any costs that might be incurred by joining a single currency. This country was ruined as a consequence of our incapacity to contain German expansionism. We have been provided with a mechanism for containing any possible future threat from such expansionism and I am extremely wary of taking steps to turn our back on that.

Mr. Legg

Will my hon. Friend give way?

Mr. Rowe

I think that I have given way enough. Other people wish to speak.

The European Union must make an effort to contain precisely those pressures that have cost the western world enormous amounts of money, resources and anxiety in Bosnia, to take just one example.

We should therefore evolve towards a European currency, which will come about inevitably, without our having to make artificial efforts to create it. Our membership of the European Union is a partnership that stands by far the best chance of resisting the enormous internal conflicting pressures within the continent of Europe. I hope that we shall not try to bulldoze the Prime Minister and the Government off the strongest position that they can hold, which is that, if other countries adopt a single currency, the United Kingdom will then consider whether it would be beneficial for us to join. The pressure that some of my hon. Friends wish to put on the Prime Minister to say that, whatever happens in the European Union, we shall never consider joining a single currency, would weaken his position absurdly. I hope that they will cease to pressure him in that way.

11.52 am

Mr. Anthony Coombs (Wyre Forest)

First, I congratulate and thank my hon. Friend and parliamentary neighbour, the hon. Member for Ludlow (Mr. Gill), for giving us an opportunity to discuss this important subject and for pointing out that a single currency enjoys not only minimal popular support in this country but dwindling support throughout Europe. The gulf between the political elite in Europe and popular opinion on this issue is increasing, which is extremely dangerous.

I was going to begin by saying that the single currency is an idea whose time has come and now, thankfully, gone. Far from moving smoothly towards its conclusion in 1999, as my hon. Friend the Member for Harrow, East (Mr. Dykes) would have us believe, its wheels are falling off as it moves forward. We have been told that the convergence criteria are being achieved. But only Luxembourg—not exactly a major player in Europe—currently meets those criteria. In 1993, the franc had to be loosened from its 2.5 per cent. band to a 15 per cent. band within the ERM.

It is interesting to read some of the comments of former Maastricht enthusiasts in France, quoted in The Economist this week. Julien Dray, a leading left winger and author in 1992 of a pro-Maastricht book, said that if the fight against the budget deficit was simply to meet the Maastricht criteria, our fellow-citizens will rightly soon be saying that they have had enough of this Euro-construction which requires nothing but sacrifices in the name of an Eldorado which no one is any longer sure even exists. Even Martine Aubry, a former socialist Employment Minister, who happens to be the daughter of Jacques Delors, conceded that a single currency was not worth breaking the country to acquire". Jacques Delors has argued that, if the French and German economies slow down, the deadline for European monetary union and a single currency will not be met. My hon. Friend the Member for Harrow, East would like us to believe that the French and German economies are not slowing down. The latest figures show that, for the past three months, German gross domestic product has been falling. In France, industrial production over the past three months declined by 6.4 per cent. If that is evidence of their moving smoothly towards the convergence criteria, those who argue it are living in cloud cuckoo land. Theo Waigel, the German Finance Minister, is also gradually distancing himself from the idea of a single currency by arguing for additional criteria and hinting that Italy and possibly France could not meet them.

The wheels of the single currency are undoubtedly falling off, and the reasons are obvious. First, the idea of a single currency is fundamentally flawed. At a time when European countries need to be more flexible in terms of dealing with the "challenge of global competitiveness", a single currency would impose a straitjacket on them by requiring unrealistic convergence criteria in fiscal terms. It would have no popular mandate in terms of the huge transfers of money from one country to another that would be required to make it work. For example, interest rate changes would have a far greater effect on Britain than on other European countries, for the simple reason that more people in Britain own their own homes. It has been calculated that, in Britain, the effect of interest on ordinary householders as a proportion of their household debt is 10.9 per cent., whereas in Germany it is only 3.9 per cent. and in France it is 3.2 per cent. So the effect of ceding decisions on interest rates to a supranational body would be far greater on British householders than it would be on French or German householders.

Secondly, the Maastricht criteria are, inevitably, heavily deflationary, especially if they are related to the strongest currency, as the Germans insist that they must be, through the exchange rate mechanism. As a result, as we have seen in France, Germany and other countries that have become constricted into preparations for the convergence criteria, our economy would probably gradually contract.

Moreover, budget deficits, the reduction of which is a major Maastricht criterion, will not be reduced as a result of cutting Government spending. That would be a virtuous way of achieving the criteria, especially for countries like Germany where nearly 50 per cent. of the country's resources go to the Government. Instead, they will be reduced by raising taxes, which will make the problem far worse in the long term. It will also worsen the problem of Europe's global competitiveness. So the criteria impose a fiscal straitjacket, whereas strenuous slimming is needed.

The third reason why it is becoming increasingly evident that a single currency is unrealistic is that it is not only anti-competitive but totally unnecessary. The Germans are so keen on it because they want to lock other countries into the very high social costs that they now endure. No less than one third of GNP in Germany goes on maintaining the welfare system, and the add-on to the average wage to cover welfare costs is no less than 80 per cent. As a result, the German economy is becoming increasingly sclerotic, and Daimler, Volkswagen and Siemens—companies that one would think of as paradigms of German competitiveness—have lost 150,000 jobs between them in the past few years.

It is small wonder, therefore, that even people such as the chief executive of the CBI, Adair Turner—he has never been exactly regarded as a Euro-sceptic—have described the inevitable concatenation of a single currency with the social chapter as "an employment-destroying disaster" here and throughout Europe.

A single currency is also unnecessary, and even the EC is admitting that there is no particular correlation between exchange rate stability and investment or trade flows within the trade bloc. As for Britain being marginalised, I would frankly prefer to be marginalised if our economic performance continued to improve as it has done in the past few years when we have not been part of the ERM, as opposed to how constricted we would be were we a part of it. As evidence for that, the president of the German equivalent of the CBI recently said not only that Britain had attracted nine times as much inward investment as Germany in the past 15 years but that it was the European country best equipped to face the challenge of global competitiveness. That is a result of the flexible, free-market policies that we have been following in this country, away from the constrictions of European monetary union and the single currency.

The main flaw in the single currency enterprise is that its main aims are not primarily economic—however flawed the arguments may be—but political. Helmut Kohl talks about an irreversible process for which decisive steps will follow in the next two years".

Mr. Rowe

Does my hon. Friend agree that the Union between Scotland and England was primarily political?

Mr. Coombs

Precisely. My hon. Friend makes my point for me.

When one sees the vilification poured on Bernard Connolly for having the temerity to challenge the intellectual basis on which political union and the single currency are based, the concern felt by many in the EC and the Commission at the feebleness of their arguments becomes ever more evident. The irony is that a single currency will not work unless the conditions for political union are in place. It is obvious that the conditions for political union are not in place, and there is no public support for regarding Europe as a federal body or entity in the way in which a successful single currency would inevitably require.

It is time that the Government recognised that a single currency is a flawed and eventually disintegrating enterprise. It would be very much in their interests if they committed themselves to a referendum on a single currency, if it ever happens—although I do not think that it will ever come to that, and the matter will remain, happily, entirely hypothetical.

Contrary to the Labour party—which is six-sided and hypocritical on this matter as it is on so many policies—we would gain a great deal of political credit if we recognised the single currency as the chimera and myth that it undoubtedly is, and said that to the British electorate.

12.4 pm

Mr. Richard Shepherd (Aldridge-Brownhills)

I am pleased to follow my hon. Friend the Member for Wyre Forest (Mr. Coombs). My hon. Friend referred to Bernard Connolly, who has been a good and faithful servant of the Community and has pointed out some of the inherent problems with the way in which monetary matters are managed.

The debate has focused on a subject which has consumed a great deal of the 20th century: the adjustment of exchange rates between one country and another. We can go back to the post-first world war settlement, Winston Churchill, the gold standard and the famous and wonderful pamphlet by Maynard Keynes, "The Economic Consequences of Mr. Churchill", the Bretton Woods settlement, through to the fixing of exchange rates by the mechanism that Europe developed. Unfortunately, we joined that system and had some very unhappy experiences in it.

My purpose is not to look at the economic side of the matter, although we know full well that only 44 per cent. of our total trade—visibles and invisibles—is with the continent of Europe, that the principal foreign currency in which we trade is the United States dollar and that we have a critical relationship with the US. Whether the proponents of the single currency or its opponents like it or not, our economic cycles seem to follow more closely those of the United States than those of the central European countries.

I wanted to look at the constitutional argument, which has divided part of our Government and Opposition Front Benchers, and particularly the Leader of the Opposition. Article 107 of the Maastricht treaty, which is justiciable, states: When exercising the powers and carrying out the tasks and duties conferred upon them by this Treaty and the Statute of the ESCB,"— that is, the European system of central banks— neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body. The Community institutions and bodies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the ECB or of the national central banks in the performance of their tasks. That is reinforced in chapter 1, article 7 of the constitution of the European system of central banks.

I understand that to mean that no elected representative of the British people—including the present Chancellor of the Exchequer or, should Labour come into office, its Chancellor—may make representations to the central bank in respect of monetary policy, to cite one area. This is a huge constitutional change, and so profound. How is it possible for the Leader of the Opposition to say that he has no constitutional problem with that?

If the Leader of the Opposition becomes Prime Minister, what will he say to the millions who vote for Labour when our economy is out of joint with the central European economies? What will he say when interest rate policies pursued in Frankfurt are not appropriate for the British economy? What will he say to all those who elected him? Will he say that we no longer have the constitutional power? Is that what the present Chancellor of the Exchequer is saying by his promotion of the endeavour?

I suggest that it is a profound constitutional area and it startles me slightly to understand that, on the very basis of article 107 and the subsequent articles, any British Government could contemplate turning round to their people and saying, "I am afraid central European interest rates, although not appropriate for us, are the governing factor." We will then ask what the Government are doing about that and whether they are making the sternest, strongest representations to the government of the European central bank. The present Chancellor would no doubt reply, "Oh no. What does it matter? I no longer have authority as we signed it away by treaty without any consultation with the British people." I have not heard a reply from the Prime Minister on that subject, and we have great difficulty in pinning down the Chancellor to specific detail on such matters of great importance.

I had thought, and this may be based on the over-optimism of someone who watches things come and go, that the clear experience of joining a fixed exchange relationship, which ended so tragically and unfortunately less than three years ago, would have exorcised from the mind of the House the desire to enter into something even more absolute. Let us remember that exit from the ERM gave us the ability to make our interest rates more consonant with the needs of the British economy. That was the constitutional power of the British Government.

Now, under the Maastricht treaty, the Leader of the Opposition says that the Labour party has no constitutional difficulty about denying us, the people, the right to influence output, employment and all the necessary apparatus of sensitive management of an economy.

12.10 pm

Mr. Mike O'Brien (North Warwickshire)

I hesitate to intervene in the debate lest I interfere in the private grief of the Conservative party. I suspect that all parties have their own reservoirs of private grief to entertain them. The Minister and I have agreed to be relatively brief, and for that reason I should prefer not to take any interventions as there is a lot to say on the issue.

I welcome the debate and I congratulate the hon. Member for Ludlow (Mr. Gill) on raising an issue of such enormous importance to the people of Europe in the coming decades. It will not surprise him when I say that I fear that the Labour party does not agree with him. The Labour party approves of the principle of economic and monetary union, but believes that questions about the practicalities still need to be resolved. In principle, we believe that in the long term a move towards economic and monetary union through the creation of a single currency would produce significant benefits for the people of Britain and Europe. In particular, a single currency would remove the cost of currency transactions, which have been variously estimated to cost in excess of £15 billion per year. The hon. Member for Harrow, East (Mr. Dykes) said that such transactions account for 0.5 per cent. of GDP of European currencies. It is also likely that a single currency would boost inward investment by reducing exchange rate risks, and in the long term it would create a more stable economic environment for industry by reducing currency speculation.

Unlike the Government, the Labour party has a clear principle to guide it when assessing the criteria and practicalities of entry into a single currency. Getting the circumstances right is important to the Opposition. We will take a hard-headed, businesslike view of the costs and benefits of a single currency. If approached wrongly, a single currency could do enormous damage to the British economy; if approached correctly, it could be a great stimulus to trade expansion, new jobs and prosperity.

The Opposition's criteria for judging the issue are clear. We believe that the convergence of the real economic performance of member states is a vital precondition of economic and monetary union. Convergence must be based upon improved levels of growth, jobs and productivity, and not just on monetary objectives alone. That is why we have long argued that the Maastricht convergence criteria need to be applied flexibly and that real economic convergence is of primary importance. Indeed, the hon. Member for Milton Keynes, South-West (Mr. Legg) said that the Prime Minister had suggested that the Maastricht criteria no longer applied at all—I hope that the Minister will tell us whether that is the case.

I was pleased to see that page 1 of the report from the European Monetary Institute on the circumstances for EMU contained the following sentence: For there to be a successful European currency area, a high degree of sustainable convergence of economic performance in the participating area is a pre-requisite". We in the Labour party agree with that. I was also pleased to note that during a recent debate in European Standing Committee B the Paymaster General agreed that Labour's policy that economic convergence was a prerequisite of entry to a single currency had now been accepted by the Government.

The Labour party also believes that, on entry, we should be confident that British industry will be able to compete effectively within the single currency area. Furthermore, and in response to the hon. Member for Aldridge-Brownhills (Mr. Shepherd), the Labour party has always said that it wants the Council of Economic and Finance Ministers to be developed as the political counterpart of the proposed European central bank to give the public a voice in shaping economic policies. The move towards a single currency must also be based upon the consent of the British people.

The Labour party's first commitment in Europe is to jobs for our people. That is why we back the Swedish proposal to write into the Maastricht treaty a clearer commitment to full employment. Labour's vision is not of a Europe for bureaucrats or politicians, nor is it just a Europe for business—although we want business to succeed and prosper—our view of Europe is a community for ordinary people. We want workers to have better rights at work. That is why the Labour party will sign the social chapter and join our European partners in setting a minimum wage. We also want the unemployed to have jobs, which is why we put economic convergence before monetary criteria for joining the EMU.

The Opposition want a Europe in which Britain has a central role—where it is, in the Prime Minister's own words: Where it belongs, at the very heart of Europe". Under the Tories, Britain has been reduced to the sidelines in Europe. The Prime Minister has sacrificed the interests of Britain to the interests of the Tory party.

The Tories are now so divided that they cannot agree the agenda for Britain's future in Europe. Some of them would crawl forward; some of them would go into reverse. I have made the analogy before and I will repeat it today. The Prime Minister reminds me of the driver of a stalled, clapped-out old bus marked "Conservative party". He sits there watching his passengers squabble while he tells them that he is not going to start the engine. The reason is that he is unable to move. He knows that if he starts and moves either way some of his passengers will get out. Two of them have already vacated the old bus. The Prime Minister dares not move, so he spends his time inventing excuses for doing nothing.

Mr. Graham Riddick (Colne Valley)

Will the hon. Gentleman give way?

Mr. O'Brien

The hon. Member was not present for the entire debate, so I will not give way to him.

Because of the Government's policies, Britain is marginalised and isolated. We do not know whether the Government support the principle of European monetary union. The Prime Minister has been quoted as saying: There is no more important issue facing the European Community than the path we choose towards economic and monetary union. We are all committed to this goal. Does that remain the Government's position? Who knows, least of all, I suspect, the Prime Minister? The Deputy Prime Minister has said: No truly unified market can exist without a single currency. A close association of monetary policies will be needed if the single market itself is not to be put at risk. Is that Government policy? Who knows, least of all the Deputy Prime Minister? Are the words of the former Conservative Prime Minister, Baroness Thatcher, the policy of the Conservative party? Is it based on the words of the Secretary of State for Defence? He has said: Economic and monetary union are a long way to political union and no Government can give up the government of the UK. Who knows whether that is Government policy, least of all the British people? We simply do not know the Government's principles on this matter. As a result, as the right hon. Member for Old Bexley and Sidcup (Sir E. Heath) recently said, so simply but accurately: Our partners in Europe do not listen to us. They do not listen because the Tories continue to play the British hokey cokey—in, out, in, out, shake it all about. They are having a pointless little dance, which is played to placate the egos of the Euro-sceptics on the Conservative Back Benches, but which, by turns, now simply irritates or amuses our European partners.

It is fair to say that over the years all political parties have had their internal disagreements about Europe. It is also fair to say, however, that historically there has always been leadership from the leaders of both parties, whether Macmillan or Gaitskell, Alec Douglas-Home or Harold Wilson, the right hon. Member for Old Bexley and Sidcup, Lord Callaghan or Baroness Thatcher. In each case, leadership was displayed—a sense of direction was clear for the Government of the day. Today, we have a divided, disorganised and disunited Cabinet, which fails to provide the sort of vision that Britain needs on the European issue.

The decision to publish a White Paper on the intergovernmental conference was dictated by internal struggles within the Tory party. It was a victory for the Europhobes. It is vital that British interests in Europe are determined not by parties' internal problems but by a genuine appreciation of where those interests lie.

The hon. Member for Southend, East (Sir T. Taylor) asked the Minister five questions. Let me put our five questions about the White Paper and Government policy. Do the Government agree with the Chancellor of the Exchequer, who said that a single currency is not a threat to the nation state"? Do they agree with the Deputy Prime Minister that a single market needs a single currency? Can they say whether, in the unlikely event of their re-election, a single currency is a possibility in the next Parliament, if the economic conditions are right? If the economic conditions were right, would the Government in principle favour persuading the country that it was right to join a single currency? One must ask whether they are prepared to agree with the following statement: Some observers hope—and others fear—that economic and monetary union as set out in the Maastricht treaty will be a step in the direction of a federal Europe… I believe that such hopes or fears are unrealistic". Do they agree with that statement by the Prime Minister? Of course they do not.

The Government do not know what they want on Europe. In a sense it does not matter, because by the time the decisions have to be made, the Government will be gone. The divisions in the Tory party will be played out, as we have seen in this debate. The Tory party is taking up positions from which to fight its civil war in the long period that it is about to undergo in the wilderness. Meanwhile, there will be a Government with a clear vision, sense of direction and agenda for Britain's future in Europe, and it will be a Labour Government.

12.20 pm

The Economic Secretary to the Treasury (Mrs. Angela Knight)

I thank my hon. Friend the Member for Ludlow (Mr. Gill) for obtaining this important debate. It shows the importance that the Conservative party attaches to European matters that so many of my hon. Friends are here. It also shows the absence of concern on the part of Labour Members about a matter of vital importance for Britain that they feel that they have better things to do elsewhere.

Mr. Jenkin

They are beating up Harriet.

Mrs. Knight

I should not like to speculate about that, but we shall find out at lunchtime what happened.

I suppose that the hon. Member for North Warwickshire (Mr. O'Brien) should be congratulated on his efforts to find a fig leaf to cover the absence of a Labour party policy on Europe. He spoke about clear principles. Perhaps I may remind him of statements made by three of his Front-Bench colleagues recently. We shall be interested to know with which of these statements he agrees.

Perhaps the hon. Member for North Warwickshire agrees with the right hon. Member for Kingston upon Hull, East (Mr. Prescott), who said of a single currency: Yes we are against a single currency". Perhaps he agrees with the right hon. Member for Copeland (Dr. Cunningham), who said that he was Personally…in favour of a single currency"; or with his party's Members of the European Parliament, who are in favour of a single currency within the time limits and timetable. Or does he agree with the hon. Member for Livingston (Mr. Cook), who said some time ago that setting such a timetable was "irresponsible"? Those clear variations exemplify a party with no policy on this vital topic.

I consider all the points made by my hon. Friends in this debate to be important and I will answer as many of them as I possibly can. On those points that I do not reach, I will write to my hon. Friends giving full and detailed answers.

The Government have consistently said that the United Kingdom would join a single currency only if it was in the national interest to do so, given the circumstances at the time. It is because the Prime Minister secured our right to opt out that Parliament and the Government can take a decision at the appropriate time in the light of all the circumstances.

I remind the House of the answer that my right hon. Friend the Prime Minister gave to my right hon. Friend the Member for Witney (Mr. Hurd) when he said: I can certainly reassure my right hon. Friend that, for a decision of such magnitude, we shall keep in mind the possibility of a referendum, if the Cabinet were to recommend British entry. That has been in my mind, as my right hon. Friend knows, for a long time and it remains there. I think that it is right to keep that before us for consideration."—[Official Report, 18 December 1995; Vol. 268, c. 1225.] I am sure that all my hon. Friends will agree with that.

It is clear that it would not be in the national interest of any European country to proceed with a single currency—or in Europe's interest for any country to do so—before conditions were right. A premature economic and monetary union could be disastrous for the future of Europe. Given the importance of the United Kingdom's trade with the rest of Europe, and the rest of the world, we have a strong interest in making sure that such a disaster does not occur, whether or not we take part.

The convergence criteria set out in the Maastricht treaty aim to ensure that economies are moving in the right direction towards economic convergence, a necessary condition for economic and monetary union. However, the criteria of reducing debt and low inflation are sensible economic criteria in their own right.

Growth rates in many European countries are relatively sluggish at present, a point made by many of my hon. Friends. The problems that France is experiencing spilled over into the streets at Christmas. Its economic activity has slowed substantially, strikes have destroyed jobs, unemployment is 3 million and rising, and a high percentage of the work force is unemployed. Germany also reports economic difficulties, with new investment plans being directed to former eastern European countries or to lower-cost countries such as Britain.

Fulfilment of convergence criteria, while necessary, is still an insufficient condition to ensure successful economic and monetary union. The criteria represent nominal convergence. That is important but only alongside proper convergence, which requires economic liberalisation to encourage economic growth—the sort of measures that we have already enacted. If Europe wants proper convergence to make a single currency obtainable, it will have to follow suit.

Integration of markets is important for assessing whether countries are ready for EMU. That is illustrated by unemployment, which was mentioned by my hon. Friends the Members for Southend, East (Sir T. Taylor) and for Ludlow. High unemployment is a problem for many of our European partners. It is rising in Germany and high in France. In Italy it is 11.5 per cent. and in Spain over 22 per cent. In the United Kingdom, it is at 8 per cent. and falling. Of the five largest European economies, Britain is not just doing well but doing substantially better than the others. It is worth looking at the reasons why that is so.

In Britain, for every £100 spent on wages, an employer has to add an extra £18 for non-wage costs. That same employer would have to add £32 in Germany, £34 in Spain, £41 in France and £44 in Italy. Those are substantial additional costs.

The head of the German CBI recently said that German labour laws were "too rigid" and that social costs and taxes were "too high". He added that Germany worked the shortest working week in Europe and that the German Government spends 50 per cent. of GDP as opposed to 34 per cent. in Britain". He went on to say: No wonder Germany has a problem". The Germans' proposals to help reduce their economic problems include reducing employers' social costs—a policy that has been followed by the British Government. In addition, they are talking about cutting income tax—precisely what the British Government are doing.

In a week in which hypocrisy has hit an all-time high, is it not grossly hypocritical of the Labour party to want to introduce a European jobs tax into Britain by adopting the social chapter and thereby, at a stroke, increasing unemployment in Britain? Hypocrisy is saying one thing when another is in fact true. We all want Europe to follow the more flexible wage markets, lower tax burdens and lower non-wage costs that we have in Britain. We have the basis of an enterprise economy, and foreign investors recognise that.

My hon. Friend the Member for Ludlow asked about the pros and cons and costs and benefits of a single currency. It is too early to judge the costs and benefits, as the Prime Minister said in the debate on 1 March. That illustrates the value of the United Kingdom's opt-out, because it is impossible to judge something until one gets closer to it. The views of industry vary considerably. The business world has mixed views on the subject, but UK businesses are sure that if the single currency goes ahead it will have important implications for them whether or not Britain participates, so it is important that it is well planned. One reason why Britain is participating in the negotiations is to ensure that practical issues such as that are properly considered.

The City of London is also a subject of vital concern. It is a centre for international financial excellence and innovation and it is the overwhelming choice as the European headquarters for major international banks. It handles more currency than all the other European Union centres put together and I am confident that it will remain competitive and rise to the challenges, whether or not the United Kingdom participates in the single currency.

My hon. Friend the Member for Southend, East raised five issues, which I shall address one by one—

Madam Deputy Speaker (Dame Janet Fookes)

Order. I am afraid that we must move to the next topic.